UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2016~~2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36243

Hilton Worldwide Holdings Inc.

(Exact name of registrant as specified in its charter)



Delaware		27-4384691
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7930 Jones Branch Drive, Suite 1100, McLean, VA		22102
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (703) 883-1000

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer x		Accelerated filer ¨
Non-accelerated filer ¨	(Do not check if a smaller reporting company)	Smaller reporting company ¨
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant's common stock, par value $0.01 per share, as of ~~October 21, 2016~~July 19, 2017 was ~~989,783,195.~~324,212,528.

HILTON WORLDWIDE HOLDINGS INC.

FORM 10-Q TABLE OF CONTENTS



		Page No.
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3432
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4941
Item 4.	Controls and Procedures	4941

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	5043
Item 1A.	Risk Factors	5043
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5043
Item 3.	Defaults Upon Senior Securities	5043
Item 4.	Mine Safety Disclosures	5043
Item 5.	Other Information	5043
Item 6.	Exhibits	5244
	Signatures	5445

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Inin millions, except share data)



	June 30,			December 31,
	2017			2016
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	784		$	1,062
Restricted cash and cash equivalents	125			121
Accounts receivable, net of allowance for doubtful accounts of $25 and $27	921			755
Prepaid expenses	123			89
Income taxes receivable	—			13
Other	46			39
Current assets of discontinued operations	—			1,478
Total current assets (variable interest entities - $83 and $167)	1,999			3,557
Intangibles and Other Assets:
Goodwill	5,164			5,218
Brands	4,872			4,848
Management and franchise contracts, net	930			963
Other intangible assets, net	432			447
Property and equipment, net	338			341
Deferred income tax assets	82			82
Other	452			408
Non-current assets of discontinued operations	—			10,347
Total intangibles and other assets (variable interest entities - $169 and $569)	12,270			22,654
TOTAL ASSETS	$	14,269		$	26,211
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	1,879		$	1,821
Current maturities of long-term debt	48			33
Income taxes payable	62			56
Current liabilities of discontinued operations	—			774
Total current liabilities (variable interest entities - $54 and $124)	1,989			2,684
Long-term debt	6,572			6,583
Deferred revenues	99			42
Deferred income tax liabilities	1,673			1,778
Liability for guest loyalty program	884			889
Other	1,537			1,492
Non-current liabilities of discontinued operations	—			6,894
Total liabilities (variable interest entities - $270 and $766)	12,754			20,362
Commitments and contingencies - see Note 14
Equity:
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of June 30, 2017 and December 31, 2016	—			—
Common stock⁽¹⁾, $0.01 par value; 10,000,000,000 authorized shares, 330,916,295 issued and 325,235,234 outstanding as of June 30, 2017 and 329,351,581 issued and 329,341,992 outstanding as of December 31, 2016	3			3
Treasury stock, at cost; 5,681,061 shares as of June 30, 2017 and 9,589 shares as of December 31, 2016	(352		)	—
Additional paid-in capital⁽¹⁾	10,245			10,220
Accumulated deficit	(7,514		)	(3,323		)
Accumulated other comprehensive loss	(867		)	(1,001		)
Total Hilton stockholders' equity	1,515			5,899
Noncontrolling interests	—			(50		)
Total equity	1,515			5,849
TOTAL LIABILITIES AND EQUITY	$	14,269		$	26,211

____________

September 30, December 31,
2016 2015
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 859
$ 609
Restricted cash and cash equivalents 272
247
Accounts receivable, net of allowance for doubtful accounts of $33 and $30 1,021
876
Inventories 508
442
Current portion of financing receivables, net 128
129
Prepaid expenses 171
147
Income taxes receivable 17
97
Other 48
38
Total current assets (variable interest entities - $176 and $141) 3,024
2,585
Property, Intangibles and Other Assets:
Property and equipment, net 9,020
9,119
Financing receivables, net 929
887
Investments in affiliates 132
138
Goodwill 5,855
5,887
Brands 4,908
4,919
Management and franchise contracts, net 1,044
1,149
Other intangible assets, net 525
586
Deferred income tax assets 75
78
Other 359
274
Total property, intangibles and other assets (variable interest entities - $616 and $481) 22,847
23,037
TOTAL ASSETS $ 25,871
$ 25,622
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other $ 2,354
$ 2,206
Current maturities of long-term debt 101
94
Current maturities of timeshare debt 80
110
Income taxes payable 63
33
Total current liabilities (variable interest entities - $248 and $157) 2,598
2,443
Long-term debt 9,883
9,857
Timeshare debt 337
392
Deferred revenues 96
283
Deferred income tax liabilities 4,487
4,630
Liability for guest loyalty program 853
784
Other 1,126
1,282
Total liabilities (variable interest entities - $779 and $627) 19,380
19,671
Commitments and contingencies - see Note 18

Equity:
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of September 30, 2016 and December 31, 2015 —
—
Common stock, $0.01 par value; 30,000,000,000 authorized shares, 989,810,812 issued and 989,782,045 outstanding as of September 30, 2016 and 987,487,127 issued and 987,458,360 outstanding as of December 31, 2015 10
10
Additional paid-in capital 10,198
10,151
Accumulated deficit (2,866 ) (3,392 )
Accumulated other comprehensive loss (826 ) (784 )
Total Hilton stockholders' equity 6,516
5,985
Noncontrolling interests (25 ) (34 )
Total equity 6,491
5,951
TOTAL LIABILITIES AND EQUITY $ 25,871
$ 25,622


⁽¹⁾	Balance as of December 31, 2016 was adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017. See Note 1: "Organization and Basis of Presentation" for additional information.

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Inin millions, except per share data)

~~(Unaudited)~~(unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues
Franchise fees													$	372		$	311		$	666		$	564
Base and other management fees													85			60			168			120
Incentive management fees													56			33			108			69
Owned and leased hotels	$	1,033		$	1,082		$	3,105		$	3,174		377			398			677			717
Management and franchise fees and other	446			416			1,276			1,194
Timeshare	358			334			1,020			974
Other revenues													20			18			57			35
	1,837			1,832			5,401			5,342			910			820			1,676			1,505
Other revenues from managed and franchised properties	1,105			1,063			3,342			3,074			1,436			1,130			2,831			2,171
Total revenues	2,942			2,895			8,743			8,416			2,346			1,950			4,507			3,676

Expenses
Owned and leased hotels	771			798			2,335			2,383			330			349			602			656
Timeshare	257			219			697			673
Depreciation and amortization	169			171			509			519			87			91			176			183
Impairment loss	—			—			15			—			—			—			—			15
General, administrative and other	147			145			392			493
General and administrative													117			97			222			180
Other expenses													11			11			34			29
	1,344			1,333			3,948			4,068			545			548			1,034			1,063
Other expenses from managed and franchised properties	1,105			1,063			3,342			3,074			1,436			1,130			2,831			2,171
Total expenses	2,449			2,396			7,290			7,142			1,981			1,678			3,865			3,234

Gain on sales of assets, net	—			164			2			306			—			1			—			1

Operating income	493			663			1,455			1,580			365			273			642			443

Interest income	3			3			10			11
Interest expense	(148		)	(138		)	(434		)	(431		)	(100		)	(99		)	(204		)	(189		)
Equity in earnings from unconsolidated affiliates	7			9			18			22
Loss on foreign currency transactions	(8		)	(8		)	(33		)	(21		)
Other gain (loss), net	(10		)	1			(15		)	(6		)
Gain (loss) on foreign currency transactions													5			(14		)	1			(26		)
Loss on debt extinguishment													—			—			(60		)	—
Other non-operating income, net													5			3			6			5

Income before income taxes	337			530			1,001			1,155
Income from continuing operations before income taxes													275			163			385			233

Income tax expense	(145		)	(247		)	(255		)	(555		)
Income tax benefit (expense)													(108		)	(63		)	(143		)	58

Income from continuing operations, net of taxes													167			100			242			291
Income from discontinued operations, net of taxes													—			144			—			263
Net income	192			283			746			600			167			244			242			554
Net income attributable to noncontrolling interests	(5		)	(4		)	(11		)	(10		)	(1		)	(5		)	(2		)	(6		)
Net income attributable to Hilton stockholders	$	187		$	279		$	735		$	590		$	166		$	239		$	240		$	548

Earnings per share
Basic	$	0.19		$	0.28		$	0.74		$	0.60
Diluted	$	0.19		$	0.28		$	0.74		$	0.60
Earnings per share⁽¹⁾
Basic:
Net income from continuing operations per share													$	0.51		$	0.29		$	0.73		$	0.88
Net income from discontinued operations per share													—			0.44			—			0.79
Net income per share													$	0.51		$	0.73		$	0.73		$	1.67
Diluted:
Net income from continuing operations per share													$	0.51		$	0.29		$	0.73		$	0.87
Net income from discontinued operations per share													—			0.43			—			0.79
Net income per share													$	0.51		$	0.72		$	0.73		$	1.66

Cash dividends declared per share	$	0.07		$	0.07		$	0.21		$	0.07
Cash dividends declared per share⁽¹⁾													$	0.15		$	0.21		$	0.30		$	0.42

____________


⁽¹⁾	Weighted average shares outstanding used in the computation of basic and diluted earnings per share and cash dividends declared per share for the three and six months ended June 30, 2016 were adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017. See Note 1: "Organization and Basis of Presentation" for additional information.

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Inin millions)

~~(Unaudited)~~(unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
Net income	$	192		$	283		$	746		$	600		$	167		$	244		$	242		$	554
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $1, $(79), $(14) and $(49)	(2		)	(115		)	(42		)	(157		)
Pension liability adjustment, net of tax of $(1), $(1), $(2) and $(2)	—			1			2			3
Cash flow hedge adjustment, net of tax of $(1), $4, $3 and $7	3			(6		)	(3		)	(11		)
Currency translation adjustment, net of tax of $—, $(12), $1 and $(15)													54			(53		)	74			(40		)
Pension liability adjustment, net of tax of $—, $—, $(1) and $(1)													3			1			4			2
Cash flow hedge adjustment, net of tax of $2, $—, $4 and $4													(5		)	—			(7		)	(6		)
Total other comprehensive income (loss)	1			(120		)	(43		)	(165		)	52			(52		)	71			(44		)

Comprehensive income	193			163			703			435			219			192			313			510
Comprehensive income attributable to noncontrolling interests	(6		)	(4		)	(10		)	(10		)	(2		)	(5		)	(2		)	(4		)
Comprehensive income attributable to Hilton stockholders	$	187		$	159		$	693		$	425		$	217		$	187		$	311		$	506

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Inin millions)

~~(Unaudited)~~(unaudited)

Nine Months Ended
September 30,
2016 2015
Operating Activities
Net income $ 746
$ 600
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 509
519
Impairment loss 15
—
Gain on sales of assets, net (2 ) (306 )
Equity in earnings from unconsolidated affiliates (18 ) (22 )
Loss on foreign currency transactions 33
21
Other loss, net 15
6
Share-based compensation 50
114
Distributions from unconsolidated affiliates 15
22
Deferred income taxes (147 ) 34
Change in restricted cash and cash equivalents (20 ) (13 )
Working capital changes and other (260 ) 16
Net cash provided by operating activities 936
991

Investing Activities
Capital expenditures for property and equipment (227 ) (214 )
Acquisitions, net of cash acquired —
(1,410 )
Payments received on other financing receivables 2
3
Issuance of other financing receivables (33 ) (9 )
Investments in affiliates —
(5 )
Distributions from unconsolidated affiliates 2
18
Proceeds from asset dispositions 1
2,197
Change in restricted cash and cash equivalents 14
—
Contract acquisition costs (35 ) (27 )
Capitalized software costs (56 ) (38 )
Net cash provided by (used in) investing activities (332 ) 515

Financing Activities
Borrowings 1,000
35
Repayment of debt (1,094 ) (1,342 )
Debt issuance costs (35 ) —
Change in restricted cash and cash equivalents (19 ) (53 )
Dividends paid (207 ) (69 )
Distributions to noncontrolling interests (6 ) (6 )
Excess tax benefits from share-based compensation —
8
Net cash used in financing activities (361 ) (1,427 )

Effect of exchange rate changes on cash and cash equivalents 7
(17 )
Net increase in cash and cash equivalents 250
62
Cash and cash equivalents, beginning of period 609
566

Cash and cash equivalents, end of period $ 859
$ 628

Supplemental Disclosures
Cash paid during the year:
Interest $ 341
$ 329
Income taxes, net of refunds 476
359

Non-cash investing activities:
Conversion of property and equipment to timeshare inventory (79 ) —
Long-term debt assumed —
(450 )

Non-cash financing activities:
Long-term debt assumed —
450
Capital lease restructuring —
(24 )

~~See notes to condensed consolidated financial statements.~~

~~HILTON WORLDWIDE HOLDINGS INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~(In millions)~~

~~(Unaudited)~~

Equity Attributable to Hilton Stockholders

Additional
Paid-in
Capital
Accumulated Deficit
Accumulated
Other
Comprehensive
Loss

Common Stock
Noncontrolling
Interests

Shares Amount Total
Balance as of December 31, 2015 987
$ 10
$ 10,151
$ (3,392 ) $ (784 ) $ (34 ) $ 5,951
Share-based compensation 3
—
47
—
—
—
47
Net income —
—
—
735
—
11
746
Other comprehensive income (loss), net of tax:
Currency translation adjustment —
—
—
—
(41 ) (1 ) (42 )
Pension liability adjustment —
—
—
—
2
—
2
Cash flow hedge adjustment —
—
—
—
(3 ) —
(3 )
Other comprehensive loss —
—
—
—
(42 ) (1 ) (43 )
Dividends —
—
—
(209 ) —
—
(209 )
Cumulative effect of the adoption of ASU 2015-02 —
—
—
—
—
5
5
Distributions —
—
—
—
—
(6 ) (6 )
Balance as of September 30, 2016 990
$ 10
$ 10,198
$ (2,866 ) $ (826 ) $ (25 ) $ 6,491

Equity Attributable to Hilton Stockholders

Additional
Paid-in
Capital
Accumulated Deficit
Accumulated
Other
Comprehensive
Loss

Common Stock
Noncontrolling
Interests

Shares Amount Total
Balance as of December 31, 2014 985
$ 10
$ 10,028
$ (4,658 ) $ (628 ) $ (38 ) $ 4,714
Share-based compensation 2
—
106
—
—
—
106
Net income —
—
—
590
—
10
600
Other comprehensive income (loss), net of tax:
Currency translation adjustment —
—
—
—
(157 ) —
(157 )
Pension liability adjustment —
—
—
—
3
—
3
Cash flow hedge adjustment —
—
—
—
(11 ) —
(11 )
Other comprehensive loss —
—
—
—
(165 ) —
(165 )
Dividends —
—
—
(69 ) —
—
(69 )
Distributions —
—
—
—
—
(6 ) (6 )
Balance as of September 30, 2015 987
$ 10
$ 10,134
$ (4,137 ) $ (793 ) $ (34 ) $ 5,180



	Six Months Ended
	June 30,
	2017			2016
Operating Activities:
Net income	$	242		$	554
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	176			340
Impairment loss	—			15
Gain on sales of assets, net	—			(2		)
Loss (gain) on foreign currency transactions	(1		)	25
Loss on debt extinguishment	60			—
Share-based compensation	36			27
Deferred income taxes	(98		)	(100		)
Working capital changes and other	(39		)	(185		)
Net cash provided by operating activities	376			674
Investing Activities:
Capital expenditures for property and equipment	(18		)	(169		)
Proceeds from asset dispositions	—			1
Contract acquisition costs	(32		)	(18		)
Capitalized software costs	(29		)	(35		)
Other	(18		)	(15		)
Net cash used in investing activities	(97		)	(236		)
Financing Activities:
Borrowings	1,823			—
Repayment of debt	(1,836		)	(64		)
Debt issuance costs and redemption premium	(68		)	—
Dividends paid	(98		)	(138		)
Cash transferred in spin-offs of Park and HGV	(501		)	—
Repurchases of common stock	(352		)	—
Distributions to noncontrolling interests	(1		)	(4		)
Tax withholdings on share-based compensation	(28		)	(13		)
Net cash used in financing activities	(1,061		)	(219		)

Effect of exchange rate changes on cash, restricted cash and cash equivalents	7			6
Net increase (decrease) in cash, restricted cash and cash equivalents	(775		)	225
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	1,183			633
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	501			223
Cash, restricted cash and cash equivalents, beginning of period	1,684			856
Cash, restricted cash and cash equivalents from continuing operations, end of period	909			718
Cash, restricted cash and cash equivalents from discontinued operations, end of period	—			363
Cash, restricted cash and cash equivalents, end of period	$	909		$	1,081

Supplemental Disclosures:
Cash paid during the year:
Interest	$	158		$	225
Income taxes, net of refunds	237			242
Non-cash investing activities:
Conversion of Park's property and equipment to timeshare inventory of HGV	$	—		$	(22	)
Non-cash financing activities:
Spin-offs of Park and HGV	$	29		$	—

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)

Note 1: Organization and Basis of Presentation

Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest hospitality companies in the world ~~based upon the number of hotel rooms~~ and ~~timeshare units. We are~~is engaged in managing, franchising, owning and leasing ~~managing~~hotels and ~~franchising hotels,~~ resorts, ~~and~~including timeshare properties. As of ~~September~~June 30, ~~2016,~~2017, we managed, franchised, owned or leased ~~managed or franchised 4,774 hotel~~5,079 hotels and ~~resort properties,~~resorts, totaling ~~781,272~~825,747 rooms in ~~104~~103 countries and ~~territories, as well as 46 timeshare properties comprising 7,592 units.~~territories.

AsIn March 2017, HNA Tourism Group Co., Ltd. and certain of ~~September 30, 2016,~~its affiliates (together, "HNA") acquired 82.5 million shares of Hilton common stock from affiliates of The Blackstone Group L.P. ("Blackstone"). As of June 30, 2017, HNA and Blackstone beneficially owned approximately ~~45.8~~25.4 percent and 10.3 percent of our common ~~stock.~~stock, respectively.

~~Spin-off~~Spin-offs

~~Hilton Grand Vacations Inc. ("HGV")~~On January 3, 2017, we completed the spin-offs of a portfolio of hotels and resorts, as well as our timeshare business, into two independent, publicly traded companies: Park Hotels & Resorts Inc. ("Park") ~~have each filed Registration Statements on Form 10 with the U.S. Securities~~ and ~~Exchange Commission~~Hilton Grand Vacations Inc. ("~~SEC"~~HGV") ~~in which they disclosed financial and other details of our previously announced spin-off transactions~~, respectively, (the "spin-offs"). See Note 3: "Discontinued Operations" for additional information.

Reverse Stock Split

On January 3, 2017, we completed a 1-for-3 reverse stock split of ~~a substantial portion~~Hilton's outstanding common stock (the "Reverse Stock

Split"). All historical share and share-related information presented in these condensed consolidated financial statements have been retrospectively adjusted to reflect the decreased number of ~~our ownership business, consisting primarily of our owned hotels located~~shares resulting from the Reverse Stock Split. The retrospective adjustments resulted in the ~~U.S., as well as our timeshare business, resulting~~reclassification of $7 million from common stock to additional paid-in capital in ~~two additional independent, publicly traded companies. Completion of each~~the condensed consolidated balance sheets for all periods presented prior to the date of the ~~spin-offs is subject to several conditions, including the SEC declaring effective the registration statements and final approval of the transactions by our board of directors.~~Reverse Stock Split.

Basis of Presentation

The accompanying condensed consolidated financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 have been prepared in accordance with United States of America ("U.S.") generally accepted accounting principles ("GAAP") and are unaudited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with ~~U.S.~~ GAAP. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in Item 8.01 of our ~~Annual~~Current Report on Form ~~10-K for the fiscal year ended December 31, 2015.~~8-K dated July 26, 2017.

The preparation of financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. ~~Interim~~Additionally, interim results are not necessarily indicative of full year performance.

These condensed consolidated financial statements present the condensed consolidated financial position of Hilton as of June 30, 2017 and December 31, 2016 and the results of operations of Hilton for the three and six months ended June 30, 2017 and 2016 giving effect to the spin-offs, with the historical financial results of Park and HGV reflected as discontinued operations. Unless otherwise indicated, the information in the notes to the condensed consolidated financial statements refer only to Hilton's continuing operations and do not include discussion of balances or activity of Park or HGV.

Principles of Consolidation

In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All material intercompany transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in previously issued financial statements have been reclassified to conform to the presentation following the spin-offs, which includes the reclassification of the financial position and results of operations of Park and HGV as discontinued operations as of December 31, 2016 and for the three and six months ended June 30, 2016. Additionally, certain line items in the condensed consolidated statements of operations have been revised to reflect the operating structure of Hilton subsequent to the spin-offs. The primary change to the condensed consolidated statements of operations is the disaggregation of management and franchise fee revenues.

Note 2: Recently Issued Accounting Pronouncements

Adopted Accounting Standards

In ~~April 2015,~~January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2015-03~~2017-04 ("ASU ~~2015-03"~~2017-04"), ~~Interest~~Intangibles - ~~Imputation of Interest (Subtopic 835-30)~~Goodwill and Other (Topic 350): Simplifying the ~~Presentation of Debt Issuance Costs.~~ This ASU requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset, which is consistent with the presentation of debt discounts and premiums. In August 2015, the FASB issued ASU No. 2015-15 ("ASU 2015-15"), ~~Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies that absent authoritative guidance in ASU 2015-03~~Test for debt issuance costs related to line-of-credit arrangements, the staff of the SEC would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted ASU 2015-03 and ASU 2015-15 retrospectively as of January 1, 2016. As a result, approximately $94 million of debt issuance costs that were previously presented in other

non-current assets as of December 31, 2015 are now included within long-term debt and timeshare debt. We elected to continue presenting the debt issuance costs related to our line-of-credit arrangements within other non-current assets.

~~In February 2015, the FASB issued ASU No. 2015-02 ("ASU 2015-02"),~~ ~~Consolidation (Topic 810) - Amendments to the Consolidation Analysis~~Goodwill Impairment. This ASU modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation undersimplifies the ~~revised consolidation model.~~subsequent measurement of goodwill by removing Step 2 from the goodwill impairment test. We elected, as permitted by the standard, to early adopt ASU ~~2015-02~~2017-04 on a prospective basis as of January 1, ~~2016 using~~2017. The adoption did not have a ~~modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2016 of approximately $5 million. Additionally, certain~~material effect on our condensed consolidated entities that were not previously considered variable interest entities ("VIEs") prior to the adoption of ASU 2015-02 were considered to be VIEs for which we are the primary beneficiary and continue to be consolidated following adoption; prior period VIE disclosures do not include the balances or activity associated with these VIEs.financial statements.

~~Accounting Standards Not Yet Adopted~~

In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment ~~Accounting~~Accounting.. This ASU is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory ~~tax~~ withholding requirements, as well as to clarify the classification in the statement of cash flows. ~~The provisions of~~We adopted ASU 2016-09 ~~are effective for reporting periods beginning after December 15, 2016; early adoption is permitted. The~~as of January 1, 2017. One of the provisions of this ASU ~~contain specific transition guidance~~requires entities to make an accounting policy election with respect to forfeitures of share-based payment awards, and we elected to account for ~~each amendment. The adoption is not expected~~forfeitures as they occur and adopted this provision of ASU 2016-09 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2017 of approximately $1 million. Additionally, we have applied the provisions of this ASU on a ~~material effect on~~retrospective basis in our condensed consolidated ~~financial statements.~~statements of cash flows, which includes presenting: (i) excess tax benefits as an operating activity, which were previously presented as a financing activity; and (ii) cash payments to tax authorities for employee taxes when shares are withheld to meet statutory withholding requirements as a financing activity, which were previously presented as an operating activity.

Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases (Topic 842), which supersedes existing guidance on accounting for leases in Leases (Topic 840) and generally requires all leases, including operating leases, to be recognized in the statement of financial position as right-of-use assets and lease liabilities by lessees. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach and are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial ~~statements.~~statements, but we expect this ASU to have a material effect on our consolidated balance sheet.

In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue inwhen a ~~way that depicts the transfer~~customer obtains control of promised goods or services ~~to customers~~and is recognized in an amount that reflects the consideration ~~to which~~ the entity expects to ~~be entitled~~receive in exchange for those goods or services. Subsequent to ASU 2014-09, the FASB ~~has~~ issued several related ASUs. The provisions of ASU 2014-09 and the related ASUs are effective for reporting periods beginning after December 15, ~~2017~~2017; early adoption is permitted. ASU 2014-09 permits two transition approaches: retrospective or modified retrospective. We currently expect to implement this ASU using the retrospective approach.

We anticipate that ASU 2014-09 and the related ASUs will have a material effect on our consolidated financial statements. However, we expect revenue recognition related to our accounting for ongoing royalty and management fee revenues, direct reimbursable fees from our management and franchise agreements and hotel guest transactions at our owned and leased hotels to remain substantially unchanged.

While we are continuing to assess all other potential effects of the standard, we currently believe the provisions of ASU 2014-09 and the related ASUs will affect revenue recognition as follows: (i) application and initiation fees for new hotels entering the system will be ~~applied retrospectively~~recognized over the term of the franchise agreement; (ii) certain contract acquisition costs related to our management and franchise agreements will be recognized over the term of the agreements as a reduction to revenue; and (iii) incentive management fees will be recognized to the extent that it is probable that a significant reversal will not occur as a

result of future hotel profits or ~~using a modified retrospective approach.~~cash flows. We do not expect the changes in revenue recognition for certain contract acquisition costs or incentive management fees to affect the Company’s net income for any full year period. We are currently ~~evaluating~~assessing the effect of the standard on indirect reimbursable fees related to our ~~method~~management and franchise agreements and the accounting for our guest loyalty program. We continue to update our assessment of ~~adoption and~~ the effect that ~~this~~ ASU 2014-09 and the related ASUs will have on our consolidated financial ~~statements.~~statements and we will disclose further material effects, if any, when known.

Note 3: ~~Acquisitions~~Discontinued Operations

On January 3, 2017, we completed the spin-offs of Park and HGV via a pro rata distribution to each of Hilton's stockholders of record, as of close of business on December 15, 2016, of 100 percent of the outstanding common stock of each of Park and HGV (the "Distribution"). Each Hilton stockholder of record received one share of Park common stock for every five shares of Hilton common stock and one share of HGV common stock for every ten shares of Hilton common stock. Following the spin-offs, Hilton did not retain any ownership interest in Park or HGV. Both Park and HGV have their common stock listed on the New York Stock Exchange under the symbols "PK" and "HGV," respectively.

In connection with the spin-offs, on January 2, 2017, Hilton entered into several agreements with Park and HGV that govern Hilton’s relationship with them following the Distribution including: (i) a Distribution Agreement; (ii) an Employee Matters Agreement; (iii) a Tax Matters Agreement; (iv) a Transition Services Agreement ("TSA"); (v) an HGV License Agreement; (vi) a Tax Stockholders Agreement; and (vii) management and franchise agreements.

Under the TSA with Park and HGV, Hilton or one of its affiliates provides Park and HGV with certain services for a period of two years to help ensure an orderly transition following the Distribution. The services that Hilton agreed to provide under the TSA may include: finance; information technology; human resources and compensation; facilities; legal and compliance; and other services. The entity providing the services is compensated for any such services at agreed amounts as set forth in the TSA.

The License Agreement with HGV granted HGV the exclusive right, for an initial term of 100 years, to use certain Hilton marks and intellectual property in its timeshare business, subject to the terms and conditions of the agreement. HGV pays a royalty fee of five percent of gross revenues, as defined, to Hilton quarterly in arrears, as well as specified additional fees and reimbursements. Additionally, during the term of the license agreement, HGV will participate in Hilton’s guest loyalty program, Hilton Honors.

Under the management and franchise agreements with Park, Park pays agreed upon fees for various services that Hilton provides to support the operations of their hotels, as well as royalty fees for the licensing of Hilton's hotel brands. The terms of the management agreements generally include a base management fee, calculated as three percent of gross hotel revenues or receipts, and an incentive management fee, calculated as six percent of a specified measure of hotel earnings that is calculated in accordance with the applicable management agreement. Additionally, payroll and related costs, certain other operating costs, marketing expenses and other expenses associated with Hilton's brands and shared services are directly reimbursed to Hilton by Park pursuant to the terms of the management and franchise agreements.

Financial Information

During the~~nine~~ three and six months ended ~~September~~June 30, ~~2015~~2017, we ~~used proceeds from the sale~~recognized $43 million and $82 million, respectively, of management and franchise fees for properties that were transferred to Park upon completion of the ~~Waldorf Astoria New York (see Note 4: "Disposals") to acquire, as part~~spin-offs and $23 million and $43 million, respectively, of ~~a tax deferred exchange of real property, the following properties~~license fees from ~~sellers affiliated with Blackstone and an unrelated third party, for a total purchase price of $1.87 billion:~~HGV.

Prior to the ~~resort complex consisting~~spin-offs, the results of ~~the Waldorf Astoria Orlando~~Park were reported in our ownership segment and the ~~Hilton Orlando Bonnet Creek~~results of HGV were reported in ~~Orlando, Florida (the "Bonnet Creek Resort");~~

our timeshare segment. Following the ~~Casa Marina Resort in Key West, Florida;~~

~~the Reach Resort in Key West, Florida;~~

~~the Parc 55 in San Francisco, California; and~~

~~the Juniper Hotel Cupertino in Cupertino, California.~~spin-offs, we do not have a timeshare segment, as we no longer have timeshare operations.

~~We incurred transaction costs~~

The following table presents the assets and liabilities of ~~$26 million recognized~~Park and HGV that were included in ~~other gain (loss), net~~discontinued operations in our condensed consolidated balance sheet:



	December 31, 2016
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	341
Restricted cash and cash equivalents	160
Accounts receivable, net	250
Prepaid expenses	48
Inventories	527
Current portion of financing receivables, net	136
Other	16
Total current assets of discontinued operations (variable interest entities - $92)	1,478
Intangibles and Other Assets:
Goodwill	604
Management and franchise contracts, net	56
Other intangible assets, net	60
Property and equipment, net	8,589
Deferred income tax assets	35
Financing receivables, net	895
Investments in affiliates	81
Other	27
Total intangibles and other assets of discontinued operations (variable interest entities - $405)	10,347
TOTAL ASSETS OF DISCONTINUED OPERATIONS	$	11,825
LIABILITIES
Current Liabilities:
Accounts payable, accrued expenses and other	$	632
Current maturities of long-term debt	65
Current maturities of timeshare debt	73
Income taxes payable	4
Total current liabilities of discontinued operations (variable interest entities - $81)	774
Long-term debt	3,437
Timeshare debt	621
Deferred revenues	22
Deferred income tax liabilities	2,797
Other	17
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS (variable interest entities - $506)	$	7,668

The following table presents the results of operations of Park and HGV that were included in discontinued operations in our condensed consolidated statements of operations:



	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
	(in millions)
Total revenues from discontinued operations	$	1,101		$	2,125

Expenses
Owned and leased hotels	459			908
Timeshare	223			440
Depreciation and amortization	80			157
Other	60			102
Total expenses from discontinued operations	822			1,607

Gain on sales of assets, net	1			1

Operating income from discontinued operations	280			519

Non-operating loss, net	(43		)	(88		)

Income from discontinued operations before income taxes	237			431

Income tax expense	(93		)	(168		)

Income from discontinued operations, net of taxes	144			263
Income from discontinued operations attributable to noncontrolling interests, net of taxes	(1		)	(3		)
Income from discontinued operations attributable to Hilton stockholders, net of taxes	$	143		$	260

The following table presents selected financial information of Park and HGV that was included in our condensed consolidated statement of ~~operations for the~~ ~~nine months ended September 30, 2015~~.

~~The results of operations from these properties included in our condensed consolidated statements of operations were as follows:~~cash flows:

Three Months Ended Nine Months Ended
September 30, 2015 September 30, 2015
(in millions)
Total revenues $ 84
$ 228
Income before income taxes 10
44



	Six Months Ended June 30, 2016
	(in millions)
Non-cash items included in net income:
Depreciation and amortization	$	157
Gain on sales of assets, net	(1		)

Investing activities:
Capital expenditures for property and equipment	$	(140	)

~~Note 4: Disposals~~

~~Hilton Sydney~~

In July 2015, we completed the sale of the Hilton Sydney for a purchase price of 442 million Australian dollars ("AUD") (equivalent to $340 million as of the closing date). As a result of the sale, we recognized a pre-tax gain of $163 million included in gain on sales of assets, net in our condensed consolidated statements of operations for the three and ~~nine months ended September 30, 2015~~. The pre-tax gain was net of transaction costs, a goodwill reduction of $36 million and a reclassification of a currency translation adjustment of $25 million from accumulated other comprehensive loss into earnings concurrent with the disposition. The goodwill reduction was due to our consideration of the Hilton Sydney property as a business within our ownership segment; therefore, we reduced the carrying amount of our goodwill by the amount representing the fair value of the business disposed relative to the fair value of the portion of our ownership reporting unit goodwill that was retained.

~~Waldorf Astoria New York~~

In February 2015, we completed the sale of the Waldorf Astoria New York for a purchase price of $1.95 billion, and we repaid in full the existing mortgage loan secured by the Waldorf Astoria New York property (the "Waldorf Astoria Loan") of approximately $525 million. As a result of the sale, we recognized a gain of $143 million included in gain on sales of assets, net in our condensed consolidated statement of operations for the ~~nine months ended September 30, 2015~~. The gain was net of transaction costs and a goodwill reduction of $185 million. The goodwill reduction was due to our consideration of the Waldorf Astoria New York property as a business within our ownership segment; therefore, we reduced the carrying amount of our goodwill by the amount representing the fair value of the business disposed relative to the fair value of the portion of our ownership reporting unit goodwill that was retained. Additionally, we recognized a loss of $6 million in other gain (loss), net in our condensed consolidated statement of operations for the ~~nine months ended September 30, 2015~~ ~~related to the reduction of the Waldorf Astoria Loan's remaining carrying amount of debt issuance costs.~~

~~Note 5: Property and Equipment~~

~~Property and equipment were as follows:~~

September 30, December 31,
2016 2015
(in millions)
Land $ 3,451
$ 3,486
Buildings and leasehold improvements 6,478
6,410
Furniture and equipment 1,369
1,263
Construction-in-progress 112
80
11,410
11,239
Accumulated depreciation (2,390 ) (2,120 )
$ 9,020
$ 9,119

Depreciation expense of property and equipment, including assets recorded for capital lease assets, was $86 million and $88 million during the three months ended September 30, 2016 and 2015, respectively, and $263 million and $260 million during the nine months ended September 30, 2016 and 2015, respectively.

As of September 30, 2016 and December 31, 2015, property and equipment included approximately $155 million and $144 million, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of $85 million and $71 million, respectively, of accumulated depreciation.

~~Note 6: Financing Receivables~~

~~Financing receivables were as follows:~~

September 30, 2016
Securitized Timeshare
Unsecuritized Timeshare⁽¹⁾
Other Total
(in millions)
Financing receivables $ 228
$ 741
$ 63
$ 1,032
Less: allowance for loan loss (9 ) (94 ) —
(103 )
219
647
63
929

Current portion of financing receivables 51
88
2
141
Less: allowance for loan loss (2 ) (11 ) —
(13 )
49
77
2
128

Total financing receivables $ 268
$ 724
$ 65
$ 1,057

December 31, 2015
Securitized Timeshare
Unsecuritized Timeshare⁽¹⁾
Other Total
(in millions)
Financing receivables $ 309
$ 632
$ 39
$ 980
Less: allowance for loan loss (14 ) (79 ) —
(93 )
295
553
39
887

Current portion of financing receivables 58
83
1
142
Less: allowance for loan loss (3 ) (10 ) —
(13 )
55
73
1
129

Total financing receivables $ 350
$ 626
$ 40
$ 1,016

~~____________~~


⁽¹⁾	~~Included in this balance, we had $164 million and~~$163 million of gross timeshare financing receivables securing our revolving non-recourse timeshare financing receivables credit facility (the "Timeshare Facility"), as of September 30, 2016 and December 31, 2015, respectively.

~~Timeshare Financing Receivables~~

As of September 30, 2016, our timeshare financing receivables had interest rates ranging from 5.15 percent to 20.50 percent, a weighted average interest rate of 11.94 percent, a weighted average remaining term of 7.7 years and maturities through 2028.

~~Our timeshare financing receivables as of September 30, 2016 mature as follows:~~

Securitized Timeshare Unsecuritized Timeshare
Year (in millions)
2016 (remaining) $ 13
$ 31
2017 51
76
2018 50
81
2019 47
84
2020 43
88
Thereafter 75
469
279
829
Less: allowance for loan loss (11 ) (105 )
$ 268
$ 724

As of September 30, 2016 and December 31, 2015, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $34 million and $32 million, respectively. The following table details an aged analysis of our gross timeshare financing receivables balance:

September 30, December 31,
2016 2015
(in millions)
Current $ 1,061
$ 1,035
30 - 89 days past due 13
15
90 - 119 days past due 4
4
120 days and greater past due 30
28
$ 1,108
$ 1,082

~~The changes in our allowance for loan loss were as follows:~~

Nine Months Ended
September 30,
2016 2015
(in millions)
Beginning balance $ 106
$ 96
Write-offs (27 ) (23 )
Provision for loan loss 37
29
Ending balance $ 116
$ 102

~~Note 7: Investments in Affiliates~~

~~Investments in affiliates were as follows:~~

September 30, December 31,
2016 2015
(in millions)
Equity investments $ 123
$ 129
Other investments 9
9
$ 132
$ 138

~~We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased 15 and 16 hotels as of September 30, 2016 and~~ ~~December 31, 2015, respectively. These entities had total debt of approximately $960 million and $959 million as of September 30, 2016 and~~ ~~December 31, 2015, respectively. Substantially all of the debt is secured solely by the affiliates' assets or is guaranteed by other partners without recourse to us.~~

Note 8:4: Consolidated Variable Interest Entities

As of ~~September~~June 30, 2017 and December 31, 2016, we consolidated ~~nine VIEs: six~~three variable interest entities ("VIEs"): two entities that ~~own or lease~~leased hotel ~~properties; two that are associated with our timeshare financing receivables securitization transactions that both issued debt (collectively, the "Securitized Timeshare Debt");~~properties and one management company. As of December 31, 2015, prior to adoption of ASU 2015-02, we consolidated three VIEs that owned or leased hotel properties and two that issued our Securitized Timeshare Debt. Of the four additional entities considered to be VIEs following the adoption of ASU 2015-02, two were previously consolidated by us and two were unconsolidated investments in affiliates.

We are the primary beneficiaries of these consolidated VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of ~~these~~the respective entities. ~~As of September 30, 2016 and December 31, 2015, our~~Our condensed consolidated balance sheets included the assets and liabilities of ~~the nine and five VIEs, respectively,~~these entities, which primarily comprised the following:


	September 30,		December 31,		June 30,		December 31,
	2016		2015		2017		2016
	(in millions)				(in millions)
Cash and cash equivalents	$	73	$	46	$	64	$	57
Restricted cash and cash equivalents	22		15
Accounts receivable, net	18		19		12		14
Property and equipment, net	265		72		53		52
Financing receivables, net	268		350
Deferred income tax assets	69		62		60		58
Other non-current assets	63		52		56		53
Accounts payable, accrued expenses and other	51		35		37		33
Long-term debt	395		219		219		212
Timeshare debt	268		353

During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.

~~In June 2015, one~~

Note 5: Goodwill and Intangible Assets

Goodwill

Our goodwill balances, by reporting unit, were as follows:



	Ownership⁽¹⁾			Management and Franchise⁽²⁾		Total
	(in millions)
Balance as of December 31, 2016	$	184		$	5,034	$	5,218
Spin-offs of Park and HGV	(91		)	—		(91		)
Foreign currency translation	6			31		37
Balance as of June 30, 2017	$	99		$	5,065	$	5,164

____________

⁽¹⁾

The balance as of December 31, 2016 excludes goodwill of $2,706 million and accumulated impairment losses of $2,102 million that were attributable to Park and included in non-current assets of discontinued operations in our condensed consolidated balance sheet. Amounts for the ownership reporting unit include the following gross carrying values and accumulated impairment losses for the periods presented:



	Gross Carrying Value			Accumulated Impairment Losses			Net Carrying Value
	(in millions)
Balance as of December 31, 2016	$	856		$	(672	)	$	184
Spin-offs of Park and HGV	(423		)	332			(91		)
Foreign currency translation	6			—			6
Balance as of June 30, 2017	$	439		$	(340	)	$	99


⁽²⁾	There were no accumulated impairment losses for the management and franchise reporting unit as of December 31, 2016 and June 30, 2017.

Intangible Assets

Intangible assets were as follows:



	June 30, 2017
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(in millions)
Amortizing Intangible Assets:
Management and franchise contracts:
Management and franchise contracts recorded at merger⁽¹⁾	$	2,232	$	(1,625	)	$	607
Contract acquisition costs and other	398		(75		)	323
	$	2,630	$	(1,700	)	$	930

Other intangible assets:
Leases⁽¹⁾	$	290	$	(140	)	$	150
Capitalized software	539		(396		)	143
Hilton Honors⁽¹⁾	338		(205		)	133
Other	38		(32		)	6
	$	1,205	$	(773	)	$	432

Non-amortizing Intangible Assets:
Brands⁽¹⁾⁽²⁾	$	4,872	$	—		$	4,872



	December 31, 2016
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(in millions)
Amortizing Intangible Assets:
Management and franchise contracts:
Management and franchise contracts recorded at merger⁽¹⁾	$	2,221	$	(1,534	)	$	687
Contract acquisition costs and other	343		(67		)	276
	$	2,564	$	(1,601	)	$	963

Other intangible assets:
Leases⁽¹⁾	$	276	$	(126	)	$	150
Capitalized software	510		(362		)	148
Hilton Honors⁽¹⁾	335		(192		)	143
Other	37		(31		)	6
	$	1,158	$	(711	)	$	447

Non-amortizing Intangible Assets:
Brands⁽¹⁾⁽²⁾	$	4,848	$	—		$	4,848

____________


⁽¹⁾	Represents intangible assets that were initially recorded at their fair value as part of the October 24, 2007 transaction whereby we became a wholly owned subsidiary of an affiliate of Blackstone.


⁽²⁾	Changes to our brands intangible assets from December 31, 2016 to June 30, 2017 were due to foreign currency translations.

We recorded amortization expense of ~~our consolidated VIEs modified~~$71 million and $77 million for the terms of its capital lease, resulting in a reduction in long-term debt of $24 million. This amount was recognized as a gain in other gain (loss), net in our condensed consolidated statement of operations during the ninethree months ended ~~September~~June 30, ~~2015,~~2017 and 2016, respectively, including $17 million and $21 million of amortization expense on capitalized software, respectively. We recorded amortization expense of $145 million and $155 million for the six months ended June 30, 2017 and 2016, respectively, including $34 million and $43 million of amortization expense on capitalized software, respectively.

We estimated our future amortization expense for our amortizing intangible assets as ~~the capital lease asset had previously been fully impaired.~~of June 30, 2017 to be as follows:



Year	(in millions)
2017 (remaining)	$	152
2018	264
2019	249
2020	204
2021	76
Thereafter	417
	$	1,362

Note 9:6: Debt

Long-term Debt

Long-term debt balances, including obligations for capital leases, and associated interest rates as of ~~September~~June 30, ~~2016,~~2017, were as follows:

September 30, December 31,

2016 2015

(in millions)
Senior notes with a rate of 5.625%, due 2021 $ 1,500
$ 1,500
Senior notes with a rate of 4.25%, due 2024 1,000
—
Senior secured term loan facility with a rate of 3.50%, due 2020 1,000
4,225
Senior secured term loan facility with an average rate of 3.10%, due 2023 3,217
—
Commercial mortgage-backed securities loan with a rate of 4.47%, due 2018 2,427
3,418
Mortgage loans and other property debt with an average rate of 4.28%, due 2016 to 2022⁽¹⁾
620
616
Other unsecured notes with a rate of 7.50%, due 2017 54
54
Capital lease obligations with an average rate of 6.38%, due 2018 to 2097 277
245

10,095
10,058
Less: current maturities of long-term debt⁽²⁾
(101 ) (94 )
Less: unamortized deferred financing costs and discounts (111 ) (107 )

$ 9,883
$ 9,857



	June 30,			December 31,
	2017			2016
	(in millions)
Senior notes due 2021	$	—		$	1,500
Senior notes with a rate of 4.250%, due 2024	1,000			1,000
Senior notes with a rate of 4.625%, due 2025	900			—
Senior notes with a rate of 4.875%, due 2027	600			—
Senior secured term loan facility due 2020	—			750
Senior secured term loan facility with a rate of 3.22%, due 2023	3,949			3,209
Capital lease obligations with an average rate of 6.34%, due 2021 to 2030	236			227
Other debt with an average rate of 2.65%, due 2018 to 2026	21			20
	6,706			6,706
Less: unamortized deferred financing costs and discount	(86		)	(90		)
Less: current maturities of long-term debt⁽¹⁾	(48		)	(33		)
	$	6,572		$	6,583

____________


⁽¹⁾	~~For mortgage loans with maturity date extensions that are solely at our option, we assumed they were exercised.~~


⁽²⁾	Net of unamortized deferred financing costs ~~expected~~and discount attributable to ~~be amortized in the next twelve months.~~current maturities of long-term debt.

Senior Notes

In ~~August 2016,~~March 2017, we issued ~~$1.0 billion~~$900 million aggregate principal amount of ~~4.25% senior notes~~4.625% Senior Notes due ~~2024~~2025 (the ~~"2024~~"2025 Senior Notes") and $600 million aggregate principal amount of 4.875% Senior Notes due 2027 (the "2027 Senior Notes"), and incurred ~~$20~~$21 million of debt issuance costs. Interest on the ~~2024~~2025 Senior Notes and the 2027 Senior Notes is payable semi-annually in ~~cash in~~ arrears on ~~March~~April 1 and ~~September~~October 1 of each year, beginning ~~on March 1,~~in October 2017. The ~~2024~~2025 Senior Notes and the 2027 Senior Notes are guaranteed on a senior unsecured basis by us and certain of our wholly owned subsidiaries.

We used the net proceeds of the 2025 Senior Notes and the 2027 Senior Notes, along with available cash, to redeem in full our $1.5 billion 5.625% Senior Notes due 2021 (the "2021 Senior Notes"), plus accrued and unpaid interest. In connection with the repayment, we paid a redemption premium of $42 million and accelerated the recognition of $18 million of unamortized debt issuance costs, which were included in loss on debt extinguishment in our condensed consolidated statement of operations for the six months ended June 30, 2017.

Senior Secured Credit Facility

Our senior secured credit facility ~~(the "Senior Secured Credit Facility")~~ consists of a $1.0 billion senior secured revolving credit facility (the "Revolving Credit Facility") and a senior secured term loan facility (the "Term Loans"). In ~~August 2016,~~March 2017, we amended the Term Loans pursuant to which ~~$3,225~~$750 million of outstanding Term Loans due in 2020 were ~~converted into a new~~extended, aligning their maturity with the $3,209 million tranche of Term Loans due ~~October 25, 2023~~2023. Additionally, concurrent with the extension, the entire balance of the Term Loans was repriced with an interest rate of LIBOR plus ~~2.50 percent.~~200 basis points. In connection with the ~~modification~~refinancing of the Term Loans, we ~~recognized an $8~~incurred $3 million ~~discount as a reduction to long-term debt and $4 million~~ of ~~other~~ debt issuance costs, which were included in other ~~gain (loss), net.~~

non-operating income, net, in our condensed consolidated statement of operations for the six months ended June 30, 2017. As of ~~September~~June 30, ~~2016,~~2017, we had ~~$45~~$23 million of letters of credit outstanding under our Revolving Credit Facility and a borrowing capacity of ~~$955~~$977 million.

~~CMBS and Mortgage Loans~~

In February 2015, we repaid the $525 million Waldorf Astoria Loan concurrent with the sale of the Waldorf Astoria New York. See Note 4: "Disposals" for further information on the transaction. We also assumed a $450 million mortgage loan secured by the Bonnet Creek Resort (the "Bonnet Creek Loan") as a result of an acquisition. See Note 3: "Acquisitions" for further information on the transaction.

~~In September 2016, we made prepayments of $991 million on our commercial mortgage-backed securities loan (the "CMBS Loan") in exchange for the release of certain collateral.~~

Our CMBS Loan, which was secured by 20 of our U.S. owned real estate assets as of September 30, 2016, and the Bonnet Creek Loan require us to deposit with the lenders certain cash reserves for restricted uses. As of September 30, 2016 and December 31, 2015, our condensed consolidated balance sheets included $68 million and $49 million, respectively, of restricted cash and cash equivalents related to these loans.

~~Timeshare Debt~~

~~Timeshare debt balances, and associated interest rates as of September 30, 2016, were as follows:~~

September 30, December 31,
2016 2015
(in millions)
Timeshare Facility with a rate of 1.83%, due 2019 $ 150
$ 150
Securitized Timeshare Debt with an average rate of 1.97%, due 2026 270
356
420
506
Less: current maturities of timeshare debt⁽¹⁾
(80 ) (110 )
Less: unamortized deferred financing costs (3 ) (4 )
$ 337
$ 392

~~____________~~


⁽¹⁾	~~Net of unamortized deferred financing costs expected to be amortized in the next twelve months.~~

In August 2016, we amended the terms of the Timeshare Facility to, among other things, increase the borrowing capacity from $300 million to $450 million, allowing us to borrow up to the maximum amount until August 2018 and requiring all amounts borrowed to be repaid in August 2019. As a result of the modification, we incurred $3 million of debt issuance costs recognized in other non-current assets.

We are required to deposit payments received from customers on the pledged timeshare financing receivables and securitized timeshare financing receivables related to the Timeshare Facility and Securitized Timeshare Debt, respectively, into a depository account maintained by a third party. On a monthly basis, the depository account will be used to make any required principal, interest and other payments due with respect to the Timeshare Facility and Securitized Timeshare Debt. The balance in the depository account, totaling $15 million and $17 million as of September 30, 2016 and December 31, 2015, respectively, was included in restricted cash and cash equivalents in our condensed consolidated balance sheets.

Debt Maturities

The contractual maturities of our long-term debt as of ~~September~~June 30, ~~2016~~2017 were as follows:

Long-term Debt Timeshare Debt
Year (in millions)
2016 (remaining) $ 116
$ 23
2017 104
74
2018⁽¹⁾
2,492
51
2019⁽¹⁾
478
186
2020 1,062
47
Thereafter⁽¹⁾
5,843
39
$ 10,095
$ 420



Year	(in millions)
2017 (remaining)	$	24
2018	58
2019	55
2020	56
2021	57
Thereafter	6,456
	$	6,706

~~____________~~


⁽¹⁾	~~We assumed all extensions that are solely at our option for purposes of calculating maturity dates.~~

Note ~~10:~~7: Derivative Instruments and Hedging Activities

During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, derivatives were used to hedge the interest rate risk associated with variable-rate debt, as ~~required by certain loan agreements, as~~ well as foreign exchange risk associated with certain foreign currency denominated cash balances. During the six months ended June 30, 2017, derivatives were also used to hedge the foreign exchange risk associated with franchise fees.

Cash Flow Hedges

In May 2017, we began hedging foreign exchange-based cash flow variability in our euro denominated franchise fees using forward contracts (the "Fee Forward Contracts"). We elected to designate these Fee Forward Contracts as cash flow hedges for accounting purposes, and we record the change in fair value of the effective portions of these contracts in other comprehensive income (loss) until an individual contract matures. The effective portion of the hedges are reclassified from accumulated other comprehensive loss to franchise fees in our condensed consolidated statement of operations in the same period that the franchise fee revenue is earned. As of June 30, 2017, the Fee Forward Contracts had an aggregate notional amount of $10 million and maturities of 24 months or less. The fair value and earnings effect of our Fee Forward Contracts as of and for the three and six months ended June 30, 2017 were less than $1 million.

In March 2017, we entered into two interest rate swap agreements with notional amounts of $1.6 billion and $750 million, which swap one-month LIBOR on the Term Loans to fixed rates of 1.98 percent and 2.02 percent, respectively, and expire in March 2022. We elected to designate these interest rate swaps as cash flow hedges for accounting purposes.

Non-designated Hedges

~~During the three months ended~~As of June 30, 2017, we held short-term forward contracts (the "Cash Forward Contracts") with an aggregate notional amount of $281 million to offset exposure to fluctuations in certain of our foreign currency denominated cash balances. We elected not to designate these Cash Forward Contracts as hedging instruments.

In August and September ~~30,~~ 2016, we dedesignated four interest rate swaps (the "2013 Interest Rate Swaps") that were previously designated as cash flow hedges as they no longer met the criteria for hedge accounting. These interest rate swaps, which had an aggregate notional amount of $1.45 billion and swapped three-month LIBOR on the Term Loans to a fixed rate of 1.87 percent, ~~expire~~were settled in ~~October 2018 and, as of September 30, 2016, had an aggregate notional amount of $1.45 billion.~~March 2017.

As of September 30, 2016, we also held one interest rate cap in the notional amount of $862 million, for the variable-rate component of the CMBS Loan, that expires in November 2016 and caps one-month LIBOR at 6.9 percent, and one interest rate cap in the notional amount of $337 million that expires in May 2017 and caps one-month LIBOR at 3.0 percent on the Bonnet Creek Loan. We did not elect to designate any of these interest rate caps as hedging instruments.

~~As of September 30, 2016, we held 65 short-term foreign exchange forward contracts with an aggregate notional amount of $348 million to offset exposure to fluctuations~~ ~~in our foreign currency denominated cash balances. We elected not to designate these foreign exchange forward contracts as hedging instruments.~~

Fair Value of Derivative Instruments

We measure our derivative instruments at fair value, which is estimated using a discounted cash flow analysis, and we consider the inputs used to measure the fair value as Level 2 within the fair value hierarchy. The ~~effects~~discounted cash flow analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs of similar instruments, including interest rate curves and spot and forward rates, as applicable, as well as option volatility. The fair values of our derivative instruments onin our condensed consolidated balance sheets were as follows:

Fair Value
September 30, December 31,
Balance Sheet Classification 2016 2015
(in millions)
Cash Flow Hedge:
Interest rate swaps Other liabilities N/A
$ 15

Non-designated Hedges:
Interest rate swaps Other liabilities $ 21
N/A
Interest rate caps⁽¹⁾
Other current assets —
—
Forward contracts Other current assets 2
1
Forward contracts Accounts payable, accrued expenses and other 1
1

~~____________~~


⁽¹⁾	~~The fair value of our interest rate caps was less than $1 million as of December 31, 2015.~~



		June 30,		December 31,
	Balance Sheet Classification	2017		2016
		(in millions)
Cash Flow Hedges:
Interest rate swaps	Other liabilities	$	16	N/A

Non-designated Hedges:
Interest rate swaps	Other liabilities	N/A		$	12
Forward contracts	Other current assets	4		3
Forward contracts	Accounts payable, accrued expenses and other	1		4

Earnings Effect of Derivative Instruments

The ~~effects of our derivative instruments on~~gains and losses recognized in our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss) before any effect for income taxes were as follows:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended					Six Months Ended
	Classification of Gain (Loss) Recognized	2016			2015			2016			2015				June 30,					June 30,
		(in millions)												Classification of Gain (Loss) Recognized	2017			2016		2017			2016
Cash Flow Hedges:
Interest rate swaps⁽¹⁾	Other comprehensive income (loss)	$	3		$	(10	)	$	(7	)	$	(18	)
															(in millions)					(in millions)
Cash Flow Hedges⁽¹⁾:
Interest rate swaps														Other comprehensive income (loss)	$	(9	)	$	—	$	(16	)	$	(10	)

Non-designated Hedges:
Interest rate swaps	Other gain (loss), net	(1		)	N/A			(1		)	N/A
Interest rate swaps⁽²⁾														Other non-operating income, net	—			N/A		2			N/A
Interest rate swaps⁽²⁾	Interest expense	(1		)	N/A			(1		)	N/A			Interest expense	(2		)	N/A		(5		)	N/A
Forward contracts	Loss on foreign currency transactions	4			6			7			12			Gain (loss) on foreign currency transactions	6			2		7			3

____________


⁽¹⁾	There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


⁽²⁾	~~The~~These amounts ~~recognized during the three and nine months ended September 30, 2016~~ are related to the dedesignation of ~~these instruments~~the 2013 Interest Rate Swaps as cash flow hedges and were reclassified from accumulated other comprehensive loss as the underlying transactions occurred.

Note ~~11:~~8: Fair Value Measurements

We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair ~~value~~values of certain financial instruments and the hierarchy level we used to estimate the fair values are shown ~~below:~~below, see Note 7: "Derivative Instruments and Hedging Activities" for the fair value information of our derivatives:


	September 30, 2016								June 30, 2017
			Hierarchy Level								Hierarchy Level
	Carrying Amount		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3
	(in millions)								(in millions)
Assets:
Cash equivalents	$	513	$	—	$	513	$	—	$	458	$	—	$	458	$	—
Restricted cash equivalents	12		—		12		—		12		—		12		—
Timeshare financing receivables⁽¹⁾	992		—		—		1,110
Liabilities:
Long-term debt⁽²⁾⁽³⁾	9,668		1,603		—		8,248
Timeshare debt⁽³⁾	417		—		—		420
Interest rate swaps	21		—		21		—
Long-term debt⁽¹⁾									6,363		2,567		—		3,964


	December 31, 2015								December 31, 2016
			Hierarchy Level								Hierarchy Level
	Carrying Amount		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3
	(in millions)								(in millions)
Assets:
Cash equivalents	$	327	$	—	$	327	$	—	$	782	$	—	$	782	$	—
Restricted cash equivalents	18		—		18		—		11		—		11		—
Timeshare financing receivables⁽¹⁾	976		—		—		1,080
Liabilities:
Long-term debt⁽²⁾⁽³⁾	9,673		1,619		—		8,267
Timeshare debt⁽³⁾	502		—		—		506
Interest rate swaps	15		—		15		—
Long-term debt⁽¹⁾									6,369		2,516		—		4,006

____________


⁽¹⁾	~~Carrying amount includes allowance for loan loss.~~


⁽²⁾	~~Excludes capital lease obligations with a~~The carrying ~~value of $277 million and $245 million as of September 30, 2016 and December 31, 2015, respectively, and debt of certain consolidated VIEs with a carrying value~~ of ~~$39 million and $32 million, respectively.~~


⁽³⁾	~~Carrying amount includes~~values include unamortized deferred financing costs and ~~discounts.~~discount. The carrying values and fair values exclude capital lease obligations and other debt.

The fair values of financial instruments not included in this table are estimated to be equal to their carrying ~~amounts~~values as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015.~~2016. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days, time deposits and commercial paper. The estimated fair values were based on available market pricing information of similar financial instruments.

The estimated fair values of our timeshare financing receivables were based on the expected future cash flows discounted at weighted-average interest rates of the current portfolio, which reflect the risk of the underlying notes, primarily determined by the creditworthiness of the borrowers.

~~The estimated fair values of our~~ Level 1 long-term debt were based on prices in active debt markets. The estimated fair values of our Level 3 long-term debt were based ~~on: (i)~~on indicative quotes received for similar ~~issuances; (ii) the expected future cash flows discounted at risk-adjusted rates; or (iii) the carrying value, where the interest rates approximated current market rates.~~

~~The estimated fair values of our Level 3 timeshare debt were based on the carrying values, excluding unamortized deferred financing costs, as the interest rates approximated current market rates.~~

We measure our interest rate swaps at fair value, which were estimated using an income approach. The primary inputs into our fair value estimate include interest rates and yield curves based on observable market inputs of similar instruments.issuances.

Note ~~12:~~9: Income Taxes

At the end of each quarter, we estimate the effective income tax rate expected to be applied for the full year. The effective income tax rate is determined by the level and composition of pre-tax income or loss, which is subject to federal, foreign, state and local income taxes. ~~The lower effective tax rate, as compared to our statutory tax rate, for the nine months ended September 30, 2016, was primarily attributable to changes in our uncertain tax positions.~~

Our total unrecognized tax benefits as of ~~September~~June 30, ~~2016~~2017 were $173 million. We accrued approximately $35 million for the payment of interest and ~~December 31, 2015 were $248 million~~penalties as of June 30, 2017. As a result of the expected resolution of examination issues with federal, state and ~~$407 million, respectively. During~~foreign tax authorities, we believe it is reasonably possible that during the ~~nine~~next 12 months ~~ended September 30, 2016, we released $220 million~~the amount of ~~reserves related to~~ unrecognized tax benefits will decrease up to $8 million. Included in the balance of unrecognized tax benefits as of June 30, 2017 was $171 million associated with positions that, ~~we have either settled or determined that we are more likely than not~~if favorably resolved, would provide a benefit to ~~receive the full benefit for.~~our effective income tax rate.

In April 2014, we received 30-day Letters from the Internal Revenue Service ("IRS") and the Revenue Agents Report ("RAR") for the 2006 and October 2007 tax years. We disagreed with several of the proposed adjustments in the RAR, filed a formal appeals protest with the IRS and did not make any tax payments related to this audit. The issues being protested in appeals relate to assertions by the IRS that: ~~(1)~~(i) certain foreign currency denominated intercompany loans from our foreign

subsidiaries to certain U.S. subsidiaries should be recharacterized as equity for U.S. federal income tax purposes and constitute deemed dividends from such foreign subsidiaries to our U.S. subsidiaries; ~~(2)~~(ii) in calculating the amount of U.S. taxable income resulting from our Hilton ~~HHonors~~Honors guest loyalty program, we should not reduce gross income by the estimated costs of future redemptions, but rather such costs would be deductible at the time the points are redeemed; and ~~(3)~~(iii) certain foreign currency denominated loans issued by one of our Luxembourg subsidiaries whose functional currency is the U.S. dollar ("USD"), should instead be treated as issued by one of our Belgian subsidiaries whose functional currency is the euro, and thus foreign currency gains and losses with respect to such loans should have been measured in euros, instead of USD. Additionally, in January 2016, we received a 30-day Letter from the IRS and the RAR for the December 2007 through 2010 tax years. The RAR includes the proposed ~~adjustments~~adjustments for tax years December 2007 through 2010, which reflect the carryover effect of the three protested issues from 2006 through October 2007. These proposed adjustments will also be protested in appeals and formal appeals protests have been submitted. In total, the proposed adjustments sought by the IRS would result in additional U.S. federal tax owed of approximately ~~$874~~$874 million, excluding interest and penalties and potential state income taxes. The portion of this amount related to ~~our~~ Hilton ~~HHonors guest loyalty program~~Honors would result in a decrease to our future tax liability when the points are redeemed. We disagree with the IRS's position on each of these assertions and intend to vigorously contest them. However, ~~as a result of recent developments related to the~~based on continuing appeals process discussions ~~that have taken place during 2016, we have determined based on on-going discussions~~ with the IRS, we believe that it is more likely than not that we will not recognize the full benefit related to certain of the issues being appealed. Accordingly, ~~as of September 30, 2016,~~ we have ~~recognized a $44~~recorded $47 million ~~unrecognized tax benefit.~~

We recognize interest and penalties accrued related to uncertain tax positions in income tax expense. We had accrued approximately $26 million and $27 million for the payment of interest and penalties as of September 30, 2016 and December 31, 2015, respectively. As a result of the expected resolution of examination issues with federal, state and foreign tax authorities, we believe it is reasonably possible that during the next 12 months the amount of unrecognized tax benefits ~~will decrease up~~related to $1 million. Included in the balance of unrecognized tax benefits as of September 30, 2016 and December 31, 2015 were $208 million and $377 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective tax rate.these issues.

We file income tax returns, including returns for our subsidiaries, with federal, state, local and foreign tax jurisdictions. We are under regular and recurring audit by the IRS and other taxing authorities on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in federal, state, local ~~federal~~ and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. We are no longer subject to U.S. federal income tax examination for years through 2004. As of ~~September~~June 30, ~~2016,~~2017, we remain subject to federal examinations from 2005-2015, state examinations from ~~2003-2015~~2005-2015 and foreign examinations of our income tax returns for the years 1996 through ~~2015.~~2016.

State income tax returns are generally subject to examination for a period of three to five years after filing the respective return; however, the state effect of any federal tax return changes remains subject to examination by various states for a period generally of up to one year after formal notification to the states. The statute of limitations for the foreign jurisdictions generally ranges from three to ten years after filing the respective tax return.

~~Note 13: Employee Benefit Plans~~

~~We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation.~~

We have a noncontributory retirement plan in the U.S., which covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996. We also have multiple employee benefit plans that cover many of our international employees. These include a plan that covers workers in the United Kingdom, which was frozen to further accruals in November 2013, and a number of smaller plans that cover workers in various other countries around the world. The net periodic pension cost for our employee benefit plans was $1 million and $2 million for the three months ended September 30, 2016 and 2015, respectively, and $4 million and $8 million for the nine months ended September 30, 2016 and 2015, respectively.

Note ~~14:~~10: Share-Based Compensation

WeUnder our 2013 and 2017 Omnibus Incentive Plans, we issue time-vesting restricted stock units and restricted stock ("RSUs"), nonqualified stock options ("options"), performance-vesting restricted stock units and restricted stock (collectively, "performance shares") and deferred share units ("DSUs"). We recognized share-based compensation expense of ~~$26~~$34 million and ~~$22~~$23 million during the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$70~~$59 million and ~~$143~~$39 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, which included amounts reimbursed by hotel owners. Share-based compensation expense for the nine months ended September 30, 2015 included $66 million of compensation expense that was recognized when certain remaining awards granted in connection with our initial public offering vested during 2015. As of ~~September~~June 30, ~~2016,~~2017, unrecognized compensation costs for unvested awards was ~~approximate~~l~~y $116~~approximately $165 million, which isare expected to be recognized over a weighted-average period of ~~1.9 years~~2.0 years on a straight-line basis. As of ~~September~~June 30, ~~2016,~~2017, there ~~were 62,204,701~~ ~~shares~~were 17,979,543 shares of common stock available for future ~~issuance.~~issuance under our 2017 Omnibus Incentive Plan, plus any shares subject to awards outstanding under our 2013 Omnibus Incentive Plan, which will become available for issuance under our 2017 Omnibus Incentive Plan as a result of such outstanding awards expiring or terminating or being canceled or forfeited.

All historical share and share-related information have been adjusted to reflect the Reverse Stock Split. See Note 1: "Organization and Basis of Presentation" for additional information.

Effect of the Spin-offs on Equity Awards

In connection with the spin-offs, the outstanding share-based compensation awards held by employees transferring to Park and HGV were converted to equity awards in Park and HGV common stock, respectively.

Share-based compensation awards of employees remaining at Hilton were adjusted using a conversion factor in accordance with the anti-dilution provisions of the 2013 Omnibus Incentive Plan with the intent to preserve the intrinsic value of the original awards (the "Conversion Factor"). The adjustments were determined by comparing the fair value of such awards immediately prior to the spin-offs to the fair value of such awards immediately after the spin-offs. The comparison resulted in no incremental compensation expense. Equity awards that were adjusted generally remain subject to the same vesting, expiration and other terms and conditions as applied to the awards immediately prior to the spin-offs.

RSUs

~~During~~The following table summarizes the ~~nine~~activity of our RSUs during the six months ended ~~September~~June 30, ~~2016, we issued 3,507,714~~2017:



	Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2016	1,624,541		$	65.24
Conversion from performance shares upon completion of the spin-offs⁽¹⁾	671,604		72.42
Effect of the spin-offs⁽²⁾	439,113		57.60
Granted	1,459,473		58.77
Vested⁽²⁾	(881,070	)	47.26
Forfeited⁽²⁾	(81,616	)	49.07
Outstanding as of June 30, 2017⁽²⁾	3,232,045		52.63

____________


⁽¹⁾	Represents all performance shares outstanding as of December 31, 2016.


⁽²⁾	The weighted average grant date fair value was adjusted to reflect the Conversion Factor.

The RSUs ~~with a weighted average grant date fair value of $19.91, which~~granted during the six months ended June 30, 2017 generally vest in equal annual installments over two or three years from the date of grant.

Options

~~During~~The following table summarizes the ~~nine~~activity of our options during the six months ended ~~September~~June 30, ~~2016, we issued 1,509,451~~2017:



	Number of Options		Weighted Average Exercise Price per Share
Outstanding as of December 31, 2016	1,076,031		$	66.83
Effect of the spin-offs⁽¹⁾	251,145		57.60
Granted	748,965		58.40
Exercised⁽¹⁾	(34,939	)	45.71
Forfeited, canceled or expired⁽¹⁾	(2,149	)	51.86
Outstanding as of June 30, 2017⁽¹⁾	2,039,053		51.23
Exercisable as of June 30, 2017⁽¹⁾	768,747		48.31

____________


⁽¹⁾	The weighted average exercise price was adjusted to reflect the Conversion Factor.

The options ~~with an exercise price of $19.61, which~~granted during 2017 vest over three years from the date of grant and terminate 10 years from the date of grant or earlier if the individual’s service terminates inunder certain circumstances.

The weighted average grant date fair value of ~~these~~the options granted during the six months ended June 30, 2017 was ~~$5.47,~~$13.96, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:



Expected volatility⁽¹⁾	~~32.00~~24.00	%
Dividend yield⁽²⁾	~~1.43~~0.92 - 1.03%	%
Risk-free rate⁽³⁾	~~1.36~~1.93 - 2.03%	%
Expected term (in years)⁽⁴⁾	6.0

____________

⁽¹⁾

~~Due~~Estimated using historical movement of Hilton's stock price and, due to limited trading history, of our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption in addition to our historical and implied volatility. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.assumption.


⁽²⁾	Estimated based on the expected annualized dividend ~~payment.~~payment at the date of grant.


⁽³⁾	Based on the yields of U.S. Department of Treasury instruments with similar expected lives.


⁽⁴⁾	Estimated using the average of the vesting periods and the contractual term of the options.

~~As of~~ ~~September 30, 2016,~~ ~~885,644~~ ~~options outstanding were exercisable.~~

Performance Shares

~~During the nine months ended September 30,~~As of December 31, 2016, we ~~issued 1,804,706~~had outstanding performance ~~shares. The performance shares are settled at the end of the three-year performance period with 50 percent of the shares subject to achievement~~awards based on a measure of the Company’s total shareholder return relative to the total shareholder returns of members of a peer company group ("relative shareholder return") and based on

the Company’s earnings before interest expense, income taxes and depreciation and amortization ("EBITDA") compound annual growth rate ("CAGR"). Upon completion of the spin-offs, we converted all 671,604 outstanding performance shares to RSUs based on a 100 percent achievement percentage with the same vesting periods as the original awards and, as of June 30, 2017, there were no outstanding performance shares based on relative shareholder return.

During the six months ended June 30, 2017, we issued performance shares with 50 percent of the shares subject to achievement based on the Company's EBITDA CAGR and the other 50 percent of the shares subject to achievement based on the Company’s ~~earnings before interest expense, taxes and depreciation and amortization~~free cash flow ("~~EBITDA"~~FCF") ~~compound annual growth rate~~per share CAGR ("FCF CAGR").

The ~~grant date fair value of these~~ performance shares ~~based on relative shareholder return was $20.81, which was determined using a Monte Carlo simulation valuation model with~~are settled at the ~~following assumptions:~~



~~Expected volatility~~⁽¹⁾	~~31.00~~	%
~~Dividend yield~~⁽²⁾	—	%
~~Risk-free rate~~⁽³⁾	~~0.92~~	%
~~Expected term (in years)~~⁽⁴⁾	~~2.8~~

~~____________~~

⁽¹⁾

Due to limited trading history of our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption in addition to our historical and implied volatility. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.


⁽²⁾	As dividends are assumed to be reinvested in shares of common stock and dividends will not be paid to the participants of the performance shares unless the shares vest, we utilized a dividend yield of zero percent.


⁽³⁾	~~Based on the yields of U.S. Department of Treasury instruments with similar expected lives.~~


⁽⁴⁾	~~Midpoint of the 30-calendar day period preceding the~~ end ~~of the performance period.~~

~~The grant date fair value~~ of ~~these~~the three-year performance ~~shares based on our EBITDA CAGR was $19.61. For these shares, we~~period. We determined that the performance condition for these awards is probable of achievement and, as of ~~September~~June 30, ~~2016,~~2017, we recognized compensation expense based on the anticipated achievement percentage ~~as follows:~~of 150 percent and 100 percent for the performance awards based on EBITDA CAGR and FCF CAGR, respectively.

The following table summarizes the activity of our performance shares during the six months ended June 30, 2017:



	~~Achievement Percentage~~
~~2014 grants~~	~~125~~	%
~~2015 grants~~	88	%
~~2016 grants~~	63	%



	EBITDA CAGR				FCF CAGR
	Number of Shares		Weighted Average Grant Date Fair Value per Share		Number of Shares	Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2016	335,802		$	68.09	—	N/A
Conversion to RSUs upon completion of the spin-offs	(335,802	)	68.09		—	N/A
Granted	179,006		58.40		178,975	$	58.40
Outstanding as of June 30, 2017	179,006		58.40		178,975	58.40

DSUs

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we issued to our independent directors ~~34,259~~13,740 DSUs with a grant date fair value of ~~$22.04,~~$65.48, which are fully vested and non-forfeitable on the grant date. DSUs are settled for shares of our common stock and deliverable upon the earlier of termination of the individual's service on our board of directors or a change in control.

Note 11: Stockholders' Equity and Accumulated Other Comprehensive Loss

The changes in the components of stockholders' equity were as follows:



	Equity Attributable to Hilton Stockholders
					Treasury Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss
	Common Stock															Noncontrolling Interests
	Shares		Amount													Noncontrolling Interests			Total
	(in millions)
Balance as of December 31, 2016⁽¹⁾	329		$	3	$	—		$	10,220	$	(3,323	)	$	(1,001	)	$	(50	)	$	5,849
Share-based compensation	2		—		—			24		—			—			—			24
Repurchases of common stock	(6	)	—		(352		)	—		—			—			—			(352		)
Net income	—		—		—			—		240			—			2			242
Other comprehensive income	—		—		—			—		—			71			—			71
Dividends	—		—		—			—		(99		)	—			—			(99		)
Spin-offs of Park and HGV	—		—		—			—		(4,331		)	63			49			(4,219		)
Cumulative effect of the adoption of ASU 2016-09	—		—		—			1		(1		)	—			—			—
Distributions	—		—		—			—		—			—			(1		)	(1		)
Balance as of June 30, 2017	325		$	3	$	(352	)	$	10,245	$	(7,514	)	$	(867	)	$	—		$	1,515



	Equity Attributable to Hilton Stockholders
				Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss
	Common Stock											Noncontrolling Interests⁽²⁾
	Shares	Amount										Noncontrolling Interests⁽²⁾			Total
	(in millions)
Balance as of December 31, 2015⁽¹⁾	329	$	3	$	10,158	$	(3,392	)	$	(784	)	$	(34	)	$	5,951
Share-based compensation	1	—		24		—			—			—			24
Net income	—	—		—		548			—			6			554
Other comprehensive loss	—	—		—		—			(42		)	(2		)	(44		)
Dividends	—	—		—		(140		)	—			—			(140		)
Cumulative effect of the adoption of ASU 2015-02	—	—		—		—			—			5			5
Distributions	—	—		—		—			—			(4		)	(4		)
Balance as of June 30, 2016⁽¹⁾	330	$	3	$	10,182	$	(2,984	)	$	(826	)	$	(29	)	$	6,346

____________


⁽¹⁾	Common stock and additional paid-in capital were adjusted to reflect the Reverse Stock Split. See Note 1: "Organization and Basis of Presentation" for additional information.


⁽²⁾	Other comprehensive loss attributable to non-controlling interests was related to currency translation adjustments.

In February 2017, our board of directors authorized a stock repurchase program of up to $1.0 billion of the Company's common stock. During the six months ended June 30, 2017, we repurchased 5,671,472 shares of common stock under the program at a total cost of $352 million, including the repurchase of 1,500,000 shares from affiliates of Blackstone for a total cost of $99 million in June 2017. As of June 30, 2017, $648 million remained available for share repurchases under the program.

The changes in the components of accumulated other comprehensive loss, net of taxes, were as follows:



	Currency Translation Adjustment⁽¹⁾			Pension Liability Adjustment⁽²⁾			Cash Flow Hedge Adjustment⁽³⁾			Total
	(in millions)
Balance as of December 31, 2016	$	(738	)	$	(251	)	$	(12	)	$	(1,001	)
Other comprehensive income (loss) before reclassifications	74			—			(10		)	64
Amounts reclassified from accumulated other comprehensive loss	—			4			3			7
Net current period other comprehensive income (loss)	74			4			(7		)	71
Spin-offs of Park and HGV	63			—			—			63
Balance as of June 30, 2017	$	(601	)	$	(247	)	$	(19	)	$	(867	)



	Currency Translation Adjustment⁽¹⁾			Pension Liability Adjustment⁽²⁾			Cash Flow Hedge Adjustment			Total
	(in millions)
Balance as of December 31, 2015	$	(580	)	$	(194	)	$	(10	)	$	(784	)
Other comprehensive loss before reclassifications	(37		)	(1		)	(6		)	(44		)
Amounts reclassified from accumulated other comprehensive loss	(1		)	3			—			2
Net current period other comprehensive income (loss)	(38		)	2			(6		)	(42		)
Balance as of June 30, 2016	$	(618	)	$	(192	)	$	(16	)	$	(826	)

____________


⁽¹⁾	Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature. Amounts reclassified related to gains on net investment hedges and were recognized in other non-operating income, net, net of a tax benefit of less than $1 million, in our condensed consolidated statement of operations for the six months ended June 30, 2016.


⁽²⁾	Amounts reclassified include the amortization of prior service cost and net loss that were included in our computation of net periodic pension cost. They were recognized in general and administrative expenses, net of a $2 million tax benefit, in our condensed consolidated statements of operations for the six months ended June 30, 2017 and 2016, respectively.


⁽³⁾	Amount reclassified includes $5 million related to the 2013 Interest Rate Swaps, net of a tax benefit of $2 million, recognized in interest expense in our condensed consolidated statement of operations for the six months ended June 30, 2017.

Note ~~15:~~12: Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS"):. All historical share and per share amounts have been adjusted to reflect the Reverse Stock Split. See Note 1: "Organization and Basis of Presentation" for additional information.


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
	(in millions, except per share amounts)								(in millions, except per share amounts)
Basic EPS:
Numerator:
Net income attributable to Hilton stockholders	$	187	$	279	$	735	$	590
Net income from continuing operations attributable to Hilton stockholders									$	166	$	96	$	240	$	288
Denominator:
Weighted average shares outstanding	988		987		988		986		327		329		328		329
Basic EPS	$	0.19	$	0.28	$	0.74	$	0.60	$	0.51	$	0.29	$	0.73	$	0.88

Diluted EPS:
Numerator:
Net income attributable to Hilton stockholders	$	187	$	279	$	735	$	590
Net income from continuing operations attributable to Hilton stockholders									$	166	$	96	$	240	$	288
Denominator:
Weighted average shares outstanding	992		989		991		989		329		330		330		330
Diluted EPS	$	0.19	$	0.28	$	0.74	$	0.60	$	0.51	$	0.29	$	0.73	$	0.87

~~Approximately 2~~Approximately 1 million share-based compensation awards were excluded from the weighted average shares outstanding used in the computation of diluted EPS for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017 and ~~1 million awards were excluded for the three and nine months ended September~~June 30, ~~2015~~2016 because their effect would have been anti-dilutive under the treasury stock method.

~~Note 16: Accumulated Other Comprehensive Loss~~

~~The components of accumulated other comprehensive loss, net of taxes, were as follows:~~

Currency Translation Adjustment⁽¹⁾
Pension Liability Adjustment Cash Flow Hedge Adjustment Total
(in millions)
Balance as of December 31, 2015 $ (580 ) $ (194 ) $ (10 ) $ (784 )

Other comprehensive loss before reclassifications (40 ) (2 ) (4 ) (46 )
Amounts reclassified from accumulated other comprehensive loss (1 ) 4
1
4
Net current period other comprehensive income (loss) (41 ) 2
(3 ) (42 )

Balance as of September 30, 2016 $ (621 ) $ (192 ) $ (13 ) $ (826 )

Currency Translation Adjustment⁽¹⁾
Pension Liability Adjustment Cash Flow Hedge Adjustment Total
(in millions)
Balance as of December 31, 2014 $ (446 ) $ (179 ) $ (3 ) $ (628 )

Other comprehensive loss before reclassifications (173 ) (1 ) (11 ) (185 )
Amounts reclassified from accumulated other comprehensive loss 16
4
—
20
Net current period other comprehensive income (loss) (157 ) 3
(11 ) (165 )

Balance as of September 30, 2015 $ (603 ) $ (176 ) $ (14 ) $ (793 )

~~____________~~


⁽¹⁾	~~Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature.~~

The following table presents additional information about reclassifications out of accumulated other comprehensive loss; amounts in parentheses indicate a loss in our condensed consolidated statements of operations:

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(in millions)
Currency translation adjustment:
Sale and liquidation of foreign assets⁽¹⁾
$ —
$ (25 ) $ —
$ (25 )
Gains on net investment hedges⁽²⁾
—
—
1
—
Tax benefit⁽³⁾⁽⁴⁾
—
9
—
9
Total currency translation adjustment reclassifications for the period, net of tax —
(16 ) 1
(16 )

Pension liability adjustment:
Amortization of prior service cost⁽⁵⁾
(1 ) (1 ) (3 ) (3 )
Amortization of net loss⁽⁵⁾
(1 ) —
(4 ) (4 )
Tax benefit⁽³⁾
1
1
3
3
Total pension liability adjustment reclassifications for the period, net of tax (1 ) —
(4 ) (4 )

Cash flow hedge adjustment:
Dedesignation of interest rate swaps⁽⁶⁾
(1 ) —
(1 ) —
Tax benefit⁽³⁾⁽⁷⁾
—
—
—
—
Total cash flow hedge adjustment reclassifications for the period, net of tax (1 ) —
(1 ) —

Total reclassifications for the period, net of tax $ (2 ) $ (16 ) $ (4 ) $ (20 )

~~____________~~


⁽¹⁾	Reclassified out of accumulated other comprehensive loss to gain on sales of assets, net for the three and nine months ended September 30, 2015 in our condensed consolidated statements of operations. See Note 4: "Disposals" for additional information.


⁽²⁾	~~Reclassified out of accumulated other comprehensive loss to other gain (loss), net in our condensed consolidated statements of operations.~~


⁽³⁾	~~Reclassified out of accumulated other comprehensive loss to income tax expense in our condensed consolidated statements of operations.~~


⁽⁴⁾	~~The tax benefit was less than $1 million for the nine months ended September 30, 2016.~~


⁽⁵⁾	Reclassified out of accumulated other comprehensive loss to general, administrative and other in our condensed consolidated statements of operations. These amounts were included in the computation of net periodic pension cost (credit).


⁽⁶⁾	~~Reclassified out of accumulated other comprehensive loss to interest expense in our condensed consolidated statements of operations.~~


⁽⁷⁾	~~The tax benefit was less than $1 million for the three and nine months ended September 30, 2016.~~

Note ~~17:~~13: Business Segments

We are a diversified hospitality company with operations organized in ~~three~~two distinct operating ~~segments: ownership;~~segments following the spin-offs: (i) management and franchise; and ~~timeshare. Each segment is~~(ii) ownership. These segments are managed and reported separately because of ~~its~~their distinct economic characteristics.

The ownership segment included 142 properties totaling 57,868 rooms, comprising 120 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, six hotels owned or leased by consolidated VIEs and 15 hotels that are owned or leased by unconsolidated affiliates, as of September 30, 2016. While we do not include equity in earnings (losses) from unconsolidated affiliates in our measure of segment revenues, we manage these investments in our ownership segment and the results are included in our measure of segment profits.

The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us. As of ~~September~~June 30, ~~2016,~~2017, this segment included ~~545~~633 managed hotels and ~~4,087~~4,324 franchised ~~hotels totaling 4,632~~ hotels consisting of ~~723,404 rooms.~~795,312 total rooms, which includes the 67 hotels with 35,425 rooms that were previously owned or leased by Hilton or unconsolidated affiliates of Hilton and, upon completion of the spin-offs, were owned or leased by Park or unconsolidated affiliates of Park. This segment also earns fees for managing properties in our ownership segment and, effective upon completion of the spin-offs, a license fee from HGV for the exclusive right to use certain Hilton marks and intellectual property in HGV's timeshare ~~segments.~~business.

The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, resort operations and providing timeshare customer financing for the timeshare interests. This segment also provides assistance to third-party developers in selling their timeshare inventory. As of ~~September~~June 30, ~~2016, this~~2017, the ownership segment included ~~46 timeshare~~74 properties totaling ~~7,592 units.~~22,334 rooms, comprising 65 hotels that we wholly owned or leased, one hotel leased by a consolidated non-wholly owned entity, two hotels leased by consolidated VIEs and six hotels owned or leased by unconsolidated affiliates.

~~Corporate and other represents revenues and related~~Prior to the spin-offs, the performance of our operating ~~expenses generated by~~segments was evaluated primarily on Adjusted EBITDA. Following the ~~incidental support of hotel operations for owned, leased, managed and franchised hotels and other rental income, as well as corporate assets and related expenditures.~~

~~The~~spin-offs, the performance of our operating segments is evaluated primarily ~~based~~ on ~~Adjusted EBITDA. We define~~operating income, without allocating corporate and other revenues and other expenses or general and administrative expenses, since we have simplified our operating segments and certain adjustments included in Adjusted EBITDA as EBITDA, further adjusted to exclude certain items, including gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based compensation expense; (viii) severance, relocation and other expenses; and (ix) other items.on a segment basis are no longer applicable.

The following table presents revenues for our reportable segments, reconciled to consolidated amounts:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2016			2015			2016			2015			2017			2016			2017			2016
	(in millions)												(in millions)
Revenues
Management and franchise⁽¹⁾													$	523		$	416		$	959		$	773
Ownership	$	1,040		$	1,089		$	3,128		$	3,194		377			398			677			717
Management and franchise	470			438			1,350			1,263
Timeshare	358			334			1,020			974
Segment revenues	1,868			1,861			5,498			5,431			900			814			1,636			1,490
Other revenues													20			18			57			35
Other revenues from managed and franchised properties	1,105			1,063			3,342			3,074			1,436			1,130			2,831			2,171
Other revenues	24			25			69			67
Intersegment fees elimination⁽¹⁾	(55		)	(54		)	(166		)	(156		)	(10		)	(12		)	(17		)	(20		)
Total revenues	$	2,942		$	2,895		$	8,743		$	8,416		$	2,346		$	1,950		$	4,507		$	3,676

____________

⁽¹⁾~~Includes the following intercompany charges that were eliminated in our condensed consolidated financial statements:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(in millions)
Rental and other fees^(a)
$ 6
$ 6
$ 19
$ 17
Management, royalty and intellectual property fees^(b)
33
33
104
99
Licensing fee^(c)
12
11
33
31
Laundry services^(d)
3
3
6
6
Other^(e)
1
1
4
3
Intersegment fees elimination $ 55
$ 54
$ 166
$ 156

~~____________~~

^(a)~~Represents fees charged to our timeshare segment by our ownership segment.~~

^(b)~~Represents fees charged to our ownership segment by our management and franchise segment.~~

^(c)~~Represents fees charged to our timeshare segment by our management and franchise segment.~~

^(d)~~Represents charges to our ownership segment for services provided by our wholly owned laundry business. Revenues from our laundry business~~

~~are included in other revenues.~~

^(e)~~Represents other intercompany charges, which are a benefit to the ownership segment and a cost to corporate and other.~~

~~The following table provides a reconciliation of segment Adjusted EBITDA to consolidated net income:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(in millions)
Ownership⁽¹⁾⁽²⁾
$ 264
$ 281
$ 770
$ 789
Management and franchise⁽²⁾
470
438
1,350
1,263
Timeshare⁽²⁾
85
99
278
259
Segment Adjusted EBITDA 819
818
2,398
2,311
Corporate and other⁽²⁾
(54 ) (60 ) (174 ) (177 )
Interest expense (148 ) (138 ) (434 ) (431 )
Income tax expense (145 ) (247 ) (255 ) (555 )
Depreciation and amortization (169 ) (171 ) (509 ) (519 )
Interest expense, income tax and depreciation and amortization included in equity in earnings from unconsolidated affiliates (8 ) (6 ) (23 ) (20 )
Gain on sales of assets, net —
164
2
306
Loss on foreign currency transactions (8 ) (8 ) (33 ) (21 )
FF&E replacement reserve (13 ) (9 ) (42 ) (36 )
Share-based compensation expense (26 ) (21 ) (70 ) (143 )
Impairment loss —
—
(15 ) —
Other gain (loss), net (10 ) 1
(15 ) (6 )
Other adjustment items (46 ) (40 ) (84 ) (109 )
Net income $ 192
$ 283
$ 746
$ 600

~~____________~~


⁽¹⁾	Includes ~~unconsolidated affiliate Adjusted EBITDA.~~management, royalty and intellectual property fees charged to our ownership segment, which were eliminated in our condensed consolidated statements of operations.

The following table presents operating income for our reportable segments, reconciled to consolidated income from continuing operations before income taxes:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
	(in millions)
Management and franchise⁽¹⁾	$	523		$	416		$	959		$	773
Ownership⁽¹⁾	37			37			58			41
Segment operating income	560			453			1,017			814
Other revenues, less other expenses	9			7			23			6
Depreciation and amortization	(87		)	(91		)	(176		)	(183		)
Impairment loss	—			—			—			(15		)
General and administrative	(117		)	(97		)	(222		)	(180		)
Gain on sales of assets, net	—			1			—			1
Operating income	365			273			642			443
Interest expense	(100		)	(99		)	(204		)	(189		)
Gain (loss) on foreign currency transactions	5			(14		)	1			(26		)
Loss on debt extinguishment	—			—			(60		)	—
Other non-operating income, net	5			3			6			5
Income from continuing operations before income taxes	$	275		$	163		$	385		$	233

____________


⁽²⁾⁽¹⁾	~~Our measures of Adjusted EBITDA included intercompany charges that~~Includes management, royalty and intellectual property fees charged to our ownership segment by our management and franchise segment, which were eliminated in our condensed consolidated ~~financial statements. Refer to the footnote to the segment revenues table for detail~~statements of ~~the intercompany charges.~~operations.

The following table presents total assets for our reportable segments, reconciled to consolidated ~~amounts:~~assets of continuing operations:


	September 30,		December 31,		June 30,		December 31,
	2016		2015		2017		2016
	(in millions)				(in millions)
Management and franchise					$	10,846	$	10,825
Ownership	$	11,298	$	11,269	970		1,032
Management and franchise	10,314		10,392
Timeshare	2,114		1,935
Corporate and other	2,145		2,026		2,453		2,529
	$	25,871	$	25,622	$	14,269	$	14,386

The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated ~~amounts:~~

capital expenditures of continuing operations:


	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2016		2015		2017		2016
	(in millions)				(in millions)
Ownership	$	203	$	200	$	10	$	25
Timeshare	15		7
Corporate and other	9		7		8		4
	$	227	$	214	$	18	$	29

Note ~~18:~~14: Commitments and Contingencies

~~As of~~ ~~September 30, 2016, we had outstanding guarantees of $25 million, with remaining terms ranging from four years to six years, for debt and other obligations of third parties.~~ We have one letter of credit for $25 million that has been pledged as collateral for one of these guarantees. Although we believe it is unlikely that material payments will be required under these guarantees or letters of credit, there can be no assurance that this will be the case.

~~We have also provided~~provide performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of ~~September~~June 30, ~~2016,~~2017, we had ~~eight~~six contracts containing performance guarantees, with expirations ranging from ~~2017~~2019 to 2030, ~~and~~with possible cash outlays totaling approximately ~~$89~~$72 million. Our obligations under these guarantees in future periods ~~depend~~are dependent on the operating performance levels of these hotels over the remaining terms of the performance guarantees. We do not have any letters of credit pledged as collateral against these guarantees. As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~,2016, we recorded ~~a current liability of approximately $8~~$11 million in accounts payable, accrued expenses and other and ~~a non-current liability of approximately $20~~$14 million and ~~$25~~$17 million, respectively, in other liabilities in our condensed consolidated balance sheets for antwo outstanding performance ~~guarantee~~guarantees that isare related to ~~a VIE~~VIEs for which we are not the primary beneficiary.

As of September 30, 2016, we had outstanding commitments under third-party contracts of approximately $74 million for capital expenditures at certain owned and leased properties. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurs, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

We ~~have~~ entered into an agreement with an affiliate of the owner of a hotel whereby we ~~have~~ agreed to ~~provide~~fund a $60 million junior mezzanine loan to finance the construction of ~~a new~~the hotel, ~~that we will manage.~~which is managed by us. The junior mezzanine loan ~~will be~~is subordinated to a senior mortgage loan and senior mezzanine loan provided by third parties unaffiliated with ~~us and will be funded on a pro rata basis with these loans as the construction costs are incurred.~~us. During the ~~nine~~three months ended ~~September~~June 30, ~~2016 and 2015,~~2017, we funded ~~$25 million and $11~~the remaining $1 million of this commitment ~~respectively,~~ and, ~~we currently expect to fund the remainder of our commitment as follows: $10 million in the remainder of 2016 and $8 million in 2017.~~

We have entered into certain arrangements with developers whereby we have committed to purchase timeshare units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of September 30, 2016, we are committed to purchase approximately $195 million of inventory over a period of four years. The ultimate amount and timing of the acquisitions is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances. During the nine months ended September 30, 2016 and 2015, we purchased $11 million and $17 million, respectively, of inventory as required under our commitments. As of September 30, 2016, our remaining contractual obligations pursuant to these arrangements were expected to be incurred as follows: $3 million in the remainder of 2016; $8 million in 2017; $56 million in 2018; and $128 million in 2019.

In 2010, an affiliate of Blackstone settled a $75 million liability on our behalf in conjunction with a lawsuit settlement by entering into service contracts with the plaintiff. As part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that this affiliate does not fund related to those service contracts up to the value of the settlement amount made by the affiliate. The remaining potential exposuretherefore, as of ~~September~~June 30, ~~2016~~2017, the loan was ~~approximately $14 million. We have not accrued a liability for this guarantee as we believe the likelihood of any material funding to be remote.~~fully funded.

We are involved in ~~other~~ litigation arising in the normal course of business, some of which includes claims for substantial sums. While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of ~~September~~June 30, ~~2016~~2017 will not have a material effect on our ~~condensed~~ consolidated financial position, results of operations ~~financial position~~ or cash flows.

Note ~~19:~~15: Condensed Consolidating Guarantor Financial Information

In October 2013, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. ~~("the Subsidiary~~(the "HWF Issuers"), entities ~~formed in August 2013~~ that are 100 percent owned by Hilton Worldwide Parent LLC ("HWP"), which is 100 percent owned by the Parent, issued ~~$1.5 billion of 5.625% senior notes due in~~the 2021 ~~(the "2021~~ Senior ~~Notes").~~Notes. In ~~August~~September 2016, Hilton Domestic Operating Company Inc. ("HOC"), an entity ~~formed~~incorporated in ~~August~~July 2016 that is 100 percent owned by Hilton Worldwide Finance LLC and is a guarantor of the 2021 Senior Notes, ~~issued~~2025 Senior Notes and 2027 Senior Notes, assumed the 2024 Senior ~~Notes. The 2021~~Notes that were issued in August 2016 by escrow issuers. In March 2017, the HWF Issuers, which are guarantors of the 2024 Senior Notes, issued the 2025 Senior Notes and 2027 Senior Notes, and used the net proceeds and available cash to repay in full the 2021 Senior Notes. The 2024 Senior Notes, 2025 Senior Notes and 2027 Senior Notes are collectively referred to as the Senior Notes. The HWF Issuers and HOC are collectively referred to as the Subsidiary Issuers.

The ~~obligations of the Subsidiary Issuers~~Senior Notes are guaranteed jointly and severally on a senior unsecured basis by HWP, the Parent and certain of the Parent's 100 percent owned domestic restricted subsidiaries that are themselves not issuers of the applicable series of Senior Notes (together, the ~~"Guarantors"~~"Guarantors''). The indentures that govern the Senior Notes provide that any subsidiary of the Company that provides a guarantee of the Senior Secured Credit Facility will guarantee the Senior Notes. ~~None~~As of June 30, 2017, none of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign ~~operations;~~operations or our non-wholly owned ~~subsidiaries; our~~ subsidiaries ~~that secure the CMBS Loan and $446 million in mortgage loans; or certain of our special purpose subsidiaries formed in connection with our Timeshare Facility and Securitized Timeshare Debt~~ guarantee the Senior Notes (collectively, the "Non-Guarantors").

In September 2016, certain employees, assets and liabilities of a guarantor subsidiary were transferred into HOC. This transfer was considered to be a transfer of assets rather than a transfer of a business. Accordingly, we have separately presented HOC as a subsidiary issuer in our condensed consolidating financial information prospectively from the date of the transfer.

In connection with the spin-offs, certain entities that were previously guarantors of the 2021 Senior Notes and 2024 Senior Notes were released and no longer guaranteed these senior notes. The condensed consolidating financial information presents the financial information based on the composition of the Guarantors and Non-Guarantors as of June 30, 2017.

The guarantees are full and unconditional, subject to certain customary release provisions. The indentures that govern the Senior Notes provide that any Guarantor may be released from its guarantee so long as: (i) the subsidiary is sold or sells all of its assets; (ii) the subsidiary is released from its guaranty under the Senior Secured Credit Facility; (iii) the subsidiary is declared "unrestricted" for covenant purposes; (iv) the subsidiary is merged with or ~~(iv)~~into the applicable Subsidiary Issuers or another Guarantor or the Guarantor liquidates after transferring all of its assets to the applicable Subsidiary Issuers or another Guarantor; or (v) the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been ~~satisfied.~~satisfied, in each case in compliance with applicable provisions of the indentures.

The following schedules present the condensed consolidating financial information as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, for the Parent, ~~Subsidiary~~HWF Issuers, HOC, Guarantors and Non-Guarantors.


	September 30, 2016																	June 30, 2017
	Parent		Subsidiary Issuers			Guarantors			Non-Guarantors			Eliminations			Total			Parent		HWF Issuers		HOC		Guarantors		Non-Guarantors		Eliminations			Total
	(in millions)																	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	—		$	78		$	781		$	—		$	859		$	—	$	—	$	3	$	11	$	770	$	—		$	784
Restricted cash and cash equivalents	—		—			171			101			—			272			—		—		87		10		28		—			125
Accounts receivable, net	—		—			594			427			—			1,021			—		—		11		620		290		—			921
Intercompany receivables	—		—			24			42			(66		)	—			—		—		—		—		40		(40		)	—
Inventories	—		—			486			22			—			508
Current portion of financing receivables, net	—		—			59			69			—			128
Prepaid expenses	—		—			62			113			(4		)	171			—		—		6		45		73		(1		)	123
Income taxes receivable	—		—			17			—			—			17			—		—		—		27		—		(27		)	—
Other	—		—			10			38			—			48			—		—		1		4		41		—			46
Total current assets	—		—			1,501			1,593			(70		)	3,024			—		—		108		717		1,242		(68		)	1,999
Property, Intangibles and Other Assets:
Property and equipment, net	—		—			299			8,742			(21		)	9,020
Financing receivables, net	—		—			571			358			—			929
Investments in affiliates	—		—			80			52			—			132
Intangibles and Other Assets:
Investments in subsidiaries	6,506		12,205			6,537			—			(25,248		)	—			1,506		6,911		8,097		1,506		—		(18,020		)	—
Goodwill	—		—			3,851			2,004			—			5,855			—		—		—		3,824		1,340		—			5,164
Brands	—		—			4,405			503			—			4,908			—		—		—		4,404		468		—			4,872
Management and franchise contracts, net	—		—			791			253			—			1,044			—		—		—		677		253		—			930
Other intangible assets, net	—		—			367			158			—			525			—		—		1		281		150		—			432
Property and equipment, net																		—		—		13		61		264		—			338
Deferred income tax assets	10		6			—			75			(16		)	75			9		4		166		—		87		(184		)	82
Other	—		7			205			147			—			359			—		10		32		218		192		—			452
Total property, intangibles and other assets	6,516		12,218			17,106			12,292			(25,285		)	22,847

Total intangibles and other assets																		1,515		6,925		8,309		10,971		2,754		(18,204		)	12,270
TOTAL ASSETS	$	6,516	$	12,218		$	18,607		$	13,885		$	(25,355	)	$	25,871		$	1,515	$	6,925	$	8,417	$	11,688	$	3,996	$	(18,272	)	$	14,269

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—	$	49		$	1,625		$	684		$	(4	)	$	2,354		$	—	$	23	$	204	$	1,193	$	460	$	(1	)	$	1,879
Intercompany payables	—		—			42			31			(73		)	—			—		—		40		—		—		(40		)	—
Current maturities of long-term debt	—		(9		)	(3		)	113			—			101			—		32		—		—		16		—			48
Current maturities of timeshare debt	—		—			—			80			—			80
Income taxes payable	—		—			28			35			—			63			—		—		—		5		84		(27		)	62
Total current liabilities	—		40			1,692			943			(77		)	2,598			—		55		244		1,198		560		(68		)	1,989
Long-term debt	—		5,651			1,038			3,194			—			9,883			—		5,349		982		—		241		—			6,572
Timeshare debt	—		—			—			337			—			337
Deferred revenues	—		—			96			—			—			96			—		—		—		99		—		—			99
Deferred income tax liabilities	—		—			1,920			2,583			(16		)	4,487			—		—		—		1,857		—		(184		)	1,673
Liability for guest loyalty program	—		—			853			—			—			853			—		—		—		884		—		—			884
Other	—		21			803			302			—			1,126			—		15		280		526		716		—			1,537
Total liabilities	—		5,712			6,402			7,359			(93		)	19,380			—		5,419		1,506		4,564		1,517		(252		)	12,754

Equity:
Total Hilton stockholders' equity	6,516		6,506			12,205			6,551			(25,262		)	6,516			1,515		1,506		6,911		7,124		2,479		(18,020		)	1,515
Noncontrolling interests	—		—			—			(25		)	—			(25		)	—		—		—		—		—		—			—
Total equity	6,516		6,506			12,205			6,526			(25,262		)	6,491			1,515		1,506		6,911		7,124		2,479		(18,020		)	1,515

TOTAL LIABILITIES AND EQUITY	$	6,516	$	12,218		$	18,607		$	13,885		$	(25,355	)	$	25,871		$	1,515	$	6,925	$	8,417	$	11,688	$	3,996	$	(18,272	)	$	14,269


	December 31, 2015																December 31, 2016
	Parent		Subsidiary Issuers			Guarantors		Non-Guarantors			Eliminations			Total			Parent		HWF Issuers		HOC		Guarantors		Non-Guarantors			Eliminations			Total
	(in millions)																(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	—		$	223	$	386		$	—		$	609		$	—	$	—	$	3	$	22	$	1,037		$	—		$	1,062
Restricted cash and cash equivalents	—		—			148		99			—			247			—		—		87		9		25			—			121
Accounts receivable, net	—		—			501		375			—			876			—		—		7		484		264			—			755
Intercompany receivables	—		—			89		—			(89		)	—			—		—		—		—		42			(42		)	—
Inventories	—		—			419		23			—			442
Current portion of financing receivables, net	—		—			55		74			—			129
Prepaid expenses	—		—			39		129			(21		)	147			—		—		6		21		65			(3		)	89
Income taxes receivable	—		—			120		—			(23		)	97			—		—		—		30		—			(17		)	13
Other	—		—			9		29			—			38			—		—		1		5		33			—			39
Current assets of discontinued operations																	—		—		—		—		1,502			(24		)	1,478
Total current assets	—		—			1,603		1,115			(133		)	2,585			—		—		104		571		2,968			(86		)	3,557
Property, Intangibles and Other Assets:
Property and equipment, net	—		—			304		8,815			—			9,119
Financing receivables, net	—		—			451		436			—			887
Investments in affiliates	—		—			94		44			—			138
Intangibles and Other Assets:
Investments in subsidiaries	6,166		11,854			5,232		—			(23,252		)	—			5,889		11,300		12,583		5,889		—			(35,661		)	—
Goodwill	—		—			3,851		2,036			—			5,887			—		—		—		3,824		1,394			—			5,218
Brands	—		—			4,405		514			—			4,919			—		—		—		4,404		444			—			4,848
Management and franchise contracts, net	—		—			877		272			—			1,149			—		—		—		716		247			—			963
Other intangible assets, net	—		—			402		184			—			586			—		—		1		296		150			—			447
Property and equipment, net																	—		—		12		62		267			—			341
Deferred income tax assets	24		3			—		78			(27		)	78			10		2		167		—		82			(179		)	82
Other	—		9			165		100			—			274			—		12		30		213		153			—			408
Total property, intangibles and other assets	6,190		11,866			15,781		12,479			(23,279		)	23,037

Non-current assets of discontinued operations																	—		—		—		12		10,345			(10		)	10,347
Total intangibles and other assets																	5,899		11,314		12,793		15,416		13,082			(35,850		)	22,654
TOTAL ASSETS	$	6,190	$	11,866		$	17,384	$	13,594		$	(23,412	)	$	25,622		$	5,899	$	11,314	$	12,897	$	15,987	$	16,050		$	(35,936	)	$	26,211

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—	$	39		$	1,542	$	646		$	(21	)	$	2,206		$	—	$	26	$	293	$	1,091	$	414		$	(3	)	$	1,821
Intercompany payables	—		—			—		89			(89		)	—			—		—		42		—		—			(42		)	—
Current maturities of long-term debt	—		(12		)	—		106			—			94			—		26		—		—		7			—			33
Current maturities of timeshare debt	—		—			—		110			—			110
Income taxes payable	—		—			6		50			(23		)	33			—		—		—		—		73			(17		)	56
Current liabilities of discontinued operations																	—		—		—		77		721			(24		)	774
Total current liabilities	—		27			1,548		1,001			(133		)	2,443			—		52		335		1,168		1,215			(86		)	2,684
Long-term debt	—		5,659			54		4,144			—			9,857			—		5,361		981		—		241			—			6,583
Timeshare debt	—		—			—		392			—			392
Deferred revenues	—		—			282		1			—			283			—		—		—		42		—			—			42
Deferred income tax liabilities	—		—			2,041		2,616			(27		)	4,630			—		—		—		1,919		38			(179		)	1,778
Liability for guest loyalty program	—		—			784		—			—			784			—		—		—		889		—			—			889
Other	205		14			821		242			—			1,282			—		12		277		490		713			—			1,492
Non-current liabilities of discontinued operations																	—		—		4		—		6,900			(10		)	6,894
Total liabilities	205		5,700			5,530		8,396			(160		)	19,671			—		5,425		1,597		4,508		9,107			(275		)	20,362

Equity:
Total Hilton stockholders' equity	5,985		6,166			11,854		5,232			(23,252		)	5,985			5,899		5,889		11,300		11,479		6,993			(35,661		)	5,899
Noncontrolling interests	—		—			—		(34		)	—			(34		)	—		—		—		—		(50		)	—			(50		)
Total equity	5,985		6,166			11,854		5,198			(23,252		)	5,951			5,899		5,889		11,300		11,479		6,943			(35,661		)	5,849

TOTAL LIABILITIES AND EQUITY	$	6,190	$	11,866		$	17,384	$	13,594		$	(23,412	)	$	25,622		$	5,899	$	11,314	$	12,897	$	15,987	$	16,050		$	(35,936	)	$	26,211


	Three Months Ended September 30, 2016																	Three Months Ended June 30, 2017
	Parent		Subsidiary Issuers			Guarantors			Non-Guarantors			Eliminations			Total			Parent		HWF Issuers			HOC			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)																	(in millions)
Revenues
Franchise fees																		$	—	$	—		$	49		$	296		$	32		$	(5	)	$	372
Base and other management fees																		—		—			—			53			32			—			85
Incentive management fees																		—		—			—			21			35			—			56
Owned and leased hotels	$	—	$	—		$	63		$	977		$	(7	)	$	1,033		—		—			—			—			377			—			377
Management and franchise fees and other	—		—			377			93			(24		)	446
Timeshare	—		—			341			17			—			358
Other revenues																		—		—			2			16			2			—			20
	—		—			781			1,087			(31		)	1,837			—		—			51			386			478			(5		)	910
Other revenues from managed and franchised properties	—		—			1,306			123			(324		)	1,105			—		—			41			1,229			166			—			1,436
Total revenues	—		—			2,087			1,210			(355		)	2,942			—		—			92			1,615			644			(5		)	2,346

Expenses
Owned and leased hotels	—		—			46			747			(22		)	771			—		—			—			—			330			—			330
Timeshare	—		—			259			4			(6		)	257
Depreciation and amortization	—		—			81			88			—			169			—		—			2			61			24			—			87
General, administrative and other	—		—			123			27			(3		)	147
General and administrative																		—		—			92			(2		)	27			—			117
Other expenses																		—		—			3			9			4			(5		)	11
	—		—			509			866			(31		)	1,344			—		—			97			68			385			(5		)	545
Other expenses from managed and franchised properties	—		—			1,306			123			(324		)	1,105			—		—			41			1,229			166			—			1,436
Total expenses	—		—			1,815			989			(355		)	2,449			—		—			138			1,297			551			(5		)	1,981

Operating income	—		—			272			221			—			493
Operating income (loss)																		—		—			(46		)	318			93			—			365

Interest income	—		—			2			1			—			3
Interest expense	—		(65		)	(24		)	(59		)	—			(148		)	—		(60		)	(26		)	—			(14		)	—			(100		)
Equity in earnings from unconsolidated affiliates	—		—			5			2			—			7
Gain (loss) on foreign currency transactions	—		—			(20		)	12			—			(8		)	—		—			2			53			(50		)	—			5
Other loss, net	—		(5		)	—			(5		)	—			(10		)
Other non-operating income, net																		—		—			2			3			—			—			5

Income (loss) before income taxes and equity in earnings from subsidiaries	—		(70		)	235			172			—			337
Income (loss) from continuing operations before income taxes and equity in earnings from subsidiaries																		—		(60		)	(68		)	374			29			—			275

Income tax benefit (expense)	1		27			(105		)	(68		)	—			(145		)	—		24			25			(147		)	(10		)	—			(108		)

Income (loss) before equity in earnings from subsidiaries	1		(43		)	130			104			—			192
Income (loss) from continuing operations before equity in earnings from subsidiaries																		—		(36		)	(43		)	227			19			—			167

Equity in earnings from subsidiaries	186		229			99			—			(514		)	—			166		202			245			166			—			(779		)	—

Net income	187		186			229			104			(514		)	192			166		166			202			393			19			(779		)	167
Net income attributable to noncontrolling interests	—		—			—			(5		)	—			(5		)	—		—			—			—			(1		)	—			(1		)
Net income attributable to Hilton stockholders	$	187	$	186		$	229		$	99		$	(514	)	$	187		$	166	$	166		$	202		$	393		$	18		$	(779	)	$	166

Comprehensive income	$	187	$	189		$	214		$	117		$	(514	)	$	193		$	217	$	161		$	201		$	394		$	76		$	(830	)	$	219
Comprehensive income attributable to noncontrolling interests	—		—			—			(6		)	—			(6		)	—		—			—			—			(2		)	—			(2		)
Comprehensive income attributable to Hilton stockholders	$	187	$	189		$	214		$	111		$	(514	)	$	187		$	217	$	161		$	201		$	394		$	74		$	(830	)	$	217

Three Months Ended September 30, 2015
Parent Subsidiary Issuers Guarantors Non-Guarantors Eliminations Total
(in millions)
Revenues
Owned and leased hotels $ —
$ —
$ 64
$ 1,025
$ (7 ) $ 1,082
Management and franchise fees and other —
—
355
86
(25 ) 416
Timeshare —
—
314
20
—
334
—
—
733
1,131
(32 ) 1,832
Other revenues from managed and franchised properties —
—
1,199
116
(252 ) 1,063
Total revenues —
—
1,932
1,247
(284 ) 2,895

Expenses
Owned and leased hotels —
—
46
773
(21 ) 798
Timeshare —
—
221
4
(6 ) 219
Depreciation and amortization —
—
82
89
—
171
General, administrative and other —
—
117
33
(5 ) 145
—
—
466
899
(32 ) 1,333
Other expenses from managed and franchised properties —
—
1,199
116
(252 ) 1,063
Total expenses —
—
1,665
1,015
(284 ) 2,396

Gain on sales of assets, net —
—
—
164
—
164

Operating income —
—
267
396
—
663

Interest income —
—
2
1
—
3
Interest expense —
(69 ) (9 ) (60 ) —
(138 )
Equity in earnings from unconsolidated affiliates —
—
7
2
—
9
Gain (loss) on foreign currency transactions —
—
213
(221 ) —
(8 )
Other gain, net —
—
—
1
—
1

Income (loss) before income taxes and equity in earnings from subsidiaries —
(69 ) 480
119
—
530

Income tax benefit (expense) (1 ) 27
(200 ) (73 ) —
(247 )

Income (loss) before equity in earnings from subsidiaries (1 ) (42 ) 280
46
—
283

Equity in earnings from subsidiaries 280
322
42
—
(644 ) —

Net income 279
280
322
46
(644 ) 283
Net income attributable to noncontrolling interests —
—
—
(4 ) —
(4 )
Net income attributable to Hilton stockholders $ 279
$ 280
$ 322
$ 42
$ (644 ) $ 279

Comprehensive income (loss) $ 159
$ 274
$ 301
$ (47 ) $ (524 ) $ 163
Comprehensive income attributable to noncontrolling interests —
—
—
(4 ) —
(4 )
Comprehensive income (loss) attributable to Hilton stockholders $ 159
$ 274
$ 301
$ (51 ) $ (524 ) $ 159

Nine Months Ended September 30, 2016
Parent Subsidiary Issuers Guarantors Non-Guarantors Eliminations Total
(in millions)
Revenues
Owned and leased hotels $ —
$ —
$ 177
$ 2,950
$ (22 ) $ 3,105
Management and franchise fees and other —
—
1,089
265
(78 ) 1,276
Timeshare —
—
969
51
—
1,020
—
—
2,235
3,266
(100 ) 5,401
Other revenues from managed and franchised properties —
—
3,798
369
(825 ) 3,342
Total revenues —
—
6,033
3,635
(925 ) 8,743

Expenses
Owned and leased hotels —
—
133
2,273
(71 ) 2,335
Timeshare —
—
704
12
(19 ) 697
Depreciation and amortization —
—
242
267
—
509
Impairment loss —
—
—
15
—
15
General, administrative and other —
—
303
99
(10 ) 392
—
—
1,382
2,666
(100 ) 3,948
Other expenses from managed and franchised properties —
—
3,798
369
(825 ) 3,342
Total expenses —
—
5,180
3,035
(925 ) 7,290

Gain on sales of assets, net —
—
—
2
—
2

Operating income —
—
853
602
—
1,455

Interest income —
—
7
3
—
10
Interest expense —
(199 ) (55 ) (180 ) —
(434 )
Equity in earnings from unconsolidated affiliates —
—
15
3
—
18
Gain (loss) on foreign currency transactions —
—
(82 ) 49
—
(33 )
Other loss, net —
(5 ) —
(10 ) —
(15 )

Income (loss) before income taxes and equity in earnings from subsidiaries —
(204 ) 738
467
—
1,001

Income tax benefit (expense) 193
78
(347 ) (179 ) —
(255 )

Income (loss) before equity in earnings from subsidiaries 193
(126 ) 391
288
—
746

Equity in earnings from subsidiaries 542
668
277
—
(1,487 ) —

Net income 735
542
668
288
(1,487 ) 746
Net income attributable to noncontrolling interests —
—
—
(11 ) —
(11 )
Net income attributable to Hilton stockholders $ 735
$ 542
$ 668
$ 277
$ (1,487 ) $ 735

Comprehensive income $ 693
$ 539
$ 614
$ 302
$ (1,445 ) $ 703
Comprehensive income attributable to noncontrolling interests —
—
—
(10 ) —
(10 )
Comprehensive income attributable to Hilton stockholders $ 693
$ 539
$ 614
$ 292
$ (1,445 ) $ 693


	Nine Months Ended September 30, 2015																		Three Months Ended June 30, 2016
	Parent			Subsidiary Issuers			Guarantors			Non-Guarantors			Eliminations			Total			Parent		HWF Issuers			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)																		(in millions)
Revenues
Franchise fees																			$	—	$	—		$	284		$	29		$	(2	)	$	311
Base and other management fees																			—		—			33			27			—			60
Incentive management fees																			—		—			3			30			—			33
Owned and leased hotels	$	—		$	—		$	177		$	3,016		$	(19	)	$	3,174		��		—			—			398			—			398
Management and franchise fees and other	—			—			1,026			243			(75		)	1,194
Timeshare	—			—			911			63			—			974
Other revenues																			—		—			14			4			—			18
	—			—			2,114			3,322			(94		)	5,342			—		—			334			488			(2		)	820
Other revenues from managed and franchised properties	—			—			3,449			345			(720		)	3,074			—		—			993			137			—			1,130
Total revenues	—			—			5,563			3,667			(814		)	8,416			—		—			1,327			625			(2		)	1,950

Expenses
Owned and leased hotels	—			—			128			2,321			(66		)	2,383			—		—			—			349			—			349
Timeshare	—			—			678			12			(17		)	673
Depreciation and amortization	—			—			255			264			—			519			—		—			68			23			—			91
General, administrative and other	—			—			405			99			(11		)	493
General and administrative																			—		—			66			31			—			97
Other expenses																			—		—			8			5			(2		)	11
	—			—			1,466			2,696			(94		)	4,068			—		—			142			408			(2		)	548
Other expenses from managed and franchised properties	—			—			3,449			345			(720		)	3,074			—		—			993			137			—			1,130
Total expenses	—			—			4,915			3,041			(814		)	7,142			—		—			1,135			545			(2		)	1,678

Gain on sales of assets, net	—			—			—			306			—			306			—		—			—			1			—			1

Operating income	—			—			648			932			—			1,580			—		—			192			81			—			273

Interest income	—			—			9			2			—			11
Interest expense	—			(213		)	(37		)	(181		)	—			(431		)	—		(67		)	(20		)	(12		)	—			(99		)
Equity in earnings from unconsolidated affiliates	—			—			18			4			—			22
Gain (loss) on foreign currency transactions	—			—			73			(94		)	—			(21		)	—		—			(69		)	55			—			(14		)
Other loss, net	—			—			—			(6		)	—			(6		)
Other non-operating income (loss), net																			—		—			4			(1		)	—			3

Income (loss) before income taxes and equity in earnings from subsidiaries	—			(213		)	711			657			—			1,155
Income (loss) from continuing operations before income taxes and equity in earnings from subsidiaries																			—		(67		)	107			123			—			163

Income tax benefit (expense)	(6		)	82			(299		)	(332		)	—			(555		)	—		25			(42		)	(46		)	—			(63		)

Income (loss) before equity in earnings from subsidiaries	(6		)	(131		)	412			325			—			600
Income (loss) from continuing operations before equity in earnings from subsidiaries																			—		(42		)	65			77			—			100

Equity in earnings from subsidiaries	596			727			315			—			(1,638		)	—			96		138			73			—			(307		)	—

Income from continuing operations, net of taxes																			96		96			138			77			(307		)	100
Income from discontinued operations, net of taxes																			143		143			143			134			(419		)	144
Net income	590			596			727			325			(1,638		)	600			239		239			281			211			(726		)	244
Net income attributable to noncontrolling interests	—			—			—			(10		)	—			(10		)	—		—			—			(5		)	—			(5		)
Net income attributable to Hilton stockholders	$	590		$	596		$	727		$	315		$	(1,638	)	$	590		$	239	$	239		$	281		$	206		$	(726	)	$	239

Comprehensive income	$	425		$	585		$	709		$	189		$	(1,473	)	$	435		$	187	$	239		$	251		$	189		$	(674	)	$	192
Comprehensive income attributable to noncontrolling interests	—			—			—			(10		)	—			(10		)	—		—			—			(5		)	—			(5		)
Comprehensive income attributable to Hilton stockholders	$	425		$	585		$	709		$	179		$	(1,473	)	$	425		$	187	$	239		$	251		$	184		$	(674	)	$	187

Nine Months Ended September 30, 2016
Parent Subsidiary Issuers Guarantors Non-Guarantors Eliminations Total
(in millions)
Operating Activities:
Net cash provided by operating activities $ —
$ —
$ 321
$ 703
$ (88 ) $ 936

Investing Activities:
Capital expenditures for property and equipment —
—
(28 ) (199 ) —
(227 )
Payments received on other financing receivables —
—
1
1
—
2
Issuance of other financing receivables —
—
(33 ) —
—
(33 )
Distributions from unconsolidated affiliates —
—
1
1
—
2
Issuance of intercompany receivables —
—
—
(42 ) 42
—
Proceeds from asset dispositions —
—
—
1
—
1
Change in restricted cash and cash equivalents —
—
—
14
—
14
Contract acquisition costs —
—
(28 ) (7 ) —
(35 )
Capitalized software costs —
—
(56 ) —
—
(56 )
Net cash used in investing activities —
—
(143 ) (231 ) 42
(332 )

Financing Activities:
Borrowings —
—
1,000
—
—
1,000
Repayment of debt —
(8 ) —
(1,086 ) —
(1,094 )
Intercompany borrowings —
—
42
—
(42 ) —
Debt issuance costs —
(12 ) (23 ) —
—
(35 )
Change in restricted cash and cash equivalents —
—
—
(19 ) —
(19 )
Intercompany transfers 207
20
(1,342 ) 1,115
—
—
Dividends paid (207 ) —
—
—
—
(207 )
Intercompany dividends —
—
—
(88 ) 88
—
Distributions to noncontrolling interests —
—
—
(6 ) —
(6 )
Net cash used in financing activities —
—
(323 ) (84 ) 46
(361 )

Effect of exchange rate changes on cash and cash equivalents —
—
—
7
—
7
Net increase (decrease) in cash and cash equivalents —
—
(145 ) 395
—
250
Cash and cash equivalents, beginning of period —
—
223
386
—
609

Cash and cash equivalents, end of period $ —
$ —
$ 78
$ 781
$ —
$ 859



	Six Months Ended June 30, 2017
	Parent		HWF Issuers			HOC			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Revenues
Franchise fees	$	—	$	—		$	68		$	551		$	56		$	(9	)	$	666
Base and other management fees	—		—			—			103			65			—			168
Incentive management fees	—		—			—			43			65			—			108
Owned and leased hotels	—		—			—			—			677			—			677
Other revenues	—		—			22			29			6			—			57
	—		—			90			726			869			(9		)	1,676
Other revenues from managed and franchised properties	—		—			86			2,449			296			—			2,831
Total revenues	—		—			176			3,175			1,165			(9		)	4,507

Expenses
Owned and leased hotels	—		—			—			—			602			—			602
Depreciation and amortization	—		—			3			125			48			—			176
General and administrative	—		—			171			—			51			—			222
Other expenses	—		—			15			16			12			(9		)	34
	—		—			189			141			713			(9		)	1,034
Other expenses from managed and franchised properties	—		—			86			2,449			296			—			2,831
Total expenses	—		—			275			2,590			1,009			(9		)	3,865

Operating income (loss)	—		—			(99		)	585			156			—			642

Interest expense	—		(123		)	(54		)	—			(27		)	—			(204		)
Gain (loss) on foreign currency transactions	—		—			13			74			(86		)	—			1
Loss on debt extinguishment	—		(60		)	—			—			—			—			(60		)
Other non-operating income (loss), net	—		(3		)	3			4			2			—			6

Income (loss) from continuing operations before income taxes and equity in earnings from subsidiaries	—		(186		)	(137		)	663			45			—			385

Income tax benefit (expense)	—		73			52			(255		)	(13		)	—			(143		)

Income (loss) from continuing operations before equity in earnings from subsidiaries	—		(113		)	(85		)	408			32			—			242

Equity in earnings from subsidiaries	240		353			438			240			—			(1,271		)	—

Net income	240		240			353			648			32			(1,271		)	242
Net income attributable to noncontrolling interests	—		—			—			—			(2		)	—			(2		)
Net income attributable to Hilton stockholders	$	240	$	240		$	353		$	648		$	30		$	(1,271	)	$	240

Comprehensive income	$	311	$	233		$	356		$	649		$	106		$	(1,342	)	$	313
Comprehensive income attributable to noncontrolling interests	—		—			—			—			(2		)	—			(2		)
Comprehensive income attributable to Hilton stockholders	$	311	$	233		$	356		$	649		$	104		$	(1,342	)	$	311



	Six Months Ended June 30, 2016
	Parent		HWF Issuers			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Revenues
Franchise fees	$	—	$	—		$	518		$	51		$	(5	)	$	564
Base and other management fees	—		—			65			55			—			120
Incentive management fees	—		—			11			58			—			69
Owned and leased hotels	—		—			—			717			—			717
Other revenues	—		—			28			7			—			35
	—		—			622			888			(5		)	1,505
Other revenues from managed and franchised properties	—		—			1,917			254			—			2,171
Total revenues	—		—			2,539			1,142			(5		)	3,676

Expenses
Owned and leased hotels	—		—			—			656			—			656
Depreciation and amortization	—		—			136			47			—			183
Impairment loss	—		—			—			15			—			15
General and administrative	—		—			123			57			—			180
Other expenses	—		—			17			17			(5		)	29
	—		—			276			792			(5		)	1,063
Other expenses from managed and franchised properties	—		—			1,917			254			—			2,171
Total expenses	—		—			2,193			1,046			(5		)	3,234

Gain on sales of assets, net	—		—			—			1			—			1

Operating income	—		—			346			97			—			443

Interest expense	—		(134		)	(31		)	(24		)	—			(189		)
Gain (loss) on foreign currency transactions	—		—			(64		)	38			—			(26		)
Other non-operating income (loss), net	—		—			6			(1		)	—			5

Income (loss) from continuing operations before income taxes and equity in earnings from subsidiaries	—		(134		)	257			110			—			233

Income tax benefit (expense)	192		51			(142		)	(43		)	—			58

Income (loss) from continuing operations before equity in earnings from subsidiaries	192		(83		)	115			67			—			291

Equity in earnings from subsidiaries	96		179			64			—			(339		)	—

Income from continuing operations, net of taxes	288		96			179			67			(339		)	291
Income from discontinued operations, net of taxes	260		260			260			240			(757		)	263
Net income	548		356			439			307			(1,096		)	554
Net income attributable to noncontrolling interests	—		—			—			(6		)	—			(6		)
Net income attributable to Hilton stockholders	$	548	$	356		$	439		$	301		$	(1,096	)	$	548

Comprehensive income	$	506	$	350		$	400		$	308		$	(1,054	)	$	510
Comprehensive income attributable to noncontrolling interests	—		—			—			(4		)	—			(4		)
Comprehensive income attributable to Hilton stockholders	$	506	$	350		$	400		$	304		$	(1,054	)	$	506

Nine Months Ended September 30, 2015
Parent Subsidiary Issuers Guarantors Non-Guarantors Eliminations Total
(in millions)
Operating Activities:
Net cash provided by operating activities $ —
$ —
$ 722
$ 456
$ (187 ) $ 991

Investing Activities:
Capital expenditures for property and equipment —
—
(19 ) (195 ) —
(214 )
Acquisitions, net of cash acquired —
—
—
(1,410 ) —
(1,410 )
Payments received on other financing receivables —
—
1
2
—
3
Issuance of other financing receivables —
—
(7 ) (2 ) —
(9 )
Investments in affiliates —
—
(5 ) —
—
(5 )
Distributions from unconsolidated affiliates —
—
18
—
—
18
Issuance of intercompany receivables —
—
(184 ) —
184
—
Payments received on intercompany receivables —
—
184
—
(184 ) —
Proceeds from asset dispositions —
—
—
2,197
—
2,197
Contract acquisition costs —
—
(14 ) (13 ) —
(27 )
Capitalized software costs —
—
(38 ) —
—
(38 )
Net cash provided by (used in) investing activities —
—
(64 ) 579
—
515

Financing Activities:
Borrowings —
—
—
35
—
35
Repayment of debt —
(675 ) —
(667 ) —
(1,342 )
Intercompany borrowings —
—
—
184
(184 ) —
Repayment of intercompany borrowings —
—
—
(184 ) 184
—
Change in restricted cash and cash equivalents —
—
—
(53 ) —
(53 )
Intercompany transfers 69
675
(666 ) (78 ) —
—
Dividends paid (69 ) —
—
—
—
(69 )
Intercompany dividends —
—
—
(187 ) 187
—
Distributions to noncontrolling interests —
—
—
(6 ) —
(6 )
Excess tax benefits from share-based compensation —
—
8
—
—
8
Net cash used in financing activities —
—
(658 ) (956 ) 187
(1,427 )

Effect of exchange rate changes on cash and cash equivalents —
—
—
(17 ) —
(17 )
Net increase in cash and cash equivalents —
—
—
62
—
62
Cash and cash equivalents, beginning of period —
—
270
296
—
566

Cash and cash equivalents, end of period $ —
$ —
$ 270
$ 358
$ —
$ 628

~~Note 20: Subsequent Events~~

In October 2016, in preparation of the spin-offs, we made prepayments of $1,967 million on our CMBS Loan. Additionally, we issued commercial mortgage-backed securities loans that will be held by Park, including a $725 million loan that matures in 2023 and is secured by two of our U.S. owned real estate assets and a $1,275 million loan that matures in 2026 and is secured by one of our U.S. owned real estate assets.



	Six Months Ended June 30, 2017
	Parent			HWF Issuers			HOC			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—		$	(69	)	$	(58	)	$	395		$	108		$	—		$	376
Investing Activities:
Capital expenditures for property and equipment	—			—			(3		)	(3		)	(12		)	—			(18		)
Contract acquisition costs	—			—			—			(17		)	(15		)	—			(32		)
Capitalized software costs	—			—			—			(29		)	—			—			(29		)
Other	—			(13		)	—			(5		)	3			(3		)	(18		)
Net cash used in investing activities	—			(13		)	(3		)	(54		)	(24		)	(3		)	(97		)
Financing Activities:
Borrowings	—			1,823			—			—			—			—			1,823
Repayment of debt	—			(1,832		)	—			—			(4		)	—			(1,836		)
Debt issuance costs and redemption premium	—			(68		)	—			—			—			—			(68		)
Repayment of intercompany borrowings	—			—			(3		)	—			—			3			—
Intercompany transfers	450			159			92			(351		)	(350		)	—			—
Dividends paid	(98		)	—			—			—			—			—			(98		)
Cash transferred in spin-offs of Park and HGV	—			—			—			—			(501		)	—			(501		)
Repurchases of common stock	(352		)	—			—			—			—			—			(352		)
Distributions to noncontrolling interests	—			—			—			—			(1		)	—			(1		)
Tax withholdings on share-based compensation	—			—			(28		)	—			—			—			(28		)
Net cash provided by (used in) financing activities	—			82			61			(351		)	(856		)	3			(1,061		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—			—			—			—			7			—			7
Net decrease in cash, restricted cash and cash equivalents	—			—			—			(10		)	(765		)	—			(775		)
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	—			—			90			31			1,062			—			1,183
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	—			—			—			—			501			—			501
Cash, restricted cash and cash equivalents, beginning of period	—			—			90			31			1,563			—			1,684
Cash, restricted cash and cash equivalents, end of period	$	—		$	—		$	90		$	21		$	798		$	—		$	909



	Six Months Ended June 30, 2016
	Parent			HWF Issuers		Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—		$	—	$	(133	)	$	861		$	(54	)	$	674
Investing Activities:
Capital expenditures for property and equipment	—			—		(1		)	(168		)	—			(169		)
Proceeds from asset dispositions	—			—		—			1			—			1
Contract acquisition costs	—			—		(16		)	(2		)	—			(18		)
Capitalized software costs	—			—		(32		)	(3		)	—			(35		)
Other	—			—		(18		)	3			—			(15		)
Net cash used in investing activities	—			—		(67		)	(169		)	—			(236		)
Financing Activities:
Repayment of debt	—			—		—			(64		)	—			(64		)
Intercompany transfers	138			—		214			(352		)	—			—
Dividends paid	(138		)	—		—			—			—			(138		)
Intercompany dividends	—			—		—			(54		)	54			—
Distributions to noncontrolling interests	—			—		—			(4		)	—			(4		)
Tax withholdings on share-based compensation	—			—		(13		)	—			—			(13		)
Net cash provided by (used in) financing activities	—			—		201			(474		)	54			(219		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—			—		—			6			—			6
Net increase in cash, restricted cash and cash equivalents	—			—		1			224			—			225
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	—			—		109			524			—			633
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	—			—		—			223			—			223
Cash, restricted cash and cash equivalents, beginning of period	—			—		109			747			—			856
Cash, restricted cash and cash equivalents from continuing operations, end of period	—			—		110			608			—			718
Cash, restricted cash and cash equivalents from discontinued operations, end of period	—			—		—			363			—			363
Cash, restricted cash and cash equivalents, end of period	$	—		$	—	$	110		$	971		$	—		$	1,081

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form ~~10-Q~~10-Q. The unaudited condensed consolidated financial statements present the consolidated financial position of Hilton as of June 30, 2017 and December 31, 2016 and the results of operations of Hilton for the three and six months ended June 30, 2017 and 2016 giving effect to the spin-offs, with the historical financial results of Park and HGV reflected as discontinued operations. Unless indicated otherwise, the following discussion and analysis herein refers to Hilton's continuing operations. Refer to our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016 as updated by our Current Reports on Form 8-K dated May 24, 2017 and July 26, 2017 (Item 8.01) for the presentation of Hilton's consolidated results of operations and financial position as of and for the year ended December 31, 2016 giving effect to the spin-offs, and for other additional information, including our significant accounting policies and principal components and factors affecting our results of operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements ~~that reflect our current views with respect to, among other things, our operations~~within the meaning of Section 27A of the Securities Act of 1933, as amended and ~~financial performance. Forward-looking~~Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, ~~all statements that~~but are not ~~historical facts.~~limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the spin-offs and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks,~~" "approximately,~~" "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond our control, competition for hotel guests, management and franchise agreements, ~~and timeshare sales,~~ risks related to doing business with third-party hotel owners, ~~our significant investments in owned and leased real estate,~~ performance of our information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the U.S.~~, risks related to our proposed spin-offs~~ and our indebtedness. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Overview

Our Business

Hilton is one of the largest and fastest growing hospitality companies in the world, with ~~4,820 hotels, resorts and timeshare~~5,079 properties comprising ~~788,864~~825,747 rooms in ~~104~~103 countries and territories as of ~~September~~June 30, ~~2016.~~2017. Our premier brand portfolio ~~includes~~includes: our luxury and lifestyle hotel brands, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts and Canopy by ~~Hilton,~~Hilton; our full-service hotel brands, Hilton Hotels & Resorts, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton and Embassy Suites by ~~Hilton,~~Hilton; our focused-service hotel brands, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by ~~Hilton,~~Hilton; and our timeshare brand, Hilton Grand Vacations. We had approximately 5867 million members in our award-winning ~~customer~~guest loyalty program, Hilton ~~HHonors,~~Honors, as of ~~September~~June 30, ~~2016.~~2017.

Recent Events

On January 3, 2017, we completed the spin-offs of Park and HGV. The historical financial results of Park and HGV are reflected in our unaudited condensed consolidated financial statements as discontinued operations. See Note 3: "Discontinued Operations" in our unaudited condensed consolidated financial statements for additional information.

On January 3, 2017, we completed a 1-for-3 reverse stock split of Hilton's outstanding common stock. See Note 1: "Organization and Basis of Presentation" in our unaudited condensed consolidated financial statements for additional information.

Segments and Regions

Management analyzes our operations and business by both operating segments and geographic regions. Our operations consist of ~~three~~two reportable segments following the spin-offs that are based on similar products or services: ~~ownership;~~(i) management and franchise; and ~~timeshare. The ownership segment primarily derives earnings from providing hotel room rentals, food and beverage sales and other services at our owned and leased hotels.~~(ii) ownership. The management and franchise segment provides services, ~~which include~~including hotel management and licensing of our ~~brands to franchisees, as well as property management at timeshare properties.~~brands. This segment generates its revenue from management and franchise fees charged toto: (i) third-party hotel ~~owners, including our~~owners; (ii) owned and leased ~~hotels,~~hotels; and (iii) license fees for the exclusive right to ~~homeowners' associations at timeshare properties.~~use certain Hilton marks and intellectual property. As a manager of hotels, ~~and timeshare resorts,~~ we typically are responsible for supervising or operating the property in exchange for management fees. As a franchisor of hotels, we charge franchise fees in exchange for the use of one of our brand names and related commercial services, such as our reservation system, marketing and information technology services. The ~~timeshare~~ownership segment ~~consists of multi-unit vacation ownership properties~~primarily derives earnings from providing hotel room rentals, food and ~~generates revenue by marketing~~beverage sales and ~~selling timeshare intervals owned by us and third parties, resort operations and providing consumer financing for the timeshare interests.~~

~~In February 2016, we announced a plan to separate a substantial portion of our ownership business, consisting primarily of~~other services at our owned ~~hotels located in the U.S., as well as our timeshare business from Hilton, forming two additional independent, publicly traded companies. Hilton Grand Vacations Inc.~~ and Park Hotels & Resorts Inc. have each filed registration statements with the SEC disclosing financial and other details of these planned spin-off transactions, which are each subject to several conditions, including the SEC declaring effective the registration statements and final approval of the transactions by our board of directors.leased hotels.

Geographically, management conducts business through three distinct geographic regions: (i) the Americas; (ii) Europe, Middle East and Africa ("EMEA"); and (iii) Asia Pacific. The Americas region includes North America, South America and Central America, including all Caribbean nations. Although the U.S. is included in the Americas, it represents a significant portion of our system-wide hotel rooms, which was 7574 percent as of ~~September~~June 30, ~~2016;~~2017; therefore, the U.S. is often analyzed separately

and apart from the Americas geographic region and, as such, it is presented separately within the analysis herein. The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Ireland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations. Europe and MEA are often analyzed separately ~~by management.~~and, as such, are presented separately within the analysis herein. The Asia Pacific region includes the eastern and southeastern nations of Asia, as well as India, Australia, New Zealand and the Pacific island nations.

System Growth and Pipeline

We continue to expand our global footprint ~~fee-based business~~ and ~~the capital efficiency of our timeshare~~fee-based business. As we enter into new management and franchise ~~contracts,~~agreements, we expand our business with minimal or no capital investment by us as the manager or franchisor, assince the capital required to build and maintain hotels is typically provided by the third-party owner of the ~~respective~~ hotel ~~that~~with whom we contract ~~with~~ to provide the management or franchise services. Additionally, prior to approving the addition of new hotels to our management and franchise development pipeline, we evaluate the economic viability of the hotel based on the geographic location, the credit quality of the third-party owner and other factors. ~~As a result, by~~By increasing the number of management and franchise agreements with third-party owners, we expect to ~~achieve a higher~~increase overall return on invested capital.

As of ~~September~~June 30, ~~2016,~~2017, we had a total of ~~1,898~~2,153 hotels in our development pipeline, representing approximately ~~300,000~~332,000 rooms under construction or approved for development throughout 91104 countries and territories, including 3136 countries and territories where we do not currently have any open hotels. ~~Over 99 percent~~All of the rooms in the pipeline are within our management and franchise segment. Of the rooms in the pipeline, ~~over 148,000~~169,000 rooms, or more than half of the pipeline, were located outside the U.S., ~~which will result in the percentage of hotel~~and over 169,000 rooms ~~outside the U.S. increasing in future years as hotels in the pipeline open. As of September 30, 2016, approximately 149,000 rooms, representing half of our development pipeline,~~ were under construction. We do not consider any individual development project to be material to us.

Our overall supply of timeshare intervals as of September 30, 2016 was approximately 127,000 intervals, or nearly six years at current sales pace. In addition to investing in developing timeshare properties for sales to customers, we enter into agreements to market and sell timeshare units developed by third parties. Our supply of third-party developed timeshare intervals was approximately 103,000, or 81 percent of our overall supply, as of September 30, 2016.

Key Business and Financial Metrics Used by Management

Comparable Hotels

We define our comparable hotels as those that: (i) were active and operating in our system for at least one full calendar year as of the end of the current period, and open January 1st of the p~~revious~~previous year; (ii) have not undergone a change in brand or ownership type during the c~~urrent~~current or comparable periods ~~reported;~~reported, excluding the hotels distributed in the spin-offs; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results are not available. Of the ~~4,774~~5,031 hotels in our system as of ~~September~~June 30, ~~2016, 3,760 were~~2017, 4,012 hotels have been classified as comparable hotels. Our ~~1,014~~1,019 non-comparable hotels included ~~151 properties,~~234 hotels, or approximately ~~three~~five percent of the total hotels in our system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were not available.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of ~~hotels.~~hotels for a given period. Occupancy measures the utilization of our hotels' available capacity. Management uses

occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ~~Average Daily Rate~~average daily rate levels as demand for hotel rooms increases or decreases.

Average Daily Rate ("ADR")

ADR represents hotel room revenue divided by total number of room nights sold infor a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room ("RevPAR")

~~We calculate~~ RevPAR is calculated by dividing hotel room revenue by total number of room nights available to guests for a given period. We consider RevPAR to be a meaningful indicator of our performance as it provides a metric correlated to two primary and key drivers of operations at a hotel or group of hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to RevPAR, ADR and occupancy are presented on a comparable basis and references to RevPAR and ADR are presented on a currency neutral basis (all periods presented use the ~~same~~actual exchange ~~rates)~~rates for the three and six months ended June 30, 2017, as applicable), unless otherwise noted.

EBITDA and Adjusted EBITDA

~~For~~EBITDA reflects income (loss) from continuing operations, net of taxes, excluding interest expense, a ~~discussion of our definition of Adjusted EBITDA, see Note 17: "Business Segments" in our unaudited condensed consolidated financial statements.~~provision for income taxes and depreciation and amortization.

~~EBITDA and~~ Adjusted EBITDA ~~are not recognized terms~~is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under ~~U.S. GAAP~~certain lease agreements; (v) reorganization costs; (vi) share-based compensation expense; (vii) non-cash impairment losses; (viii) severance, relocation and ~~should not be considered as alternatives to net income (loss) or~~ other ~~measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA~~expenses; and ~~Adjusted EBITDA may not be comparable to similarly titled measures of~~(ix) other ~~companies.~~items.

We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) these measures are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within our industry. For instance, interest expense and the provision for income taxes are dependent on company specifics, including, among other things, our capital structure and operating jurisdictions, respectively, and, therefore could vary significantly across companies. Depreciation and amortization are dependent upon company policies, including the method of acquiring and depreciating assets and the useful lives that are used. For Adjusted EBITDA, we also exclude items such as: (i) share-based compensation expense, as this could vary widely among companies due to the different plans in place and the usage of them; (ii) FF&E replacement reserve to be consistent with the treatment of FF&E for owned and leased hotels where it is capitalized and depreciated over the life of the FF&E; and (iii) other items that are not core to our operations and are not reflective of our performance.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered as alternatives, either in isolation or as a substitute, for net income (loss), cash flow or other methods of analyzing our results as reported under ~~U.S.~~ GAAP. Some of these limitations are:

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

EBITDA and Adjusted EBITDA do not reflect our income tax expense or the cash requirements to pay our taxes;

EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and

other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

Results of Operations

~~The hotel operating statistics by segment for our system-wide comparable hotels were as follows:~~

Three Months Ended Variance Nine Months Ended Variance
September 30, 2016 2016 vs. 2015 September 30, 2016 2016 vs. 2015
Owned and leased hotels
Occupancy 82.8 % (1.2 )% pts. 79.2 % (1.2 )% pts.
ADR $ 185.91
0.3 % $ 185.93
2.1 %
RevPAR $ 153.87
(1.2 )% $ 147.32
0.6 %

Managed and franchised hotels
Occupancy 79.1 % (0.2 )% pts. 76.0 % — % pts.
ADR $ 141.27
1.7 % $ 140.31
2.3 %
RevPAR $ 111.77
1.5 % $ 106.63
2.2 %

System-wide
Occupancy 79.5 % (0.2 )% pts. 76.3 % (0.1 )% pts.
ADR $ 145.43
1.5 % $ 144.56
2.2 %
RevPAR $ 115.54
1.3 % $ 110.28
2.1 %

The hotel operating statistics by region for our system-wide comparable hotels were as follows:


	Three Months Ended			Variance			Nine Months Ended			Variance			Three Months Ended			Variance			Six Months Ended			Variance
	September 30, 2016			2016 vs. 2015			September 30, 2016			2016 vs. 2015			June 30, 2017			2017 vs. 2016			June 30, 2017			2017 vs. 2016
U.S.
Occupancy	80.4		%	(0.3	)%	pts.	77.7		%	(0.1	)%	pts.	80.3		%	(0.5	)%	pts.	76.2		%	0.2	%	pts.
ADR	$	145.68		1.9	%		$	144.59		2.2	%		$	149.27		1.1	%		$	147.19		1.2	%
RevPAR	$	117.10		1.5	%		$	112.28		2.1	%		$	119.89		0.5	%		$	112.13		1.5	%

Americas (excluding U.S.)
Occupancy	78.2		%	0.5	%	pts.	73.4		%	0.1	%	pts.	74.0		%	2.5	%	pts.	70.8		%	2.1	%	pts.
ADR	$	125.71		5.3	%		$	122.91		4.5	%		$	123.27		2.9	%		$	125.80		1.5	%
RevPAR	$	98.37		6.0	%		$	90.26		4.7	%		$	91.24		6.5	%		$	89.10		4.6	%

Europe
Occupancy	79.6		%	(1.7	)%	pts.	73.7		%	(1.3	)%	pts.	78.2		%	2.6	%	pts.	73.0		%	3.5	%	pts.
ADR	$	148.66		1.5	%		$	148.38		2.7	%		$	145.41		2.9	%		$	135.26		2.1	%
RevPAR	$	118.36		(0.7	)%		$	109.29		0.9	%		$	113.69		6.5	%		$	98.75		7.3	%

MEA
Occupancy	65.9		%	(0.7	)%	pts.	63.3		%	(3.5	)%	pts.	64.1		%	4.5	%	pts.	65.4		%	3.7	%	pts.
ADR	$	164.54		(1.6	)%		$	168.94		5.3	%		$	171.44		2.0	%		$	162.86		(2.7	)%
RevPAR	$	108.37		(2.6	)%		$	106.99		(0.2	)%		$	109.96		9.6	%		$	106.58		3.1	%

Asia Pacific
Occupancy	74.4		%	3.8	%	pts.	70.7		%	3.9	%	pts.	71.9		%	5.2	%	pts.	70.7		%	5.7	%	pts.
ADR	$	144.87		(4.5	)%		$	145.33		(1.6	)%		$	136.15		(0.9	)%		$	138.21		(2.3	)%
RevPAR	$	107.78		0.6	%		$	102.74		4.1	%		$	97.89		6.9	%		$	97.70		6.3	%

System-wide
Occupancy													78.8		%	0.4	%	pts.	74.9		%	1.1	%	pts.
ADR													$	147.37		1.2	%		$	144.89		0.9	%
RevPAR													$	116.09		1.8	%		$	108.58		2.4	%

During the three ~~and nine~~ months ended ~~September~~June 30, ~~2016,~~2017, we experienced system-wide RevPAR growth ~~from continued ADR growth at both of our hotel segments. The U.S. and~~across all regions, particularly in Asia Pacific, ~~continued~~MEA and Europe. Europe RevPAR growth resulted from strong demand, particularly in London, as well as several continental European countries. RevPAR increased in Asia Pacific also due to ~~experience~~strong demand growth and in MEA as a result of increased occupancy driven by favorable holiday shifts.

During the six months ended June 30, 2017, we also experienced system-wide RevPAR growth across all regions, primarily driven by growth in occupancy. Europe experienced RevPAR growth as a result of demand growth in continental Europe, as well as strong ADR ~~growth~~in the United Kingdom and ~~increased demand, respectively, while the Americas (excluding U.S.)~~Ireland. MEA experienced ~~strong RevPAR~~solid occupancy growth ~~primarily~~ as a result of ~~improved group business~~increased demand in ~~Canada. RevPAR~~Egypt, Saudi Arabia and the United Arab Emirates, while Asia Pacific experienced occupancy growth due to new hotels in ~~Europe and MEA were negatively affected by geopolitical and terrorism concerns, resulting~~the region stabilizing in ~~a decrease in occupancy.~~

~~Revenues~~

~~Owned and leased hotels~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016
2015 2016 vs. 2015
(in millions) (in millions)
U.S. owned and leased hotels $ 614
$ 611
0.5 $ 1,872
$ 1,807
3.6
International owned and leased hotels 419
471
(11.0) 1,233
1,367
(9.8)
Total owned and leased hotels $ 1,033
$ 1,082
(4.5) $ 3,105
$ 3,174
(2.2)
our system.

The ~~following details the changes in revenues at our U.S. owned~~table below provides a reconciliation of income from continuing operations, net of taxes to EBITDA and ~~leased hotels giving effect to acquired and disposed hotels, which resulted in overall net increases in revenues:~~Adjusted EBITDA:

Increase / (decrease)
Net increase / (decrease) from acquired and disposed hotels⁽¹⁾
Net increase / (decrease) excluding the effect of acquired and disposed hotels
September 30,
2016 2015
(in millions)
Three Months Ended
Comparable U.S. owned and leased hotels $ 529
$ 521
$ 8
$ —
$ 8
Non-comparable U.S. owned and leased hotels 85
90
(5 ) (2 ) (3 )
U.S. owned and leased hotels $ 614
$ 611
$ 3
$ (2 ) $ 5

Nine Months Ended
Comparable U.S. owned and leased hotels $ 1,575
$ 1,540
$ 35
$ —
$ 35
Non-comparable U.S. owned and leased hotels 297
267
30
41
(11 )
U.S. owned and leased hotels $ 1,872
$ 1,807
$ 65
$ 41
$ 24



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
	(in millions)
Income from continuing operations, net of taxes	$	167		$	100		$	242		$	291
Interest expense	100			99			204			189
Income tax expense (benefit)	108			63			143			(58		)
Depreciation and amortization	87			91			176			183
EBITDA	462			353			765			605
Gain on sales of assets, net	—			(1		)	—			(1		)
Loss (gain) on foreign currency transactions	(5		)	14			(1		)	26
Loss on debt extinguishment	—			—			60			—
FF&E replacement reserve	15			16			21			28
Share-based compensation expense	34			23			59			39
Impairment loss	—			—			—			15
Other adjustment items⁽¹⁾	13			7			39			15
Adjusted EBITDA	$	519		$	412		$	943		$	727

____________


⁽¹⁾	~~From January 1, 2015 to September~~Includes adjustments for severance and other items and, for the three and six months ended June 30, ~~2016,~~ ~~six~~ ~~properties were added to our U.S. owned and leased portfolio on a net basis.~~ 2017, also includes transaction costs.

As of September 30, 2016, we had 46 consolidated owned and leased hotels located in the U.S., comprising 27,066 rooms. The increase in comparable U.S. owned and leased hotel revenue during the three months ended September 30, 2016 was primarily a result of an increase in food and beverage revenue attributable to an increase in banquet business. The increase in comparable U.S. owned and leased hotel revenue during the nine months ended September 30, 2016 was primarily a result of an increase in RevPAR of 1.5 percent, attributable to an increase in ADR of 2.9 percent, offset by a decrease in occupancy of 1.1 percentage points, as well as an increase in food and beverage revenue. Certain markets continued to experience decreases in RevPAR, mainly Chicago and New York, which resulted from decreases in city-wide events and transient business, respectively. Additionally, during the nine months ended September 30, 2016, U.S. owned and leased hotel revenue increased as a result of increases in revenues from properties acquired in February and June of 2015 (see Note 3: "Acquisitions"), net of the decrease in revenues from the Waldorf Astoria New York, which was sold in February 2015 (see Note 4: "Disposals"). Excluding acquisitions and dispositions, revenues from non-comparable U.S. owned and leased hotels decreased for the three and nine months ended September 30, 2016, primarily as a result of renovations at one property.

Revenues

The following details the changes in revenues at our international owned and leased hotels giving effect to foreign currency ("FX") changes and acquired and disposed hotels, which resulted in overall net decreases in revenues:



	Three Months Ended				Percent	Six Months Ended				Percent
	June 30,				Change	June 30,				Change
	2017		2016		2017 vs. 2016	2017		2016		2017 vs. 2016
	(in millions)					(in millions)
Franchise fees	$	372	$	311	19.6	$	666	$	564	18.1

Base and other management fees	$	85	$	60	41.7	$	168	$	120	40.0
Incentive management fees	56		33		69.7	108		69		56.5
Total management fees	$	141	$	93	51.6	$	276	$	189	46.0

Decrease
Net increase / (decrease) due to FX changes⁽¹⁾

Decrease from disposed hotels⁽²⁾
Net decrease excluding the effect of FX changes and disposed hotels

September 30,
2016 2015
(in millions)
Three Months Ended
Comparable international owned and leased hotels $ 396
$ 427
$ (31 ) $ (17 ) $ —
$ (14 )
Non-comparable international owned and leased hotels 23
44
(21 ) 1
(20 ) (2 )
International owned and leased hotels $ 419
$ 471
$ (52 ) $ (16 ) $ (20 ) $ (16 )

Nine Months Ended
Comparable international owned and leased hotels $ 1,164
$ 1,203
$ (39 ) $ (39 ) $ —
$ —
Non-comparable international owned and leased hotels 69
164
(95 ) —
(89 ) (6 )
International owned and leased hotels $ 1,233
$ 1,367
$ (134 ) $ (39 ) $ (89 ) $ (6 )

~~____________~~


⁽¹⁾	Unfavorable movements were a result of the strengthening of the USD compared to other currencies, primarily the British pound, partially offset by the strengthening of the Japanese Yen compared to the USD.


⁽²⁾	~~From~~ ~~January 1, 2015~~ ~~to September 30, 2016,~~ ~~six~~ ~~properties were removed from our international owned and leased portfolio.~~

~~As of September 30, 2016, we had 81 consolidated owned~~The increases in management and ~~leased hotels located outside of the U.S., comprising 23,272 rooms. The decreases in revenues at our international hotels~~franchise fees during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were primarily a result of the effect of foreign currency changes and decreases in revenues from properties disposed of between January 1, 2015 and September 30, 2016. Additionally, on a currency-neutral basis, comparable international owned and leased hotel revenues decreased during the three months ended September 30, 2016 as a result of a decrease in RevPAR of 3.3 percent, primarily due to a decrease in ADR of 2.4 percent. During the three and nine months ended September 30, 2016, we experienced decreased transient room revenue at certain of our comparable international owned and leased hotels, which was offsetdriven by ~~an increase in group business during the nine months ended September 30, 2016, despite a modest decline in group business during the three months ended September 30, 2016.~~

~~Management and franchise fees and other~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Management fees $ 101
$ 95
6.3 $ 305
$ 289
5.5
Franchise fees 324
299
8.4 908
844
7.6
Other 21
22
(4.5) 63
61
3.3
$ 446
$ 416
7.2 $ 1,276
$ 1,194
6.9

~~The increases in management and franchise fees were primarily a result of~~ the addition of new managed and franchised properties to our ~~portfolio, which are not included in our comparable hotels. From~~portfolio. Including new development and ownership type transfers, from January 1, ~~2015~~2016 to ~~September~~June 30, ~~2016,~~2017, we added ~~498~~538 managed and franchised properties on a net basis, ~~including new development and ownership type transfers,~~ providing an additional ~~74,090~~103,425 rooms to our managed and franchised ~~segment.~~segment, including the properties that were owned by Park and managed or franchised by Hilton upon completion of the spin-offs. As new hotels ~~are established~~stabilize in our system, we expect the fees received from such hotels to increase as they are part of our system for full periods. Franchise fees also increased as a result of an increase in licensing and other fees of $45 million and $68 million during the three and six months ended June 30, 2017, respectively, primarily attributable to license fees from HGV recognized during the periods.

~~Additionally,~~On a comparable basis, our management ~~and franchise~~ fees increased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as a result of increases in RevPAR at our comparable managed hotels of 3.9 percent and ~~franchised hotels~~3.3 percent, respectively, primarily due to ~~increases~~an increase in ~~ADR. During~~occupancy of 2.3 percentage points for both periods. On a comparable basis, our franchise fees increased during the ~~three and nine~~six months ended ~~September~~June 30, ~~2016,~~2017 as a result of an increase in RevPAR ~~increased 1.2 percent and 2.3 percent, respectively, at our comparable managed hotels and 1.5 percent and 2.2 percent, respectively,~~ at our comparable franchised ~~hotels. Franchise fees also increased as a result~~hotels of ~~increases~~1.8 percent primarily due to an increase in ~~licensing and other fees~~ADR of ~~$2 million and $13 million during the three and nine months ended September 30, 2016, respectively.~~1.0 percent.

~~Timeshare~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Timeshare sales $ 263
$ 246
6.9 $ 737
$ 716
2.9
Resort operations 57
51
11.8 172
152
13.2
Financing and other 38
37
2.7 111
106
4.7
$ 358
$ 334
7.2 $ 1,020
$ 974
4.7



	Three Months Ended				Percent	Six Months Ended				Percent
	June 30,				Change	June 30,				Change
	2017		2016		2017 vs. 2016	2017		2016		2017 vs. 2016
	(in millions)					(in millions)
Owned and leased hotels	$	377	$	398	(5.3)	$	677	$	717	(5.6)

~~Timeshare sales revenue increased during~~Owned and leased hotel revenues decreased during the three and ~~nine~~six months ended ~~September~~June 30, 2016 as a result of increases in commissions recognized from the sale of third-party developed intervals of $11 million and $16 million, respectively, as well as increases in revenue from the sale of owned timeshare intervals of $6 million and $5 million, respectively, due to increases in sales volume. Overall timeshare sales volume increased 15 percent and 9 percent, respectively, during the three and nine months ended September 30, 2016, as a result of increased tour flow and net volume per guest. Additionally, revenues from our resort operations increased during the three and nine months ended September 30, 2016 as a result of increases in fees earned related to our Hilton Grand Vacations Club, including fees generated by new members.

~~Operating Expenses~~

~~Owned and leased hotels~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
U.S. owned and leased hotels $ 410
$ 403
1.7 $ 1,245
$ 1,191
4.5
International owned and leased hotels 361
395
(8.6) 1,090
1,192
(8.6)
Total owned and leased hotels $ 771
$ 798
(3.4) $ 2,335
$ 2,383
(2.0)

Fluctuations in operating expenses at our owned and leased hotels can relate to various factors, including changes in occupancy levels, labor costs, utilities, taxes and insurance costs. The change in the number of occupied room nights directly affects certain variable expenses, which include payroll, supplies and other operating expenses.

The following details the changes in operating expenses at our U.S. owned and leased hotels giving effect to acquired and disposed hotels, which resulted in overall net increases in operating expenses:

Increase
Net increase from acquired and disposed hotels⁽¹⁾
Net increase / (decrease) excluding the effect of acquired and disposed hotels
September 30,
2016 2015
(in millions)
Three Months Ended
Comparable U.S. owned and leased hotels $ 350
$ 346
$ 4
$ —
$ 4
Non-comparable U.S. owned and leased hotels 60
57
3
3
—
U.S. owned and leased hotels $ 410
$ 403
$ 7
$ 3
$ 4

Nine Months Ended
Comparable U.S. owned and leased hotels $ 1,058
$ 1,022
$ 36
$ —
$ 36
Non-comparable U.S. owned and leased hotels 187
169
18
21
(3 )
U.S. owned and leased hotels $ 1,245
$ 1,191
$ 54
$ 21
$ 33

~~____________~~


⁽¹⁾	~~From~~ ~~January 1, 2015~~ ~~to September 30, 2016,~~ ~~six~~ ~~properties were added to our U.S. owned and leased portfolio on a net basis.~~

The increases in operating expenses at our U.S. owned and leased hotels during the three and nine months ended September 30, 2016 were primarily the result of increases at our comparable hotels due to increased wages and benefits and other operating expenses. Operating expenses at our non-comparable U.S. owned and leased hotels increased during the nine

~~months ended September 30, 2016~~2017 primarily as a result of increases in operating expenses from properties acquired in February and June of 2015 (see Note 3: "Acquisitions"), net of the decrease in operating expenses from the Waldorf Astoria New York, which was sold in February 2015 (see Note 4: "Disposals").

The following details the changes in operating expenses at our international owned and leased hotels giving effect to FX changes and disposed hotels, which resulted in net overall decreases in operating expenses:

Decrease
Net increase / (decrease) due to FX changes⁽¹⁾

Decrease from disposed hotels⁽²⁾
Net increase / (decrease) excluding the effect of FX changes and disposed hotels

September 30,
2016 2015
(in millions)
Three Months Ended
Comparable international owned and leased hotels $ 342
$ 360
$ (18 ) $ (18 ) $ —
$ —
Non-comparable international owned and leased hotels 19
35
(16 ) 1
(17 ) —
International owned and leased hotels $ 361
$ 395
$ (34 ) $ (17 ) $ (17 ) $ —

Nine Months Ended
Comparable international owned and leased hotels $ 1,026
$ 1,055
$ (29 ) $ (40 ) $ —
$ 11
Non-comparable international owned and leased hotels 64
137
(73 ) (1 ) (67 ) (5 )
International owned and leased hotels $ 1,090
$ 1,192
$ (102 ) $ (41 ) $ (67 ) $ 6

~~____________~~


⁽¹⁾	Unfavorable movements were a result of the strengthening of the USD compared to other currencies, primarily the British pound, partially offset by the strengthening of the Japanese Yen compared to the USD.


⁽²⁾	~~From~~ ~~January 1, 2015~~ ~~to September 30, 2016,~~ ~~six~~ ~~properties were removed from our international owned and leased portfolio.~~

~~The decreases in operating expenses at our international owned and leased hotels during the three and nine months ended September 30, 2016 were primarily~~ a result of the effect of foreign currency changes of $26 million and ~~properties disposed of between January 1, 2015 and September 30, 2016.~~

~~Timeshare~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Timeshare sales $ 204
$ 172
18.6 $ 544
$ 532
2.3
Resort operations 34
31
9.7 98
94
4.3
Financing and other 19
16
18.8 55
47
17.0
$ 257
$ 219
17.4 $ 697
$ 673
3.6

~~Timeshare sales expense increased~~$49 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~ 2017, respectively. On a currency neutral basis, owned and leased hotel revenues increased $5 million and $9 million during the three and six months ended June 30, 2017, respectively, primarily as a result of ~~higher sales~~increases at our comparable owned and ~~marketing expenses~~leased hotels of $9 million and $13 million, respectively, due to increases in RevPAR of 4.3 percent and 4.5 percent, respectively. The increase in RevPAR at comparable owned and leased hotels for the three and six months ended June 30, 2017 were driven by increased occupancy and ADR. The increases to comparable owned and leased hotels were partially offset by net decreases of $5 million and$11 million during the three and six months ended June 30, 2017, respectively, from properties opened or disposed between January 1, 2016 and June 30, 2017.



	Three Months Ended				Percent	Six Months Ended				Percent
	June 30,				Change	June 30,				Change
	2017		2016		2017 vs. 2016	2017		2016		2017 vs. 2016
	(in millions)					(in millions)
Other revenues	$	20	$	18	11.1	$	57	$	35	62.9

Other revenues increased during the six months ended June 30, 2017 primarily as a result of ~~increases in sales volume~~a $20 million recovery from the settlement of ~~both owned inventory~~a claim by Hilton to a third party relating to our defined benefit plans during the period.

Operating Expenses



	Three Months Ended				Percent	Six Months Ended				Percent
	June 30,				Change	June 30,				Change
	2017		2016		2017 vs. 2016	2017		2016		2017 vs. 2016
	(in millions)					(in millions)
Owned and leased hotels	$	330	$	349	(5.4)	$	602	$	656	(8.2)

Owned and ~~third-party developed timeshare intervals. During~~leased hotel expenses decreased $19 million during the ~~nine~~three months ended ~~September~~June 30, ~~2016,~~2017 primarily as a result of the effect of foreign currency changes of $24 million. On a currency neutral basis, owned and leased hotel expenses increased $5 million during the three months ended June 30, 2017, resulting from an $11 million increase ~~in timeshare sales expense was~~from comparable hotels, partially offset by a $6 million decrease from non-comparable hotels. The increase in comparable owned and leased hotels expenses was driven by an increase in variable operating costs due to increased occupancy at our comparable owned and leased hotels. The decrease in non-comparable owned and leased hotel expenses during the three months ended June 30, 2017 was primarily attributable to a net decrease of $5 million in expenses from properties opened or disposed between January 1, 2016 and June 30, 2017.

Owned and leased hotel expenses decreased $54 million during the six months ended June 30, 2017 primarily as a result of the effect of foreign currency changes of $49 million. On a currency neutral basis, owned and leased hotel expenses decreased $5 million during the six months ended June 30, 2017 as a result of a decrease of $17 million from non-comparable owned and leased hotels, partially offset by an increase from comparable hotels of $12 million. The decrease in non-comparable owned and leased hotel expenses was primarily attributable to a net decrease of $16 million in ~~the cost of product related~~expenses from properties opened or disposed between January 1, 2016 and June 30, 2017. The increase in comparable owned and leased hotel expenses resulted from an increase in variable operating costs due to ~~the reacquisition of~~increased occupancy at our comparable owned ~~timeshare inventory for customer upgrades into third-party developed properties.~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Depreciation $ 86
$ 88
(2.3) $ 263
$ 260
1.2
Amortization 83
83
— 246
259
(5.0)
$ 169
$ 171
(1.2) $ 509
$ 519
(1.9)
and leased hotels.

The increase in depreciation expense during the nine months ended September 30, 2016 resulted primarily from the addition of property and equipment related to the properties acquired in 2015, partially offset by decreases as a result of disposed hotels. The decrease in amortization expense during the nine months ended September 30, 2016 was primarily a result of $13 million in accelerated amortization that was recognized during the nine months ended September 30, 2015 on a management contract intangible asset for properties that were managed by us prior to our acquisition of them.


	Three Months Ended				Percent	Nine Months Ended				Percent	Three Months Ended				Percent	Six Months Ended				Percent
	September 30,				Change	September 30,				Change	June 30,				Change	June 30,				Change
	2016		2015		2016 vs. 2015	2016		2015		2016 vs. 2015	2017		2016		2017 vs. 2016	2017		2016		2017 vs. 2016
	(in millions)					(in millions)					(in millions)					(in millions)
Depreciation and amortization											$	87	$	91	(4.4)	$	176	$	183	(3.8)
General and administrative	$	134	$	131	2.3	$	342	$	448	(23.7)	117		97		20.6	222		180		23.3
Other	13		14		(7.1)	50		45		11.1
	$	147	$	145	1.4	$	392	$	493	(20.5)
Other expenses											11		11		—	34		29		17.2

The ~~changes~~decreases in ~~general~~depreciation and ~~administrative~~amortization expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were primarily a result of decreases in amortization expense due to certain capitalized software costs being fully amortized between June 30, 2016 and June 30, 2017.

The increases in general and administrative expense during the three and six months ended June 30, 2017 were primarily the result of ~~$19~~increases in share-based compensation expense of $9 million and ~~$71~~$14 million, respectively, due to an increase in retirement eligible participants, resulting in the acceleration of expense recognition, as well as additional expense from a special equity grant to certain participants in connection with the spin-offs. Additionally, there were $5 million and $15 million in costs associated with the spin-offs incurred during the three and six months ended June 30, 2017, respectively. Costs incurred in 2016 related to the spin-offs are included in discontinued operations. Further, during the six months ended June 30, 2017, there was an increase of $7 million in severance costs related to the 2015 sale of the Waldorf Astoria New ~~York~~ York.

The increase in other expenses during the ~~three and nine~~six months ended ~~September~~June 30, 2016, respectively, offset by increases of $27 million and $54 million, respectively, of costs associated with the planned spin-off transactions. Additionally, during the nine months ended September 30, 2016, general and administrative expense decreased as2017 was primarily a result of ~~$66 million in share-based compensation expense recognized when certain remaining awards granted in connection with~~costs relating to the settlement of the claim relating to our ~~initial public offering vested in May 2015.~~

~~Gain on sales of assets, net~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Gain on sales of assets, net $ —
$ 164

NM⁽¹⁾
$ 2
$ 306
(99.3)

~~____________~~


⁽¹⁾defined benefit plans.	~~Fluctuation in terms of percentage change is not meaningful.~~

During the nine months ended September 30, 2015, we completed the sales of two properties, one of which was during the three months ended September 30, 2015. See Note 4: "Disposals" in our unaudited condensed consolidated financial statements for additional discussion.

Non-operating Income and Expenses

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Interest expense $ 148
$ 138
7.2 $ 434
$ 431
0.7

~~The increases in interest expense during the three and~~ ~~nine months ended September 30, 2016~~ ~~were primarily due~~ to the issuance of the 2024 Senior Notes in August 2016. These increases were partially offset by decreases in interest expense on the Term Loans due to their amended interest rate, as well as prepayments made between January 1, 2015 and September 30, 2016. See Note 9: "Debt" in our unaudited condensed consolidated financial statements for further details.

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Equity in earnings from unconsolidated affiliates $ 7
$ 9
(22.2) $ 18
$ 22
(18.2)

~~Equity in earnings from unconsolidated affiliates was relatively unchanged as the performance of our unconsolidated affiliates was consistent with the three and nine months ended September 30, 2015.~~

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Loss on foreign currency transactions $ (8 ) $ (8 ) — $ (33 ) $ (21 ) 57.1

The net loss on foreign currency transactions for the three and nine months ended September 30, 2016, as well as the three months ended September 30, 2015, related to changes in foreign currency rates on our short-term cross-currency intercompany notes, predominantly those denominated in the British pound. Additionally, the net loss on foreign currency transactions for the nine months ended September 30, 2015 was attributable to changes in foreign currency rates on our short-term cross-currency intercompany loans, predominantly those denominated in AUD and Brazilian real.

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Other gain (loss), net $ (10 ) $ 1

NM⁽¹⁾
$ (15 ) $ (6 )
NM⁽¹⁾



	Three Months Ended						Percent	Six Months Ended						Percent
	June 30,						Change	June 30,						Change
	2017			2016			2017 vs. 2016	2017			2016			2017 vs. 2016
	(in millions)							(in millions)
Interest expense	$	(100	)	$	(99	)	1.0	$	(204	)	$	(189	)	7.9
Gain (loss) on foreign currency transactions	5			(14		)	NM⁽¹⁾	1			(26		)	NM⁽¹⁾
Loss on debt extinguishment	—			—			NM⁽¹⁾	(60		)	—			NM⁽¹⁾
Other non-operating income, net	5			3			66.7	6			5			20.0
Income tax benefit (expense)	(108		)	(63		)	71.4	(143		)	58			NM⁽¹⁾

____________


⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

The ~~net loss for~~increases in interest expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were primarily ~~related~~due to ~~a $5 million loss from~~ the ~~derecognition~~issuances of ~~unamortized debt issuance costs as a result of prepayments on~~ the ~~CMBS Loan,~~2025 Senior Notes and the 2027 Senior Notes in March 2017 and the 2024 Senior Notes in August 2016, as well as ~~$4 million~~the reclassification of ~~transaction costs incurred~~losses from accumulated other comprehensive loss related to the dedesignation of the 2013 Interest Rate Swaps. These increases were largely offset by decreases in ~~connection with~~interest expense due to the ~~amendment~~March 2017 repayment of the 2021 Senior Notes and the refinancing of the Term ~~Loans.~~

~~The net loss for~~Loans in March 2017, which reduced the nine months ended September 30, 2015 was primarily related to $26 million of transaction costs from the acquisition of properties in connection with the tax deferred exchange, partially offset by the $24 million gain from the capital lease liability reduction from one of our consolidated VIEs. Additionally, as a result of the repayment of the Waldorf Astoria Loan, we recognized a loss of $6 million from the derecognition of the related unamortized debt issuance costs.interest rate on these instruments. See Note 4:~~"Disposals"~~6: "Debt" and Note 7: "Derivative Instruments and Hedging Activities" in our unaudited condensed consolidated financial statements for additional ~~discussion.~~details.

The gains and losses on foreign currency transactions primarily related to changes in foreign currency rates on our short-term cross-currency intercompany loans for all periods. During the three and six months ended June 30, 2017, the changes were predominantly for loans denominated in the euro and the British pound ("GBP") and, for the six months ended June 30, 2017, also for loans denominated in the Australian dollar ("AUD"). During the three and six months ended June 30, 2016, the changes were predominantly for loans denominated in AUD, GBP and the Brazilian real.

Three Months Ended Percent Nine Months Ended Percent
September 30, Change September 30, Change
2016 2015 2016 vs. 2015 2016 2015 2016 vs. 2015
(in millions) (in millions)
Income tax expense $ (145 ) $ (247 ) (41.3) $ (255 ) $ (555 ) (54.1)

The loss on debt extinguishment related to the repayment of the 2021 Senior Notes and included a redemption premium of $42 million and the accelerated recognition of $18 million of unamortized debt issuance costs during the six months ended June 30, 2017.

Income tax expense increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased as a result of the decrease in income before income taxes, as well as a decrease in our effective tax rate. Our effective tax rate for the nine months ended September 30, 2016 decreased~~2017 primarily as a result of increased income from continuing operations before income taxes and a net reduction in our unrecognized tax benefits of $155 million ~~during~~in the ~~three months ended March 31, 2016.~~

prior year, respectively. See Note ~~12:~~9: "Income Taxes" in our unaudited condensed consolidated financial statements for additional ~~discussion.~~information.

Segment Results

We evaluate our business segment operating performance using ~~segment Adjusted EBITDA,~~operating income, as described in Note ~~17:~~13: "Business Segments" in our unaudited condensed consolidated financial statements. ~~For~~Refer to those financial statements for a ~~discussion~~reconciliation of ~~EBITDA and Adjusted EBITDA, how management uses them~~segment operating income to ~~manage our business and material limitations on their usefulness, refer to "—Key Business and Financial Metrics Used by Management."~~

income from continuing operations before income taxes. The following table sets forth revenues and ~~Adjusted EBITDA~~operating income by ~~segment, reconciled to consolidated amounts:~~segment:


	Three Months Ended						Percent	Nine Months Ended						Percent	Three Months Ended						Percent	Six Months Ended						Percent
	September 30,						Change	September 30,						Change	June 30,						Change	June 30,						Change
	2016			2015			2016 vs. 2015	2016			2015			2016 vs. 2015	2017			2016			2017 vs. 2016	2017			2016			2017 vs. 2016
	(in millions)							(in millions)							(in millions)							(in millions)
Revenues
Revenues:
Management and franchise⁽¹⁾															$	523		$	416		25.7	$	959		$	773		24.1
Ownership	$	1,040		$	1,089		(4.5)	$	3,128		$	3,194		(2.1)	377			398			(5.3)	677			717			(5.6)
Management and franchise	470			438			7.3	1,350			1,263			6.9
Timeshare	358			334			7.2	1,020			974			4.7
Segment revenues	1,868			1,861			0.4	5,498			5,431			1.2	900			814			10.6	1,636			1,490			9.8
Other revenues															20			18			11.1	57			35			62.9
Other revenues from managed and franchised properties	1,105			1,063			4.0	3,342			3,074			8.7	1,436			1,130			27.1	2,831			2,171			30.4
Other revenues	24			25			(4.0)	69			67			3.0
Intersegment fees elimination	(55		)	(54		)	1.9	(166		)	(156		)	6.4
Intersegment fees elimination⁽¹⁾															(10		)	(12		)	(16.7)	(17		)	(20		)	(15.0)
Total revenues	$	2,942		$	2,895		1.6	$	8,743		$	8,416		3.9	$	2,346		$	1,950		20.3	$	4,507		$	3,676		22.6

Adjusted EBITDA
Operating Income⁽¹⁾:
Management and franchise															$	523		$	416		25.7	$	959		$	773		24.1
Ownership	$	264		$	281		(6.0)	$	770		$	789		(2.4)	37			37			—	58			41			41.5
Management and franchise	470			438			7.3	1,350			1,263			6.9
Timeshare	85			99			(14.1)	278			259			7.3
Corporate and other	(54		)	(60		)	(10.0)	(174		)	(177		)	(1.7)
Adjusted EBITDA	$	765		$	758		0.9	$	2,224		$	2,134		4.2
Segment operating income															$	560		$	453		23.6	$	1,017		$	814		24.9

____________


⁽¹⁾	Includes management, royalty and intellectual property fees charged to our ownership segment by our management and franchise segment, which were eliminated in our unaudited condensed consolidated statements of operations.

Management and franchise segment revenues and operating income increased during the three and six months ended June 30, 2017 as a result of the net addition of hotels to our managed and franchised system and increases in RevPAR at our comparable managed and franchised properties of 1.7 percent and 2.3 percent, respectively. Refer to "—Revenues" for further discussion of the increases in revenues from our managed and franchised properties.

~~The table below provides a reconciliation of net income to EBITDA and Adjusted EBITDA:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(in millions)
Net income $ 192
$ 283
$ 746
$ 600
Interest expense 148
138
434
431
Income tax expense 145
247
255
555
Depreciation and amortization 169
171
509
519
Interest expense, income tax and depreciation and amortization included in equity in earnings from unconsolidated affiliates 8
6
23
20
EBITDA 662
845
1,967
2,125
Gain on sales of assets, net —
(164 ) (2 ) (306 )
Loss on foreign currency transactions 8
8
33
21
FF&E replacement reserve 13
9
42
36
Share-based compensation expense 26
21
70
143
Impairment loss —
—
15
—
Other loss (gain), net 10
(1 ) 15
6
Other adjustment items 46
40
84
109
Adjusted EBITDA $ 765
$ 758
$ 2,224
$ 2,134

~~Ownership~~

Ownership segment revenues decreased ~~$49~~$21 million and ~~$66~~$40 million ~~for~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively, ~~primarily~~ as a result of decreases in ~~owned~~owned and leased hotel ~~revenues. The decrease in~~ revenues, ~~at our owned and leased hotels~~which were primarily attributable to foreign currency changes. Ownership operating income was ~~primarily~~unchanged for the three months ended June 30, 2017 as a result of the ~~disposal of international hotels and foreign currency fluctuations, partially~~decrease in segment revenues being almost entirely offset by the ~~net acquisition of hotels~~decrease in ~~the U.S.~~operating expenses from owned and leased hotels. Ownership ~~Adjusted EBITDA decreased~~operating income increased $17 ~~million and $19~~ million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2016, respectively,~~2017 primarily as a result of the decrease in ~~ownership segment revenues~~owned and leased hotel operating expenses of $54 million, partially offset by ~~decreases~~the decrease in ~~owned and leased operating expenses of $27 million and $48 million, respectively.~~ownership segment revenues. Refer to "—~~Revenues—Owned and leased hotels"~~Revenues" and "—Operating ~~Expenses—Owned and leased hotels"~~Expenses" for further discussion of the changes in revenues and operating expenses at our owned and leased hotels.

~~Management and franchise~~

Management and franchise segment revenues increased $32 million and $87 million for the three and nine months ended September 30, 2016, respectively, primarily as a result of the net addition of hotels to our managed and franchised system, as well as increases in RevPAR at our comparable managed and franchised properties of 1.5 percent and 2.2 percent, respectively. Refer to "—Revenues—Management and franchise and other" for further discussion on the increases in revenues from our managed and franchised properties. Management and franchise Adjusted EBITDA increased as a result of the increases in management and franchise segment revenues.

~~Timeshare~~

Timeshare segment revenues increased $24 million and $46 million for the three and nine months ended September 30, 2016, respectively, primarily as a result of increased timeshare sales revenue due to increases in commissions recognized from the sale of third-party developed intervals of $11 million and $16 million, respectively, as well as increases in revenue from the sale of owned timeshare intervals of $6 million and $5 million, respectively, due to increases in sales volume. Additionally, revenues from our resort operations increased for the three and nine months ended September 30, 2016 as a result of increases in fees earned related to our Hilton Grand Vacations Club, including fees generated by new members. Timeshare Adjusted EBITDA decreased $14 million for the three months ended September 30, 2016 as a result of the increase in timeshare operating expenses of $38 million, partially offset by the increase in timeshare revenue of $24 million. For the nine months ended September 30, 2016, our timeshare Adjusted EBITDA increased $19 million primarily as a result of the increase in timeshare revenues of $46 million, partially offset by the increase in timeshare operating expenses of $24 million. Refer to "—Revenues—Timeshare" and "—Operating Expenses—Timeshare" for a discussion of the changes in revenues and operating expenses from our timeshare segment.

~~Supplemental Financial Data for Unrestricted U.S. Real Estate Subsidiaries~~

As of September 30, 2016, we owned a majority or controlling financial interest in 57 hotels, representing 29,096 rooms. Of these owned hotels, 36 hotels, representing an aggregate of 23,568 rooms as of September 30, 2016, were owned by subsidiaries that we collectively refer to as our "Unrestricted U.S. Real Estate Subsidiaries." Certain properties held by our Unrestricted U.S. Real Estate Subsidiaries secure either our CMBS Loan or one of our mortgage loans with outstanding balances of $2,427 million and $488 million as of September 30, 2016, respectively, and are not included in the collateral securing the Senior Secured Credit Facility. In addition, the Unrestricted U.S. Real Estate Subsidiaries are not subject to any of the restrictive covenants in the indentures that govern the Senior Notes, which are unsecured.

We have included this supplemental financial data to comply with certain financial information requirements regarding our Unrestricted U.S. Real Estate Subsidiaries set forth in the indentures that govern our Senior Notes. For the nine months ended September 30, 2016, the Unrestricted U.S. Real Estate Subsidiaries represented 19.7 percent of our total revenues, 15.6 percent of net income attributable to Hilton stockholders and 23.9 percent of our Adjusted EBITDA, and as of September 30, 2016, represented 35.3 percent of our total assets and 28.8 percent of our total liabilities.

~~The following tables present supplemental unaudited financial data, as required by the indentures that govern our Senior Notes, for our Unrestricted U.S. Real Estate Subsidiaries:~~

Nine Months Ended
September 30,
2016
2015
(in millions)
Revenues $ 1,721
$ 1,672
Net income attributable to Hilton stockholders 115
211
Capital expenditures for property and equipment 142
146
Adjusted EBITDA⁽¹⁾
531
519
Cash provided by (used in):
Operating activities 263
293
Investing activities (127 ) 308
Financing activities 144
(595 )

~~____________~~


⁽¹⁾	The following table provides a reconciliation of our Unrestricted U.S. Real Estate Subsidiaries' net income to EBITDA and Adjusted EBITDA, which we believe is the most closely comparable U.S. GAAP financial measure:

Nine Months Ended
September 30,
2016 2015
(in millions)
Net income $ 117
$ 213
Interest expense 131
131
Income tax expense 79
105
Depreciation and amortization 190
181
Interest expense and depreciation and amortization included in equity in earnings from unconsolidated affiliates 2
—
EBITDA 519
630
Gain on sales of assets, net (1 ) (143 )
Share-based compensation expense 1
1
Other loss, net 8
30
Other adjustment items 4
1
Adjusted EBITDA $ 531
$ 519

September 30, December 31,
2016 2015
(in millions)
Assets $ 9,124
$ 8,914
Liabilities 5,581
6,718

Liquidity and Capital Resources

Overview

As of ~~September~~June 30, ~~2016,~~2017, we had total cash and cash equivalents of ~~$1,131~~$909 million, including ~~$272~~$125 million of restricted cash and cash equivalents. The majority of our restricted cash and cash equivalents balance related to cash collateral on our self-insurance ~~programs, escrowed cash from our timeshare operations and cash restricted in accordance with our long-term debt and timeshare debt agreements.~~programs.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating ~~expenses~~ and other expenditures, including corporate expenses, payroll and related benefits, legal costs, ~~operating~~ costs associated with the management and franchising of hotels, interest and scheduled principal payments on our outstanding indebtedness, ~~costs associated with the spin-offs,~~ contract acquisition costs and capital expenditures for renovations and maintenance atin the hotels within our ~~owned and leased hotels.~~ownership segment. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements atin the hotels

within our ~~owned~~ownership segment, commitments to owners in our management and ~~leased hotels, purchase commitments,~~franchise segment, dividends as declared, ~~costs associated with potential acquisitions~~share repurchases and corporate capital expenditures.

We finance our business activities primarily with existing cash and cash generated from our operations. We believe that this cash will be adequate to meet anticipated requirements for operating ~~expenses~~ and other expenditures, including corporate expenses, payroll and related benefits, legal costs and ~~purchase~~other commitments for the foreseeable future. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments and returning available capital to stockholders.

We and our affiliates ~~and/or our major stockholders and their respective affiliates,~~ may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

In ~~preparation~~February 2017, our board of directors authorized a stock repurchase program of up to $1 billion of the ~~spin-offs, we completed several financing transactions during~~Company's common stock. During the ~~three~~six months ended ~~September~~June 30, 2016 and in October 2016. For further information on these transactions, see Note 9: "Debt" and Note 20: "Subsequent Events," respectively, in our unaudited condensed consolidated financial statements.

~~In September 2016,~~2017, we ~~paid a quarterly cash dividend~~repurchased $352 million of ~~$0.07 per share on shares of our~~ common stock for a total of $69 million, bringing total cash dividends in 2016 to $207 million. In October 2016, we declared a quarterly cash dividend of $0.07 per share on shares of our common stock to be paid on or before December 2, 2016 to stockholders of record of our common stockunder the program, and, as of ~~the close of business on November 10, 2016.~~June 30, 2017, $648 million remained available for share repurchases. The repurchase program does not have an expiration date and may be suspended or discontinued at any time.

Sources and Uses Ofof Our Cash and Cash Equivalents

The following table summarizes our net cash ~~flows and key metrics related to our liquidity:~~flows:


	As of and for the Nine Months Ended September 30,						Percent Change	Six Months Ended June 30,						Percent Change
	2016			2015			2016 vs. 2015	2017			2016⁽¹⁾			2017 vs. 2016
	(in millions)							(in millions)
Net cash provided by operating activities	$	936		$	991		(5.6)	$	376		$	674		(44.2)
Net cash provided by (used in) investing activities	(332		)	515			NM⁽¹⁾
Net cash used in investing activities								(97		)	(236		)	(58.9)
Net cash used in financing activities	(361		)	(1,427		)	(74.7)	(1,061		)	(219		)	NM⁽²⁾
Working capital surplus⁽²⁾	426			111			NM⁽¹⁾

____________


⁽¹⁾	Includes the cash flows from operating activities, investing activities and financing activities of Hilton, Park and HGV.


⁽²⁾	Fluctuation in terms of percentage change is not meaningful.


⁽²⁾	~~Total current assets less total current liabilities.~~

~~Our~~As of June 30, 2017 and December 31, 2016, our working capital surplus, which is calculated as current assets less current liabilities excluding assets and liabilities of discontinued operations, was $10 million and $169 million, respectively, and our ratio of current assets to current liabilities was ~~1.16~~1.01 and ~~1.06 as of September 30, 2016 and December 31, 2015,~~1.09, respectively.

Operating Activities

Cash flow from operating activities is primarily generated from management and franchise fee revenue and operating income from our owned and leased hotels and, for the six months ended June 30, 2016, sales of timeshare units.

The ~~$55~~$298 million decrease in net cash provided by operating activities was primarily a result of a decrease in operating income from our owned and leased properties and sales of timeshare units as a result of ~~an increase in net cash paid for taxes of $117 million and cash paid for interest of $12 million, partially offset by improved operating results, mainly in our management and franchise business.~~the spin-offs.

Investing Activities

For the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, net cash used in investing activities was ~~$332~~$97 million and $236 million, respectively, and consisted primarily of capital expenditures, ~~for property and equipment~~including contract acquisition costs and capitalized software costs. Our capital expenditures for property and equipment primarily consisted of expenditures related to our corporate facilities and the renovation of ~~existing~~hotels in our ownership segment, including those owned ~~and leased hotels and our corporate facilities.~~by Park following completion of the spin-offs for the six months ended June 30, 2016. Our capitalized software costs related to various systems initiatives for the benefit of our hotel owners and our overall corporate operations.

During the nine months ended September 30, 2015, we generated $515 million in cash from investing activities primarily as a result of net proceeds from the tax deferred exchange of the Waldorf Astoria New York and the sale of the Hilton Sydney

of $456 million and $331 million, respectively; see Note 3: "Acquisitions" and Note 4: "Disposals" in our unaudited condensed consolidated financial statements. This amount was partially offset by $279 million in capital expenditures, including contract acquisition costs and capitalized software costs.

Financing Activities

The ~~$1,066~~$842 million ~~decrease~~increase in net cash used in financing activities was primarily ~~attributable~~as a result of cash transferred in connection with the spin-offs. In addition, during the six months ended June 30, 2017, we issued the 2025 Senior Notes and the 2027

Senior Notes and received proceeds of $1.5 billion, which we used with available cash to ~~an increase~~repay in ~~proceeds from borrowings~~full our 2021 Senior Notes, including a redemption premium of ~~$965~~$42 million. We also returned additional capital to our stockholders of $312 million, including dividends and ~~a decrease in repayments of debt of $248 million, partially offset by an increase in cash dividends of $138 million. The increase in proceeds from borrowings was primarily due~~share repurchases during the six months ended June 30, 2017 compared to the ~~issuance of $1.0 billion of the 2024 Senior Notes in August 2016. During the nine~~six months ended ~~September~~June 30, 2016, we made prepayments of $991 million on our CMBS Loan and no prepayments on our Term Loans, while during the nine months ended September 30, 2015 we made $675 million of voluntary prepayments on our Term Loans and repaid the $525 million Waldorf Astoria New York Loan.

~~Credit Facilities~~

Our Revolving Credit Facility provides for $1.0 billion in borrowings, including the ability to draw up to $150 million in the form of letters of credit. As of September 30, 2016, we had $45 million of letters of credit outstanding under our Revolving Credit Facility, and a borrowing capacity of $955 million. We are currently required to pay a commitment fee of 0.125 percent per annum on the amount of our unused commitments.

In August 2016, we amended the terms of our Timeshare Facility to increase the borrowing capacity from $300 million to $450 million, allowing us to borrow up to the maximum amount until August 2018 and requiring all amounts borrowed to be repaid by August 2019.2016.

Debt and Borrowing Capacity

As of ~~September~~June 30, ~~2016,~~2017, our total indebtedness, excluding ~~$225 million of our share of debt of our investments in affiliates,~~unamortized deferred financing costs and discount, was approximately ~~$10.4 billion, including $417 million of timeshare debt.~~$6.7 billion. For further information on our total indebtedness, ~~and our~~ recent financing transactions, availability under our credit facility and guarantees, refer to Note 9:6: "Debt" in our unaudited condensed consolidated financial statements.

The obligations of the Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by us and all of our direct or indirect wholly owned material domestic subsidiaries, excluding our subsidiaries that are prohibited from providing guarantees as a result of the agreements governing our timeshare debt, our CMBS Loan and other mortgage loans. Additionally, none of our foreign subsidiaries or our non-wholly owned domestic subsidiaries guarantee the Senior Secured Credit Facility.

If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to reduce capital expenditures, issue additional equity securities or draw on our Revolving Credit Facility. Our ability to make scheduled principal payments and to pay interest on our debt depends on our future operating performance, which is subject to general conditions in or affecting the ~~hotel and timeshare industries~~hospitality industry that are beyond our control.

Off-Balance Sheet Arrangements

See Note ~~18:~~14: "Commitments and Contingencies" in our unaudited condensed consolidated financial statements for a discussion of our off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements in accordance with ~~U.S.~~ GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed ~~those~~the policies and estimates that we believe are critical and require the use of complex judgment in their application in our ~~Annual~~Current Report on Form ~~10-K~~8-K dated May 24, 2017, which presents Hilton's consolidated financial position and results of operations as of and for the ~~fiscal~~ year ended December 31, ~~2015.~~2016, giving effect to the spin-offs. Since the date of our ~~Annual~~Current Report on Form ~~10-K,~~8-K, there have been no material changes to our critical accounting policies or the methods or assumptions we apply under them.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk primarily from changes in interest rates and foreign currency exchange rates, which may affect future income, cash flows and the fair value of the ~~Company, depending on changes to interest rates and/or foreign exchange rates.~~Company. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent that they are not hedged. We enter into derivative financial arrangements to the extent they meet the objective described above and we do not use derivatives for trading or speculative purposes. See Note ~~10:~~7: "Derivative Instruments and Hedging Activities" in our unaudited condensed consolidated financial statements for additional ~~discussion.~~information. Our exposure to market risk has not materially changed from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016, including after giving effect to the spin-offs.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures as that term is defined in Rules 13a-15(e) and

15d-15(e) under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the "Exchange Act"),~~ that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in ~~SEC~~Securities and Exchange Commission ("SEC") rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure

controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various claims and lawsuits arising in the normal course of business, some of which include claims for substantial sums, including proceedings involving tort and other general liability claims, employee claims, consumer protection claims and claims related to our management of certain hotel properties. The ultimate results of claims and litigation cannot be predicted with certainty. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations in a particular period.

Item 1A. Risk Factors

As of ~~September~~June 30, ~~2016,~~2017, there have been no material changes from the risk factors previously disclosed in response to "Part I —Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015.~~2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Securities

None.

(b) Use of Proceeds

None.

The following table sets forth information regarding our purchases of shares of our common stock during the three months ended June 30, 2017:



	Total Number of Shares Purchased	Average Price Paid per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Program⁽²⁾	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽²⁾ (in millions)
April 1, 2017 to April 30, 2017	927,000	$	57.56	927,000	$	877
May 1, 2017 to May 31, 2017	1,675,678	63.44		1,675,678	770
June 1, 2017 to June 30, 2017	1,855,379	66.07		1,855,379	648
Total	4,458,057	63.31		4,458,057

____________


⁽¹⁾	This price includes per share commissions paid for all share repurchases.


⁽²⁾	In February 2017, our board of directors authorized a stock repurchase program of up to $1.0 billion of the Company's common stock. The repurchase program does not have an expiration date and may be suspended or discontinued at any time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Hilton Hawaiian Village CMBS Loan~~

~~On October~~As of July 24, 2016, Hilton Hawaiian Village LLC (the "HHV CMBS Borrower"), our wholly owned subsidiary, entered into a $1,275 million commercial mortgage-backed securities loan (the "HHV CMBS Loan") with JPMorgan Chase Bank, National Association, Deutsche Bank, AG, New York Branch, Goldman Sachs Mortgage2017, the roles and responsibilities of James E. Holthouser were modified such that Mr. Holthouser is no longer an "executive officer" of the Company ~~Barclays Bank PLC and Morgan Stanley Bank, N.A. The HHV CMBS Loan is secured~~within the meaning of Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended. Mr. Holthouser remains employed by the ~~Hilton Hawaiian Village.~~

The HHV CMBS Borrower and the HHV CMBS Loan guarantor (as defined below) are "unrestricted subsidiaries" for purposes of the debt agreements governing our senior secured credit facilities and senior notes and, upon consummation of our planned spin-offs, will be subsidiaries of Park.

We applied a portion of the proceeds from the HHV CMBS Loan to repay the portion of our existing CMBS Loan that was secured by the Hilton Hawaiian Village and intend to use the remaining net proceeds to prepay additional amounts outstanding under the existing CMBS Loan.

~~Term~~

~~The HHV CMBS Loan has a term of 10 years.~~

~~Interest and Fees~~

~~The HHV CMBS Loan bears interest at a fixed rate per annum of 4.1995%.~~

~~Amortization~~

~~The HHV CMBS Loan has no amortization payments.~~Company.

~~Prepayments~~

From and after the date which is 30 months after the first interest payment date (or earlier in certain circumstances), the HHV CMBS Borrower will be able to prepay the HHV CMBS Loan in full, or, in connection with a partial property release, in part, in each case, subject to payment of: (i) a yield maintenance premium in the case of any prepayment made prior to the interest payment date that is six months prior to the inactivity date of the HHV CMBS Loan; (ii) the payment of all interest scheduled to accrue through the end of the applicable interest period in which prepayment is made; and (iii) all other sums then due and payable under the loan agreement, including the lenders’ reasonable, actual out-of-pocket costs and expenses in connection with such prepayment.

~~Mandatory prepayments will be required in connection with certain casualties or condemnations of a property.~~

~~Once repaid, no further borrowings will be permitted under the HHV CMBS Loan.~~

~~Guarantee~~

Certain obligations of the HHV CMBS Borrower with respect to the HHV CMBS Loan are guaranteed by Park Intermediate Holdings LLC (the "HHV CMBS Loan guarantor"). Under the HHV CMBS guarantee, (i) the HHV CMBS Loan guarantor has agreed to indemnify the lenders for losses with respect to (x) customary "bad-boy" acts of the HHV CMBS Borrower and its affiliates and (y) certain events relating to the Employee Retirement Income Security Act of 1974, and (ii) the HHV CMBS Loan will become fully recourse to the HHV CMBS Loan guarantor upon a voluntary or collusive involuntary bankruptcy of the HHV CMBS Borrower or the appointment of a custodian, receiver, trustee or examiner for the HHV CMBS Borrower if consented to by the HHV CMBS Borrower. Notwithstanding the foregoing, the aggregate liability of the HHV CMBS Loan guarantor as a result of clause (ii) above will be capped at 10% of the then outstanding principal balance of the HHV CMBS Loan. The HHV CMBS Loan guarantor has also executed a guaranty agreement pursuant to which it will guarantee payment of the deductible with respect to flood, windstorm and earthquake insurance coverages to the extent such deductible exceeds the base deductible that would otherwise be permitted by the loan documents. At its election, the HHV CMBS Borrower may also, in lieu of the purchase of additional terrorism insurance, add an additional guaranteed matter with respect to any losses to the lenders arising from a terrorism event in excess of the applicable policy payment.

~~Covenants and Other Matters~~

The HHV CMBS Loan includes certain customary affirmative and negative covenants and events of default. Such covenants, among other things, will restrict, subject to certain exceptions, the ability of the HHV CMBS Borrower to, among other things: incur additional debt; create liens on assets; transfer, pledge or assign certain equity interests; pay any dividends or make any distributions to its direct or indirect owners if an event of default exists or if the debt yield under the HHV CMBS Loan (calculated based on the outstanding balance of the HHV CMBS Loan) is below 7.00% for two consecutive quarters; make certain investments, loans and advances; consolidate, merge, sell or otherwise dispose of all or any part of its assets or to purchase, lease or otherwise acquire all or any substantial part of assets of any other person; enter into certain transactions with affiliates; engage in any business other than the ownership of the properties and business activities ancillary thereto; and amend or modify the HHV CMBS Borrower’s articles of organization, limited liability company agreement and certain agreements. The HHV CMBS Loan also includes affirmative covenants requiring the HHV CMBS Borrower to, among other things, exist as a “special purpose entity,” maintain, while a low debt yield trigger exists, certain reserve funds in respect of furniture, fixtures and equipment, taxes and insurance (unless such amounts have been paid or are being collected by the property manager), and comply with other customary obligations for commercial mortgage-backed securities loan financings.

In addition, revenues will be required to be deposited into segregated accounts, to be used by the property manager to make certain payments relating to the Hilton Hawaiian Village. So long as there is no event of default under the loan and the debt yield for the HHV CMBS Loan (calculated based on the outstanding principal balance of the HHV CMBS Loan) does not fall below 7.00% for two consecutive quarters, then all cash in that account (after payment of property expenses and reserves) would be available to the HHV CMBS Borrower for any purpose, including for the payment of dividends or distributions to its direct or indirect owners.

~~Section 13(r) Disclosure~~

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we hereby incorporate by reference herein Exhibit 99.1 of this report, which includes disclosures regarding activities at NCR Corporation, which may be considered an affiliate of Blackstone and, therefore, our affiliate.

Item 6. Exhibits



Exhibit Number		Exhibit Description
3.1		Certificate of Incorporation of Hilton Worldwide Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-36243) filed on December 17, 2013).
3.2		~~Bylaws~~Certificate of Amendment to Certificate of Incorporation of Hilton Worldwide Holdings Inc. effective as of January 3, 2017 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-36243) filed on January 4, 2017).
3.3		Amended and Restated By-Laws of Hilton Worldwide Holdings Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 001-36243) filed on ~~December~~March 17, ~~2013)~~2017).
~~4.1~~10.1		~~Indenture, dated as of August 18, 2016, by and among~~ Hilton ~~Escrow Issuer LLC, Hilton Escrow Issuer Corp., the guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee~~2017 Omnibus Incentive Plan (incorporated by reference to Exhibit ~~4.1~~10.1 to the Company's Current Report on Form 8-K (File No. 001-36243) filed on ~~August 18, 2016)~~May 26, 2017).*
~~4.2~~10.2		Form of ~~4.250% Senior Note due 2024 (included in Exhibit 4.1).~~Deferred Share Unit Agreement for Independent Directors.*
~~4.3~~10.3		~~Registration Rights~~Share Repurchase Agreement, dated ~~as of August 18, 2016,~~June 6, 2017, by and among Hilton ~~Escrow Issuer LLC, Hilton Escrow Issuer Corp.~~Worldwide Holdings Inc. and ~~Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf~~each of the ~~initial purchasers~~entities identified on Schedule 1 thereto (incorporated by reference to Exhibit ~~4.3~~10.1 to the Company's Current Report on Form 8-K (File No. 001-36243) filed on ~~August 18, 2016).~~
~~4.4~~		~~Fourth Supplemental Indenture, dated as of August 19, 2016, between Hilton Domestic Operating Company Inc. and Wilmington Trust, National Association, as trustee.~~
~~4.5~~		Fifth Supplemental Indenture, dated as of September 22, 2016, among Hilton Worldwide Parent LLC, Hilton Worldwide Finance LLC, Hilton Worldwide Finance Corp., and Wilmington Trust, National Association, as trustee.
~~4.6~~		First Supplemental Indenture, dated as of September 22, 2016, among Hilton Escrow Issuer LLC, Hilton Escrow Issuer Corp., Hilton Domestic Operating Company Inc., Hilton Worldwide Holdings Inc., Hilton Worldwide Finance LLC, the subsidiary guarantors party thereto, and Wilmington Trust, National Association, as trustee.
~~4.7~~		~~Second Supplemental Indenture, dated as of September 22, 2016, among Hilton Domestic Operating Company Inc., Hilton Worldwide Parent LLC, and Wilmington Trust, National Association.~~
~~10.1~~		Amendment No. 1, dated as of August 18, 2016, to the Credit Agreement, dated as of October 25, 2013, by and among Hilton Worldwide Holdings Inc., Hilton Worldwide Finance LLC, the other guarantors party thereto from time to time, Deutsche Bank AG New York Branch as administrative agent, collateral agent, swing line lender and L/C issuer and the other lenders party thereto from time to time (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-36243) filed on August 18, 2016).
~~10.2~~		Omnibus Amendment No. 4 to Receivables Loan Agreement and Amendment No. 2 to Sale and Contribution Agreement, effective as of August 18, 2016, among Hilton Grand Vacations Trust I LLC, as borrower, Wells Fargo Bank, National Association, as paying agent and securities intermediary, the financial institutions signatory thereto, as managing agents, the financial institutions signatory thereto as committed lenders and Deutsche Bank Securities, Inc., as administrative agent (incorporated by reference to Exhibit 10.11 to Hilton Grand Vacations Inc.'s Registration Statement on Form 10 (File No. 001-37794) filed on September 16, 2016)June 12, 2017).
12		Computation of Ratio of Earnings to Fixed Charges.
31.1		Certificate of Christopher J. Nassetta, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certificate of Kevin J. Jacobs, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certificate of Christopher J. Nassetta, President and Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certificate of Kevin J. Jacobs, Executive Vice President and Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
~~99.1~~		~~Section 13(r) Disclosure.~~
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.



101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

____________


*	This document has been identified as a management contract or compensatory plan or arrangement.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



HILTON WORLDWIDE HOLDINGS INC.

By:		/s/ Christopher J. Nassetta
Name:		Christopher J. Nassetta
		President and Chief Executive Officer

By:		/s/ Kevin J. Jacobs
Name:		Kevin J. Jacobs
		Executive Vice President and Chief Financial Officer

Date: ~~October~~July 26, ~~2016~~2017

5445



	Three Months Ended		Nine Months Ended
	September 30, 2015		September 30, 2015
	(in millions)
Total revenues	$	84	$	228
Income before income taxes	10		44



	September 30, 2016
	Securitized Timeshare			Unsecuritized Timeshare⁽¹⁾			Other		Total
	(in millions)
Financing receivables	$	228		$	741		$	63	$	1,032
Less: allowance for loan loss	(9		)	(94		)	—		(103		)
	219			647			63		929

Current portion of financing receivables	51			88			2		141
Less: allowance for loan loss	(2		)	(11		)	—		(13		)
	49			77			2		128

Total financing receivables	$	268		$	724		$	65	$	1,057



	Securitized Timeshare			Unsecuritized Timeshare
Year	(in millions)
2016 (remaining)	$	13		$	31
2017	51			76
2018	50			81
2019	47			84
2020	43			88
Thereafter	75			469
	279			829
Less: allowance for loan loss	(11		)	(105		)
	$	268		$	724



		Fair Value
		September 30,		December 31,
	Balance Sheet Classification	2016		2015
		(in millions)
Cash Flow Hedge:
Interest rate swaps	Other liabilities	N/A		$	15

Non-designated Hedges:
Interest rate swaps	Other liabilities	$	21	N/A
Interest rate caps⁽¹⁾	Other current assets	—		—
Forward contracts	Other current assets	2		1
Forward contracts	Accounts payable, accrued expenses and other	1		1



	Currency Translation Adjustment⁽¹⁾			Pension Liability Adjustment			Cash Flow Hedge Adjustment			Total
	(in millions)
Balance as of December 31, 2015	$	(580	)	$	(194	)	$	(10	)	$	(784	)

Other comprehensive loss before reclassifications	(40		)	(2		)	(4		)	(46		)
Amounts reclassified from accumulated other comprehensive loss	(1		)	4			1			4
Net current period other comprehensive income (loss)	(41		)	2			(3		)	(42		)

Balance as of September 30, 2016	$	(621	)	$	(192	)	$	(13	)	$	(826	)



	Three Months Ended September 30, 2015
	Parent			Subsidiary Issuers			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Revenues
Owned and leased hotels	$	—		$	—		$	64		$	1,025		$	(7	)	$	1,082
Management and franchise fees and other	—			—			355			86			(25		)	416
Timeshare	—			—			314			20			—			334
	—			—			733			1,131			(32		)	1,832
Other revenues from managed and franchised properties	—			—			1,199			116			(252		)	1,063
Total revenues	—			—			1,932			1,247			(284		)	2,895

Expenses
Owned and leased hotels	—			—			46			773			(21		)	798
Timeshare	—			—			221			4			(6		)	219
Depreciation and amortization	—			—			82			89			—			171
General, administrative and other	—			—			117			33			(5		)	145
	—			—			466			899			(32		)	1,333
Other expenses from managed and franchised properties	—			—			1,199			116			(252		)	1,063
Total expenses	—			—			1,665			1,015			(284		)	2,396

Gain on sales of assets, net	—			—			—			164			—			164

Operating income	—			—			267			396			—			663

Interest income	—			—			2			1			—			3
Interest expense	—			(69		)	(9		)	(60		)	—			(138		)
Equity in earnings from unconsolidated affiliates	—			—			7			2			—			9
Gain (loss) on foreign currency transactions	—			—			213			(221		)	—			(8		)
Other gain, net	—			—			—			1			—			1

Income (loss) before income taxes and equity in earnings from subsidiaries	—			(69		)	480			119			—			530

Income tax benefit (expense)	(1		)	27			(200		)	(73		)	—			(247		)

Income (loss) before equity in earnings from subsidiaries	(1		)	(42		)	280			46			—			283

Equity in earnings from subsidiaries	280			322			42			—			(644		)	—

Net income	279			280			322			46			(644		)	283
Net income attributable to noncontrolling interests	—			—			—			(4		)	—			(4		)
Net income attributable to Hilton stockholders	$	279		$	280		$	322		$	42		$	(644	)	$	279

Comprehensive income (loss)	$	159		$	274		$	301		$	(47	)	$	(524	)	$	163
Comprehensive income attributable to noncontrolling interests	—			—			—			(4		)	—			(4		)
Comprehensive income (loss) attributable to Hilton stockholders	$	159		$	274		$	301		$	(51	)	$	(524	)	$	159



	Nine Months Ended September 30, 2016
	Parent		Subsidiary Issuers			Guarantors			Non-Guarantors			Eliminations			Total
	(in millions)
Revenues
Owned and leased hotels	$	—	$	—		$	177		$	2,950		$	(22	)	$	3,105
Management and franchise fees and other	—		—			1,089			265			(78		)	1,276
Timeshare	—		—			969			51			—			1,020
	—		—			2,235			3,266			(100		)	5,401
Other revenues from managed and franchised properties	—		—			3,798			369			(825		)	3,342
Total revenues	—		—			6,033			3,635			(925		)	8,743

Expenses
Owned and leased hotels	—		—			133			2,273			(71		)	2,335
Timeshare	—		—			704			12			(19		)	697
Depreciation and amortization	—		—			242			267			—			509
Impairment loss	—		—			—			15			—			15
General, administrative and other	—		—			303			99			(10		)	392
	—		—			1,382			2,666			(100		)	3,948
Other expenses from managed and franchised properties	—		—			3,798			369			(825		)	3,342
Total expenses	—		—			5,180			3,035			(925		)	7,290

Gain on sales of assets, net	—		—			—			2			—			2

Operating income	—		—			853			602			—			1,455

Interest income	—		—			7			3			—			10
Interest expense	—		(199		)	(55		)	(180		)	—			(434		)
Equity in earnings from unconsolidated affiliates	—		—			15			3			—			18
Gain (loss) on foreign currency transactions	—		—			(82		)	49			—			(33		)
Other loss, net	—		(5		)	—			(10		)	—			(15		)

Income (loss) before income taxes and equity in earnings from subsidiaries	—		(204		)	738			467			—			1,001

Income tax benefit (expense)	193		78			(347		)	(179		)	—			(255		)

Income (loss) before equity in earnings from subsidiaries	193		(126		)	391			288			—			746

Equity in earnings from subsidiaries	542		668			277			—			(1,487		)	—

Net income	735		542			668			288			(1,487		)	746
Net income attributable to noncontrolling interests	—		—			—			(11		)	—			(11		)
Net income attributable to Hilton stockholders	$	735	$	542		$	668		$	277		$	(1,487	)	$	735

Comprehensive income	$	693	$	539		$	614		$	302		$	(1,445	)	$	703
Comprehensive income attributable to noncontrolling interests	—		—			—			(10		)	—			(10		)
Comprehensive income attributable to Hilton stockholders	$	693	$	539		$	614		$	292		$	(1,445	)	$	693



					Increase / (decrease)			Net increase / (decrease) from acquired and disposed hotels⁽¹⁾			Net increase / (decrease) excluding the effect of acquired and disposed hotels
	September 30,
	2016		2015
	(in millions)
Three Months Ended
Comparable U.S. owned and leased hotels	$	529	$	521	$	8		$	—		$	8
Non-comparable U.S. owned and leased hotels	85		90		(5		)	(2		)	(3		)
U.S. owned and leased hotels	$	614	$	611	$	3		$	(2	)	$	5

Nine Months Ended
Comparable U.S. owned and leased hotels	$	1,575	$	1,540	$	35		$	—		$	35
Non-comparable U.S. owned and leased hotels	297		267		30			41			(11		)
U.S. owned and leased hotels	$	1,872	$	1,807	$	65		$	41		$	24



					Decrease			Net increase / (decrease) due to FX changes⁽¹⁾			Decrease from disposed hotels⁽²⁾			Net decrease excluding the effect of FX changes and disposed hotels

	September 30,
	2016		2015
	(in millions)
Three Months Ended
Comparable international owned and leased hotels	$	396	$	427	$	(31	)	$	(17	)	$	—		$	(14	)
Non-comparable international owned and leased hotels	23		44		(21		)	1			(20		)	(2		)
International owned and leased hotels	$	419	$	471	$	(52	)	$	(16	)	$	(20	)	$	(16	)

Nine Months Ended
Comparable international owned and leased hotels	$	1,164	$	1,203	$	(39	)	$	(39	)	$	—		$	—
Non-comparable international owned and leased hotels	69		164		(95		)	—			(89		)	(6		)
International owned and leased hotels	$	1,233	$	1,367	$	(134	)	$	(39	)	$	(89	)	$	(6	)



					Increase		Net increase from acquired and disposed hotels⁽¹⁾		Net increase / (decrease) excluding the effect of acquired and disposed hotels
	September 30,
	2016		2015
	(in millions)
Three Months Ended
Comparable U.S. owned and leased hotels	$	350	$	346	$	4	$	—	$	4
Non-comparable U.S. owned and leased hotels	60		57		3		3		—
U.S. owned and leased hotels	$	410	$	403	$	7	$	3	$	4

Nine Months Ended
Comparable U.S. owned and leased hotels	$	1,058	$	1,022	$	36	$	—	$	36
Non-comparable U.S. owned and leased hotels	187		169		18		21		(3		)
U.S. owned and leased hotels	$	1,245	$	1,191	$	54	$	21	$	33