UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20182019
or
¨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) (703) 883-1000

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


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareHLTNew York Stock Exchange

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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filerx
 
Accelerated filer¨
Non-accelerated filer ¨
(Do not check if a smaller reporting company)
Smaller reporting company ¨
Emerging growth 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 July 19, 201818, 2019 was 298,186,104.286,854,529.






HILTON WORLDWIDE HOLDINGS INC.
FORM 10-Q TABLE OF CONTENTS


  Page No.
PART IFINANCIAL INFORMATION 
   
Item 1.Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
   
PART IIOTHER INFORMATION 
   
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
 Signatures






PART I. FINANCIAL INFORMATION


Item 1.    Financial Statements


HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
(unaudited)
 June 30, December 31,
20192018
 (unaudited)  
ASSETS   
Current Assets:   
Cash and cash equivalents$635
 $403
Restricted cash and cash equivalents83
 81
Accounts receivable, net of allowance for doubtful accounts of $44 and $421,190
 1,150
Prepaid expenses117
 160
Other190
 189
Total current assets (variable interest entities  $92 and $90)
2,215
 1,983
Intangibles and Other Assets:   
Goodwill5,157
 5,160
Brands4,874
 4,869
Management and franchise contracts, net817
 872
Other intangible assets, net400
 415
Operating lease right-of-use assets891
 
Property and equipment, net418
 367
Deferred income tax assets146
 90
Other222
 239
Total intangibles and other assets (variable interest entities  $186 and $178)
12,925
 12,012
TOTAL ASSETS$15,140
 $13,995
LIABILITIES AND EQUITY (DEFICIT)   
Current Liabilities:   
Accounts payable, accrued expenses and other$1,657
 $1,549
Current maturities of long-term debt37
 16
Current portion of deferred revenues298
 350
Current portion of liability for guest loyalty program788
 700
Total current liabilities (variable interest entities  $68 and $56)
2,780
 2,615
Long-term debt7,772
 7,266
Operating lease liabilities1,066
 
Deferred revenues822
 826
Deferred income tax liabilities861
 898
Liability for guest loyalty program986
 969
Other876
 863
Total liabilities (variable interest entities  $272 and $263)
15,163
 13,437
Commitments and contingencies - see Note 14


 


Equity (Deficit):   
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of June 30, 2019 and December 31, 2018
 
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 333,019,440 issued and 287,693,211 outstanding as of June 30, 2019 and 332,105,163 issued and 294,815,890 outstanding as of December 31, 20183
 3
Treasury stock, at cost; 45,326,229 shares as of June 30, 2019 and 37,289,273 shares as of December 31, 2018(3,304) (2,625)
Additional paid-in capital10,419
 10,372
Accumulated deficit(6,342) (6,417)
Accumulated other comprehensive loss(806) (782)
Total Hilton stockholders' equity (deficit)(30) 551
Noncontrolling interests7
 7
Total equity (deficit)(23) 558
TOTAL LIABILITIES AND EQUITY (DEFICIT)$15,140
 $13,995

 June 30, December 31,
20182017
ASSETS   
Current Assets:   
Cash and cash equivalents$423
 $570
Restricted cash and cash equivalents82
 100
Accounts receivable, net of allowance for doubtful accounts of $38 and $291,041
 1,005
Prepaid expenses151
 127
Income taxes receivable11
 36
Other136
 169
Total current assets (variable interest entities - $92 and $93)1,844
 2,007
Intangibles and Other Assets:   
Goodwill5,174
 5,190
Brands4,878
 4,890
Management and franchise contracts, net893
 953
Other intangible assets, net419
 433
Property and equipment, net351
 353
Deferred income tax assets111
 111
Other316
 291
Total intangibles and other assets (variable interest entities - $176 and $171)12,142
 12,221
TOTAL ASSETS$13,986
 $14,228
LIABILITIES AND EQUITY   
Current Liabilities:   
Accounts payable, accrued expenses and other$1,312
 $1,416
Current portion of deferred revenues308
 366
Current maturities of long-term debt11
 46
Income taxes payable22
 12
Current portion of liability for guest loyalty program725
 622
Total current liabilities (variable interest entities - $49 and $58)2,378
 2,462
Long-term debt7,564
 6,556
Deferred revenues819
 829
Deferred income tax liabilities908
 931
Liability for guest loyalty program876
 839
Other881
 920
Total liabilities (variable interest entities - $261 and $271)13,426
 12,537
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, 2018 and December 31, 2017
 
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 331,911,793 issued and 298,487,855 outstanding as of June 30, 2018 and 331,054,014 issued and 317,420,933 outstanding as of December 31, 20173
 3
Treasury stock, at cost; 33,423,938 shares as of June 30, 2018 and 13,633,081 shares as of December 31, 2017(2,330) (891)
Additional paid-in capital10,321
 10,298
Accumulated deficit(6,697) (6,981)
Accumulated other comprehensive loss(742) (741)
Total Hilton stockholders' equity555
 1,688
Noncontrolling interests5
 3
Total equity560
 1,691
TOTAL LIABILITIES AND EQUITY$13,986
 $14,228


See notes to condensed consolidated financial statements.




HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
Revenues       
Franchise and licensing fees$444
 $404
 $826
 $735
Base and other management fees89
 84
 169
 161
Incentive management fees58
 59
 113
 114
Owned and leased hotels387
 392
 699
 726
Other revenues26
 22
 52
 45
 1,004
 961
 1,859
 1,781
Other revenues from managed and franchised properties1,480
 1,330
 2,829
 2,584
Total revenues2,484
 2,291
 4,688
 4,365
        
Expenses       
Owned and leased hotels334
 352
 632
 672
Depreciation and amortization86
 79
 170
 161
General and administrative113
 115
 220
 219
Other expenses15
 12
 35
 26
 548
 558
 1,057
 1,078
Other expenses from managed and franchised properties1,458
 1,327
 2,841
 2,602
Total expenses2,006
 1,885
 3,898
 3,680
     

  
Operating income478
 406
 790
 685
        
Interest expense(101) (95) (199) (178)
Loss on foreign currency transactions(3) (12) (3) (1)
Other non-operating income (loss), net(12) (1) (8) 13

       
Income before income taxes362
 298
 580
 519
        
Income tax expense(101) (81) (160) (139)
        
Net income261
 217
 420
 380
Net income attributable to noncontrolling interests(1) 
 (2) (2)
Net income attributable to Hilton stockholders$260
 $217
 $418
 $378
        
Earnings per share:       
Basic$0.90
 $0.72
 $1.43
 $1.22
Diluted$0.89
 $0.71
 $1.42
 $1.21
        
Cash dividends declared per share$0.15
 $0.15
 $0.30
 $0.30

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
Revenues       
Franchise fees$404
 $355
 $735
 $637
Base and other management fees84
 81
 161
 162
Incentive management fees59
 57
 114
 106
Owned and leased hotels392
 373
 726
 669
Other revenues22
 20
 45
 57
 961
 886
 1,781
 1,631
Other revenues from managed and franchised properties1,330
 1,190
 2,584
 2,341
Total revenues2,291
 2,076
 4,365
 3,972
        
Expenses       
Owned and leased hotels352
 327
 672
 595
Depreciation and amortization79
 83
 161
 169
General and administrative115
 118
 219
 224
Other expenses12
 11
 26
 34
 558
 539
 1,078
 1,022
Other expenses from managed and franchised properties1,327
 1,213
 2,602
 2,409
Total expenses1,885
 1,752
 3,680
 3,431
     

  
Operating income406
 324
 685
 541
        
Interest expense(95) (86) (178) (175)
Gain (loss) on foreign currency transactions(12) 5
 (1) 1
Loss on debt extinguishment
 
 
 (60)
Other non-operating income (loss), net(1) 7
 13
 9

       
Income before income taxes298
 250
 519
 316
        
Income tax expense(81) (99) (139) (117)
        
Net income217
 151
 380
 199
Net income attributable to noncontrolling interests
 (1) (2) (2)
Net income attributable to Hilton stockholders$217
 $150
 $378
 $197
        
Earnings per share:       
Basic$0.72
 $0.46
 $1.22
 $0.60
Diluted$0.71
 $0.46
 $1.21
 $0.60
        
Cash dividends declared per share$0.15
 $0.15
 $0.30
 $0.30


See notes to condensed consolidated financial statements.




HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
Three Months Ended Six Months EndedThree Months Ended Six Months Ended
June 30, June 30,June 30, June 30,
2018 2017 2018 20172019 2018 2019 2018
Net income$217
 $151
 $380
 $199
$261
 $217
 $420
 $380
Other comprehensive income (loss), net of tax benefit (expense):              
Currency translation adjustment, net of tax of $—, $—, $1 and $1(77) 53
 (45) 73
Pension liability adjustment, net of tax of $(1), $—, $(1) and $(1)2
 3
 3
 4
Cash flow hedge adjustment, net of tax of $(4), $2, $(14) and $413
 (5) 41
 (7)
Total other comprehensive income (loss)(62) 51
 (1) 70
Currency translation adjustment, net of tax of $9, $—, $1 and $115
 (77) 12
 (45)
Pension liability adjustment, net of tax of $—, $(1), $(1) and $(1)2
 2
 4
 3
Cash flow hedge adjustment, net of tax of $8, $(4), $13 and $(14)(25) 13
 (40) 41
Total other comprehensive loss(8) (62) (24) (1)
              
Comprehensive income155
 202
 379
 269
253
 155
 396
 379
Comprehensive income attributable to noncontrolling interests
 (2) (2) (2)(1) 
 (2) (2)
Comprehensive income attributable to Hilton stockholders$155
 $200
 $377
 $267
$252
 $155
 $394
 $377


See notes to condensed consolidated financial statements.




HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months EndedSix Months Ended
June 30,June 30,
2018 20172019 2018
Operating Activities:      
Net income$380
 $199
$420
 $380
Adjustments to reconcile net income to net cash provided by operating activities:      
Amortization of contract acquisition costs14
 14
Depreciation and amortization161
 169
170
 161
Amortization of contract acquisition costs14
 8
Loss (gain) on foreign currency transactions1
 (1)
Loss on debt extinguishment
 60
Loss on foreign currency transactions3
 1
Share-based compensation68
 59
81
 68
Deferred income taxes(39) (123)1
 (39)
Contract acquisition costs(38) (32)(43) (38)
Working capital changes and other(15) 5
4
 (15)
Net cash provided by operating activities532
 344
650
 532
Investing Activities:      
Capital expenditures for property and equipment(28) (18)(46) (28)
Capitalized software costs(38) (29)(44) (38)
Other(9) (18)(5) (9)
Net cash used in investing activities(75) (65)(95) (75)
Financing Activities:      
Borrowings1,650
 1,823
1,795
 1,650
Repayment of debt(672) (1,836)(1,317) (672)
Debt issuance costs and redemption premium(21) (68)
Debt issuance costs(27) (21)
Dividends paid(92) (98)(87) (92)
Cash transferred in spin-offs of Park and HGV
 (501)
Repurchases of common stock(1,439) (352)(653) (1,439)
Distributions to noncontrolling interests
 (1)
Tax withholdings on share-based compensation(42) (28)
Share-based compensation tax withholdings and other(34) (42)
Net cash used in financing activities(616) (1,061)(323) (616)
      
Effect of exchange rate changes on cash, restricted cash and cash equivalents(6) 7
2
 (6)
Net decrease in cash, restricted cash and cash equivalents(165) (775)
Cash, restricted cash and cash equivalents from continuing operations,
beginning of period
670
 1,183
Cash, restricted cash and cash equivalents from discontinued operations,
beginning of period

 501
Net increase (decrease) in cash, restricted cash and cash equivalents234
 (165)
Cash, restricted cash and cash equivalents, beginning of period670
 1,684
484
 670
Cash, restricted cash and cash equivalents, end of period$505
 $909
$718
 $505
      
Supplemental Disclosures:      
Cash paid during the year:      
Interest$149
 $158
$190
 $149
Income taxes, net of refunds149
 237
157
 149
Non-cash financing activities:   
Spin-offs of Park and HGV$
 $17


See notes to condensed consolidated financial statements.




HILTON WORLDWIDE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Note 1: Organization

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 and is engaged in managing, franchising, owning and leasing hotels and resorts including timeshare properties.and licensing its brands and intellectual property ("IP"). As of June 30, 2018,2019, we managed, franchised, owned or leased 5,4565,872 hotels and resorts, including timeshare properties, totaling 879,349939,297 rooms in 106114 countries and territories.

In April 2018, HNA Tourism Group Co., Ltd. and certain of its affiliates (together, "HNA") sold its entire ownership interest in Hilton totaling 82.5 million shares of Hilton common stock, of which 66.0 million shares were sold in an underwritten, public offering and 16.5 million shares were repurchased by us. See Note 6: "Debt" for additional information.

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") and Hilton Grand Vacations Inc. ("HGV"), respectively (the "spin-offs").


Note 2: Basis of Presentation and Summary of Significant Accounting Policies


Basis of Presentation


The accompanying condensed consolidated financial statements for the three and six months ended June 30, 20182019 and 20172018 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 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 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018. Certain prior year amounts in our condensed consolidated balance sheets have been reclassified to conform to current year presentation.


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

On January 1, 2018, we adopted the requirements of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") using the full retrospective approach as of January 1, 2016. All amounts and disclosures set forth in this Form 10-Q reflect the necessary adjustments required for the adoption of this standard, including the reclassification of prior year balances to conform to current year presentation. See "Summary of Significant Accounting Policies" below for additional information.


Summary of Significant Accounting Policies


Our significant accounting policies are detailed in Note 2: "Basis of Presentation and Summary of Significant Accounting Policies" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The2018. On January 1, 2019, we adopted the requirements of Accounting Standards Update ("ASU") No. 2016-02 ("ASU 2016-02"), Leases (Topic 842), and the significant accounting policies that changed as a result of the adoption of ASU 2014-09 are set forth below.


Revenue RecognitionLeases


Revenues are primarily derived from managementWe determine if a contract is or contains a lease at the inception of the contract, and franchise contracts with third-party hotel and resort owners,we classify that lease as wella finance lease if it meets certain criteria or as from our owned and leased hotels. The majorityan operating lease when it does not. We reassess if a contract is or contains a leasing arrangement upon modification of our performance obligationsthe contract. For a contract, in which we are a serieslessee, that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted.

At the commencement date of distinct goods or services,a lease, we recognize a lease liability for which we receive variable consideration throughfuture fixed lease payments and a right-of-use ("ROU") asset representing our management and franchise fees or fixed consideration through our owned and leased hotels. We allocateright to use the variable fees tounderlying asset during the distinct services to which they relate applying the prescribed variable consideration allocation guidance, and we allocate fixed consideration to the related performance obligations based onlease term. The lease liability is initially measured as the present value of the allocated variable cash flows. We dofuture fixed lease payments that will be made over the lease term. The lease term includes lessee options to extend the lease and periods occurring after a lessee early termination option, only to the extent it is reasonably certain that we will exercise such extension options and not adjustexercise such early termination options, respectively. The future fixed lease payments are discounted using the promisedrate implicit in the lease, if available, or our incremental borrowing rate. Our incremental borrowing rate is estimated on a portfolio basis and incorporates lease term, currency risk, credit risk and an adjustment for collateral. Upon adoption of ASU 2016-02, we elected to use the remaining lease term as of January 1, 2019 in our estimation of the applicable discount rate for leases that were in place at adoption. For the initial measurement of the lease liability for leases commencing after January 1, 2019, we use the discount rate as of the commencement date of the lease, incorporating the entire lease term. Additionally, we elected not to recognize leases with lease terms of 12 months or less at the commencement date in our consolidated balance sheets. Current maturities and long-term portions of operating lease liabilities are classified as accounts payable, accrued expenses and other and operating lease liabilities, respectively, and current maturities and long-term portions of finance lease liabilities are classified as current maturities of long-term debt and long-term debt, respectively, in our consolidated balance sheets.


The ROU asset is measured at the amount of considerationthe lease liability with adjustments, if applicable, for lease prepayments made prior to or at lease commencement, initial direct costs incurred by us and lease incentives. We evaluate the effectscarrying value of a significant financing component when we expect, at contract inception, thatROU assets if there are indicators of impairment and review the period between our transferrecoverability of a promised good


or servicethe related asset group. If the carrying value of the asset group is determined to a customernot be recoverable and when the customer pays for that good or service will be one year or less, which it is in substantially all cases. Additionally,excess of the estimated fair value, we do not typically include extended payment termsrecord an impairment loss in our contracts with customers.consolidated statements of operations. ROU assets of operating leases are classified as operating lease right-of-use assets and ROU assets of finance leases are classified as property and equipment, net in our consolidated balance sheets.


Management and franchise revenues

We identifiedOur operating leases require: (i) fixed lease payments, or minimum payments, as contractually stated in the following performance obligations in connection withlease agreement; (ii) variable lease payments, which, for our management and franchise contracts:

Intellectual Property ("IP") licenses grant the right to access our hotel system IP, including brand IP, reservations systems and property management systems.
Hotel management services include providing day-to-day management services of the hotels, for the property owners.
Development services include providing consultative services (e.g., design assistance and contractor selection) to the property owner to assist with the construction of the hotel prior to the hotel opening.
Pre-opening services include providing services (e.g., advertising, budgeting, e-commerce strategies, food and beverage testing) to the property owner to assist in preparing for the hotel opening.
Material rights for free or discounted goods or services to hotel guests are satisfied at the earlier point in time of either when the material right expires or the underlying free or discounted good or service is provided to the hotel guest.

Each of the identified performance obligations related to management and franchise revenues is considered to be a series of distinct services transferred over time. While the underlying activities may vary from day to day, the nature of the promises are the same each day, and the property owner can independently benefit from each day's services. Management and franchise fees are typically based on the sales or usage of the underlying hotel, with the exception of fixed upfront fees, which usually represent an insignificant portion of the transaction price.

Franchise fees represent fees earned in connection with the licensing of one of our brands, usually under long-term contracts with the property owner, and include the following:

Royalty fees are generally based on a percentage of the hotel's monthly gross room revenue and,underlying asset's revenues or profits, or are dependent on changes in some cases, may also include a percentage of gross food and beverage revenues and other revenues, as applicable. These fees are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed.
Application, initiation and other fees are charged when: (i) new hotels enter our system; (ii) there is a change of ownership of a hotel;an index; or (iii) contracts with properties alreadylease payments equal to the greater of the fixed or variable lease payments. In addition, we may be required to pay some, or all, of the capital costs for furniture, equipment and leasehold improvements in our system are extended. These fees are typically fixed and collected upfront and are recognized as revenue overa hotel property that we lease during the term of the franchise contract. We do not consider this advance considerationlease. For operating leases, lease expense relating to include a significant financing component, since it is used to protect us from the property owner failing to adequately complete some or all of its obligations under the contract.
License fees are earned from: (i) a license agreement with HGV to use certain Hilton marks and IP in its timeshare business, which are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed; and (ii) co-brand credit card arrangements, which are recognized as revenue when points for our guest loyalty program, Hilton Honors, are issued, generally as spend on the co-branded credit card occurs; see further discussion below under "Hilton Honors."

Franchise fees are reduced by any consideration paid or anticipated to be paid to incentivize hotel owners to enter into franchise contracts with us.

Management fees represent fees earned from hotels that we manage, usually under long-term contracts with the property owner, and include the following:

Base management fees are generally based on a percentage of the hotel's monthly gross revenue. Base fees are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed.
Incentive management fees are generally based on a percentage of the hotel's operating profits and in some cases may be subject to a stated return threshold to the property owner, normally over a one-calendar year period (the "incentive period"). Incentive fee revenuefixed payments is recognized on a monthlystraight-line basis but onlyover the lease term, and lease expense relating to the extent the cumulative fee earned does not exceed the probable fee for the incentive period. Incentive fee payment terms vary, but they are generally billedvariable payments is expensed as incurred, with amounts recognized in owned and collected monthly or annually upon completion of the incentive period.

Baseleased hotel expenses, general and other management fees are reduced by any consideration paid or anticipated to be paid to incentivize hotel owners to enter into management contracts with us.



Other revenues from managedadministrative expenses and franchised properties represent amounts that are contractually reimbursed to us by property owners, either directly as costs are incurred or indirectly through fees that are billed and collected in advance related to certain costs and expenses of the related properties, and include the following:

Direct reimbursements include payroll and related costs and certain other operating costs of the managed and franchised properties’ operations, which are contractually reimbursed to us by the property owners as expenses are incurred. Revenue is recognized based on the amount of expenses incurred by Hilton, which are presented as other expenses from managed and franchised properties in our consolidated statements of operations, that are then reimbursed to us byoperations. For finance leases, the property owner typically on a monthly basis, which results in no net effect on operating income (loss)amortization of the asset is recognized over the shorter of the lease term or net income (loss).
Indirect reimbursements include marketing expenses and other expenses associated with our brands and shared services, which are paid from fees collected by Hilton from the managed and franchised properties. Revenue is generally recognized as fees are billed, which are based onuseful life of the underlying hotel's sales or usage (e.g., gross room revenuesasset within depreciation and number of reservations processed). System implementation fees charged to property owners are deferredamortization expense and recognized as revenue over the term of the management or franchise contract. The corresponding expenses are expensed as incurred and are presented as other expenses from managed and franchised properties in our consolidated statements of operations and are expectedoperations. The interest expense related to equal the revenues earned from indirect reimbursements over time.

The management and franchise fees and reimbursements from third-party hotel owners are allocated to the performance obligations and the distinct services to which they relate using their estimated standalone selling prices. The terms of the fees earned under the contract relate to a specific outcome of providing the services (e.g., hotel room sales) or to Hilton's efforts (e.g., costs) to satisfy the performance obligations. We use time as the measure of progress to recognize as revenue the fees that are allocated to the period earned per the contract or to the period when the reimbursable costs are incurred.

Owned and leased hotel revenues

We identified the following performance obligations in connection with our owned and leased hotel revenues, for which revenuefinance leases, including any variable lease payments, is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services:

Cancellable room reservations or ancillary services are typically satisfied as the good or service is transferred to the hotel guest, which is generally when the room stay occurs.
Noncancellable room reservations and banquet or conference reservations represent a series of distinct goods or services provided over time and satisfied as each distinct good or service is provided, which is reflected by the duration of the room reservation.
Material rights for free or discounted goods or services are satisfied at the earlier point in time when the material right expires or the underlying free or discounted good or service is provided to the hotel guest.
Other ancillary goods and services are purchased independently of the room reservation at standalone selling prices and are considered separate performance obligations, which are satisfied when the related good or service is provided to the hotel guest.
Components of package reservations for which each component could be sold separately to other hotel guests are considered separate performance obligations and are satisfied as set forth above.

Owned and leased hotel revenues primarily consist of hotel room rentals, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales and other ancillary goods and services (e.g., parking) related to owned, leased and consolidated non-wholly owned hotel properties. Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and services are provided. Owned and leased hotel revenues are reduced upon issuance of Hilton Honors points, for Hilton Honors members' paid stay transactions and are recognized when Hilton Honors points are redeemed for a free stay at an owned or leased hotel (see the "Hilton Honors" section below for additional information).

Although the transaction prices of room rentals, goods and other services are generally fixed and based on the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected to be provided to the customer. For package reservations, the transaction price is allocated to the performance obligations within the package based on the estimated standalone selling prices of each component. On occasion, the hotel may also provide the customer with a material right to a free or discounted good or service in conjunction with a room reservation or banquet contract (e.g., free breakfast and free room night for every four nights booked). These material rights are considered separate performance obligations to which a portion of the transaction price is allocated based on the estimated standalone selling prices of the good or service, adjusted for the likelihood the hotel guest will exercise the right.



Other revenues

Other revenues include revenues generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels, including purchasing operations, and other operating income. Purchasing revenues include any amounts received for vendor rebate arrangements that we participate in as a manager of hotels.

Taxes and fees collected on behalf of governmental agencies

We are required to collect certain taxes and fees from customers on behalf of governmental agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in our measurement of transaction prices. We have elected to present revenue net of sales taxes and other similar taxes. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.

Contract Assets

Contract assets relate to incentive management fees for which the period of service has passed, but for which our right to consideration is conditional upon completing the requirements of the incentive fee period. Contract assets are included in other current assets in our consolidated balance sheets and are reclassified as accounts receivable when our right to consideration becomes unconditional.

Contract Liabilities

Contract liabilities relate to: (i) advance consideration received from hotel owners at contract inception for services considered to be part of the contract performance obligations, such as management or franchise contract application, initiation, renewal and other fees; (ii) advance consideration received for certain indirect reimbursements, such as system implementation fees; and (iii) amounts received when points are issued under Hilton Honors, but for which revenue is not yet recognized, since the related points are not yet redeemed. Contract liabilities related to advance consideration received for fees, excluding Hilton Honors, and certain indirect reimbursements are recognized as revenue over the term of the related contract. Contract liabilities related to amounts received for Hilton Honors are recognized as revenue when the points are redeemed for a free good or service by the Hilton Honors member, which, on average, occurs within two years of points issuance. Contract liabilities are included in deferred revenues in our consolidated balance sheets.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value in connection with the October 24, 2007 transaction whereby we became a wholly owned subsidiary of an affiliate of The Blackstone Group L.P. ("Blackstone") (the "Merger"). These intangible assets consist of management contracts, franchise contracts, leases, certain proprietary technologies and our Hilton Honors guest loyalty program. Additionally, we capitalize cash consideration paid to incentivize hotel owners to enter into management and franchise contracts with us as contract acquisition costs and the incremental costs to obtain or fulfill the contracts as development commissions, which are generally fixed. We also capitalize costs incurred to develop internal-use computer software and costs to acquire software licenses, as well as internal and external costs incurred in connection with development of upgrades or enhancements that result in additional information technology functionality.

Intangible assets with finite useful lives are amortized using the straight-line method over their respective estimated useful lives, which for contract acquisition costs and development commissions is the contract term, including any renewal periods that are at our sole option. These estimated useful lives are generally as follows: management contracts recorded at the Merger (13 to 16 years); management contract acquisition costs and development commissions (20 to 30 years); franchise contracts recorded at the Merger (12 to 13 years); franchise contract acquisition costs and development commissions (10 to 20 years); leases (12 to 35 years); Hilton Honors (16 years); and capitalized software development costs (3 years).The amortization of these intangible assets, excluding contract acquisition costs, is included in depreciation and amortizationinterest expense in our consolidated statements of operations, and the amortization of contract acquisition costs is recognized as a reduction to franchise fees and base and other management fees in our consolidated statements of operations, based on contract type. Costs incurred prior to the acquisition of a contract, such as external legal costs, are expensed as incurred and included in general and administrative expenses in our consolidated statements of operations. Cash flows for contract acquisition costs and development commissions are included as operating activities in our consolidated statements of cash flows.



We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.

Hilton Honors

Hilton Honors is our guest loyalty and marketing program provided to our hotel and resort properties. Nearly all of our owned, leased, managed and franchised properties participate in the Hilton Honors program. Hilton Honors members earn points based on their spending at our participating properties and through participation in affiliated partner programs. When points are earned by Hilton Honors members, they are provided with a material right to free or discounted goods or services in the future upon accumulation of the required level of Hilton Honors points. Points may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping and dining. As the points are issued to a Hilton Honors member, the property or affiliated partner pays Hilton Honors based on an estimated cost per point for the costs of operating the program, which include marketing, promotion, communication and administrative expenses, as well as the estimated cost of award redemptions.

We record liabilities for the payments received from participating hotels and program partners, which are typically due when the points are issued to a Hilton Honors member. Amounts equal to the estimated cost per point of the future redemption obligation are included in the liability for guest loyalty program and any amounts received in excess of the estimated cost per point are included in deferred revenues in our consolidated balance sheets. We engage outside actuaries to assist in determining the fair value of the future redemption obligation using statistical formulas that project future point redemptions based on factors that include historical experience, an estimate of points that will eventually be redeemed, which includes an estimate of "breakage" for points that will never be redeemed, and the cost of reimbursing properties and other third parties with respect to other redemption opportunities available to Hilton Honors members. When points are issued as a result of a stay at an owned or leased hotel, we recognize a reduction in owned and leased hotel revenues, since we are also the guest loyalty program sponsor. For the Hilton Honors fees that are charged to the participating properties, we allocate the fees to the material right created by the Hilton Honors points that are issued using the variable consideration allocation guidance, since the fees are directly related to the issuance of Hilton Honors points to the Hilton Honors member and Hilton's efforts to satisfy the future redemption of those Hilton Honors points.

The transaction prices for the Hilton Honors points are reduced by the expected payments to the third parties that will provide the free or discounted room or service using the actuarial projection of the cost per point. The remaining transaction price is then further allocated to the points that are expected to be redeemed, adjusting the points that are issued for estimated breakage, and recognized when those points are redeemed. While the points are outstanding, both the estimate of the expected payments to third parties (cost per point) and the estimated breakage are reevaluated, and the amount of revenue recognized when each point is redeemed is adjusted so that the final amount allocated to the material right is reflective of the amount retained for providing the free or discounted goods and services, net of the payments to third parties and points not redeemed.

We also earn license fees from co-brand credit card arrangements (see "Management and franchise revenues" within the "Revenue Recognition" section above). The co-brand license fee is allocated between two performance obligations based on their estimated standalone selling prices: (i) an IP license using the relief-from-royalty method; and (ii) material rights for free or discounted goods or services to the credit card customers using a cost plus method based on an evaluation of other third-party administrators.

We satisfy our performance obligation related to points issued under Hilton Honors when points are redeemed for a free good or service by the Hilton Honors member, and we satisfy our remaining performance obligations over time as the customer simultaneously receives and consumes the benefits of the goods or services provided. Hilton Honors reimburses participating properties when points are redeemed by members at the respective properties, at which time the redemption obligation is reduced and the related deferred revenue is recognized in other revenues from managed and franchised properties in our consolidated statements of operations. Additionally, when Hilton Honors members redeem award certificates at our owned and leased hotels, we recognize room revenue, included in owned and leased hotel revenues in our consolidated statements of operations.


Recently Issued Accounting Pronouncements


Adopted Accounting Standards

In March 2017,August 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-072018-15 ("ASU 2017-07"2018-15"), Compensation - Retirement Benefits (Topic 715)Intangibles – Goodwill and Other – Internal-use Software (Subtopic 350-40): Improving the Presentation of Net Periodic Pension Cost and Net Periodic


Postretirement Benefit Cost. Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU requires employersaligns guidance for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with guidance for capitalizing implementation costs to reportdevelop or obtain internal-use software. Capitalized implementation costs will be amortized over the service cost componentterm of net periodic pension costthe arrangement and presented in the same line item or items ofin the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic pension cost must be presented separately fromfees associated with the service cost component and outside of a subtotal of income (loss) from operations.contract. We adopted ASU 2017-07 on January 1, 2018 on a retrospective basis in our condensed consolidated statements of operations, which includes presenting: (i) the service cost component of net periodic pension cost in owned and leased hotel expenses and general and administrative expenses; and (ii) the other components of net periodic pension cost in other non-operating income (loss), net in our condensed consolidated statements of operations. Prior to adoption, all net periodic pension costs were presented in owned and leased hotel expenses and general and administrative expenses. We have applied the practical expedient permitting us to use the amounts disclosed in our Employee Benefits Plans note in our Annual Report on Form 10-K for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. See the "Prior Period Financial Information" below for the effect of the adoption of ASU 2017-07 on our condensed consolidated statements of operations for the three and six months ended June 30, 2017.

In May 2014, the FASB issued ASU 2014-09. This ASU supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and requires entities to recognize revenue when a customer obtains control of promised goods or services and in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Subsequent to ASU 2014-09, the FASB issued several related ASUs to clarify the application of the new revenue recognition standard, collectively referred to herein as ASU 2014-09. We adopted the requirements of ASU 2014-09 on January 1, 2018 using the full retrospective approach,elected, as permitted by the standard, resulting into early adopt ASU 2018-05 on a cumulative adjustment to accumulated deficit of $212 millionprospective basis as of January 1, 2016.

2019. The provisions of ASU 2014-09 affected our revenue recognition as follows:

Application, initiation and other fees are recognized over the term of the franchise contract, rather than upon execution of the contract and the unamortized portion of these fees is included in deferred revenues in our condensed consolidated balance sheets.
Contract acquisition costs related to our management and franchise contracts are recognized over the term of the contracts asadoption did not have a reduction to revenue, instead of as amortization expense. This change does not affect net income (loss).
Incentive management fees are recognized to the extent that it is probable that a significant reversal will not occur as a result of future hotel profits or cash flows, as opposed to recognizing amounts that would be due if the management contract was terminated at the end of the reporting period. This change does not affect net income (loss) for any full year period.
Revenue related to our Hilton Honors guest loyalty program is recognized upon point redemption, net of any reward reimbursement paid to a third party, as opposed to recognized on a gross basis at the time points are issued in conjunction with the accrual of the expected future cost of the reward reimbursement. Additionally, points issued at owned and leased hotels are accounted for as a reduction of revenue from owned and leased hotels, as opposed to expenses of owned and leased hotels. Fees received in excess of the estimated liability for guest loyalty program are included in deferred revenues in our condensed consolidated balance sheets.
Reimbursable fees related to our management and franchise contracts are recognized as they are billed, as opposed to when we incur the related expenses. Timing differences related to the receipt and spend of these fees will no longer be recorded in other assets and other liabilities in our condensed consolidated balance sheets.

We have not retrospectively restated for contract modifications of management and franchise contracts that occurred before January 1, 2016. Instead, we have reflected the aggregatematerial effect of all contract modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price. The estimated effect of applying this practical expedient is to use a longer period over which to straight line any fixed consideration either received from the customer or paid to the customer, since all fees will be amortized over the full contract term beginning on the date of initial execution, rather than amortizing fees received upon contract modifications prospectively from the contract modification date. We do not anticipate that this effect is material given the insignificance of the fixed consideration compared to the overall consideration we expect to earn over the term of the contract. See the "Prior Period Financial Information" below for the effect of the adoption of ASU 2014-09 on our condensed consolidated balance sheet as of December 31, 2017 and our condensed consolidated statements of operations for the three and six months ended June 30, 2017.



Prior Period Financial Information

The following table presents the effect of the adoption of ASU 2014-09 for the line items affected in our condensed consolidated balance sheet:
 December 31, 2017
 As Previously Reported Adoption of ASU 2014-09 As Adjusted
 (in millions)
ASSETS     
Accounts receivable, net$998
 $7
 $1,005
Prepaid expenses111
 16
 127
Other current assets171
 (2) 169
Management and franchise contracts, net909
 44
 953
Deferred income tax assets113
 (2) 111
Other non-current assets434
 (143) 291
TOTAL ASSETS14,308
 (80) 14,228
      
LIABILITIES AND EQUITY     
Current liabilities:     
Accounts payable, accrued expenses and other(1)(2)
1,487
 (71) 1,416
Current portion of deferred revenues(1)
41
 325
 366
Deferred revenues97
 732
 829
Deferred income tax liabilities1,063
 (132) 931
Other non-current liabilities1,470
 (550) 920
Total liabilities12,233
 304
 12,537
Equity:     
Accumulated deficit(6,596) (385) (6,981)
Accumulated other comprehensive loss(742) 1
 (741)
Total equity2,075
 (384) 1,691
TOTAL LIABILITIES AND EQUITY14,308
 (80) 14,228
____________
(1)
The current portion of deferred revenues has been separated from accounts payable, accrued expenses and other in the "As Previously Reported" column following the adoption of ASU 2014-09.
(2)
The current portion of liability for guest loyalty program has been separated from accounts payable, accrued expenses and other to conform with current presentation. The balance was $622 million as of December 31, 2017 and did not change as a result of the adoption of ASU 2014-09.



The following tables present the effect of the adoption of ASU 2014-09 and ASU 2017-07 on our condensed consolidated statement of operations:

 Three Months Ended June 30, 2017
 As Previously Reported Adoption of ASU 2014-09 Adoption of ASU 2017-07 As Adjusted
 (in millions)
Revenues       
Franchise fees$372
 $(17) $
 $355
Base and other management fees85
 (4) 
 81
Incentive management fees56
 1
 
 57
Owned and leased hotels377
 (4) 
 373
Other revenues20
 
 
 20
 910
 (24) 
 886
Other revenues from managed and franchised properties1,436
 (246) 
 1,190
Total revenues2,346
 (270) 
 2,076
        
Expenses       
Owned and leased hotels330
 (4) 1
 327
Depreciation and amortization87
 (4) 
 83
General and administrative117
 
 1
 118
Other expenses11
 
 
 11
 545
 (8) 2
 539
Other expenses from managed and franchised properties1,436
 (223) 
 1,213
Total expenses1,981
 (231) 2
 1,752
        
Operating income365
 (39) (2) 324
        
Interest expense(100) 14
 
 (86)
Gain on foreign currency transactions5
 
 
 5
Other non-operating income, net5
 
 2
 7
        
Income before income taxes275
 (25) 
 250
        
Income tax expense(108) 9
 
 (99)
        
Net income167
 (16) 
 151
Net income attributable to noncontrolling interests(1) 
 
 (1)
Net income attributable to Hilton stockholders$166
 $(16) $
 $150
        
Earnings per share:       
Basic$0.51
     $0.46
Diluted$0.51
     $0.46



 Six Months Ended June 30, 2017
 As Previously Reported Adoption of ASU 2014-09 Adoption of ASU 2017-07 As Adjusted
 (in millions)
Revenues       
Franchise fees$666
 $(29) $
 $637
Base and other management fees168
 (6) 
 162
Incentive management fees108
 (2) 
 106
Owned and leased hotels677
 (8) 
 669
Other revenues57
 
 
 57
 1,676
 (45) 
 1,631
Other revenues from managed and franchised properties2,831
 (490) 
 2,341
Total revenues4,507
 (535) 
 3,972
        
Expenses       
Owned and leased hotels602
 (8) 1
 595
Depreciation and amortization176
 (7) 
 169
General and administrative222
 
 2
 224
Other expenses34
 
 
 34
 1,034
 (15) 3
 1,022
Other expenses from managed and franchised properties2,831
 (422) 
 2,409
Total expenses3,865
 (437) 3
 3,431
        
Operating income642
 (98) (3) 541
        
Interest expense(204) 29
 
 (175)
Gain on foreign currency transactions1
 
 
 1
Loss on debt extinguishment(60) 
 
 (60)
Other non-operating income, net6
 
 3
 9
        
Income before income taxes385
 (69) 
 316
        
Income tax expense(143) 26
 
 (117)
        
Net income242
 (43) 
 199
Net income attributable to noncontrolling interests(2) 
 
 (2)
Net income attributable to Hilton stockholders$240
 $(43) $
 $197
        
Earnings per share:       
Basic$0.73
     $0.60
Diluted$0.73
     $0.60

Accounting Standards Not Yet Adopted

In February 2018, the FASB issued ASU No. 2018-02 ("ASU 2018-02"), Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU permits a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects that do not reflect the appropriate tax rates as a result of the Tax Cuts and Jobs Act of 2017 (the "TCJ Act"). The provisions of ASU 2018-02 are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax rate in the TCJ Act is recognized. Early adoption is permitted. We are currently evaluating the effect that ASU 2018-02 will have on our consolidated financial statements.


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 of lessees as right-of-useROU assets and lease liabilities, by lessees. The provisions ofwith certain practical expedients available. Subsequent to ASU 2016-02, arethe FASB issued related ASUs, including ASU No. 2018-11 ("ASU 2018-11"), Leases (Topic 842): Targeted Improvements, which provides for another transition method in addition to be applied using athe modified retrospective approach required by ASU 2016-02. This option allows entities to initially apply the new leases standard at the adoption date and are effective for reporting periods beginning afterrecognize a cumulative adjustment to the opening balance of retained earnings in the period of adoption.



December 15, 2018; early adoption is permitted. We intend to adopt the standardAs described above, we adopted ASU 2016-02 on January 1, 2019 and applyapplied the package of practical expedients availableincluded therein, as well as utilized the transition method included in ASU 2018-11. By applying ASU 2016-02 at the adoption date, as opposed to us upon adoption. We are continuingat the beginning of the earliest period presented, the presentation of financial information for periods prior to evaluateJanuary 1, 2019 remain unchanged and in accordance with Leases (Topic 840). On January 1, 2019, we recognized a $256 million cumulative adjustment to accumulated deficit, net of taxes of $81 million related to a decrease to our deferred tax liability, as a result of the effectimpairment of ROU assets that this ASU will have on our consolidated financial statements, but we expect this ASUoccurred in periods prior to have a material effect on our consolidated balance sheet.the adoption date.




Note 3: Revenues from Contracts with Customers


Contract Liabilities


OurThe following table summarizes the activity of our contract liabilities, which are classified as a component of current and long-term deferred revenues, decreased $18during the six months ended June 30, 2019:
 (in millions)
Balance as of December 31, 2018$1,060
Cash received in advance and not recognized as revenue(1)
220
Revenue recognized(1)
(135)
Other(2)
(92)
Balance as of June 30, 2019$1,053
____________
(1)
Primarily related to Hilton Honors, our guest loyalty program.
(2)
Primarily the result of changes in estimated transaction prices for our performance obligations related to points issued under Hilton Honors, which had no effect on revenues.

We recognized revenues that were previously deferred as contract liabilities of $78 million and $56 million during the three months ended June 30, 2019 and 2018, respectively, and $116 million during the six months ended June 30, 2018, from $1,087 million as of December 31, 2017 to $1,069 million as of June 30, 2018. The change included a $107 million decrease, which had no effect on revenues, resulting from changes in estimated transaction prices for our performance obligations related to points issued under Hilton Honors. This decrease was partially offset by a $90 million net increase from cash received in advance, for which revenue recognition was deferred, and revenue recognized during the period, mostly related to Hilton Honors. We recognized revenue that was previously deferred as a contract liability of $56 million and $38 million during the three months ended June 30, 2018 and 2017, respectively, and $116 million and $74 million during the six months ended June 30, 2018 and 2017, respectively.


Performance Obligations


As of June 30, 2018,2019, we had $509$438 million of deferred revenues related to unsatisfied performance obligations underrelated to Hilton Honors that will be recognized in revenue as revenues when the points are redeemed, which is expected towe estimate will occur over the next two years.years. Additionally, we had $560$615 million of deferred revenues related to application, initiation and otherlicensing fees, which are expected to be recognized in revenueas revenues in future periods over the termterms of the related contract.contracts.

We did not estimate revenues expected to be recognized related to our unsatisfied performance obligations for our: (i) royalty fees since they are considered sales-based royalty fees recognized as hotel room sales occur in exchange for licenses of our brand names over the terms of the franchise contracts; and (ii) base management fees and incentive management fees since they are allocated entirely to the wholly unsatisfied promise to transfer management services, which form part of a single performance obligation in a series, over the term of the management contract.

As part of the adoption of ASU 2014-09, we elected not to disclose the amount of the transaction price allocated to our remaining performance obligations as of December 31, 2017 or provide an explanation of when we expect to recognize that amount as revenue.


Note 4: Consolidated Variable Interest Entities


As of June 30, 20182019 and December 31, 2017,2018, we consolidated threetwo variable interest entities ("VIEs"): two entities that lease hotel properties and, as of December 31, 2018, we also consolidated one VIE that is a management company. We consolidated these VIEs, since we are the primary beneficiaries of these consolidated VIEs as we havebeneficiary, having 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 consolidated VIEs are only available to settle the obligations of the respective entities.

In June 2019, the VIE that is a management company, which we had previously consolidated, sold its assets. As a result of the sale, we deconsolidated $7 million of total assets and $3 million of total liabilities, as we no longer had the power to direct the activities that most significantly affect the VIE's economic performance. See Note 12: "Stockholders' Equity (Deficit) and Accumulated Other Comprehensive Loss" for additional information.

Our condensed consolidated balance sheets included the assets and liabilities of these entities,the VIEs that we consolidated as of the respective periods, which primarily comprised the following:
 June 30, December 31,
 2019 2018
 (in millions)
Cash and cash equivalents$72
 $71
Property and equipment, net73
 68
Deferred income tax assets51
 53
Other non-current assets61
 58
Accounts payable, accrued expenses and other52
 41
Long-term debt(1)
204
 205
Other long-term liabilities15
 15
 June 30, December 31,
 2018 2017
 (in millions)
Cash and cash equivalents$73
 $73
Accounts receivable, net12
 16
Property and equipment, net59
 57
Deferred income tax assets57
 56
Other non-current assets59
 57
Accounts payable, accrued expenses and other38
 43
Long-term debt(1)
207
 212
Other long-term liabilities13
 13

____________
(1) 
Includes capitalfinance lease obligationsliabilities of $189$186 million and $191$187 million as of June 30, 20182019 and December 31, 2017,2018, respectively.


During the six months ended June 30, 2018 and 2017, weWe 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 induring the future.



six months ended June 30, 2019 and 2018.


Note 5: Amortizing Intangible Assets


Amortizing intangible assets were as follows:
June 30, 2018June 30, 2019
Gross Carrying Value Accumulated Amortization Net Carrying ValueGross Carrying Value Accumulated Amortization Net Carrying Value
(in millions)(in millions)
Management and franchise contracts:          
Management and franchise contracts recorded at Merger(1)
$2,234
 $(1,794) $440
$2,232
 $(1,960) $272
Contract acquisition costs451
 (87) 364
548
 (108) 440
Development commissions102
 (13) 89
Development commissions and other122
 (17) 105
$2,787
 $(1,894) $893
$2,902
 $(2,085) $817
          
Other amortizing intangible assets:     
Other intangible assets:     
Leases(1)
$295
 $(157) $138
$287
 $(167) $120
Capitalized software costs619
 (455) 164
547
 (358) 189
Hilton Honors(1)
339
 (226) 113
338
 (247) 91
Other(1)38
 (34) 4
34
 (34) 
$1,291
 $(872) $419
$1,206
 $(806) $400


December 31, 2017December 31, 2018
Gross Carrying Value Accumulated Amortization Net Carrying ValueGross Carrying Value Accumulated Amortization Net Carrying Value
(in millions)(in millions)
Management and franchise contracts:          
Management and franchise contracts recorded at Merger(1)
$2,242
 $(1,716) $526
$2,228
 $(1,873) $355
Contract acquisition costs416
 (74) 342
525
 (101) 424
Development commissions97
 (12) 85
Development commissions and other108
 (15) 93
$2,755
 $(1,802) $953
$2,861
 $(1,989) $872
          
Other amortizing intangible assets:     
Other intangible assets:     
Leases(1)
$301
 $(153) $148
$288
 $(161) $127
Capitalized software costs585
 (428) 157
503
 (321) 182
Hilton Honors(1)
341
 (217) 124
338
 (236) 102
Other(1)38
 (34) 4
38
 (34) 4
$1,265
 $(832) $433
$1,167
 $(752) $415
____________
(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 affiliates of The Blackstone Group L.P (the "Merger").

Amortization of our amortizing intangible assets was as follows:
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
 (in millions)
Recognized in depreciation and amortization expense(1)
$71
 $66
 $141
 $135
Recognized as a reduction of franchise and licensing fees and base and other management fees7
 7
 14
 14
____________
(1)
Includes amortization expense of $51 million and $52 million for the three months ended June 30, 2019 and 2018, respectively, and $102 million and $103 million for the six months ended June 30, 2019 and 2018, respectively, associated with assets that were initially recorded at their fair value at the time of the Merger.

Amortization of our amortizing intangible assets was as follows:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
 (in millions)
Recognized in depreciation and amortization expense(1)
$66
 $69
 $135
 $139
Recognized as a reduction of franchise fee and base and other management fee revenues7
 5
 14
 8

____________
(1)
Includes amortization of $52 million and $50 million for the three months ended June 30, 2018 and 2017, respectively, and $103 million and $101 million for the six months ended June 30, 2018 and 2017, respectively, associated with assets recorded at their fair value at the time of the Merger.



We estimatedestimate future amortization of our amortizing intangible assets as of June 30, 20182019 to be as follows:
 Recognized in Depreciation and Amortization Expense Recognized as a Reduction of Franchise and Licensing Fees and Base and Other Management Fees
Year(in millions)
2019 (remaining)$141
 $13
2020250
 26
2021110
 25
202281
 23
202351
 23
Thereafter144
 330
 $777
 $440

 Recognized in Depreciation and Amortization Expense Recognized as a Reduction of Franchise Fee and Base and Other Management Fee Revenues
Year(in millions)
2018 (remaining)$136
 $13
2019270
 23
2020219
 22
202182
 21
202260
 21
Thereafter181
 264
 $948
 $364


Note 6: Debt

Long-term Debt


Long-term debt balances, including obligations for capitalfinance leases, and associated interest rates and maturities as of June 30, 2018,2019, were as follows:

June 30, December 31,

2019 2018

(in millions)
Senior secured term loan facility with a rate of 4.15%, due 2026$2,619
 $3,119
Senior notes with a rate of 4.250%, due 20241,000
 1,000
Senior notes with a rate of 4.625%, due 2025900
 900
Senior notes with a rate of 5.125%, due 20261,500
 1,500
Senior notes with a rate of 4.875%, due 2027600
 600
Senior notes with a rate of 4.875%, due 20301,000
 
Finance lease liabilities with an average rate of 5.80%, due 2019 to 2030260
 225
Other debt with a rate of 3.08% due 202618
 17

7,897
 7,361
Less: unamortized deferred financing costs and discount(88) (79)
Less: current maturities of long-term debt(1)
(37) (16)

$7,772
 $7,266

June 30, December 31,

2018 2017

(in millions)
Senior notes with a rate of 4.250%, due 2024$1,000
 $1,000
Senior notes with a rate of 4.625%, due 2025900
 900
Senior notes with a rate of 5.125%, due 20261,500
 
Senior notes with a rate of 4.875%, due 2027600
 600
Senior secured term loan facility with a rate of 3.84%, due 20233,419
 3,929
Capital lease obligations with an average rate of 6.32%, due 2021 to 2030229
 233
Other debt with a rate of 3.08% due 202617
 21

7,665
 6,683
Less: unamortized deferred financing costs and discount(90) (81)
Less: current maturities of long-term debt(1)
(11) (46)

$7,564
 $6,556

____________
(1) 
Net of unamortized deferred financing costs and discount attributable toRepresents current maturities of long-term debt.finance lease liabilities.


Senior Notes

In April 2018, we issued $1.5 billion aggregate principal amountOur senior secured credit facilities consist of 5.125% Senior Notes due 2026 (the "2026 Senior Notes"), and incurred $21 million of debt issuance costs. Interest on the 2026 Senior Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning November 2018. We used a portion of the net proceeds from the issuance of the 2026 Senior Notes, together with borrowings under our senior secured revolving credit facility (the "Revolving Credit Facility") and available cash to repurchase 16.5 million shares of our common stock from HNA for $1,171 million and repay $500 million outstanding under oura senior secured term loan facility (the "Term Loans"). See "Senior Secured Credit Facility" below for additional information.

In March 2017, we used the proceeds from issuances of the 4.625% Senior Notes due 2025 (the "2025 Senior Notes") and the 4.875% Senior Notes due 2027 (the "2027 Senior Notes") to redeem in full $1.5 billion of Senior Notes due 2021 (the "2021 Senior Notes"). 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.



The 4.250% Senior Notes due 2024 (the "2024 Senior Notes"), the 2025 Senior Notes, the 2026 Senior Notes and the 2027 Senior Notes are guaranteed on a senior unsecured basis by the Parent and certain of its wholly owned subsidiaries. See Note 15: "Condensed Consolidating Guarantor Financial Information" for additional details.

Senior Secured Credit Facility

Our senior secured credit facility consists of a $1.0 billion Revolving Credit Facility and the Term Loans. The obligations of our senior secured credit facilityfacilities are unconditionally and irrevocably guaranteed by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries.


In June 2019, we amended the Term Loans to extend the maturity date to June 2026 with a discount of 0.25 percent and also incurred $2 million of debt issuance costs. We also amended the Revolving Credit Facility to increase the borrowing capacity to $1.75 billion, $250 million of which is available in the form of letters of credit, and extended the maturity date to June 2024. In connection with this amendment, we incurred $7 million of debt issuance costs, which were included in other non-current assets in our condensed consolidated balance sheet as of June 30, 2019. As of June 30, 2019, we had $59 million of outstanding letters of credit, resulting in an available borrowing capacity under the Revolving Credit Facility of $1.69 billion. We are required to pay a commitment fee of 0.125 percent per annum under the Revolving Credit Facility in respect of the unused commitments thereunder.

In June 2019, we issued $1.0 billion aggregate principal amount of 4.875% Senior Notes due 2030 (the "2030 Senior Notes"), and incurred $13 million of debt issuance costs. Interest on the 2030 Senior Notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning January 2020. We used a portion of the net proceeds from the issuance of the 2030 Senior Notes to repay $500 million outstanding on our Term Loans and to repay $225 million outstanding under our Revolving Credit Facility. In connection with the $500 million repayment of the Term Loans, in April 2018, we accelerated the recognition of $5recognized $8 million of fees and


unamortized debt issuancedeferred financing costs and discount, which were included in other non-operating income (loss), net, in our condensed consolidated statements of operations for the three and six months ended June 30, 2018. Additionally,2019.

The 4.250% Senior Notes due 2024 (the "2024 Senior Notes"), the interest rate4.625% Senior Notes due 2025 (the "2025 Senior Notes"), the 5.125% Senior Notes due 2026 (the "2026 Senior Notes"), the 4.875% Senior Notes due 2027 (the "2027 Senior Notes") and the 2030 Senior Notes are guaranteed on a senior unsecured basis by the remaining balanceParent and substantially all of its direct and indirect wholly owned domestic subsidiaries that are themselves not issuers of the Term Loans was reduced by 25 basis points to LIBOR plus 175 basis points.applicable series of senior notes. See Note 15: "Condensed Consolidating Guarantor Financial Information" for additional information.

As of June 30, 2018, we had $64 million of letters of credit outstanding under our Revolving Credit Facility and a borrowing capacity of $936 million.

Debt Maturities


The contractual maturities of our long-term debt as of June 30, 20182019 were as follows:
Year(in millions)
2019 (remaining)$19
202035
202128
202220
202321
Thereafter7,774
 $7,897

Year(in millions)
2018 (remaining)$4
201916
202017
202118
202219
Thereafter7,591
 $7,665


Note 7: Derivative Instruments and Hedging Activities

Cash Flow Hedges

In May 2017, we began hedging foreign exchange-based cash flow variability in certain of our foreign currency denominated management and franchise fees using forward contracts (the "Fee Forward Contracts"). We elected to designate these Fee Forward Contracts as cash flow hedges for accounting purposes. As of June 30, 2018, the Fee Forward Contracts had an aggregate notional amount of $69 million and maturities of 24 months or less.

In March 2017, we entered into two interest rate swap agreements with notional amounts of $1.6 billion and $750 million to swap one-month LIBOR on the Term Loans to fixed rates of 1.98 percent and 2.02 percent, respectively, through March 2022. In May 2018, we settled the interest rate swap with a notional amount of $750 million and received $18 million from the counterparty. Concurrently, we entered into an interest rate swap agreement with a notional amount of $1.6 billion, which swaps one-month LIBOR on the Term Loans to a fixed rate of 3.03 percent, for a term from March 2022 to March 2023. We elected to designate these interest rate swaps as cash flow hedges for accounting purposes.

Non-designated Hedges

As of June 30, 2018, we held short-term forward contracts with an aggregate notional amount of $349 million to offset exposure to fluctuations in certain of our foreign currency denominated cash balances. We elected not to designate these forward contracts as hedging instruments. Depending on the fair value of each contract, we classify it as an asset or liability.



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 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 in our condensed consolidated balance sheets were as follows:
   June 30, December 31,
 Balance Sheet Classification 2018 2017
   (in millions)
Cash Flow Hedges:     
Interest rate swapsOther non-current assets $41
 $11
Forward contractsOther current assets 2
 
Forward contractsAccounts payable, accrued expenses and other 
 1
      
Non-designated Hedges:     
Forward contractsOther current assets 3
 4
Forward contractsAccounts payable, accrued expenses and other 6
 1

Earnings Effect of Derivative Instruments

The gains and losses recognized in our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income before any effect for income taxes were as follows: 
   Three Months Ended Six Months Ended
   June 30, June 30,
 Classification of Gain (Loss) Recognized 2018 2017 2018 2017
   (in millions)
Cash Flow Hedges(1):
         
Interest rate swapsOther comprehensive income (loss) $11
 $(15) $45
 $(24)
Interest rate swaps(2)
Interest expense 
 (6) (2) (8)
Forward contracts(3)(4)
Other comprehensive income (loss) 4
 
 3
 
          
Non-designated Hedges:         
Interest rate swapsOther non-operating income (loss), net N/A
 
 N/A
 2
Interest rate swaps(5)
Interest expense (2) (2) (5) (5)
Forward contractsGain (loss) on foreign currency transactions (7) 6
 (6) 7
____________
(1)
There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the three and six months ended June 30, 2018 and 2017.
(2)
The amount for the three months ended June 30, 2018 was less than $1 million.
(3)
The earnings effect of the Fee Forward Contracts on fee revenues for the three and six months ended June 30, 2018 and 2017 was less than $1 million.
(4)
Amounts for the three and six months ended June 30, 2017 were less than $1 million.
(5)
These amounts are related to the dedesignation of interest rate swaps in 2016 that no longer met the criteria for hedge accounting and were settled in 2017 and the interest rate swap that was settled in May 2018. The amounts were reclassified to interest expense from accumulated other comprehensive loss as the underlying transactions occurred.



Note 8:7: Fair Value Measurements


We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair values of certain financial instruments and the hierarchy level we used to estimate the fair values are shown below, see Note 7: "Derivative Instruments and Hedging Activities" forbelow; the fair value information of our derivative instruments:
 June 30, 2018
   Hierarchy Level
 Carrying Value Level 1 Level 2 Level 3
 (in millions)
Assets:       
Cash equivalents$109
 $
 $109
 $
Restricted cash equivalents15
 
 15
 
Liabilities:       
Long-term debt(1)
7,329
 3,895
 ���
 3,419

 December 31, 2017
   Hierarchy Level
 Carrying Value Level 1 Level 2 Level 3
 (in millions)
Assets:       
Cash equivalents$284
 $
 $284
 $
Restricted cash equivalents12
 
 12
 
Liabilities:       
Long-term debt(1)
6,348
 2,575
 
 3,954
____________
(1)
The carrying values include unamortized deferred financing costs and discount. The carrying values and fair values exclude capital lease obligations and other debt.

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 20182019 and December 31, 2017. Our estimates2018:
 June 30, 2019
   Hierarchy Level
 Carrying Value Level 1 Level 2 Level 3
 (in millions)
Assets:       
Cash equivalents$265
 $
 $265
 $
Restricted cash equivalents19
 
 19
 
Liabilities:       
Long-term debt(1)
7,531
 5,149
 
 2,624
Interest rate swaps35
 
 35
 

 December 31, 2018
   Hierarchy Level
 Carrying Value Level 1 Level 2 Level 3
 (in millions)
Assets:       
Cash equivalents$87
 $
 $87
 $
Restricted cash equivalents18
 
 18
 
Interest rate swaps16
 
 16
 
Liabilities:       
Long-term debt(1)
7,040
 3,809
 
 3,039
____________
(1)
The carrying values include unamortized deferred financing costs and discount. The carrying values and fair values exclude finance lease liabilities and other debt.

We measure our interest rate swaps at fair value, which were estimated using a discounted cash flow analysis that reflects the contractual terms of the fair values were determined using available market informationinterest rate swaps, including the period to maturity, 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 and time deposits. The estimated fair values were based on available market pricing informationuses observable market-based inputs of similar financial instruments.instruments, including interest rate curves, as applicable. Our interest rate swaps are included in other non-current assets or other long-term liabilities in our condensed consolidated balance sheets depending on their fair value.

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 indicative quotes received for similar issuances.




Note 9: Income Taxes8: Leases


On December 22, 2017, the TCJ Act, which permanently reduces the federalWe lease hotel properties, land, corporate income tax rate from a graduated 35 percentoffice space and equipment used at hotels and corporate offices, with our most significant lease liabilities related to a flat 21 percent rate and imposes a one-time transition tax on earnings of foreign subsidiaries that were previously deferred, was signed into law.hotel properties. As of June 30, 2018,2019, we had not completed our accounting for the tax effects of enactment of the TCJ Act; however, where possible, as described below, we made a reasonable estimate of the effects on our existing deferred tax balancesleased 53 hotels under operating leases and the one-time transition tax. In other cases, we were not able to make a reasonable estimate and continued to account for those items based on the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to determine a reasonable estimate, we recognized a provisional benefit at December 31, 2017 of $665 million,six hotels under finance leases, two of which $517 million waswere the resultliabilities of the remeasurement of U.S. deferred tax assetsconsolidated VIEs and other tax liabilities. The provisional benefit of $517 million recordedwere non-recourse to us. Our hotel leases expire at December 31, 2017 on our existing deferred tax balances excludes the income tax impact of the adoption of ASU 2014-09. Asvarious dates, with varying renewal and termination options.
Supplemental balance sheet information related to leases as of June 30, 2018, we made adjustments2019 was as follows:
 
(dollars
 in millions)
Operating leases: 
Operating lease right-of-use assets$891
Accounts payable, accrued expenses and other131
Operating lease liabilities1,066
Finance leases: 
Property and equipment, net$57
Current maturities of long-term debt37
Long-term debt223
  
Weighted average remaining lease term: 
Operating leases13.0 years
Finance leases8.9 years
 ��
Weighted average discount rate: 
Operating leases3.74%
Finance leases5.80%


The components of lease expense were as follows:
 Three Months Ended Six Months Ended
 June 30, 2019 June 30, 2019
 (in millions)
Operating lease expense for fixed payments$36
 $73
Finance lease expense:  

Amortization of ROU assets8
 16
Interest on lease liabilities3
 7
Variable lease expense(1)
52
 82
____________
(1)
Includes amounts related to operating leases and interest payments on finance leases.

Lease expense for our operating leases for the provisional amounts recorded atyear ended December 31, 2017, as described below.2018 included $225 million of fixed lease expense and $142 million of variable lease expense.




Provisional Amounts

Deferred tax assets and liabilities and other tax liabilities. We remeasured deferred tax assets and liabilities and other tax liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The provisional amounts recorded at December 31, 2017Supplemental cash flow information related to leases for the remeasurement of our deferred tax assets and liabilities, uncertain tax position reserves, and other tax liabilities were income tax benefits of $517 million, $33 million and $84 million, respectively. However, this remeasurement was based on estimates as of the enactment date of the TCJ Act and our existing analysis of the numerous complex tax law changes in the TCJ Act. Upon refinement of our calculations during the threesix months ended June 30, 2018, we adjusted our provisional amount by recording an additional tax benefit of $8 million, which is included2019 was as a component of income tax expense. We will continue to analyze the tax law changes in the TCJ Act, including the impact on our 2017 tax return filing positions throughout the 2018 fiscal year, and update our provisional amounts related to the remeasurement of these balances.follows:
 (in millions)
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$90
Financing cash flows from finance leases21
ROU assets obtained in exchange for lease liabilities in non-cash transactions: 
Operating leases21
Finance leases52






Foreign taxation changes. A one-time transition tax is applied to foreign earnings previously not subjected to U.S. tax. The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") that were previously deferred from U.S. income taxes, but is assessed at a lower tax rate than the federal corporate tax rate of 35 percent. We recorded a provisional amount for our one-time transition tax liability for our foreign subsidiaries based on estimates,Our future minimum lease payments as of the enactment date of the TCJ Act, for our controlled foreign subsidiaries and estimates of the total post-1986 E&P for noncontrolled foreign subsidiaries. Additionally, the language in the TCJ Act is not specific enough to address all aspects of the calculation of the transition tax and leaves certain components of the calculation open to interpretation. The U.S. Treasury department is expected to issue regulations to provide clarification. We previously recorded a federal deferred tax liability for our deferred earnings at the statutory 35 percent rate. The application of the transition tax results in the deferred earnings previously recorded at 35 percent being subjected to a lower rate, resulting in a provisional income tax benefit at December 31, 2017 of $15 million. As a result of additional guidance issued by the U.S. Treasury department during the three months ended June 30, 2018, we refined our calculations and recorded an additional tax benefit of $3 million. Additionally, we had not recorded certain deferred tax assets, related primarily to E&P deficits, for some foreign subsidiaries based upon an expectation that no tax benefit from such assets would be realized within the foreseeable future. The recognition of tax benefits from the deferred tax assets previously not recorded resulted in a provisional income tax benefit at December 31, 2017 of $16 million. We will continue to update our provisional amounts related to the transition tax as the U.S. Treasury department provides further guidance.

We continue to analyze the impact of the TCJ Act on our recognition of deferred tax assets and liabilities for outside basis differences in our investments in foreign subsidiaries and due to the complexity of these calculations on both our U.S. and foreign tax positions and uncertainty regarding the impact of new taxes on certain foreign earnings, we have not recorded provisional amounts. As of June 30, 2018, we had not recorded any deferred tax assets or liabilities for outside basis differences in our investments in foreign subsidiaries. We will further analyze the impact of these new taxes on foreign earnings and their impact on our tax positions throughout fiscal year 2018 to allow us to complete the required accounting for our outside basis differences in our investments in foreign subsidiaries. We continued to apply existing accounting guidance based on the provisions of the tax laws that2019 were in effect immediately prior to the TCJ Act being enacted.as follows:

 Operating
Leases
 Finance
Leases
Year(in millions)
2019 (remaining)$89
 $26
2020175
 49
2021161
 40
2022137
 31
2023122
 30
Thereafter872
 166
Total minimum lease payments1,556
 342
Less: imputed interest(359) (82)
Total lease liabilities$1,197
 $260

Global Intangible Low-Taxed
Note 9: Income ("GILTI") and Foreign Derived Intangible Income ("FDII")Taxes

The TCJ Act subjects a U.S. shareholder to current tax on GILTI earned by certain foreign subsidiaries. In addition, the TCJ Act provides for FDII to be taxed at a lower effective rate than the statutory rate by allowing a tax deduction against the income. Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Given the complexity of the GILTI provisions, we are still evaluating the effects of the GILTI provisions and have not yet determined our accounting policy. As of June 30, 2018, because we are still evaluating the GILTI provisions and our analysis of future taxable income that is subject to GILTI, we have included GILTI and the FDII deduction related to current-year operations only in our estimated annual effective tax rate and have not provided additional GILTI on deferred items.


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,(loss) before income taxes, which is subject to federal, state, local and foreign income taxes.


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 Internal Revenue Service ("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 and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. As of June 30, 2019, we remain subject to federal and state examinations of our income tax returns for tax years from 2005 through 2017 and foreign examinations of our income tax returns for tax years from 1996 through 2018.

Our total unrecognized tax benefitbenefits as of June 30, 2019 and December 31, 2018 was $285 million. Wewere $323 million and $318 million, respectively. As of June 30, 2019 and December 31, 2018, we had accrued approximately $36$44 million and $40 million, respectively, for the payment of interest and penalties as of June 30, 2018.related to our unrecognized tax benefits in our condensed consolidated balance sheets. Included in the balancebalances of unrecognized tax benefits as of June 30, 2019 and December 31, 2018 was $285$312 million and $310 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective income tax rate.




In April 2014, we received 30-day Letters from the Internal Revenue Service ("IRS")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: (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; (ii) in calculating the amount of U.S. taxable income resulting from our Hilton 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 (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 ("EUR"), and thus foreign currency gains and losses with respect to such loans should have been measured in euros,EUR, instead of USD. Additionally, inIn 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 theyears, which included proposed adjustments for tax years December 2007 through 2010, whichadjustments that reflect the carryover effect of the three protested issues from the 2006 through October 2007.2007 tax years. These proposed adjustments willare also bebeing protested in appeals and formal appeals protests have been submitted. In total,April 2016, we requested a Technical Advice Memorandum ("TAM") from the IRS with respect to the treatment of the gains and losses recognized as a result of changes in foreign currency exchange rates on loans issued by our Luxembourg subsidiary. We received a taxpayer favorable TAM in October 2018 and this issue is no longer being pursued by the IRS for any of the open tax years. In September 2018, we received a 30-day Letter from the IRS and the RAR for the 2011 through 2013 tax years, which reflects proposed adjustments for the carryover effect of the two remaining protested issues from the 2006 through October 2007 tax years. The adjustments for the 2011 through 2013 tax years will also be protested in appeals and formal protests have been submitted. After receipt of the TAM relating to the Luxembourg subsidiary, the two remaining proposed adjustments sought by the IRS would result in additional U.S. federal tax owed of approximately $874$817 million,, excluding interest and penalties and potential state income taxes. The portion of this amount related to Hilton 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, based on continuing appeals process 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 June 30, 2018,2019, we havehad recorded $47$55 million of unrecognized tax benefits related to 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 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 June 30, 2018, we remain subject to federal examinations from 2005 through 2016, state examinations from 2005 through 2016 and foreign examinations of our income tax returns for the years 1996 through 2017.


Note 10: Share-Based Compensation


We grant time-vesting restricted stock units and restricted stock (collectively, "RSUs"), nonqualified stock options ("options") and performance-vesting restricted stock units and restricted stock (collectively, "performanceRSUs ("performance shares") to our employees and deferred share units ("DSUs") to members of our board of directors. We recognized share-based compensation expense of $40$47 million and $34$40 million during the three months ended June 30, 20182019 and 2017,2018, respectively, and $68$81 million and $59$68 million during the six months ended June 30, 20182019 and 2017,2018, respectively. As of June 30, 2018,2019, unrecognized compensation costs for unvested awards was approximately $190 million, which are expected to be recognized over a weighted-average period of 1.9 years on a straight-line basis. As of June 30, 2018,2019, there were 16.114.2 million shares of common stock available for future issuance under ourthe Hilton 2017 Omnibus Incentive Plan, plus any shares subject to awards outstanding under our 2013 Omnibus Incentive Plan, which will become available for issuance under ourthe Hilton 2017 Omnibus Incentive Plan if such outstanding awards expire or are terminated or are canceled or forfeited.


RSUs


During the six months ended June 30, 2018,2019, we granted 0.91.0 million RSUs with a weighted average grant date fair value per share of $79.32,$83.38, which generally vest in equal annual installments over two or three years from the date of grant.


Options


During the six months ended June 30, 2018,2019, we granted 0.60.8 million options with a weighted average exercise price per share of $79.36,$83.11, which vest over three years from the date of grant in equal annual installments and terminate 10 years from the date of grant or earlier if the individual’s service terminates under certain circumstances.




The weighted average grant date fair value per share of the options granted during the six months ended June 30, 20182019 was $23.72,$21.08, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:
Expected volatility(1)
27.9123.51%
Dividend yield(2)
0.740.81%
Risk-free rate(3)
2.732.47%
Expected term (in years)(4)
6.0

____________
(1) 
Estimated using historical movement of Hilton's stock price.
(2) 
Estimated based on the current quarterly dividend and the three-month average stock price 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 June 30, 2018, 1.22019, 1.6 million options were exercisable.


Performance Shares


During the six months ended June 30, 2018,2019, we granted 0.30.4 million performance shares with a weighted average grant date fair value per share of $79.36.$83.11. The performance shares are settled at the end of the three-year performance period withwith: (i) 50 percent of the awards subject to achievement based on the compound annual growth rate ("CAGR") of the Company's adjusted earnings before interest expense, a provision for income taxes and depreciation and amortization ("EBITDA"), adjusted to exclude certain items ("Adjusted EBITDA") compound annual growth rate ("CAGR") (", referred to as EBITDA CAGR")CAGR and the other(ii) 50 percent of the awards subject to achievement based on the Company’s free cash flow ("FCF") per share CAGR, ("referred to as FCF CAGR"). WeCAGR. The total number of performance shares that vest related to each performance measure is based on an achievement factor that ranges from a zero percent to 200 percent payout, with 100 percent being the target. As of June 30, 2019, we determined that the performance conditions for the performance shares issued in 2018 and 2017 are probable of achievement and as of June 30, 2018, we recognized compensation expense, based onfor both our outstanding EBITDA CAGR and FCF CAGR performance shares, at the following anticipatedmaximum achievement percentagespercentage for these performance shares:the 2017 grants, between target and maximum for the 2018 grants and at target for the 2019 grants.


 EBITDA CAGR FCF CAGR
2017 performance shares200% 200%
2018 performance shares150% 150%




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(1)
 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of December 31, 2017317
 $3
 $(891) $10,298
 $(6,981) $(741) $3
 $1,691
Share-based compensation1
 
 
 23
 
 
 
 23
Repurchases of common stock(20) 
 (1,439) 
 
 
 
 (1,439)
Net income
 
 
 
 378
 
 2
 380
Other comprehensive loss
 
 
 
 
 (1) 
 (1)
Dividends
 
 
 
 (94) 
 
 (94)
Balance as of June 30, 2018298
 $3
 $(2,330) $10,321
 $(6,697) $(742) $5
 $560

 Equity Attributable to Hilton Stockholders    
     Treasury Stock Additional
Paid-in
Capital
 
Accumulated Deficit(1)
 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     
Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of December 31, 2016329
 $3
 $
 $10,220
 $(3,545) $(1,001) $(50) $5,627
Share-based compensation2
 
 
 24
 
 
 
 24
Repurchases of common stock(6) 
 (352) 
 
 
 
 (352)
Net income
 
 
 
 197
 
 2
 199
Other comprehensive income
 
 
 
 
 70
 
 70
Dividends
 
 
 
 (99) 
 
 (99)
Spin-offs of Park and HGV
 
 
 
 (4,318) 63
 49
 (4,206)
Cumulative effect of the adoption of ASU 2016-09
 
 
 1
 (1) 
 
 
Distributions
 
 
 
 
 
 (1) (1)
Balance as of June 30, 2017325
 $3
 $(352) $10,245
 $(7,766) $(868) $
 $1,262
___________
(1)
Includes adjustments of $385 million and $222 million to the balances as of December 31, 2017 and 2016, respectively, as a result of the adoption of ASU 2014-09 as of January 1, 2016. See Note 2: "Basis of Presentation and Summary of Significant Accounting Policies" for additional information.

During 2017, our board of directors authorized a stock repurchase program for up to $2.0 billion of the Company's common stock (the "program"), and, as of June 30, 2018, approximately $841 million remained available for share repurchases under the program. During the six months ended June 30, 2018, we repurchased 19.8 million shares of common stock, including 1.25 million shares that were repurchased pursuant to the program from affiliates of Blackstone, as part of their full divestiture of their investment in Hilton, as well as 16.5 million shares that were repurchased from HNA outside of the program, as part of their full divestiture of their investment in Hilton. See Note 1: "Organization" for additional information on the HNA share repurchase.



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, 2017$(513) $(229) $1
 $(741)
Other comprehensive income (loss) before reclassifications(45) 
 36
 (9)
Amounts reclassified from accumulated other comprehensive loss
 3
 5
 8
Net current period other comprehensive income (loss)(45) 3
 41
 (1)
Balance as of June 30, 2018$(558) $(226) $42
 $(742)

 
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 reclassifications73
 
 (15) 58
Amounts reclassified from accumulated other comprehensive loss
 4
 8
 12
Net current period other comprehensive income (loss)73
 4
 (7) 70
Spin-offs of Park and HGV63
 
 
 63
Balance as of June 30, 2017$(602) $(247) $(19) $(868)
____________
(1)
Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature.
(2)
Amounts reclassified include the amortization of prior service cost and the amortization of net gain (loss) that were included in our computation of net periodic pension cost. They were recognized in other non-operating income (loss), net in our condensed consolidated statements of operations and are presented net of a tax benefit of $1 million and $2 million for the six months ended June 30, 2018 and 2017, respectively.
(3)
Amounts reclassified relate to the designated interest rate swaps, as well as the interest rate swaps that were settled in 2017 and 2018. The amounts were recognized in interest expense in our condensed consolidated statements of operations and are presented net of a tax benefit of $2 million and $5 million for the six months ended June 30, 2018 and 2017, respectively. See Note 7: "Derivative Instruments and Hedging Activities" for additional information.



Note 12:11: Earnings Per Share


The following table presents the calculation of basic and diluted earnings per share ("EPS"):
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
 (in millions, except per share amounts)
Basic EPS:       
Numerator:       
Net income attributable to Hilton stockholders$260
 $217
 $418
 $378
Denominator:       
Weighted average shares outstanding290
 301
 291
 308
Basic EPS$0.90
 $0.72
 $1.43
 $1.22
        
Diluted EPS:       
Numerator:       
Net income attributable to Hilton stockholders$260
 $217
 $418
 $378
Denominator:       
Weighted average shares outstanding292
 303
 294
 311
Diluted EPS$0.89
 $0.71
 $1.42
 $1.21

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
 (in millions, except per share amounts)
Basic EPS:       
Numerator:       
Net income attributable to Hilton stockholders$217
 $150
 $378
 $197
Denominator:       
Weighted average shares outstanding301
 327
 308
 328
Basic EPS$0.72
 $0.46
 $1.22
 $0.60
        
Diluted EPS:       
Numerator:       
Net income attributable to Hilton stockholders$217
 $150
 $378
 $197
Denominator:       
Weighted average shares outstanding303
 329
 311
 330
Diluted EPS$0.71
 $0.46
 $1.21
 $0.60


Less than 1 million share-based compensation awards were excluded from the weighted average shares outstanding in the computation of diluted EPS for the three and six months ended June 30, 20182019 and 20172018 because their effect would have been anti-dilutive under the treasury stock method.


Note 12: Stockholders' Equity (Deficit) and Accumulated Other Comprehensive Loss

The following tables present the changes in the components of stockholders' equity (deficit) for the three and six months ended June 30, 2019 and 2018:
 Three Months Ended June 30, 2019
 Equity (Deficit) Attributable to Hilton Stockholders    
     Treasury Stock Additional
Paid-in
Capital
 Accumulated Deficit 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of March 31, 2019292
 $3
 $(2,921) $10,374
 $(6,558) $(798) $8
 $108
Net income
 
 
 
 260
 
 1
 261
Other comprehensive loss
 
 
 
 
 (8) 
 (8)
Dividends
 
 
 
 (44) 
 
 (44)
Repurchases of common stock(4) 
 (383) 
 
 
 
 (383)
Share-based compensation
 
 
 45
 
 
 
 45
Deconsolidation of a VIE
 
 
 
 
 
 (2) (2)
Balance as of June 30, 2019288
 $3
 $(3,304) $10,419
 $(6,342) $(806) $7
 $(23)



 Three Months Ended June 30, 2018
 Equity (Deficit) Attributable to Hilton Stockholders    
     Treasury Stock Additional
Paid-in
Capital
 Accumulated Deficit 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     
Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of March 31, 2018317
 $3
 $(1,001) $10,288
 $(6,868) $(680) $5
 $1,747
Net income
 
 
 
 217
 
 
 217
Other comprehensive loss
 
 
 
 
 (62) 
 (62)
Dividends
 
 
 
 (46) 
 
 (46)
Repurchases of common stock(19) 
 (1,329) 
 
 
 
 (1,329)
Share-based compensation
 
 
 33
 
 
 
 33
Balance as of June 30, 2018298
 $3
 $(2,330) $10,321
 $(6,697) $(742) $5
 $560


 Six Months Ended June 30, 2019
 Equity (Deficit) Attributable to Hilton Stockholders    
     Treasury Stock Additional
Paid-in
Capital
 Accumulated Deficit 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of December 31, 2018295
 $3
 $(2,625) $10,372
 $(6,417) $(782) $7
 $558
Net income
 
 
 
 418
 
 2
 420
Other comprehensive loss
 
 
 
 
 (24) 
 (24)
Dividends
 
 
 
 (87) 
 
 (87)
Repurchases of common stock(8) 
 (679) 
 
 
 
 (679)
Share-based compensation1
 
 
 47
 
 
 
 47
Cumulative effect of the adoption of ASU 2016-02
 
 
 
 (256) 
 
 (256)
Deconsolidation of a VIE
 
 
 
 
 
 (2) (2)
Balance as of June 30, 2019288
 $3
 $(3,304) $10,419
 $(6,342) $(806) $7
 $(23)


 Six Months Ended June 30, 2018
 Equity (Deficit) Attributable to Hilton Stockholders    
     Treasury Stock Additional
Paid-in
Capital
 Accumulated Deficit 
Accumulated
Other
Comprehensive
Loss
    
 Common Stock     
Noncontrolling
Interests
  
 Shares Amount      Total
 (in millions)
Balance as of December 31, 2017317
 $3
 $(891) $10,298
 $(6,981) $(741) $3
 $1,691
Net income
 
 
 
 378
 
 2
 380
Other comprehensive loss
 
 
 
 
 (1) 
 (1)
Dividends
 
 
 
 (94) 
 
 (94)
Repurchases of common stock(20) 
 (1,439) 
 
 
 
 (1,439)
Share-based compensation1
 
 
 23
 
 
 
 23
Balance as of June 30, 2018298
 $3
 $(2,330) $10,321
 $(6,697) $(742) $5
 $560


The changes in 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, 2018$(545) $(260) $23
 $(782)
Other comprehensive income (loss) before reclassifications11
 
 (35) (24)
Amounts reclassified from accumulated other comprehensive loss1
 4
 (5) 
Net current period other comprehensive income (loss)12
 4
 (40) (24)
Balance as of June 30, 2019$(533) $(256) $(17) $(806)


 
Currency Translation Adjustment(1)
 Pension Liability Adjustment Cash Flow Hedge Adjustment Total
 (in millions)
Balance as of December 31, 2017$(513) $(229) $1
 $(741)
Other comprehensive income (loss) before reclassifications(45) 
 36
 (9)
Amounts reclassified from accumulated other comprehensive loss
 3
 5
 8
Net current period other comprehensive income (loss)(45) 3
 41
 (1)
Balance as of June 30, 2018$(558) $(226) $42
 $(742)
____________
(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 Six Months Ended
 June 30, 2019 June 30, 2019
 (in millions)
Currency translation adjustment:   
Liquidation of investment in a foreign entity(1)
$(1) $(1)
Total currency translation adjustment reclassifications for the period, net of taxes(1) (1)
    
Pension liability adjustment:   
Amortization of prior service cost(3)
(1) (2)
Amortization of net loss(3)
(1) (3)
Tax benefit(2)

 1
Total pension liability adjustment reclassifications for the period, net of taxes(2) (4)
    
Cash flow hedge adjustment:   
Dedesignated interest rate swaps(4)
3
 6
Tax expense(2)

 (1)
Total cash flow hedge adjustment reclassifications for the period, net of taxes3
 5
Total reclassifications for the period, net of taxes$
 $
____________
(1)
Includes a gain on the related net investment hedge. Reclassified to loss on foreign currency transactions in our condensed consolidated statements of operations. The related tax benefit reclassified to income tax expense in our condensed consolidated statements of operations was less than $1 million.
(2)
Reclassified to income tax expense in our condensed consolidated statements of operations.
(3)
Reclassified to other non-operating income (loss), net in our condensed consolidated statements of operations.
(4)
Reclassified to interest expense in our condensed consolidated statements of operations.

As of June 30, 2019, approximately $1.4 billion remained available for share repurchases under our $3.5 billion stock repurchase program.

Note 13: Business Segments


We are a hospitality company with operations organized in two distinct operating segments: (i) management and franchise;franchise and (ii) ownership. These segments are managed and reported separately because of their distinct economic characteristics.


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 June 30, 2018,2019, this segment included 662691 managed hotels and 4,6725,059 franchised hotels consisting of 849,265909,453 total rooms. This segment also earns licenselicensing fees from HGVHilton Grand Vacations and co-brand credit card arrangements for the exclusive right to use certain Hilton marks and IP, as well as fees for managing properties in our ownership segment.


As of June 30, 2018,2019, the ownership segment included 7167 properties totaling 21,71720,928 rooms, comprising 6259 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, two hotels leased by consolidated VIEs and sixfive hotels owned or leased by unconsolidated affiliates.



The performance of our operating segments is evaluated primarily on operating income, without allocating corporate and other revenues and expenses or general and administrative expenses.


The following table presents revenues for our reportable segments, reconciled to consolidated amounts:
Three Months Ended Six Months EndedThree Months Ended Six Months Ended
June 30, June 30,June 30, June 30,
2018 2017 2018 20172019 2018 2019 2018
(in millions)(in millions)
Franchise fees$405
 $356
 $738
 $639
Franchise and licensing fees$445
 $405
 $830
 $738
Base and other management fees(1)
101
 95
 191
 185
106
 101
 198
 191
Incentive management fees59
 57
 114
 106
58
 59
 113
 114
Management and franchise565
 508
 1,043
 930
609
 565
 1,141
 1,043
Ownership392
 373
 726
 669
387
 392
 699
 726
Segment revenues957
 881
 1,769
 1,599
996
 957
 1,840
 1,769
Amortization of contract acquisition costs(7) (5) (14) (8)(7) (7) (14) (14)
Other revenues22
 20
 45
 57
26
 22
 52
 45
Direct reimbursements from managed and franchised properties

(2)
730
 636
 1,429
 1,299
789
 730
 1,564
 1,429
Indirect reimbursements from managed and franchised properties

(2)
600
 554
 1,155
 1,042
691
 600
 1,265
 1,155
Intersegment fees elimination(1)
(11) (10) (19) (17)(11) (11) (19) (19)
Total revenues$2,291
 $2,076
 $4,365
 $3,972
$2,484
 $2,291
 $4,688
 $4,365
____________
(1) 
Includes management, royalty and IP fees charged to our ownership segment by our management and franchise segment, which were eliminated in our condensed consolidated statements of operations.
(2)
Included in other revenues from managed and franchised properties in our condensed consolidated statements of operations.

The following table presents operating income for our reportable segments, reconciled to consolidated income before income taxes:
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
 (in millions)
Management and franchise(1)
$609
 $565
 $1,141
 $1,043
Ownership(1)
42
 29
 48
 35
Segment operating income651
 594
 1,189
 1,078
Amortization of contract acquisition costs(7) (7) (14) (14)
Other revenues, less other expenses11
 10
 17
 19
Net other revenues (expenses) from managed and franchised properties

22
 3
 (12) (18)
Depreciation and amortization(86) (79) (170) (161)
General and administrative(113) (115) (220) (219)
Operating income478
 406
 790
 685
Interest expense(101) (95) (199) (178)
Loss on foreign currency transactions(3) (12) (3) (1)
Other non-operating income (loss), net(12) (1) (8) 13
Income before income taxes$362
 $298
 $580
 $519
____________
(1)
Includes management, royalty and IP fees charged to our ownership segment by our management and franchise 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 before income taxes:

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
 (in millions)
Management and franchise(1)
$565
 $508
 $1,043
 $930
Ownership(1)
29
 36
 35
 57
Segment operating income594
 544
 1,078
 987
Amortization of contract acquisition costs(7) (5) (14) (8)
Other revenues, less other expenses10
 9
 19
 23
Net other revenues (expenses) from managed and franchised properties


3
 (23) (18) (68)
Depreciation and amortization(79) (83) (161) (169)
General and administrative(115) (118) (219) (224)
Operating income406
 324
 685
 541
Interest expense(95) (86) (178) (175)
Gain (loss) on foreign currency transactions(12) 5
 (1) 1
Loss on debt extinguishment
 
 
 (60)
Other non-operating income (loss), net(1) 7
 13
 9
Income before income taxes$298
 $250
 $519
 $316
____________
(1)
Includes management, royalty and IP fees charged to our ownership segment by our management and franchise segment, which were eliminated in our condensed consolidated statements of operations.


The following table presents total assets for our reportable segments, reconciled to consolidated amounts:
June 30, December 31,June 30, December 31,
2018 20172019 2018
(in millions)(in millions)
Management and franchise$11,366
 $11,505
$11,399
 $11,362
Ownership954
 964
1,731
 927
Corporate and other1,666
 1,759
2,010
 1,706
$13,986
 $14,228
$15,140
 $13,995


The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:
 Six Months Ended
 June 30,
 2019 2018
 (in millions)
Ownership$25
 $19
Corporate and other21
 9
 $46
 $28

 Six Months Ended
 June 30,
 2018 2017
 (in millions)
Ownership$19
 $10
Corporate and other9
 8
 $28
 $18


Note 14: Commitments and Contingencies


We 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 operating performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of June 30, 2019, we had six performance guarantees, with expirations ranging from December 2019 to 2039, and possible cash outlays totaling approximately $39 million. Our obligations under these guarantees in future periods are dependent on the operating performance level of the related hotel over the remaining term of the performance guarantee. As of June 30, 2019 and December 31, 2018, we accrued current liabilities of $7 million and $12 million, respectively, for one performance guarantee related to a hotel owned by a VIE for which we were not the primary beneficiary. We may enter into new contracts containing performance guarantees in the future, which could increase our possible cash outlays.

As of June 30, 2018,2019, we had four operating contracts containing performance guarantees,a $20 million guarantee for debt of a hotel that we franchise, which has an initial maturity date of February 2022 with expirations ranging from 2019 to 2030, and possible cash outlays totaling approximately $45 million. Our obligationstwo one-year extension options. Although we believe it is unlikely that material payments will be required under these guarantees in future periods are dependent onthis guarantee, there can be no assurance that this will be the operating performance levels of these hotels over the remaining terms of the performance guarantees.case. We do not have any letters of credit pledged as collateral against thesethis guarantee or our performance guarantees. As of June 30, 2018 and December 31, 2017, we recorded $11 million and $12 million, respectively,

We hold interests in accounts payable, accrued expenses and other and $5 million and $9 million,


respectively, in other liabilities in our condensed consolidated balance sheets for one and two outstanding performance guarantees, respectively, that are related to VIEs, for which we are not the primary beneficiary.beneficiary, that have entered into loan agreements with third parties. Under the terms of our contractual arrangements with certain of these VIEs, we may provide financial support to such entities under specified circumstances, including default of such a VIE under a third-party loan agreement, and may have the option to acquire a controlling financial interest in such an entity at a predetermined amount. In a circumstance that we provide financial support or exercise our option to acquire an additional interest in a VIE, we may be required to reassess whether we are the primary beneficiary of the VIE. If we determine that we are the primary beneficiary of the VIE, we would be required to consolidate the total assets, liabilities and results of operations of the VIE, which may be material upon consolidation.


We have entered into agreements with owners of certain hotels that we currently manage or will franchise to finance capital expenditures at the hotels for approximately $29 million. As of June 30, 2019, we expect to fund $19 million of these commitments in the remainder of 2019 and $10 million in 2020.

We receive fees from managed and franchised properties to operate our marketing, sales and brand programs on behalf of
hotel and resort owners. As of June 30, 20182019 and December 31, 2017,2018, we had collected an aggregate of $414$392 million and $402$375 million in excess of amounts expended, respectively, across all programs.


We are involved in various claims and lawsuits arising in the ordinary course of business, some of which include 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 June 30, 20182019 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.




Note 15: Condensed Consolidating Guarantor Financial Information


In April 2018, Hilton Domestic Operating Company Inc. ("HOC"), which is 100 percent owned by Hilton Worldwide Finance LLC, issued the 2026 Senior Notes. In March 2017, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (the(together, the "HWF Issuers"), entities thatwhich are 100 percent owned by Hilton Worldwide Parent LLC ("HWP"), which is 100 percent owned by the Parent, issued the 2025 Senior Notes and the 2027 Senior Notes. In September 2016, HOCHilton Domestic Operating Company Inc. ("HOC"), which is 100 percent owned by Hilton Worldwide Finance LLC, assumed the 2024 Senior Notes, that were issued in August 2016 by escrow issuers. The HWF Issuers are guarantors of the 2026 Senior Notes and, in June 2019, issued the 2024 Senior Notes. HOC is a guarantor of the 2025 Senior Notes and the 20272030 Senior Notes. The 2024 Senior Notes, 2025 Senior Notes, 2026 Senior Notes, 2027 Senior Notes and 20272030 Senior Notes are collectively referred to as the Senior Notes. The HWF Issuers and HOC are collectively referred to as the Subsidiary Issuers.


The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by HWP, the Parent and certain of the Parent's 100 percentwholly owned domestic restricted subsidiaries that are themselves not issuers of the applicable series of Senior Notes (together, the "Guarantors''). The indentures that govern the Senior Notes provide that any subsidiary of the Company that provides a guarantee of our senior secured credit facilityfacilities will guarantee the Senior Notes. Additionally, the HWF Issuers are guarantors of the 2024 Senior Notes, the 2026 Senior Notes and the 2030 Senior Notes and HOC is a guarantor of the 2025 Senior Notes and the 2027 Senior Notes. As of June 30, 2018,2019, none of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign operations or our non-wholly owned subsidiaries guarantee the Senior Notes (collectively, the "Non-Guarantors").

The condensed consolidating financial information presents the financial information for all periods based on the composition of the Guarantors and Non-Guarantors as of June 30, 2018.


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 our senior secured credit facility;facilities; (iii) the subsidiary is declared "unrestricted" for covenant purposes; (iv) the subsidiary is merged with or 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, in each case in compliance with applicable provisions of the indentures.


The following tables present the condensed consolidating financial information as of June 30, 20182019 and December 31, 2017,2018, and for the three and six months ended June 30, 20182019 and 2017,2018, for the Parent, HWF Issuers, HOC, Guarantors and Non-Guarantors. The condensed consolidating financial information presents the financial information for all periods based on the composition of the Guarantors and Non-Guarantors as of June 30, 2019.




 June 30, 2019
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
ASSETS             
Current Assets:             
Cash and cash equivalents$
 $
 $3
 $23
 $609
 $
 $635
Restricted cash and cash equivalents
 
 34
 16
 33
 
 83
Accounts receivable, net
 
 14
 852
 324
 
 1,190
Intercompany receivables
 
 
 
 40
 (40) 
Prepaid expenses
 
 16
 48
 55
 (2) 117
Other
 1
 1
 48
 147
 (7) 190
Total current assets
 1
 68
 987
 1,208
 (49) 2,215
Intangibles and Other Assets:             
Investments in subsidiaries2
 4,113
 7,850
 2
 
 (11,967) 
Goodwill
 
 
 3,824
 1,333
 
 5,157
Brands
 
 
 4,405
 469
 
 4,874
Management and franchise contracts, net
 
 1
 502
 314
 
 817
Other intangible assets, net
 
 
 279
 121
 
 400
Operating lease right-of-use assets
 
 36
 10
 845
 
 891
Property and equipment, net
 
 61
 67
 290
 
 418
Deferred income tax assets4
 7
 86
 
 146
 (97) 146
Other
 12
 31
 17
 162
 
 222
Total intangibles and other assets6
 4,132
 8,065
 9,106
 3,680
 (12,064) 12,925
TOTAL ASSETS$6
 $4,133
 $8,133
 $10,093
 $4,888
 $(12,113) $15,140
LIABILITIES AND EQUITY (DEFICIT)             
Current Liabilities:             
Accounts payable, accrued expenses and other$36
 $20
 $201
 $664
 $743
 $(7) $1,657
Current maturities of long-term debt
 
 20
 
 17
 
 37
Current portion of deferred revenues
 
 47
 241
 12
 (2) 298
Intercompany payables
 
 40
 
 
 (40) 
Current portion of liability for guest loyalty program
 
 
 788
 
 
 788
Total current liabilities36
 20
 308
 1,693
 772
 (49) 2,780
Long-term debt
 4,076
 3,473
 
 223
 
 7,772
Operating lease liabilities
 
 43
 8
 1,015
 
 1,066
Deferred revenues
 
 
 754
 68
 
 822
Deferred income tax liabilities
 
 
 958
 
 (97) 861
Liability for guest loyalty program
 
 
 986
 
 
 986
Other
 35
 196
 94
 551
 
 876
Total liabilities36
 4,131
 4,020
 4,493
 2,629
 (146) 15,163
Equity (Deficit):             
Total Hilton stockholders' equity (deficit)(30) 2
 4,113
 5,600
 2,252
 (11,967) (30)
Noncontrolling interests
 
 
 
 7
 
 7
Total equity (deficit)(30) 2
 4,113
 5,600
 2,259
 (11,967) (23)
TOTAL LIABILITIES AND EQUITY (DEFICIT)$6
 $4,133
 $8,133
 $10,093
 $4,888
 $(12,113) $15,140




June 30, 2018December 31, 2018
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations TotalParent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
(in millions)(in millions)
ASSETS                          
Current Assets:                          
Cash and cash equivalents$
 $
 $3
 $14
 $406
 $
 $423
$
 $
 $3
 $17
 $383
 $
 $403
Restricted cash and cash equivalents
 
 34
 16
 32
 
 82

 
 34
 15
 32
 
 81
Accounts receivable, net
 
 21
 734
 287
 (1) 1,041

 
 10
 735
 405
 
 1,150
Intercompany receivables
 
 
 
 40
 (40) 

 
 
 
 40
 (40) 
Prepaid expenses
 
 16
 49
 88
 (2) 151

 
 52
 37
 80
 (9) 160
Income taxes receivable
 
 
 32
 
 (21) 11
Other
 2
 1
 21
 112
 
 136

 1
 1
 36
 154
 (3) 189
Total current assets
 2
 75
 866
 965
 (64) 1,844

 1
 100
 840
 1,094
 (52) 1,983
Intangibles and Other Assets:                          
Investments in subsidiaries553
 5,397
 8,095
 553
 
 (14,598) 
557
 5,131
 7,930
 557
 
 (14,175) 
Goodwill
 
 
 3,824
 1,350
 
 5,174

 
 
 3,824
 1,336
 
 5,160
Brands
 
 
 4,405
 473
 
 4,878

 
 
 4,404
 465
 
 4,869
Management and franchise contracts, net
 
 
 587
 306
 
 893

 
 
 556
 316
 
 872
Other intangible assets, net
 
 
 281
 138
 
 419

 
 
 287
 128
 
 415
Property and equipment, net
 
 21
 65
 265
 
 351

 
 27
 65
 275
 
 367
Deferred income tax assets5
 
 102
 
 111
 (107) 111
4
 
 94
 
 90
 (98) 90
Other
 49
 31
 65
 171
 
 316

 23
 33
 22
 161
 
 239
Total intangibles and other assets558
 5,446
 8,249
 9,780
 2,814
 (14,705) 12,142
561
 5,154
 8,084
 9,715
 2,771
 (14,273) 12,012
TOTAL ASSETS$558
 $5,448
 $8,324
 $10,646
 $3,779
 $(14,769) $13,986
$561
 $5,155
 $8,184
 $10,555
 $3,865
 $(14,325) $13,995
LIABILITIES AND EQUITY                          
Current Liabilities:                          
Accounts payable, accrued expenses and other$3
 $20
 $170
 $548
 $573
 $(2) $1,312
$10
 $19
 $229
 $529
 $765
 $(3) $1,549
Current maturities of long-term debt
 
 
 
 16
 
 16
Current portion of deferred revenues
 
 37
 261
 11
 (1) 308

 
 106
 239
 14
 (9) 350
Intercompany payables
 
 40
 
 
 (40) 

 
 40
 
 
 (40) 
Current maturities of long-term debt
 
 
 
 11
 
 11
Income taxes payable
 
 
 
 43
 (21) 22
Current portion of liability for guest loyalty program
 
 
 725
 
 
 725

 
 
 700
 
 
 700
Total current liabilities3
 20
 247
 1,534
 638
 (64) 2,378
10
 19
 375
 1,468
 795
 (52) 2,615
Long-term debt
 4,865
 2,464
 
 235
 
 7,564

 4,573
 2,467
 
 226
 
 7,266
Deferred revenues
 
 1
 757
 61
 
 819

 
 
 762
 64
 
 826
Deferred income tax liabilities
 10
 
 1,000
 5
 (107) 908

 6
 
 962
 28
 (98) 898
Liability for guest loyalty program
 
 
 876
 
 
 876

 
 
 969
 
 
 969
Other
 
 215
 64
 602
 
 881

 
 211
 93
 559
 
 863
Total liabilities3
 4,895
 2,927
 4,231
 1,541
 (171) 13,426
10
 4,598
 3,053
 4,254
 1,672
 (150) 13,437
Equity:                          
Total Hilton stockholders' equity555
 553
 5,397
 6,415
 2,233
 (14,598) 555
551
 557
 5,131
 6,301
 2,186
 (14,175) 551
Noncontrolling interests
 
 
 
 5
 
 5

 
 
 
 7
 
 7
Total equity555
 553
 5,397
 6,415
 2,238
 (14,598) 560
551
 557
 5,131
 6,301
 2,193
 (14,175) 558
TOTAL LIABILITIES AND EQUITY$558
 $5,448
 $8,324
 $10,646
 $3,779
 $(14,769) $13,986
$561
 $5,155
 $8,184
 $10,555
 $3,865
 $(14,325) $13,995







 December 31, 2017
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
ASSETS             
Current Assets:             
Cash and cash equivalents$
 $
 $2
 $18
 $550
 $
 $570
Restricted cash and cash equivalents
 
 61
 10
 29
 
 100
Accounts receivable, net
 
 18
 712
 275
 
 1,005
Intercompany receivables
 
 
 
 40
 (40) 
Prepaid expenses
 
 25
 24
 84
 (6) 127
Income taxes receivable
 
 
 60
 
 (24) 36
Other
 
 1
 13
 155
 
 169
Total current assets
 
 107
 837
 1,133
 (70) 2,007
Intangibles and Other Assets:             
Investments in subsidiaries1,697
 7,067
 8,326
 1,697
 
 (18,787) 
Goodwill
 
 
 3,824
 1,366
 
 5,190
Brands
 
 
 4,405
 485
 
 4,890
Management and franchise contracts, net
 
 2
 645
 306
 
 953
Other intangible assets, net
 
 1
 283
 149
 
 433
Property and equipment, net
 
 20
 67
 266
 
 353
Deferred income tax assets6
 
 104
 
 127
 (126) 111
Other
 20
 32
 67
 172
 
 291
Total intangibles and other assets1,703
 7,087
 8,485
 10,988
 2,871
 (18,913) 12,221
TOTAL ASSETS$1,703
 $7,087
 $8,592
 $11,825
 $4,004
 $(18,983) $14,228
LIABILITIES AND EQUITY             
Current Liabilities:             
Accounts payable, accrued expenses and other$15
 $20
 $184
 $576
 $624
 $(3) $1,416
Current portion of deferred revenues
 
 90
 266
 13
 (3) 366
Intercompany payables
 
 40
 
 
 (40) 
Current maturities of long-term debt
 32
 
 
 14
 
 46
Income taxes payable
 
 
 
 36
 (24) 12
Current portion of liability for guest loyalty program
 
 
 622
 
 
 622
Total current liabilities15
 52
 314
 1,464
 687
 (70) 2,462
Long-term debt
 5,333
 983
 
 240
 
 6,556
Deferred revenues
 
 
 770
 59
 
 829
Deferred income tax liabilities
 5
 
 1,052
 
 (126) 931
Liability for guest loyalty program
 
 
 839
 
 
 839
Other
 
 228
 64
 628
 
 920
Total liabilities15
 5,390
 1,525
 4,189
 1,614
 (196) 12,537
Equity:             
Total Hilton stockholders' equity1,688
 1,697
 7,067
 7,636
 2,387
 (18,787) 1,688
Noncontrolling interests
 
 
 
 3
 
 3
Total equity1,688
 1,697
 7,067
 7,636
 2,390
 (18,787) 1,691
TOTAL LIABILITIES AND EQUITY$1,703
 $7,087
 $8,592
 $11,825
 $4,004
 $(18,983) $14,228
 Three Months Ended June 30, 2019
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise and licensing fees$
 $
 $69
 $338
 $41
 $(4) $444
Base and other management fees
 
 
 57
 32
 
 89
Incentive management fees
 
 
 21
 37
 
 58
Owned and leased hotels
 
 
 
 387
 
 387
Other revenues
 
 1
 20
 5
 
 26
 
 
 70
 436
 502
 (4) 1,004
Other revenues from managed and franchised properties
 
 81
 1,247
 152
 
 1,480
Total revenues
 
 151
 1,683
 654
 (4) 2,484
              
Expenses             
Owned and leased hotels
 
 
 
 334
 
 334
Depreciation and amortization
 
 1
 63
 22
 
 86
General and administrative
 
 89
 
 31
 (7) 113
Other expenses
 
 3
 2
 7
 3
 15
 
 
 93
 65
 394
 (4) 548
Other expenses from managed and franchised properties
 
 87
 1,224
 147
 
 1,458
Total expenses
 
 180
 1,289
 541
 (4) 2,006
              
Operating income (loss)
 
 (29) 394
 113
 
 478
              
Interest expense
 (52) (33) 
 (16) 
 (101)
Gain (loss) on foreign currency transactions
 
 (1) (9) 7
 
 (3)
Other non-operating income (loss), net
 (9) 
 (5) 2
 
 (12)
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (61) (63) 380
 106
 
 362
              
Income tax benefit (expense)
 15
 14
 (94) (36) 
 (101)
              
Income (loss) before equity in earnings from subsidiaries
 (46) (49) 286
 70
 
 261
              
Equity in earnings from subsidiaries260
 306
 355
 260
 
 (1,181) 
              
Net income260
 260
 306
 546
 70
 (1,181) 261
Net income attributable to noncontrolling interests
 
 
 
 (1) 
 (1)
Net income attributable to Hilton stockholders$260
 $260
 $306
 $546
 $69
 $(1,181) $260
              
Comprehensive income$252
 $235
 $308
 $546
 $85
 $(1,173) $253
Comprehensive income attributable to noncontrolling interests
 
 
 
 (1) 
 (1)
Comprehensive income attributable to Hilton stockholders$252
 $235
 $308
 $546
 $84
 $(1,173) $252








Three Months Ended June 30, 2018Three Months Ended June 30, 2018
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations TotalParent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
(in millions)(in millions)
Revenues                          
Franchise fees$
 $
 $50
 $322
 $36
 $(4) $404
Franchise and licensing fees$
 $
 $50
 $322
 $36
 $(4) $404
Base and other management fees
 
 1
 55
 28
 
 84

 
 1
 55
 28
 
 84
Incentive management fees
 
 
 22
 37
 
 59

 
 
 22
 37
 
 59
Owned and leased hotels
 
 
 
 392
 
 392

 
 
 
 392
 
 392
Other revenues
 
 1
 17
 3
 1
 22

 
 1
 17
 3
 1
 22

 
 52
 416
 496
 (3) 961

 
 52
 416
 496
 (3) 961
Other revenues from managed and franchised properties
 
 62
 1,110
 158
 
 1,330

 
 62
 1,110
 158
 
 1,330
Total revenues
 
 114
 1,526
 654
 (3) 2,291

 
 114
 1,526
 654
 (3) 2,291
                          
Expenses                          
Owned and leased hotels
 
 
 
 352
 
 352

 
 
 
 352
 
 352
Depreciation and amortization
 
 2
 58
 19
 
 79

 
 2
 58
 19
 
 79
General and administrative
 
 83
 
 32
 
 115

 
 83
 
 32
 
 115
Other expenses
 
 2
 8
 6
 (4) 12

 
 2
 8
 6
 (4) 12

 
 87
 66
 409
 (4) 558

 
 87
 66
 409
 (4) 558
Other expenses from managed and franchised properties
 
 62
 1,114
 151
 
 1,327

 
 62
 1,114
 151
 
 1,327
Total expenses
 
 149
 1,180
 560
 (4) 1,885

 
 149
 1,180
 560
 (4) 1,885
                          
Operating income (loss)
 
 (35) 346
 94
 1
 406

 
 (35) 346
 94
 1
 406
                          
Interest expense
 (57) (31) 
 (9) 2
 (95)
 (57) (31) 
 (9) 2
 (95)
Gain (loss) on foreign currency transactions
 
 6
 (89) 71
 
 (12)
 
 6
 (89) 71
 
 (12)
Other non-operating income (loss), net
 (7) 1
 4
 4
 (3) (1)
 (7) 1
 4
 4
 (3) (1)
                          
Income (loss) before income taxes and equity in earnings from subsidiaries
 (64) (59) 261
 160
 
 298

 (64) (59) 261
 160
 
 298
                          
Income tax benefit (expense)
 16
 14
 (61) (50) 
 (81)
 16
 14
 (61) (50) 
 (81)
                          
Income (loss) before equity in earnings from subsidiaries
 (48) (45) 200
 110
 
 217

 (48) (45) 200
 110
 
 217
                          
Equity in earnings from subsidiaries217
 265
 310
 217
 
 (1,009) 
217
 265
 310
 217
 
 (1,009) 
                          
Net income217
 217
 265
 417
 110
 (1,009) 217
217
 217
 265
 417
 110
 (1,009) 217
Net income attributable to noncontrolling interests
 
 
 
 
 
 

 
 
 
 
 
 
Net income attributable to Hilton stockholders$217
 $217
 $265
 $417
 $110
 $(1,009) $217
$217
 $217
 $265
 $417
 $110
 $(1,009) $217
                          
Comprehensive income$155
 $227
 $266
 $416
 $38
 $(947) $155
$155
 $227
 $266
 $416
 $38
 $(947) $155
Comprehensive income attributable to noncontrolling interests
 
 
 
 
 
 

 
 
 
 
 
 
Comprehensive income attributable to Hilton stockholders$155
 $227
 $266
 $416
 $38
 $(947) $155
$155
 $227
 $266
 $416
 $38
 $(947) $155




 Three Months Ended June 30, 2017
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise fees$
 $
 $49
 $282
 $29
 $(5) $355
Base and other management fees
 
 
 52
 29
 
 81
Incentive management fees
 
 
 21
 36
 
 57
Owned and leased hotels
 
 
 
 373
 
 373
Other revenues
 
 2
 16
 2
 
 20
 
 
 51
 371
 469
 (5) 886
Other revenues from managed and franchised properties
 
 44
 1,001
 145
 
 1,190
Total revenues
 
 95
 1,372
 614
 (5) 2,076
              
Expenses             
Owned and leased hotels
 
 
 
 327
 
 327
Depreciation and amortization
 
 2
 59
 22
 
 83
General and administrative
 
 92
 
 28
 (2) 118
Other expenses
 
 3
 7
 4
 (3) 11
 
 
 97
 66
 381
 (5) 539
Other expenses from managed and franchised properties
 
 45
 1,006
 162
 
 1,213
Total expenses
 
 142
 1,072
 543
 (5) 1,752
              
Operating income (loss)
 
 (47) 300
 71
 
 324
              
Interest expense
 (60) (14) 
 (12) 
 (86)
Gain (loss) on foreign currency transactions
 
 2
 53
 (50) 
 5
Other non-operating income, net
 
 2
 3
 2
 
 7
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (60) (57) 356
 11
 
 250
              
Income tax benefit (expense)
 23
 19
 (138) (3) 
 (99)
              
Income (loss) before equity in earnings from subsidiaries
 (37) (38) 218
 8
 
 151
              
Equity in earnings from subsidiaries150
 187
 225
 150
 
 (712) 
              
Net income150
 150
 187
 368
 8
 (712) 151
Net income attributable to noncontrolling interests
 
 
 
 (1) 
 (1)
Net income attributable to Hilton stockholders$150
 $150
 $187
 $368
 $7
 $(712) $150
              
Comprehensive income$200
 $145
 $186
 $369
 $64
 $(762) $202
Comprehensive income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Comprehensive income attributable to Hilton stockholders$200
 $145
 $186
 $369
 $62
 $(762) $200






 Six Months Ended June 30, 2019
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise and licensing fees$
 $
 $130
 $632
 $73
 $(9) $826
Base and other management fees
 
 
 109
 60
 
 169
Incentive management fees
 
 
 44
 69
 
 113
Owned and leased hotels
 
 
 
 699
 
 699
Other revenues
 
 1
 43
 8
 
 52
 
 
 131
 828
 909
 (9) 1,859
Other revenues from managed and franchised properties
 
 156
 2,386
 287
 
 2,829
Total revenues
 
 287
 3,214
 1,196
 (9) 4,688
              
Expenses             
Owned and leased hotels
 
 
 
 632
 
 632
Depreciation and amortization
 
 3
 125
 42
 
 170
General and administrative
 
 171
 
 62
 (13) 220
Other expenses
 
 4
 10
 17
 4
 35
 
 
 178
 135
 753
 (9) 1,057
Other expenses from managed and franchised properties
 
 159
 2,402
 280
 
 2,841
Total expenses
 
 337
 2,537
 1,033
 (9) 3,898
              
Operating income (loss)
 
 (50) 677
 163
 
 790
              
Interest expense
 (103) (68) 
 (28) 
 (199)
Gain (loss) on foreign currency transactions
 
 1
 (27) 23
 
 (3)
Other non-operating income (loss), net
 (9) 
 (5) 6
 
 (8)
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (112) (117) 645
 164
 
 580
              
Income tax benefit (expense)
 27
 27
 (159) (55) 
 (160)
              
Income (loss) before equity in earnings from subsidiaries
 (85) (90) 486
 109
 
 420
              
Equity in earnings from subsidiaries418
 503
 593
 418
 
 (1,932) 
              
Net income418
 418
 503
 904
 109
 (1,932) 420
Net income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Net income attributable to Hilton stockholders$418
 $418
 $503
 $904
 $107
 $(1,932) $418
              
Comprehensive income$394
 $378
 $506
 $904
 $122
 $(1,908) $396
Comprehensive income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Comprehensive income attributable to Hilton stockholders$394
 $378
 $506
 $904
 $120
 $(1,908) $394


 Six Months Ended June 30, 2018
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise fees$
 $
 $94
 $584
 $65
 $(8) $735
Base and other management fees
 
 1
 106
 54
 
 161
Incentive management fees
 
 
 43
 71
 
 114
Owned and leased hotels
 
 
 
 726
 
 726
Other revenues
 
 3
 41
 5
 (4) 45
 
 
 98
 774
 921
 (12) 1,781
Other revenues from managed and franchised properties
 
 106
 2,180
 298
 
 2,584
Total revenues
 
 204
 2,954
 1,219
 (12) 4,365
              
Expenses             
Owned and leased hotels
 
 
 
 672
 
 672
Depreciation and amortization
 
 3
 118
 40
 
 161
General and administrative
 
 156
 
 67
 (4) 219
Other expenses
 
 4
 15
 15
 (8) 26
 
 
 163
 133
 794
 (12) 1,078
Other expenses from managed and franchised properties
 
 108
 2,198
 296
 
 2,602
Total expenses
 
 271
 2,331
 1,090
 (12) 3,680
              
Operating income (loss)
 
 (67) 623
 129
 
 685
              
Interest expense
 (118) (44) 
 (19) 3
 (178)
Gain (loss) on foreign currency transactions
 
 3
 (81) 77
 
 (1)
Other non-operating income (loss), net
 (7) 4
 12
 7
 (3) 13
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (125) (104) 554
 194
 
 519
              
Income tax benefit (expense)
 31
 27
 (134) (63) 
 (139)
              
Income (loss) before equity in earnings from subsidiaries
 (94) (77) 420
 131
 
 380
              
Equity in earnings from subsidiaries378
 472
 549
 378
 
 (1,777) 
              
Net income378
 378
 472
 798
 131
 (1,777) 380
Net income attributable to noncontrolling interests
 
 
 

 (2) 
 (2)
Net income attributable to Hilton stockholders$378
 $378
 $472
 $798
 $129
 $(1,777) $378
              
Comprehensive income$377
 $417
 $473
 $798
 $90
 $(1,776) $379
Comprehensive income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Comprehensive income attributable to Hilton stockholders$377
 $417
 $473
 $798
 $88
 $(1,776) $377



 Six Months Ended June 30, 2018
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise and licensing fees$
 $
 $94
 $584
 $65
 $(8) $735
Base and other management fees
 
 1
 106
 54
 
 161
Incentive management fees
 
 
 43
 71
 
 114
Owned and leased hotels
 
 
 
 726
 
 726
Other revenues
 
 3
 41
 5
 (4) 45
 
 
 98
 774
 921
 (12) 1,781
Other revenues from managed and franchised properties
 
 106
 2,180
 298
 
 2,584
Total revenues
 
 204
 2,954
 1,219
 (12) 4,365
              
Expenses             
Owned and leased hotels
 
 
 
 672
 
 672
Depreciation and amortization
 
 3
 118
 40
 
 161
General and administrative
 
 156
 
 67
 (4) 219
Other expenses
 
 4
 15
 15
 (8) 26
 
 
 163
 133
 794
 (12) 1,078
Other expenses from managed and franchised properties
 
 108
 2,198
 296
 
 2,602
Total expenses
 
 271
 2,331
 1,090
 (12) 3,680
              
Operating income (loss)
 
 (67) 623
 129
 
 685
              
Interest expense
 (118) (44) 
 (19) 3
 (178)
Gain (loss) on foreign currency transactions
 
 3
 (81) 77
 
 (1)
Other non-operating income (loss), net
 (7) 4
 12
 7
 (3) 13
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (125) (104) 554
 194
 
 519
              
Income tax benefit (expense)
 31
 27
 (134) (63) 
 (139)
              
Income (loss) before equity in earnings from subsidiaries
 (94) (77) 420
 131
 
 380
              
Equity in earnings from subsidiaries378
 472
 549
 378
 
 (1,777) 
              
Net income378
 378
 472
 798
 131
 (1,777) 380
Net income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Net income attributable to Hilton stockholders$378
 $378
 $472
 $798
 $129
 $(1,777) $378
              
Comprehensive income$377
 $417
 $473
 $798
 $90
 $(1,776) $379
Comprehensive income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Comprehensive income attributable to Hilton stockholders$377
 $417
 $473
 $798
 $88
 $(1,776) $377



 Six Months Ended June 30, 2017
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Revenues             
Franchise fees$
 $
 $68
 $526
 $52
 $(9) $637
Base and other management fees
 
 
 101
 61
 
 162
Incentive management fees
 
 
 41
 65
 
 106
Owned and leased hotels
 
 
 
 669
 
 669
Other revenues
 
 22
 29
 6
 
 57
 
 
 90
 697
 853
 (9) 1,631
Other revenues from managed and franchised properties
 
 85
 1,982
 274
 
 2,341
Total revenues
 
 175
 2,679
 1,127
 (9) 3,972
              
Expenses             
Owned and leased hotels
 
 
 
 595
 
 595
Depreciation and amortization
 
 3
 121
 45
 
 169
General and administrative
 
 171
 2
 53
 (2) 224
Other expenses
 
 15
 14
 12
 (7) 34
 
 
 189
 137
 705
 (9) 1,022
Other expenses from managed and franchised properties
 
 87
 2,032
 290
 
 2,409
Total expenses
 
 276
 2,169
 995
 (9) 3,431
              
Operating income (loss)
 
 (101) 510
 132
 
 541
              
Interest expense
 (123) (30) 
 (22) 
 (175)
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
 5
 
 9
              
Income (loss) before income taxes and equity in earnings from subsidiaries
 (186) (115) 588
 29
 
 316
              
Income tax benefit (expense)
 73
 43
 (225) (8) 
 (117)
              
Income (loss) before equity in earnings from subsidiaries
 (113) (72) 363
 21
 
 199
              
Equity in earnings from subsidiaries197
 310
 382
 197
 
 (1,086) 
              
Net income197
 197
 310
 560
 21
 (1,086) 199
Net income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Net income attributable to Hilton stockholders$197
 $197
 $310
 $560
 $19
 $(1,086) $197
              
Comprehensive income$267
 $190
 $313
 $561
 $94
 $(1,156) $269
Comprehensive income attributable to noncontrolling interests
 
 
 
 (2) 
 (2)
Comprehensive income attributable to Hilton stockholders$267
 $190
 $313
 $561
 $92
 $(1,156) $267




 Six Months Ended June 30, 2019
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Operating Activities:             
Net cash provided by (used in) operating activities$
 $(85) $
 $675
 $75
 $(15) $650
Investing Activities:             
Capital expenditures for property and equipment
 
 (5) (3) (38) 
 (46)
Capitalized software costs
 
 
 (44) 
 
 (44)
Other
 
 
 1
 (6) 
 (5)
Net cash used in investing activities
 
 (5) (46) (44) 
 (95)
Financing Activities:             
Borrowings
 795
 1,000
 
 
 
 1,795
Repayment of debt
 (1,295) (14) 
 (8) 
 (1,317)
Debt issuance costs
 (13) (14) 
 
 
 (27)
Intercompany transfers740
 598
 (933) (622) 217
 
 
Dividends paid(87) 
 
 
 
 
 (87)
Repurchases of common stock(653) 
 
 
 
 
 (653)
Intercompany dividends
 
 
 
 (15) 15
 
Share-based compensation tax withholdings and other
 
 (34) 
 
 
 (34)
Net cash provided by (used in) financing activities
 85
 5
 (622) 194
 15
 (323)
Effect of exchange rate changes on cash, restricted cash and cash equivalents
 
 
 
 2
 
 2
Net increase in cash, restricted cash and cash equivalents
 
 
 7
 227
 
 234
Cash, restricted cash and cash equivalents, beginning of period
 
 37
 32
 415
 
 484
Cash, restricted cash and cash equivalents, end of period$
 $
 $37
 $39
 $642
 $
 $718


 Six Months Ended June 30, 2018
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Operating Activities:             
Net cash provided by (used in) operating activities$
 $(102) $(8) $494
 $148
 $
 $532
Investing Activities:             
Capital expenditures for property and equipment
 
 (4) (1) (23) 
 (28)
Capitalized software costs
 
 
 (38) 
 
 (38)
Other
 
 
 (3) (6) 
 (9)
Net cash used in investing activities
 
 (4) (42) (29) 
 (75)
Financing Activities:             
Borrowings
 150
 1,500
 
 
 
 1,650
Repayment of debt
 (660) 
 
 (12) 
 (672)
Debt issuance costs
 
 (21) 
 
 
 (21)
Intercompany transfers1,531
 612
 (1,451) (450) (242) 
 
Dividends paid(92) 
 
 
 
 
 (92)
Repurchases of common stock(1,439) 
 
 
 
 
 (1,439)
Share-based compensation tax withholdings and other
 
 (42) 
 
 
 (42)
Net cash provided by (used in) financing activities
 102
 (14) (450) (254) 
 (616)
Effect of exchange rate changes on cash, restricted cash and cash equivalents
 
 
 
 (6) 
 (6)
Net increase (decrease) in cash, restricted cash and cash equivalents
 
 (26) 2
 (141) 
 (165)
Cash, restricted cash and cash equivalents, beginning of period
 
 63
 28
 579
 
 670
Cash, restricted cash and cash equivalents, end of period$
 $
 $37
 $30
 $438
 $
 $505



 Six Months Ended June 30, 2018
 Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
 (in millions)
Operating Activities:             
Net cash provided by (used in) operating activities$
 $(102) $(8) $494
 $148
 $
 $532
Investing Activities:             
Capital expenditures for property and equipment
 
 (4) (1) (23) 
 (28)
Capitalized software costs
 
 
 (38) 
 
 (38)
Other
 
 
 (3) (6) 
 (9)
Net cash used in investing activities
 
 (4) (42) (29) 
 (75)
Financing Activities:             
Borrowings
 150
 1,500
 
 
 
 1,650
Repayment of debt
 (660) 
 
 (12) 
 (672)
Debt issuance costs
 
 (21) 
 
 
 (21)
Intercompany transfers1,531
 612
 (1,451) (450) (242) 
 
Dividends paid(92) 
 
 
 
 
 (92)
Repurchases of common stock(1,439) 
 
 
 
 
 (1,439)
Tax withholdings on share-based compensation
 
 (42) 
 
 
 (42)
Net cash provided by (used in) financing activities
 102
 (14) (450) (254) 
 (616)
Effect of exchange rate changes on cash, restricted cash and cash equivalents
 
 
 
 (6) 
 (6)
Net increase (decrease) in cash, restricted cash and cash equivalents
 
 (26) 2
 (141) 
 (165)
Cash, restricted cash and cash equivalents, beginning of period
 
 63
 28
 579
 
 670
Cash, restricted cash and cash equivalents, end of period$
 $
 $37
 $30
 $438
 $
 $505




 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) $378
 $93
 $
 $344
Investing Activities:             
Capital expenditures for property and equipment
 
 (3) (3) (12) 
 (18)
Capitalized software costs
 
 
 (29) 
 
 (29)
Other
 (13) 
 (5) 3
 (3) (18)
Net cash used in investing activities
 (13) (3) (37) (9) (3) (65)
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 transfers450
 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



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 and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. As previously discussed, we adopted the requirements of ASU 2014-09 as of January 1, 2016 using the full retrospective approach; refer to Note 2: "Basis of Presentation and Summary of Significant Accounting Policies" in our unaudited condensed consolidated financial statements for additional information. All amounts and disclosures set forth in this Quarterly Report on Form 10-Q reflect this adoption.2018.


Forward-Looking Statements


This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources 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," "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 and management and franchise contracts, risks related to doing business with third-party hotel owners, performance of our information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the U.S. 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, 2017.2018. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere 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 isone of the largest and fastest growing hospitality companies in the world, with 5,4565,872 properties comprising 879,349939,297 rooms in 106114 countries and territories as of June 30, 2018.2019. Our premier brand portfolio includes: our luxury and lifestyle hotel brands, Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, Conrad Hotels & Resorts and Canopy by Hilton; our full service hotel brands, Signia Hilton, Hilton Hotels & Resorts, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton and Embassy Suites by Hilton; our focused service hotel brands, Motto by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton; and our timeshare brand, Hilton Grand Vacations. As of June 30, 2018,2019, we had approximately 78more than 94 million members in our award-winning guest loyalty program, Hilton Honors,a 2021 percent increase from June 30, 2017.2018.


Segments and Regions


Management analyzes our operations and business by both operating segments and geographic regions. Our operations consist of two reportable segments that are based on similar products or services: (i) management and franchise;franchise and (ii) ownership. The management and franchise segment provides services, including hotel management and licensing of our brands. This segment generates its revenue from: (i) management and franchise fees charged to third-party hotel owners; (ii) licenselicensing fees for the exclusive right to use certain Hilton marks and IP; and (iii) fees for managing our owned and leased hotels. As a manager of hotels, 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 ownership segment primarily derives earnings from providing hotel room rentals,sales, food and beverage sales and other services at our owned and 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 represented 7473 percent of our system-wide hotel rooms as of June 30, 2018;2019; therefore, the U.S. is often analyzed separately and apart from the Americas


geographic region overall 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 Iceland 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 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 islandIsland nations.


System Growth and Development Pipeline


Our strategic prioritiesobjectives include the continued expansion of our global networkfootprint and fee-based business. As we enter into new management and franchise contracts, we expand our business with minimal or no capital investment by us as the manager or franchisor, since the capital required to build and maintain hotels is typically provided by the third-party owner of the hotel with whom we contract to provide management services or franchise services.license our brand names. Prior to approving the addition of new properties to our management and franchise development pipeline, we evaluate the economic viability of the property based on its geographic location, the credit quality of the third-party owner and other factors. By increasing the number of management and franchise contracts with third-party owners, we expect to increase overall return on invested capital and cash available for return to stockholders.


As of June 30, 2018,2019, we had a total of 2,373nearly 2,490 hotels in our development pipeline that we expect to add as open hotels in our system, representing 362,000approximately 373,000 rooms under construction or approved for development throughout 105109 countries and territories, including 3837 countries and territories where we do not currently have any open hotels. All of the rooms in the development pipeline are within our management and franchise segment. Additionally, 194,000201,000 rooms in the development pipeline or more than half, were located outside the U.S., and 186,000192,000 rooms, or more than half, were under construction. We do not consider any individual development project to be material to us.


Brexit

In June 2016, the United Kingdom ("U.K.") held a referendum in which voters approved an exit from the European Union ("E.U.") (commonly referred to as "Brexit"), currently with a deadline of October 31, 2019. The effects of Brexit will depend on the final terms on which the U.K. will leave the E.U., including the terms of any trade agreements that will dictate the U.K.’s access to E.U. markets either during any transitional period or more permanently. While our results for the six months ended June 30, 2019 were not materially affected by Brexit, the final outcomes are not yet certain. Brexit measures could potentially disrupt the markets we serve and cause tax and foreign currency volatility, which could have adverse effects on our business. We will continue to monitor the potential impact of Brexit on our business as the deadline approaches later this year.

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 previous year; (ii) have not undergone a change in brand or ownership type during the current or comparable periods reported, excluding the hotels distributed in the spin-offs;reported; 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 5,4055,817 hotels in our system as of June 30, 2018, 4,3062019, 4,692 hotels have been classified as comparable hotels. Our 1,0991,125 non-comparable hotels included 194234 hotels, or approximately four 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 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 pricing levels as demand for hotel rooms increases or decreases.


Average Daily Rate ("ADR")


ADR represents hotel room revenue divided by the total number of room nights sold for 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 charged to customers have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.




Revenue per Available Room ("RevPAR")


RevPAR is calculated by dividing hotel room revenue by the 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:hotels, as previously described: 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, unless otherwise noted. As such, comparisons of these hotel operating statistics for the
three and six months ended June 30, 20182019 and 20172018 use the exchange rates for the three and six months ended June 30, 2018.2019, respectively.


EBITDA and Adjusted EBITDA


EBITDA reflects net income (loss), excluding interest expense, a provision for income taxes and depreciation and amortization.


Adjusted EBITDA is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated equity investments; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (v) reorganization costs; (vi) share-based compensation expense; (vii) non-cash impairment losses; (viii) severance, relocation and other expenses; (ix) amortization of contract acquisition costs; (x) the net effect of reimbursable costs included in other revenues and expenses from managed and franchised properties; and (xi) other items.

During the first quarter of 2018, we modified the definition of Adjusted EBITDA to exclude the amortization of contract acquisition costs and the net effect of reimbursable costs included in other revenues and expenses from managed and franchised properties. We believe that excluding these items is useful for the reasons set forth below and have applied the modified definition of Adjusted EBITDA to all prior periods.


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;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, capital structure and operating jurisdictions, respectively, and, therefore could vary significantly across companies. Depreciation and amortization, as well as amortization of contract acquisition costs, 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) FF&E replacement reserves 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; (ii) share-based compensation expense, as this could vary widely among companies due to the different plans in place and the usage of them; (iii) the net effect of our reimbursablecost reimbursement revenues and relatedreimbursed expenses, as we contractually do not operate the related programs to generate a profit over the terms of the respective agreements;contracts; and (iv) 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 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 a provision for income taxes 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 region for our system-wide comparable hotels were as follows:
Three Months Ended Variance Six Months Ended VarianceThree Months Ended Variance Six Months Ended Variance
June 30, 2018 2018 vs. 2017 June 30, 2018 2018 vs. 2017June 30, 2019 2019 vs. 2018 June 30, 2019 2019 vs. 2018
U.S.                
Occupancy80.9% 0.9 %pts. 76.7% 1.0 %pts.80.7% 0.2 %pts. 76.6% 0.4 %pts.
ADR$152.49
 2.3 % $149.76
 1.8 % $152.75
 0.7 % $150.35
 0.9 % 
RevPAR$123.38
 3.5 % $114.89
 3.2 % $123.32
 1.0 % $115.09
 1.4 % 
                
Americas (excluding U.S.)                
Occupancy73.4% 1.1 %pts. 70.5% 1.9 %pts.72.2% 1.0 %pts. 69.4% 1.0 %pts.
ADR$128.52
 5.0 % $129.99
 4.1 % $123.37
 1.9 % $124.84
 2.6 % 
RevPAR$94.37
 6.5 % $91.66
 7.0 % $89.09
 3.3 % $86.59
 4.1 % 
                
Europe                
Occupancy79.0% 2.0 %pts. 74.6% 2.9 %pts.80.6% 2.0 %pts. 74.8% 0.9 %pts.
ADR$157.62
 3.7 % $148.97
 2.5 % $147.36
 2.4 % $138.55
 2.9 % 
RevPAR$124.46
 6.3 % $111.11
 6.7 % $118.77
 5.0 % $103.64
 4.2 % 
                
MEA                
Occupancy69.1% 3.6 %pts. 71.5% 4.4 %pts.70.8% 2.5 %pts. 73.0% 2.6 %pts.
ADR$155.52
 (5.3)% $156.20
 (3.6)% $153.48
 (3.3)% $147.03
 (6.3)% 
RevPAR$107.49
 (0.1)% $111.73
 2.7 % $108.62
 0.2 % $107.32
 (2.8)% 
                
Asia Pacific                
Occupancy72.6% 3.8 %pts. 71.4% 4.6 %pts.72.0% 0.9 %pts. 70.5% 1.3 %pts.
ADR$133.55
 1.7 % $137.13
 2.0 % $123.25
 0.7 % $126.03
 (0.4)% 
RevPAR$96.93
 7.3 % $97.88
 9.1 % $88.76
 2.0 % $88.88
 1.6 % 
                
System-wide                
Occupancy79.5% 1.3 %pts. 75.7% 1.6 %pts.79.4% 0.5 %pts. 75.5% 0.6 %pts.
ADR$150.76
 2.3 % $148.14
 1.8 % $148.93
 0.7 % $146.33
 0.9 % 
RevPAR$119.89
 4.0 % $112.20
 3.9 % $118.27
 1.4 % $110.48
 1.6 % 


During the three and six months ended June 30, 2018,2019, we experienced system-wide RevPAR growth, particularly attributable tolargely driven by improved ADR, led by strong growth trends in Europe and the Americas (excluding U.S.). Continued strength in Europe resulted primarily from ADR growth in southern Europe, particularly in Italy and Asia Pacific regions.Turkey, as well as RevPAR growth in Germany driven by increased ADR and occupancy. In the Americas increases(excluding U.S.), RevPAR growth was attributable to increased demand in RevPAR were largely driven by positive performance related to group travel in both periods,the Caribbean and Latin America, as well as leisure travel duringRevPAR growth in Colombia and Brazil driven by increases in both ADR and occupancy. RevPAR growth in the six months ended June 30, 2018. Strength in EuropeU.S. was driven by performance in Turkey as it continuesimproved ADR, primarily due to recover from geopolitical and economic turmoil.transient demand, particularly at our luxury properties. Growth in Asia Pacific was primarily attributable to RevPAR growth in Japan due to increased occupancydemand, partially offset by relatively flat results in China resulting from new hotels maturingdue to a decline in the system. RevPAR was relatively flat in MEA duringdomestic travel. For the three months ended June 30, 2018 as compared to 2017, due to soft demand in certain local markets2019, RevPAR remained constant in the region.MEA region as occupancy increases in Saudi Arabia and Egypt helped offset transient declines in the United Arab Emirates, while RevPAR decreases in the United Arab Emirates overshadowed demand growth in Egypt for the six months ended June 30, 2019.







The table below provides a reconciliation of net income to EBITDA and Adjusted EBITDA:
Three Months Ended Six Months EndedThree Months Ended Six Months Ended
June 30, June 30,June 30, June 30,
2018 2017 2018 20172019 2018 2019 2018
(in millions)(in millions)
Net income$217
 $151
 $380
 $199
$261
 $217
 $420
 $380
Interest expense95
 86
 178
 175
101
 95
 199
 178
Income tax expense81
 99
 139
 117
101
 81
 160
 139
Depreciation and amortization79
 83
 161
 169
86
 79
 170
 161
EBITDA472
 419
 858
 660
549
 472
 949
 858
Loss (gain) on foreign currency transactions12
 (5) 1
 (1)
Loss on debt extinguishment
 
 
 60
Loss on foreign currency transactions3
 12
 3
 1
FF&E replacement reserves15
 15
 27
 21
15
 15
 29
 27
Share-based compensation expense40
 34
 68
 59
47
 40
 81
 68
Amortization of contract acquisition costs7
 5
 14
 8
7
 7
 14
 14
Net other expenses (revenues) from managed and franchised properties(3) 23
 18
 68
(22) (3) 12
 18
Other adjustment items(1)
12
 13
 14
 39
19
 12
 29
 14
Adjusted EBITDA$555
 $504
 $1,000
 $914
$618
 $555
 $1,117
 $1,000
____________
(1) 
Includes adjustments for expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities, severance transaction costs and other items.


Revenues
Three Months Ended Percent Six Months Ended PercentThree Months Ended Percent Six Months Ended Percent
June 30, Change June 30, ChangeJune 30, Change June 30, Change
2018 2017 2018 vs. 2017 2018 2017 2018 vs. 20172019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
(in millions) (in millions) (in millions) (in millions) 
Franchise fees$404
 $355
 13.8 $735
 $637
 15.4
Franchise and licensing fees$444
 $404
 9.9 $826
 $735
 12.4
                
Base and other management fees$84
 $81
 3.7 $161
 $162
 (0.6)$89
 $84
 6.0 $169
 $161
 5.0
Incentive management fees59
 57
 3.5 114
 106
 7.558
 59
 (1.7) 113
 114
 (0.9)
Total management fees$143
 $138
 3.6 $275
 $268
 2.6$147
 $143
 2.8 $282
 $275
 2.5


The increases in managementFranchise and franchiselicensing fees increased during the three and six months ended June 30, 20182019 as a result of increases in RevPAR at our comparable franchised hotels of 1.2 percent and 1.5 percent, respectively, driven by increases in both occupancy and ADR, which were drivenpartially offset by unfavorable foreign currency exchange rates. Additionally, licensing and other fees increased $16 million and $49 million during the three and six months ended June 30, 2019, respectively, which, for the six months ended June 30, 2019, included an increase in termination fees of $13 million, primarily related to the redevelopment of a franchised hotel.

Management fees increased during the three and six months ended June 30, 2019, primarily as a result of increases in RevPAR at our comparable managed hotels of 5.01.7 percent and 5.21.6 percent, respectively, and at our franchised hotels of 3.5 percent and 3.4 percent, respectively. Themainly driven by increases in RevPAR resulted from increases in both ADR and occupancy, across all periods.which were offset by unfavorable foreign currency exchange rates.


The addition of new managed and franchised properties to our portfolio also increased management and franchise fees in all periods. Including new development and ownership type transfers, from January 1, 20172018 to June 30, 2018,2019, we added 600587 managed and franchised properties on a net basis, providing an additional 110,54183,645 rooms to our managedmanagement and franchisedfranchise segment. As new hotels stabilize in our system, we expect the fees received from such hotels to increase as they are part of our system for full periods.


Additionally, franchise fees


 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2019 2018 2019 vs. 2018 2019
2018 2019 vs. 2018
 (in millions)   (in millions)  
Owned and leased hotels$387
 $392
 (1.3) $699
 $726
 (3.7)

Owned and leased hotel revenues decreased during the three and six months ended June 30, 2019 primarily as a result of unfavorable fluctuations in foreign currency exchange rates, which decreased revenues by $20 million and $42 million, respectively.

On a currency neutral basis, revenues at our comparable owned and leased hotels increased $14 million and $16 million during the three and six months ended June 30, 2019, respectively, due to increases in RevPAR of 5.9 percent and 4.2 percent, respectively, driven by increases in ADR of 5.3 percent and 4.4 percent, respectively, while occupancy broadly remained flat. Revenues at our non-comparable owned and leased hotels remained relatively flat for the three and six months ended June 30, 2019, primarily due to hotels that were under renovation in 2018, offset by hotel lease terminations that occurred during the six months ended June 30, 2019.

 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
 (in millions)   (in millions)  
Other revenues$26
 $22
 18.2 $52
 $45
 15.6

Other revenues increased during the three and six months ended June 30, 20182019 primarily as a result of increases in franchise sales and license and other fees. The increase in base and other management fees for the six months ended June 30, 2018 was offset by termination fees that were recognized during the six months ended June 30, 2017.revenues from our purchasing operations.




Operating Expenses
 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2018 2017 2018 vs. 2017 2018
2017 2018 vs. 2017
 (in millions)   (in millions)  
Owned and leased hotels$392
 $373
 5.1 $726
 $669
 8.5
 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
 (in millions)   (in millions)  
Owned and leased hotels$334
 $352
 (5.1) $632
 $672
 (6.0)


Owned and leased hotel revenues increased duringexpenses decreased during the three and six months ended June 30, 20182019 primarily as a result of favorablefluctuations in foreign currency exchange rates, which increased revenuesdecreased expenses by $16 million and $45 million, respectively. On a currency neutral basis, owned and leased hotel revenues increased $3$19 million and $12$41 million, respectively, primarily as a result of increases at our comparable owned and leased hotels of $9 million and $22 million, respectively, due to increases in RevPAR of 4.5 percent and 5.1 percent, respectively. The increases in RevPAR resulted from increases in both occupancy and ADR. Additionally, owned and leased hotel revenues decreased at our non-comparable owned and leased hotels due to decreases in revenues from hotels that underwent renovations in 2018 and properties that were disposed of between January 1, 2017 and June 30, 2018, only partially offset by the increase in revenues from a property that opened in June 2017.


 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2018 2017 2018 vs. 2017 2018 2017 2018 vs. 2017
 (in millions)   (in millions)  
Other revenues$22
 $20
 10.0 $45
 $57
 (21.1)

Other revenues decreased during the six months ended June 30, 2018 primarily as a result of a recovery from the settlement of a claim by Hilton to a third party relating to our defined benefit plans during the six months ended June 30, 2017. The decrease was partially offset by an increase in revenues from our purchasing operations.

Operating Expenses
 Three Months Ended Percent Six Months Ended Percent
 June 30, Change June 30, Change
 2018 2017 2018 vs. 2017 2018 2017 2018 vs. 2017
 (in millions)   (in millions)  
Owned and leased hotels$352
 $327
 7.6 $672
 $595
 12.9

During the three andsix months ended June 30, 2018, owned and leased hotel expenses increased primarily as a result of the effect of foreign currency exchange rate changes of $15 million and $42 million, respectively. On a currency neutral basis, owned and leased hotel expenses increased $10 millionremained flat for the three and $35 million, respectively, primarily due to increased variable operating costs at our comparable owned and leased hotels resulting from increased occupancy in both periods. Owned and leased hotel expenses at our non-comparable owned and leased hotels remained relatively consistent during the threesix months ended June 30, 20182019, primarily due to occupancy remaining flat at our comparable hotels and, increased $4 millionat our non-comparable hotels, decreases in expenses resulting from lease terminations that occurred during the six months ended June 30, 2018, which was attributable to a refund of rent related to a lease termination2019, offset by increases in expenses from hotels that was recognizedwere under renovation in 2017. Properties that underwent renovations in 2018 and properties that opened or were disposed of between January 1, 2017 and June 30, 2018 had no net effect on owned and leased hotel expenses.2018.


Three Months Ended Percent Six Months Ended PercentThree Months Ended Percent Six Months Ended Percent
June 30, Change June 30, ChangeJune 30, Change June 30, Change
2018 2017 2018 vs. 2017 2018 2017 2018 vs. 20172019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
(in millions)   (in millions) (in millions)   (in millions) 
Depreciation and amortization$79
 $83
 (4.8) $161
 $169
 (4.7)$86
 $79
 8.9 $170
 $161
 5.6
General and administrative115
 118
 (2.5) 219
 224
 (2.2)113
 115
 (1.7) 220
 219
 0.5
Other expenses12
 11
 9.1 26
 34
 (23.5)15
 12
 25.0 35
 26
 34.6


The decreasesincreases in depreciation and amortization expense during the three and six months ended June 30, 20182019 were primarily athe result of decreases in amortization expense dueadditions to certain capitalized software costs being fully amortized between that were placed into service from January 1, 2018 to June 30, 2017 and June 30, 2018.2019.


The decreases in generalGeneral and administrative expenses remained flat during the three and six months ended June 30, 2018 were2019 primarily as a result of decreases of $1 million and $6 million, respectively,increases in severanceshare-based compensation costs related to the 2015 sale of the Waldorf


Astoria New York, as well as decreases of $5 million and $15 million, respectively, in costs associated with the spin-offs. These decreases were partiallydriven by Company performance being offset by increases in payroll and compensation costs, including share-based compensation.other general corporate expenses.




Other expenses decreasedincreased during the six months ended June 30, 20182019 primarily as a result of costs relating to the settlement of the claim relating toincreases in expenses from our defined benefit plans that were recognized during the six months ended June 30, 2017.purchasing operations.


Non-operating Income and Expenses
Three Months Ended Percent Six Months Ended PercentThree Months Ended Percent Six Months Ended Percent
June 30, Change June 30, ChangeJune 30, Change June 30, Change
2018 2017 2018 vs. 2017 2018 2017 2018 vs. 20172019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
(in millions)   (in millions)  (in millions)   (in millions)  
Interest expense$(95) $(86) 10.5 $(178) $(175) 1.7$(101) $(95) 6.3 $(199) $(178) 11.8
Gain (loss) on foreign currency transactions(12) 5
 
NM(1)
 (1) 1
 
NM(1)
Loss on debt extinguishment
 
 
NM(1)

 
 (60) 
NM(1)

Loss on foreign currency transactions(3) (12) (75.0) (3) (1) 
NM(1)
Other non-operating income (loss), net(1) 7
 
NM(1)
 13
 9
 44.4(12) (1) 
NM(1)
 (8) 13
 
NM(1)
Income tax expense(81) (99) (18.2) (139) (117) 18.8(101) (81) 24.7 (160) (139) 15.1
_______________________
(1) 
Fluctuation in terms of percentage change is not meaningful.


The increaseincreases in interest expense during the three and six months ended June 30, 2018 was2019 were primarily attributabledue to the issuance of the 2026 Senior Notes in April 2018 and fordraws on the six months ended June 30, 2018, also from the issuances of the 2025 and 2027 Senior Notes in March 2017. The increaseRevolving Credit Facility during the six months ended June 30, 2018 was largely2019, partially offset by the decreasedecreases in interest expense due to principal repayments on our Term Loans totaling $800 million during 2018 and a reduction in the repaymentinterest rate on our Term Loans in 2018. The increases in interest expense were further reduced by net gains reclassified from accumulated other comprehensive loss resulting from settlements of the 2021 Senior Notes. See Note 6: "Debt"interest rate swaps in our unaudited condensed consolidated financial statements for additional information.2018 and 2017.


The gains andnet losses on foreign currency transactions primarily related to changes in foreign currency exchange rates on our short-term cross-currency intercompany loans for all periods.loans. For the three and six months ended June 30, 20182019, the changes were predominantly for loans denominated in EUR and 2017,the Australian dollar ("AUD"). For the three and six months ended June 30, 2018, the changes were predominantly for loans denominated in the British pound ("GBP") and euroEUR, and, for the six months ended June 30, 2018, and 2017, also for loans denominated in the Australian dollar.AUD.


The increases in other non-operating loss, net for the three and six months ended June 30, 2019 were primarily due to a loss on debt extinguishment related to the repaymentdisposal of an unconsolidated real estate investment in 2019 and expenses recognized in connection with the 2021 Senior Notesrefinancings and included a redemption premiumrepayments of $42 million and the accelerated recognition of $18 million of unamortized debt issuance costs duringour senior secured credit facilities. Additionally, for the six months ended June 30, 2017.

The change in other non-operating income (loss), net during the three months ended June 30, 2018 was attributable to the accelerated recognition of $5 million of unamortized debt issuance costs and discount for the repayment2019, we recognized a gain on the Term Loans and fees incurred to amend the Term Loans. The increase in other non-operating income (loss), net for the six months ended was attributable to a $6 million gain on the2018 refinancing of a loan that financedwe issued to finance the construction of a hotel that we manage and a reduction in fees incurred relating to the amendments of our Term Loans in 2018 and 2017, partially offset by the accelerated recognition of unamortized deferred issuance costs and discount.manage.


During the three months ended June 30, 2018, income tax expense decreased primarily due to the benefit recorded to adjust a provisional amount related to the TCJ Act, as well as the decrease in the annual effective rate as a result of the TCJ Act, partially offset by the increase in income before income taxes. The increaseincreases in income tax expense during the three and six months ended June 30, 2018 was2019 were primarily attributable to the increaseincreases in income before income taxes partially offset byduring the decrease in the annual effective tax rate. See Note 9: "Income Taxes" in our unaudited condensed consolidated financial statements for additional information.periods.






Segment Results


We evaluate our business segment operating performance using operating income. Refer to Note 13: "Business Segments" in our unaudited condensed consolidated financial statements for a reconciliation of segment operating income to income before income taxes and additional information on the evaluation of the performance of our segments using operating income. The following table sets forth revenues and operating income by segment:
Three Months Ended Percent Six Months Ended PercentThree Months Ended Percent Six Months Ended Percent
June 30, Change June 30, ChangeJune 30, Change June 30, Change
2018 2017 2018 vs. 2017 2018 2017 2018 vs. 20172019 2018 2019 vs. 2018 2019 2018 2019 vs. 2018
(in millions) (in millions) (in millions) (in millions) 
Revenues:                
Management and franchise(1)
$565
 $508
 11.2 $1,043
 $930
 12.2$609
 $565
 7.8 $1,141
 $1,043
 9.4
Ownership392
 373
 5.1 726
 669
 8.5387
 392
 (1.3) 699
 726
 (3.7)
Segment revenues957
 881
 8.6 1,769
 1,599
 10.6996
 957
 4.1 1,840
 1,769
 4.0
Amortization of contract acquisition costs(7) (5) 40.0 (14) (8) 75.0(7) (7)  (14) (14) 
Other revenues22
 20
 10.0 45
 57
 (21.1)26
 22
 18.2 52
 45
 15.6
Other revenues from managed and franchised properties1,330
 1,190
 11.8 2,584
 2,341
 10.41,480
 1,330
 11.3 2,829
 2,584
 9.5
Intersegment fees elimination(1)
(11) (10) 10.0 (19) (17) 11.8(11) (11)  (19) (19) 
Total revenues$2,291
 $2,076
 10.4 $4,365
 $3,972
 9.9$2,484
 $2,291
 8.4 $4,688
 $4,365
 7.4
                
Operating Income(1):
                
Management and franchise$565
 $508
 11.2 $1,043
 $930
 12.2$609
 $565
 7.8 $1,141
 $1,043
 9.4
Ownership29
 36
 (19.4) 35
 57
 (38.6)42
 29
 44.8 48
 35
 37.1
Segment operating income$594
 $544
 9.2 $1,078
 $987
 9.2$651
 $594
 9.6 $1,189
 $1,078
 10.3
____________
(1) 
Includes management, royalty and IP 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 $57increased $44 million and $113$98 million during the three and six months ended June 30, 2019, respectively, as a result of increases in RevPAR at our comparable managed and franchised hotels of 1.3 percent and 1.6 percent, respectively, increases in licensing and other fees and the net addition of managed and franchised properties to our system. Refer to "—Revenues" for further discussion of the increases in revenues from our managed and franchised properties.

Ownership segment revenues decreased $5 million and $27 million during the three and six months ended June 30, 2018, respectively,2019, respectively, primarily as a result of increasesfluctuations in RevPAR at our comparable managed and franchised properties of 3.9 percent for both periods, the net addition of managed and franchised hotels to our system and increases in franchise sales and license and other fees. Refer to "—Revenues" for further discussion of the increases in revenues from our managed and franchised properties.

Ownership segment revenuesforeign currency exchange rates. Ownership operating income increased $19 million and $57$13 million during both the three and six months ended June 30, 2018, respectively,2019, as a result of increasesdecreases in owned and leased hotel revenues,expenses, which werewas primarily attributable to favorablea result of fluctuations in foreign currency exchange rates, and increases in revenue at our comparable owned and leased hotels due to increases in RevPAR. Ownership operating income decreased $7 million and $22 million during the three and six months ended June 30, 2018, respectively, as a result of the increases in operating expenses at owned and leased hotels, only partially offset by increasesthe decreases in segment revenues.revenues due to foreign currency exchange rates. Refer to "—Revenues" and "—Operating Expenses" for further discussion of the changes in revenues and operating expenses at our owned and leased hotels.

Liquidity and Capital Resources


Overview


As of June 30, 2018,2019, we had total cash and cash equivalents of $505$718 million, including $82$83 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.


In June 2019, we issued the $1.0 billion 2030 Senior Notes, and used a portion of the net proceeds to repay $500 million and $225 million outstanding on our Term Loans and Revolving Credit Facility, respectively. The remaining proceeds will be used for general corporate purposes, including, but not limited to, funding certain share repurchases under our stock repurchase program. We also increased the borrowing capacity of our Revolving Credit Facility to $1.75 billion while extending the maturity to 2024 and extended the maturity of the remaining outstanding Term Loans to 2026.



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


within our ownership segment, commitments to owners in our management and franchise segment, dividends as declared, share repurchases and corporate capital and information technology expenditures.


We finance our business activities primarily with existing cash and cash generated from our operations. We believe that this cash and, from time-to-time, the use of our Revolving Credit Facility, will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments for the foreseeable future. The objectives of our cash management policy are to maintain existing leverage levels and the availability of liquidity, and minimizewhile minimizing 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 through dividends and share repurchases.


We and our affiliates may from time to time issue or incur or increase our capacity to incur new debt and/or purchase our outstanding debt through underwritten offerings, open market purchases,transactions, privately negotiated transactions or otherwise. PurchasesIssuances or incurrence of new debt (or an increase in our capacity to incur new debt) and/or purchases or retirement of outstanding debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.


During the six months ended June 30, 2018,2019, we repurchased 19.88 million shares of our common stock under our stock repurchase program for $1,439$679 million, which we funded principally with borrowings and available cash. See Note 6: "Debt" and Note 11: "Stockholders' Equity and Accumulated Other Comprehensive Loss" inAs of June 30, 2019, approximately $1.4 billion remained available for share repurchases under our unaudited condensed consolidated financial statements for additional information.$3.5 billion stock repurchase program.


Sources and Uses of Our Cash and Cash Equivalents


The following table summarizes our net cash flows:
Six Months Ended Percent
Six Months Ended June 30, Percent ChangeJune 30, Change
2018 2017 2018 vs. 20172019 2018 2019 vs. 2018
(in millions) (in millions) 
Net cash provided by operating activities$532
 $344
 54.7$650
 $532
 22.2
Net cash used in investing activities(75) (65) 15.4(95) (75) 26.7
Net cash used in financing activities(616) (1,061) (41.9)(323) (616) (47.6)


Operating Activities


Cash flows from operating activities were primarily generated from management and franchise fee revenue and operating income from our owned and leased hotels.


The $188$118 million increase in net cash provided by operating activities was primarily athe result of improved operating results infrom our management and franchise business, including net growth in properties, as well as decreasesan increase in net cash paid for income taxeslicensing and cash paid for interest of $88 million and $9 million, respectively. These increases wereother fees. The increase was partially offset by an increase in contract acquisition costs.cash paid for interest and income taxes.


Investing Activities


For the six months ended June 30, 20182019 and 2017,2018, net cash used in investing activities consisted primarily of capital expenditures for property and equipment and capitalized software costs. Our capital expenditures for property and equipment primarily consisted of expenditures related to the renovation of hotels in our ownership segment and our corporate facilities. Our capitalized software costs related to various systems initiatives, both for the benefit of both our hotel owners and our overall corporate operations.


Financing Activities


The $445 million decrease in net cash used in financing activities was primarily attributable to the transfer of cash in connection with the spin-offs during the six months ended June 30, 20172019 was primarily attributable to a decrease in repurchases of common stock due to the repurchases of shares from HNA Tourism Group Co., Ltd and certain


affiliates of The Blackstone Group Inc. (formerly known as the issuanceBlackstone Group L.P.) as part of the $1.5 billion 2026 Senior Notes during the six months ended June 30, 2018. These decreases werefull divestiture of their investments in Hilton in April and May 2018, respectively. The decrease in cash used in financing activities was partially offset by the net decrease in borrowings and repayments attributable to a $500 million repaymentdecrease in proceeds received from the June 2019 and April 2018 issuances of senior notes. The proceeds from the issuances of the 2030 Senior Notes and the 2026 Senior Notes were both used to repay $500 million outstanding on the Term Loans as well as $1.5 billion of capital returned to our stockholders, which includes dividends and share repurchases, during the six months ended June 30, 2018 compared to $450 million of capital returned during the six months ended June 30, 2017.in each respective period.


Debt and Borrowing Capacity


As of June 30, 2018,2019, our total indebtedness, excluding unamortized deferred financing costs and discount, was approximately $7.7$7.9 billion. For additional information on our total indebtedness, debt issuances and repayments,including our recent financing transactions, availability


under our Revolving Credit Facility and guarantees on our debt, refer to Note 6: "Debt" and Note 15: "Condensed Consolidating Guarantor Financial Information" in our unaudited condensed consolidated financial statements.


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 drawmake draws 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 hospitality industry that may be beyond our control.


Contractual Obligations


Other than the issuance of the 20262030 Senior Notes and the repayment of the Term Loans as described above, there were no material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018.


Off-Balance Sheet Arrangements


See Note 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 GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed the policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018. Since the date of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, we adopted ASU 2014-09,2016-02, which has changed our critical accounting policies and estimates related to Hilton Honors.leases. See Note 2: "Basis of Presentation and Summary of Significant Accounting Policies" in our unaudited condensed consolidated financial statements and the discussion below for additional information.


Hilton HonorsLeases


Hilton Honors records a point redemption liability for amounts received from participating hotels and program partners in an amount equal toWe record lease liabilities as the estimated cost per point of the future redemption obligation. We engage outside actuaries to assist in determining the fairpresent value of the future award redemption obligationminimum lease payments using statistical formulasa discount rate that project future point redemptions basedis either the rate implicit in the lease, if available, or our incremental borrowing rate, adjusted for collateral. The collateralized incremental borrowing rate is estimated on a portfolio basis and reflects factors such as the term of the lease and the currency in which the lease payments will be made. Our estimation utilizes various assumptions that require judgment, including our adjustment for collateral, economic factors, including currency data, and our credit risk.

We evaluate the carrying value of our ROU assets for impairment in a method consistent with our evaluation of property and equipment, including the determination of impairment indicators, projecting the undiscounted future cash flows and determining an estimate of "breakage" (points that will never be redeemed), an estimate of the points that will eventually be redeemed and the cost of the pointsasset's fair value. Refer to be redeemed. The cost of the points to be redeemed includes further estimates of available room nights, occupancy rates, room rates and any devaluation or appreciation of points basedour Annual Report on changes in reward prices or changes in points earned per stay. Any amounts received from participating hotels and program partners in excess of the actuarial determined cost per point are recorded as deferred revenues and recognized as revenue upon point redemption.

In addition to the Hilton Honors fees we receive from hotel owners to operate the program, we earn fees from co-brand credit card arrangementsForm 10-K for the use of our IP license and the issuance of Hilton Honors points. The allocation of the overall fees from the co-brand credit card arrangements between the IP license and the Hilton Honors points is based on their estimated standalone selling prices. The estimated standalone selling price of the IP license is determined using a relief-from-royalty method using statistical formulas based on factors that require significant judgment, including estimates of credit card usage, an appropriate royalty rate and a discount rate to be applied to the projected cash flows. The estimated standalone selling price of the future reward redemptions under the co-brand credit card arrangements is calculated using a discounted cash flow analysis with the same assumptions related to the point redemption liability as discussed above, adjustedfiscal year ended December 31, 2018 for an appropriate margin.additional information.


As of June 30, 2018,2019, we had a guest loyalty program liability$1.5 billion of $1,601 million, including $725 million reflected as a current liability,operating and deferred revenues of $509 million, including $205 million reflected as a current liability.finance lease liabilities. Changes in the estimates used in developing our breakagedetermining the collateralized incremental borrowing rate or other expected future program operations could result in material changes to our guest loyalty program liability and deferred revenues.lease liabilities.


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 or foreign currency




exchange rates. 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 derivative financial arrangementsinstruments 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 arrangementsinstruments to the extent they meet the objectives described above, and we do not use derivatives for trading or speculative purposes. See Note 7: "Derivative Instruments and Hedging Activities" in our unaudited condensed consolidated financial statements for additional 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, 2017.2018.


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 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 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 Over Financial Reporting


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 ordinary 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. We recognize a liability when we believe the loss is probable and can be reasonably estimated. Most occurrences involving liability, claims of negligence and employees are covered by insurance with solvent insurance carriers. The ultimate results of claims and litigation cannot be predicted with certainty. We believe we have adequate reserves against such matters. 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 cash flows. 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 June 30, 2018,2019, 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, 2017.2018.


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


(a) Unregistered Sales of Securities
    
None.


(b) Use of Proceeds


None.


(c) Issuer Purchases of Equity Securities


The following table sets forth information regarding our purchases of shares of our common stock during the three months ended June 30, 2018:2019:
 Total Number of Shares Purchased 
Average Price Paid per Share(1)
 
Total Number of Shares Purchased as Part of Publicly Announced Program(2)(3)
 
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(2)
(in millions)
April 1, 2018 to April 30, 201816,570,000
 $71.03
 70,000
 $994
May 1, 2018 to May 31, 20181,568,700
 80.33
 1,568,700
 868
June 1, 2018 to June 30, 2018325,300
 81.82
 325,300
 841
Total18,464,000
 72.01
 1,964,000
 
 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, 2019 to April 30, 2019817,246
 $87.30
 817,246
 $1,693
May 1, 2019 to May 31, 20191,438,604
 91.09
 1,438,604
 1,562
June 1, 2019 to June 30, 20191,920,936
 93.92
 1,920,936
 1,381
Total4,176,786
 91.65
 4,176,786
 
____________
(1) 
This price includes per share commissions paid.
(2) 
During 2017,In February 2019, our board of directors authorized a publicly announcedthe repurchase of an additional $1.5 billion of our common stock under our existing stock repurchase program, for up to $2.0 billion of the Company's common stock.which was initially announced in February 2017 and increased in November 2017. Under thethis publicly announced program, the Company iswe are authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The repurchase program does not have an expiration date and may be suspended or discontinued at any time.
(3)
The number of shares repurchased from April 1, 2018 to April 30, 2018 as reflected in this column excludes the 16,500,000 shares repurchased from HNA, since this repurchase was not made under the publicly announced stock repurchase program.


Item 3.     Defaults Upon Senior Securities


None.


Item 4.     Mine Safety Disclosures


Not applicable.






Item 5.     Other Information


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.None.




Item 6.     Exhibits
Exhibit Number Exhibit Description
3.1 
3.2 
3.3 
4.1 
4.2 
4.3 
10.1 
10.2 
10.3
12
31.1 
31.2 
32.1 
32.2 
99.1
101.INS XBRL Instance Document.Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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: July 25, 201824, 2019


5043