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Financial report summary
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Hilton WorldwideRisks
- We are subject to the operating risks common in the lodging and franchising industries.
- We depend on the skill, ability, and decisions of third-party operators.
- We are subject to certain risks related to our indebtedness.
- We are subject to certain risks related to litigation filed by or against us.
- Our international operations are subject to political and monetary risks.
- Labor shortages could restrict our ability and the ability of franchisees to operate hotel properties or grow our business or result in increased labor costs that could adversely affect the results of operations.
- Climate change and sustainability related concerns could have a material adverse effect on our business and results of operations.
- We may not grow our franchise system or we may lose business by failing to compete effectively or by failing to manage the reputations of our brands.
- We may not achieve our objectives for growth in the number of franchised hotels.
- We may have disputes with the owners of our franchised hotels or their representative franchisee associations.
- Under certain circumstances our franchisees may terminate our franchise contracts.
- Deterioration in the general financial condition of our franchisees may adversely affect our results.
- We may not be able to recover advances for system services that we may at certain times provide to our franchisees.
- Our franchisees may fail to make the investments necessary to maintain or improve their properties, preference for our brands and our reputation could suffer and our franchise agreements with these franchisees could terminate.
- We and our franchisees are reliant upon information technology systems to operate our business and remain competitive, and any disruption or malfunction or failure to adapt to technological developments could adversely affect our business.
- We are subject to the risks relating to the acquisition of new brands or lines of business.
- New brands may not be accepted by franchisees and consumers.
- Increasing use by consumers of alternative internet reservation channels may decrease loyalty to our brands and our existing distribution channels, and may influence our distribution strategies, in ways that may adversely affect us.
- Development and brand support activities that involve our co-investment or financing and guaranty support for third parties or development of hotels may result in losses.
- Our involvement in hotel ownership and hotel development activities to stimulate the development of new brands may result in exposure to losses and be disruptive to our asset-light business model.
- Failure to protect our trademarks and other intellectual property could impact our business.
- We may not be able to generate significant procurement services revenue from our platform business.
- Our investment in new business lines is inherently risky and could disrupt our core business.
- Investing jointly through affiliates decreases our ability to manage risk.
- We are subject to the risks related to cybersecurity.
- Failure to maintain the integrity of internal or customer data could result in faulty business decisions, damage of reputation, and/or subject us to costs, fines or lawsuits.
- Privacy laws and regulations could adversely affect our ability to transfer guest data and market our products effectively and could be applied to impose costs, fines and operational conditions on our business in the event of perceived non-compliance, and could otherwise impact our results from operations.
- Government franchise and tax regulation could impact our business.
- We may be deemed to be a joint employer with our franchisees under certain new laws, rules and regulations.
- Anti-takeover provisions may prevent a change in control.
- The concentration of share ownership may influence the outcome of certain matters.
- Because the market price of our common stock that Wyndham stockholders may receive in the proposed Offer will fluctuate, Wyndham stockholders cannot be sure of the value of the common stock they may receive.
- We must obtain governmental and regulatory approvals to consummate the Offer, which, if delayed or not granted, may delay, jeopardize or prohibit the Offer and the Second-Step Mergers.
- Our stock price may be adversely affected if the Offer and the Second-Step Mergers are not completed.
- The Offer is subject to other conditions that we do not control.
- Uncertainties associated with the Offer and the Second-Step Mergers may affect our future business and operations.
- We have not negotiated the price or terms of the Offer or Second-Step Mergers with Wyndham.
- You may be unable to assert a claim against Wyndham’s independent registered public accounting firm under Section 11 of the Securities Act.
- Wyndham and Choice may not successfully integrate.
- We may not realize the financial benefits expected following the consummation of the Proposed Combination.
- We have only conducted a review of Wyndham’s publicly available information and have not had access to Wyndham’s non-public information. Therefore, we may not be able to retain certain agreements and may be subject to liabilities of Wyndham unknown to us, which may have a material adverse effect on our profitability, financial condition and results of operations and which may result in a decline in the market value of our common stock.
- We expect to incur a substantial amount of indebtedness to acquire the shares of Wyndham Common Stock pursuant to the Offer and the Second-Step Mergers and, as a result, will increase its outstanding indebtedness. Our failure to meet our debt service obligations, including a failure to comply with the restrictive covenants contained in the related agreements, could have a material adverse effect on its business, financial condition and results of operations.
- All of our debt obligations, and any future indebtedness we may incur, will have priority over our common stock with respect to payment in the event of a liquidation, dissolution or winding up.
- The consummation of the Offer and the Second-Step Mergers may result in ratings organizations and/or securities analysts taking actions which may adversely affect the combined companies’ business, financial condition and operating results, as well as the market price of our common stock.
- The Offer could trigger certain provisions contained in Wyndham’s equity plan or award agreements and certain employee benefit plans or agreements that could require us to vest outstanding equity awards, make change of control or severance payments or accelerate vesting and payment of certain deferred compensation amounts.
- Our future results may differ materially from the unaudited pro forma condensed combined financial statements of Choice and Wyndham presented in the Exchange Offer.
- Resales of our common stock following the Offer may cause the market price of our common stock to fall.
- The trading price of our common stock may be affected by factors different from those affecting the price of Wyndham Common Stock.
Management Discussion
- For the year ended December 31, 2023, the Company recognized income before income taxes of $337.0 million, which is a $99.8 million decrease from the year ended December 31, 2022. The decrease in income before income taxes is primarily due to a decrease in operating income.
- Operating income decreased $103.4 million primarily due to a $47.9 million decrease in the net surplus generated from other revenues and other expenses from franchised and managed properties, a $22.7 million decrease in termination fees in other revenues from the exit of 110 WoodSpring units in September 2022, and a $16.2 million decrease in net gains on the sale of business and assets that were recognized during 2022. Selling, general and administrative expenses increased $48.4 million primarily due to the inclusion of the full year's cost of operations of the acquired Radisson Hotels Americas business, an increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments, and an increase in employee salary and benefit continuation payments due to certain restructurings. Business combination, diligence and transition costs increased $16.2 million related to the integration of the Radisson Hotels Americas business and costs associated with acquisition pursuits. Depreciation and amortization expense also increased $9.3 million due to the acquisition of three hotel properties and identifiable intangible assets in the Radisson Hotels Americas transaction. The decreases to operating income were partially offset by the growth of the legacy Choice franchising business and the inclusion of the full year's revenues from operations of the acquired Radisson Hotels Americas business.
- The primary reasons for these fluctuations are described in more detail below.