UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2019~~2020



☐			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.)

~~Delaware~~

~~27-4384691~~

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

7930 Jones Branch Drive,

Suite 1100,

McLean,

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 class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

HLT

New 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting

☐

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 ☒

The number of shares outstanding of the registrant's common stock, par value $0.01 per share, as of July ~~18, 2019~~31, 2020 was ~~286,854,529.~~277,309,352.

HILTON WORLDWIDE HOLDINGS INC.

FORM 10-Q TABLE OF CONTENTS


				Page No.
PART I		FINANCIAL INFORMATION

			~~Page No.~~
~~PART I~~	~~FINANCIAL INFORMATION~~

Item 1.	Financial Statements		2
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		2821
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		3733
Item 4.		Controls and Procedures		3833

PART II		OTHER INFORMATION

Item 1.		Legal Proceedings		3934
Item 1A.		Risk Factors		3934
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3936
Item 3.		Defaults Upon Senior Securities		3936
Item 4.		Mine Safety Disclosures		3936
Item 5.		Other Information		4036
Item 6.		Exhibits		4136
		Signatures		4338

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

June 30, December 31,
2019 2018
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 635
$ 403
Restricted cash and cash equivalents 83
81
Accounts receivable, net of allowance for doubtful accounts of $44 and $42 1,190
1,150
Prepaid expenses 117
160
Other 190
189
Total current assets (variable interest entities – $92 and $90)
2,215
1,983
Intangibles and Other Assets:
Goodwill 5,157
5,160
Brands 4,874
4,869
Management and franchise contracts, net 817
872
Other intangible assets, net 400
415
Operating lease right-of-use assets 891
—
Property and equipment, net 418
367
Deferred income tax assets 146
90
Other 222
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 debt 37
16
Current portion of deferred revenues 298
350
Current portion of liability for guest loyalty program 788
700
Total current liabilities (variable interest entities – $68 and $56)
2,780
2,615
Long-term debt 7,772
7,266
Operating lease liabilities 1,066
—
Deferred revenues 822
826
Deferred income tax liabilities 861
898
Liability for guest loyalty program 986
969
Other 876
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, 2018 3
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 capital 10,419
10,372
Accumulated deficit (6,342 ) (6,417 )
Accumulated other comprehensive loss (806 ) (782 )
Total Hilton stockholders' equity (deficit) (30 ) 551
Noncontrolling interests 7
7
Total equity (deficit) (23 ) 558
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 15,140
$ 13,995


	June 30,		December 31,
			2020		2019
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	3,503	$	538
Restricted cash and cash equivalents	72		92
Accounts receivable, net of allowance for credit losses of $70 and $44	827		1,261
Prepaid expenses	91		130
Other	84		72
Total current assets (variable interest entities – $54 and $100)	4,577		2,093
Intangibles and Other Assets:
Goodwill	5,147		5,159
Brands	4,869		4,877
Management and franchise contracts, net	688		780
Other intangible assets, net	328		421
Operating lease right-of-use assets	740		867
Property and equipment, net	355		380
Deferred income tax assets	118		100
Other	304		280
Total intangibles and other assets (variable interest entities – $194 and $179)	12,549		12,864
TOTAL ASSETS	$	17,126	$	14,957
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts payable, accrued expenses and other	$	1,372	$	1,703
Current maturities of long-term debt	45		37
Current portion of deferred revenues	242		332
Current portion of liability for guest loyalty program	647		799
Total current liabilities (variable interest entities – $47 and $64)	2,306		2,871
Long-term debt	10,437		7,956
Operating lease liabilities	926		1,037
Deferred revenues	1,445		827
Deferred income tax liabilities	669		795
Liability for guest loyalty program	1,626		1,060
Other	1,008		883
Total liabilities (variable interest entities – $239 and $260)	18,417		15,429
Commitments and contingencies – see Note 14
Equity (Deficit):
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, NaN issued or outstanding as of June 30, 2020 and December 31, 2019	—		—
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 330,229,410 issued and 277,309,060 outstanding as of June 30, 2020 and 333,159,770 issued and 278,985,125 outstanding as of December 31, 2019	3		3
Treasury stock, at cost; 52,920,350 shares as of June 30, 2020 and 54,174,645 shares as of December 31, 2019	(4,457)		(4,169)
Additional paid-in capital	10,465		10,489
Accumulated deficit	(6,429)		(5,965)
Accumulated other comprehensive loss	(881)		(840)
Total Hilton stockholders' deficit	(1,299)		(482)
Noncontrolling interests	8		10
Total deficit	(1,291)		(472)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	17,126	$	14,957

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 fees 89
84
169
161
Incentive management fees 58
59
113
114
Owned and leased hotels 387
392
699
726
Other revenues 26
22
52
45
1,004
961
1,859
1,781
Other revenues from managed and franchised properties 1,480
1,330
2,829
2,584
Total revenues 2,484
2,291
4,688
4,365

Expenses
Owned and leased hotels 334
352
632
672
Depreciation and amortization 86
79
170
161
General and administrative 113
115
220
219
Other expenses 15
12
35
26
548
558
1,057
1,078
Other expenses from managed and franchised properties 1,458
1,327
2,841
2,602
Total expenses 2,006
1,885
3,898
3,680

Operating income 478
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

Income tax expense (101 ) (81 ) (160 ) (139 )

Net income 261
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,
	2020		2019		2020		2019
Revenues
Franchise and licensing fees	$	132	$	444	$	471	$	826
Base and other management fees	8		89		68		169
Incentive management fees	(5)		58		18		113
Owned and leased hotels	31		387		241		699
Other revenues	10		26		33		52
	176		1,004		831		1,859
Other revenues from managed and franchised properties	388		1,480		1,653		2,829
Total revenues	564		2,484		2,484		4,688

Expenses
Owned and leased hotels	95		334		334		632
Depreciation and amortization	88		86		179		170
General and administrative	63		113		123		220
Reorganization costs	38		—		38		—
Impairment losses	15		—		127		—
Other expenses	13		15		27		35
	312		548		828		1,057
Other expenses from managed and franchised properties	554		1,458		1,890		2,841
Total expenses	866		2,006		2,718		3,898

Operating income (loss)	(302)		478		(234)		790

Interest expense	(106)		(101)		(200)		(199)
Loss on foreign currency transactions	(13)		(3)		(4)		(3)
Other non-operating loss, net	(23)		(12)		(23)		(8)

Income (loss) before income taxes	(444)		362		(461)		580

Income tax benefit (expense)	12		(101)		47		(160)

Net income (loss)	(432)		261		(414)		420
Net loss (income) attributable to noncontrolling interests	2		(1)		2		(2)
Net income (loss) attributable to Hilton stockholders	$	(430)	$	260	$	(412)	$	418

Earnings (loss) per share:
Basic	$	(1.55)	$	0.90	$	(1.49)	$	1.43
Diluted	$	(1.55)	$	0.89	$	(1.48)	$	1.42

Cash dividends declared per share	$	—	$	0.15	$	0.15	$	0.30

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Net income $ 261
$ 217
$ 420
$ 380
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $9, $—, $1 and $1 15
(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 income 253
155
396
379
Comprehensive income attributable to noncontrolling interests (1 ) —
(2 ) (2 )
Comprehensive income attributable to Hilton stockholders $ 252
$ 155
$ 394
$ 377


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net income (loss)	$	(432)	$	261	$	(414)	$	420
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $1, $9, $9 and $1	20		15		(4)		12
Pension liability adjustment, net of tax of $(1), $—, $(1) and $(1)	2		2		3		4
Cash flow hedge adjustment, net of tax of $1, $8, $14 and $13	(4)		(25)		(40)		(40)
Total other comprehensive income (loss)	18		(8)		(41)		(24)

Comprehensive income (loss)	(414)		253		(455)		396
Comprehensive loss (income) attributable to noncontrolling interests	2		(1)		2		(2)
Comprehensive income (loss) attributable to Hilton stockholders	$	(412)	$	252	$	(453)	$	394

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Six Months Ended							Six Months Ended
	June 30,							June 30,
	2019			2018				2020		2019
Operating Activities:							Operating Activities:
Net income	$	420		$	380
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							Net income (loss)	$	(414)	$	420
Adjustments to reconcile net income (loss) to net cash provided by operating activities:							Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of contract acquisition costs	14			14			Amortization of contract acquisition costs	15		14
Depreciation and amortization	170			161			Depreciation and amortization	179		170
Impairment losses							Impairment losses	127		—
Loss on foreign currency transactions	3			1			Loss on foreign currency transactions	4		3
Share-based compensation	81			68			Share-based compensation	12		81
Deferred income taxes	1			(39		)	Deferred income taxes	(118)		1
Contract acquisition costs	(43		)	(38		)	Contract acquisition costs	(23)		(43)
Change in deferred revenues							Change in deferred revenues	528		(57)
Change in liability for guest loyalty program							Change in liability for guest loyalty program	413		106
Working capital changes and other	4			(15		)	Working capital changes and other	223		(45)
Net cash provided by operating activities	650			532			Net cash provided by operating activities	946		650
Investing Activities:							Investing Activities:
Capital expenditures for property and equipment	(46		)	(28		)	Capital expenditures for property and equipment	(30)		(46)
Capitalized software costs	(44		)	(38		)	Capitalized software costs	(33)		(44)
Other	(5		)	(9		)	Other	(13)		(5)
Net cash used in investing activities	(95		)	(75		)	Net cash used in investing activities	(76)		(95)
Financing Activities:							Financing Activities:
Borrowings	1,795			1,650			Borrowings	2,690		1,795
Repayment of debt	(1,317		)	(672		)	Repayment of debt	(213)		(1,317)
Debt issuance costs	(27		)	(21		)	Debt issuance costs	(14)		(27)
Dividends paid	(87		)	(92		)	Dividends paid	(42)		(87)
Repurchases of common stock	(653		)	(1,439		)	Repurchases of common stock	(296)		(653)
Share-based compensation tax withholdings and other	(34		)	(42		)	Share-based compensation tax withholdings and other	(43)		(34)
Net cash used in financing activities	(323		)	(616		)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	2,082		(323)

Effect of exchange rate changes on cash, restricted cash and cash equivalents	2			(6		)	Effect of exchange rate changes on cash, restricted cash and cash equivalents	(7)		2
Net increase (decrease) in cash, restricted cash and cash equivalents	234			(165		)
Net increase in cash, restricted cash and cash equivalents							Net increase in cash, restricted cash and cash equivalents	2,945		234
Cash, restricted cash and cash equivalents, beginning of period	484			670			Cash, restricted cash and cash equivalents, beginning of period	630		484
Cash, restricted cash and cash equivalents, end of period	$	718		$	505		Cash, restricted cash and cash equivalents, end of period	$	3,575	$	718

Supplemental Disclosures:							Supplemental Disclosures:
Cash paid during the year:							Cash paid during the year:
Interest	$	190		$	149		Interest	$	200	$	190
Income taxes, net of refunds	157			149			Income taxes, net of refunds	53		157

See notes to condensed consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Organization and Basis of Presentation

Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest hospitality companies in the world and is engaged in managing, franchising, owning and leasing hotels and resorts, and licensing its brands and intellectual property ("IP"). As of June 30, ~~2019,~~2020, we managed, franchised, owned or leased ~~5,872~~6,215 hotels and resorts, including timeshare properties, totaling ~~939,297~~983,465 rooms in ~~114~~118 countries and territories.

~~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, ~~2019~~2020 and ~~2018~~2019 have been prepared in accordance with United States ("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, ~~2018. Certain prior year amounts in our condensed consolidated balance sheets have been reclassified to conform to current year presentation.~~2019.

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 particular, the novel coronavirus ("COVID-19") pandemic had a material adverse impact on our results for the three and six months ended June 30, 2020, and we expect it to continue to have a material adverse impact on our results for an indeterminate length of time. Management is making estimates and judgments in light of these circumstances, and this interim period, as well as upcoming periods, are unlikely to be comparable to past performance or indicative of future 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.

~~Summary of Significant Accounting Policies~~

Reorganization

~~Our significant accounting policies are detailed~~

We recognized $38 million of reorganization costs in our condensed consolidated statements of operations during the three and six months ended June 30, 2020 related to organizational changes, including reductions in our workforce and the associated costs, as part of our efforts to reduce future costs for our corporate operations in response to the COVID-19 pandemic. As of June 30, 2020, $35 million of such reorganization costs were included in accounts payable, accrued expenses and other in our condensed consolidated balance sheet.

Note 2: ~~"Basis of Presentation and Summary of Significant~~Recently Issued Accounting ~~Policies" in our Annual Report on Form 10-K for~~Pronouncements

In June 2016, the ~~fiscal year ended December 31, 2018. On January 1, 2019, we adopted the requirements of~~Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. ~~2016-02~~2016-13 ("ASU ~~2016-02"~~2016-13"), ~~Leases~~Financial Instruments – Credit Losses (Topic ~~842),~~326): Measurement of Credit Losses on Financial Instruments ~~and the significant accounting policies that changed as a result of the adoption are set forth below.~~

~~Leases~~

We determine if a contract is or contains a lease at the inception of the contract, and we classify that lease as a finance lease if it meets certain criteria or as an operating lease when it does not. We reassess if a contract is or contains a leasing arrangement upon modification of the contract. For a contract, in, which ~~we are a lessee, that contains fixed payments for both lease and non-lease components, we have elected to~~significantly changes how entities account for ~~the components as a single lease component, as permitted.~~

~~At the commencement date of a lease, we recognize a lease liability~~credit losses for ~~future fixed lease payments~~most financial assets and ~~a right-of-use ("ROU") asset representing our right to use the underlying asset during the lease term. The lease liability is initially~~certain other instruments that are not measured ~~as the present~~at fair value of the future 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 exercise such early termination options, respectively. The future fixed lease payments are discounted using the rate 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 ofthrough net income. On 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,~~2020, we ~~use the discount rate as of the commencement date of the lease, incorporating the entire lease term. Additionally, we elected not~~adopted ASU 2016-13 and subsequent ASUs issued 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 the 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 carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, we record an impairment loss in our 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.

Our operating leases require: (i) fixed lease payments, or minimum payments, as contractually stated in the lease agreement; (ii) variable lease payments, which, for our hotels, are generally based on a percentage of the underlying asset's revenues or profits, or are dependent on changes in an index; or (iii) lease 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 a hotel property that we lease during the term of the lease. For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term, and lease expense relating to variable payments is expensed as incurred, with amounts recognized in owned and leased hotel expenses, general and administrative expenses and other expenses from managed and franchised properties in our consolidated statements of operations. For finance leases, the amortization of the asset is recognized over the shorter of the lease term or useful life of the underlying asset within depreciation and amortization expense and other expenses from managed and franchised properties in our consolidated statements of operations. The interest expense related to finance leases, including any variable lease payments, is recognized in interest expense in our consolidated statements of operations.

~~Recently Issued Accounting Pronouncements~~

~~In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-15 ("ASU 2018-15"),~~ ~~Intangibles – Goodwill and Other – Internal-use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.~~ This ASU aligns guidance for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with guidance for capitalizing implementation costs to develop or obtain internal-use software. Capitalized implementation costs will be amortized over the term of the arrangement and presented in the same line item in the statement of operations as the fees associated with the service contract. We elected, as permitted by the standard, to early adopt ASU 2018-05clarify its application, on a prospective basis, asand recognized a $10 million cumulative adjustment, net of ~~January 1, 2019. The adoption did not have a material effect on our condensed consolidated financial statements.~~

~~In February 2016, the FASB issued~~taxes, in accumulated deficit. By applying ASU ~~2016-02~~, ~~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 ROU assets and lease liabilities, with certain practical expedients available. Subsequent to ASU 2016-02, the 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 the modified retrospective approach required by ASU 2016-02. This option allows entities to initially apply the new leases standard~~2016-13 at the adoption date, ~~and recognize a cumulative adjustment to the opening balance of retained earnings in the period of adoption.~~

As described above, we adopted ASU 2016-02 on January 1, 2019 and applied the package of practical expedients included 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 at the beginning of the earliest period presented, the presentation of ~~financial information~~credit losses for periods prior to January 1, ~~2019 remain~~2020 remains unchanged and in accordance with ~~Leases~~Receivables (Topic ~~840)~~310). ~~On January 1, 2019,~~

As a result of the adoption, we ~~recognized a $256 million~~consider forecasted business conditions, in addition to current business conditions and historical collection activity, in calculating our allowance for credit losses on our financial instruments. The cumulative adjustment to accumulated deficit ~~net~~that we recognized upon adoption of ~~taxes~~this ASU did not include the impact of ~~$81 million related to a decrease to our deferred tax liability,~~the COVID-19 crisis as a ~~result~~forecasted business condition. However, during the six months ended June 30, 2020, we revised our expected future credit loss rates from those used at adoption, primarily for our accounts receivable balances, in light of business conditions in the ~~impairment of ROU assets~~current environment. In particular, we considered the expected impact on our hotel owners' and customers' ability to ultimately settle receivables that ~~occurred in periods prior~~are or will be due to ~~the adoption date.~~

us.

Note 3: Revenues from Contracts with Customers

Contract Liabilities

The following table summarizes the activity of our contract liabilities, which are classified as a component of current and long-term deferred revenues, during the six months ended June 30, ~~2019:~~2020:

(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.~~(in millions)

Balance as of December 31, 2019	$	1,041
Cash received in advance and not recognized as revenue⁽¹⁾⁽²⁾	~~Primarily the result~~725
Revenue recognized⁽¹⁾⁽³⁾	(110)
Other⁽⁴⁾	(22)
Balance as of ~~changes in estimated transaction prices for our performance obligations related to points issued under Hilton Honors, which had no effect on revenues.~~June 30, 2020	$	1,634

____________

⁽¹⁾WePrimarily related to Hilton Honors, our guest loyalty program, which included revenue recognized ~~revenues that were previously deferred~~of $51 million.

⁽²⁾Includes $636 million recorded as ~~contract liabilities~~a result of ~~$78 million and~~ the Hilton Honors points pre-sale to American Express; see below for additional information.

⁽³⁾~~$56 million during~~During the three months ended June 30, 2020 and 2019, revenue recognized was $56 million and ~~2018,~~$78 million, respectively, and ~~$116 million~~ during the six months ended June 30, ~~2018.~~2019 was $135 million.

⁽⁴⁾Represents changes in estimated transaction prices for our performance obligations related to points issued under Hilton Honors, which had no effect on revenues.

In April 2020, we pre-sold Hilton Honors points to American Express for $1.0 billion in cash ("Honors Points Pre-Sale"), of which $636 million was recorded in deferred revenues and the remainder was recorded in liability for guest loyalty program in our condensed consolidated balance sheet. American Express and their respective designees may use the points in connection with Hilton Honors co-branded credit cards and for promotions, rewards and incentive programs or certain other activities as they may establish or engage in from time to time. We recognize revenue from licensing fees related to these Hilton Honors points when American Express issues the points to customers and other revenues from managed and franchised properties when customers redeem the Hilton Honors points.

Performance Obligations

As of June 30, ~~2019,~~2020, we had ~~$438 million~~ of deferred revenues ~~related to~~for unsatisfied performance obligations consisting of: (i) $422 million related to Hilton Honors that will be recognized as revenues when the points are redeemed, which we estimate will occur over approximately the next two ~~years. Additionally, we had~~ ~~$615~~to three years; (ii) $561 million related to the Honors Points Pre-Sale of ~~deferred~~which a portion will be recognized as revenue when points are awarded, with the remaining portion recognized as revenues when the points are redeemed; and (iii) $651 million related to application, initiation and licensing fees ~~which are~~that is expected to be recognized as revenues ~~in future periods~~ over the terms of the related contracts.

Incentive Management Fees

We update our estimates of the expected achievement of incentive management fee targets each reporting period and constrain the recognition of revenue to the extent that we do not expect to achieve the thresholds as specified in our management contracts with incentive fees. Due to revisions of the initial estimates, we reversed certain incentive fees that were recognized in the previous period during the three months ended June 30, 2020, due to the expectation that stated return thresholds to the hotel owners would no longer be met.

Note 4: Consolidated Variable Interest Entities

As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we consolidated ~~two~~2 variable interest entities ("VIEs") that lease hotel ~~properties and, as of December 31, 2018, we also consolidated one VIE that is a management company.~~properties. We consolidated these VIEs since we are the primary beneficiary, 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 ~~the VIEs that we consolidated as of the respective periods,~~these entities, which primarily comprised the following:

June 30, December 31,
2019 2018
(in millions)
Cash and cash equivalents $ 72
$ 71
Property and equipment, net 73
68
Deferred income tax assets 51
53
Other non-current assets 61
58
Accounts payable, accrued expenses and other 52
41
Long-term debt⁽¹⁾
204
205
Other long-term liabilities 15
15


	June 30,		December 31,
	2020		2019
	(in millions)
Cash and cash equivalents	$	41	$	81
Property and equipment, net	78		69
Deferred income tax assets	53		48
Other non-current assets	63		61
Accounts payable, accrued expenses and other	27		49
Long-term debt⁽¹⁾	195		194
Other long-term liabilities	17		17

____________

⁽¹⁾

⁽¹⁾Includes finance lease liabilities of $177 million as of June 30, 2020 and December 31, 2019.

In June 2020, one of our consolidated VIEs entered into a revolving credit facility to provide financial flexibility in response to business disruption during the COVID-19 pandemic. The revolving credit facility has a borrowing capacity of 2.75 billion Japanese yen (equivalent to $26 million as of June 30, 2020) and matures in June 2021. As of June 30, 2020, no amounts have been drawn under the revolving credit facility.

~~Includes finance lease liabilities of~~ ~~$186 million~~ ~~and $187 million as of June 30, 2019 and December 31, 2018, respectively.~~

We did not provide any financial or other support to any consolidated VIEs that we were not previously contractually required to provide during the six months ended June 30, 2020 and 2019, and ~~2018.~~we are not aware of any future obligations to do so.

Note 5: ~~Amortizing~~Finite-Lived Intangible Assets

~~Amortizing~~Finite-lived intangible assets were as follows:


	June 30, 2020
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
	(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger⁽¹⁾	$	2,158	$	(2,051)	$	107
Contract acquisition costs⁽²⁾	604		(133)		471
Development commissions and other	131		(21)		110
	$	2,893	$	(2,205)	$	688

Other intangible assets:
Leases⁽¹⁾⁽³⁾	$	144	$	(85)	$	59
Capitalized software costs	650		(451)		199
Hilton Honors⁽¹⁾	337		(267)		70
	$	1,131	$	(803)	$	328

June 30, 2019
Gross Carrying Value Accumulated Amortization Net Carrying Value
(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger⁽¹⁾
$ 2,232
$ (1,960 ) $ 272
Contract acquisition costs 548
(108 ) 440
Development commissions and other 122
(17 ) 105
$ 2,902
$ (2,085 ) $ 817

Other intangible assets:
Leases⁽¹⁾
$ 287
$ (167 ) $ 120
Capitalized software costs 547
(358 ) 189
Hilton Honors⁽¹⁾
338
(247 ) 91
Other⁽¹⁾
34
(34 ) —
$ 1,206
$ (806 ) $ 400


	December 31, 2018								December 31, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
	(in millions)								(in millions)
Management and franchise contracts:								Management and franchise contracts:
Management and franchise contracts recorded at Merger⁽¹⁾	$	2,228	$	(1,873	)	$	355	Management and franchise contracts recorded at Merger⁽¹⁾	$	2,163	$	(1,974)	$	189
Contract acquisition costs	525		(101		)	424		Contract acquisition costs	604		(121)		483
Development commissions and other	108		(15		)	93		Development commissions and other	127		(19)		108
	$	2,861	$	(1,989	)	$	872		$	2,894	$	(2,114)	$	780

Other intangible assets:								Other intangible assets:
Leases⁽¹⁾	$	288	$	(161	)	$	127	Leases⁽¹⁾	$	290	$	(176)	$	114
Capitalized software costs	503		(321		)	182		Capitalized software costs	625		(399)		226
Hilton Honors⁽¹⁾	338		(236		)	102		Hilton Honors⁽¹⁾	338		(257)		81
Other⁽¹⁾	38		(34		)	4		Other⁽¹⁾	34		(34)		—
	$	1,167	$	(752	)	$	415		$	1,287	$	(866)	$	421

____________

⁽¹⁾

⁽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 Inc. (the "Merger").

⁽²⁾We recognized impairment losses during the three and six months ended June 30, 2020 that reduced the gross and net carrying values of contract acquisition costs by $9 million.

⁽³⁾We recognized impairment losses during the six months ended June 30, 2020 that reduced the gross carrying value of our leases intangible asset by $138 million, the accumulated amortization by $92 million and the net carrying value by $46 million. See Note 7: "Fair Value Measurements" for additional information.

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~~finite-lived intangible assets was as follows:


	Three Months Ended				Six Months Ended					Three Months Ended						Six Months Ended
	June 30,				June 30,					June 30,						June 30,
	2019		2018		2019		2018			2020		2019		2020		2019
	(in millions)									(in millions)
Recognized in depreciation and amortization expense⁽¹⁾	$	71	$	66	$	141	$	135	Recognized in depreciation and amortization expense⁽¹⁾	$	74	$	71	$	151	$	141
Recognized as a reduction of franchise and licensing fees and base and other management fees	7		7		14		14		Recognized as a reduction of franchise and licensing fees and base and other management fees	7		7		15		14

____________


⁽¹⁾ ⁽¹⁾Includes amortization expense of $47 million and $51 million for the three months ended June 30, 2020 and 2019, respectively, and $96 million and $102 million for the six months ended June 30, 2020 and 2019, respectively, associated with assets that were initially recorded at their fair value at the time of the Merger.	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.

We estimate future amortization of our ~~amortizing~~finite-lived intangible assets as of June 30, ~~2019~~2020 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
2020 250
26
2021 110
25
2022 81
23
2023 51
23
Thereafter 144
330
$ 777
$ 440


	Recognized in Depreciation and Amortization Expense		Recognized as a Reduction of Franchise and Licensing Fees and Base and Other Management Fees
Year	(in millions)
2020 (remaining)	$	120	$	15
2021	129		29
2022	98		26
2023	63		26
2024	13		25
Thereafter	122		350
	$	545	$	471

Note 6: Debt

Long-term debt balances, including obligations for finance leases, and associated interest rates and maturities as of June 30, ~~2019,~~2020, 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 2024 1,000
1,000
Senior notes with a rate of 4.625%, due 2025 900
900
Senior notes with a rate of 5.125%, due 2026 1,500
1,500
Senior notes with a rate of 4.875%, due 2027 600
600
Senior notes with a rate of 4.875%, due 2030 1,000
—
Finance lease liabilities with an average rate of 5.80%, due 2019 to 2030 260
225
Other debt with a rate of 3.08% due 2026 18
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,
	2020		2019
	(in millions)
Senior secured revolving credit facility with a weighted average rate of 1.43%, due 2024	$	1,690	$	195
Senior secured term loan facility with a rate of 1.93%, due 2026	2,619		2,619
Senior notes with a rate of 4.250%, due 2024	1,000		1,000
Senior notes with a rate of 4.625%, due 2025	900		900
Senior notes with a rate of 5.375%, due 2025	500		—
Senior notes with a rate of 5.125%, due 2026	1,500		1,500
Senior notes with a rate of 4.875%, due 2027	600		600
Senior notes with a rate of 5.750%, due 2028	500		—
Senior notes with a rate of 4.875%, due 2030	1,000		1,000
Finance lease liabilities with a weighted average rate of 5.82%, due 2020 to 2030	245		245
Other debt with a rate of 3.08%, due 2026	18		17
	10,572		8,076
Less: unamortized deferred financing costs and discount	(90)		(83)
Less: current maturities of long-term debt⁽¹⁾	(45)		(37)
	$	10,437	$	7,956

____________


⁽¹⁾ ⁽¹⁾Represents current maturities of finance lease liabilities.	~~Represents current maturities of finance lease liabilities.~~

Our senior secured credit facilities consist of a $1.75 billion senior secured revolving credit facility (the "Revolving Credit Facility") and a senior secured term loan facility (the "Term Loans"). The obligations of our senior secured credit facilities are unconditionally and irrevocably guaranteed by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries.

In ~~June 2019,~~March 2020, as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic, 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~~fully drew down on our Revolving Credit ~~Facility to increase the borrowing capacity to $1.75 billion, $250~~Facility. As of June 30, 2020, we also had $60 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.~~Facility.

In ~~June 2019,~~April 2020, we issued ~~$1.0 billion~~$500 million aggregate principal amount of ~~4.875%~~5.375% Senior Notes due ~~2030~~2025 (the ~~"2030~~"5.375% 2025 Senior Notes"), and $500 million aggregate principal amount of 5.750% Senior Notes due 2028 (the "2028 Senior Notes") and incurred ~~$13~~$14 million of debt issuance costs. Interest on the ~~2030~~5.375% 2025 Senior Notes and the 2028 Senior Notes is payable semi-annually in arrears on ~~January 15~~May 1 and ~~July 15~~November 1 of each year, beginning ~~January~~November 1, 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 repayment of the Term Loans, we recognized $8 million of fees and

unamortized deferred 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, 2019.

The 4.250% Senior Notes due 2024, ~~(the "2024 Senior Notes"),~~ the 4.625% Senior Notes due 2025, ~~(the "2025~~the 5.375% 2025 Senior ~~Notes"),~~Notes, the 5.125% Senior Notes due 2026, ~~(the "2026 Senior Notes"),~~ the 4.875% Senior Notes due 2027, ~~(the "2027~~the 2028 Senior ~~Notes")~~Notes and the ~~2030~~4.875% Senior Notes due 2030 are collectively referred to as the Senior Notes and are jointly and severally guaranteed on a senior unsecured basis by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries, ~~that are themselves not issuers~~other than Hilton Domestic Operating Company Inc. ("HOC"), a wholly owned subsidiary of the ~~applicable series of senior notes. See Note 15: "Condensed Consolidating Guarantor Financial Information" for additional information.~~Parent, which is the issuer.

The contractual maturities of our long-term debt as of June 30, ~~2019~~2020 were as follows:

Year (in millions)
2019 (remaining) $ 19
2020 35
2021 28
2022 20
2023 21
Thereafter 7,774
$ 7,897


Year	(in millions)
2020 (remaining)	$	20
2021	41
2022	25
2023	21
2024	2,712
Thereafter	7,753
	$	10,572

Note 7: Fair Value Measurements

~~We did not elect~~Estimates of the fair ~~value measurement option for any~~values of our financial instruments and nonfinancial assets ~~or liabilities.~~ were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

The fair values of certain financial instruments and the hierarchy level we used to estimate the fair values are shown ~~below; the~~below:


	June 30, 2020
			Hierarchy Level
	Carrying Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Cash equivalents	$	3,304	$	—	$	3,304	$	—
Restricted cash equivalents	12		—		12		—
Liabilities:
Long-term debt⁽¹⁾	10,219		5,934		—		4,156
Interest rate swaps	95		—		95		—


	December 31, 2019
			Hierarchy Level
	Carrying Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Cash equivalents	$	117	$	—	$	117	$	—
Restricted cash equivalents	32		—		32		—
Liabilities:
Long-term debt⁽¹⁾	7,731		5,230		—		2,834
Interest rate swaps	37		—		37		—

____________

⁽¹⁾The carrying values include unamortized deferred financing costs and discount. The carrying values and fair values ~~of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 2019~~exclude finance lease liabilities and ~~December 31, 2018:~~other debt.

June 30, 2019
Hierarchy Level
Carrying Value Level 1 Level 2 Level 3
(in millions)
Assets:
Cash equivalents $ 265
$ —
$ 265
$ —
Restricted cash equivalents 19
—
19
—
Liabilities:
Long-term debt⁽¹⁾
7,531
5,149
—
2,624
Interest rate swaps 35
—
35
—

December 31, 2018
Hierarchy Level
Carrying Value Level 1 Level 2 Level 3
(in millions)
Assets:
Cash equivalents $ 87
$ —
$ 87
$ —
Restricted cash equivalents 18
—
18
—
Interest rate swaps 16
—
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~~was determined using a discounted cash flow analysis that reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs of similar 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~~sheets.

Our nonfinancial assets that were measured at fair value on ~~their~~a non-recurring basis during the six months ended June 30, 2020, and for which we recorded impairment losses, were related to certain hotel properties under operating and finance leases in our ownership segment. See Note 5: "Finite-Lived Intangible Assets" and Note 8: "Leases" foradditional information on the impairment losses related to our leased properties. The fair ~~value.~~values, which were determined using significant Level 3 unobservable inputs, were as follows:


	(in millions)
Other intangible assets, net⁽¹⁾	$	—
Operating lease right-of-use assets⁽¹⁾	34
Property and equipment, net⁽¹⁾	8

____________

⁽¹⁾Amounts were measured at March 31, 2020, except for $10 million of operating lease right-of-use ("ROU") assets, which were remeasured at June 30, 2020.

We recognized impairment losses during the three months ended March 31, 2020 related to certain hotel properties under operating and finance leases. During the three months ended June 30, 2020, the short-term expected results for certain of these leased hotels declined from estimates used in the assessment of recoverability at March 31, 2020, generally due to extensions of government mandated closures and additional visibility into expected hotel customer engagement at such properties. As a result, further analysis of the recoverability of the carrying value of the assets related to leased hotel properties was necessary at June 30, 2020.

We assessed recoverability of the assets included in the table above using estimates of undiscounted net cash flows, and concluded that the carrying values of the assets were not fully recoverable. We then estimated the fair value of these assets using discounted cash flow analyses, which included an estimate of the impact of the COVID-19 pandemic on each leased property based on the expected recovery term. The stabilized growth rates after recovery and discount rates used for the fair value of the assets reflect the risk profile of the underlying cash flows and the individual markets where the assets are located, and are not necessarily indicative of our hotel portfolio as a whole. Estimations of stabilized growth rates after the recovery period ranged from 1.7 percent to 4.8 percent, and discount rates ranged from 7.0 percent to 12.0 percent, with the weighted average, based on relative impairment losses, for both inputs being at the lower end of each of the ranges. As a result of these non-recurring fair value measurements, we recognized impairment losses of $6 million and $118 million during the three and six months ended June 30, 2020, respectively.

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 2020 and December 31, 2019.

Note 8: Leases

We lease hotel properties, land, corporate office space and equipment used at hotels and corporate offices, with our most significant lease liabilities related to hotel properties. As of June 30, ~~2019,~~2020, we leased 5352 hotels under operating leases and ~~six~~6 hotels under finance leases, ~~two~~2 of which were the liabilities of consolidated VIEs and were non-recourse to us. Our hotel leases expire at various dates, with varying renewal and termination options.

~~Supplemental balance sheet information~~During the three and six months ended June 30, 2020, we recognized $6 million and $51 million of impairment losses related to ~~leases as of June 30, 2019 was as follows:~~

(dollars
in millions)
Operating leases:
Operating lease right-of-use assets $ 891
Accounts payable, accrued expenses and other 131
Operating lease liabilities 1,066
Finance leases:
Property and equipment, net $ 57
Current maturities of long-term debt 37
Long-term debt 223

Weighted average remaining lease term:
Operating leases 13.0 years
Finance leases 8.9 years
��
Weighted average discount rate:
Operating leases 3.74 %
Finance leases 5.80 %

~~The components of~~certain operating 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 assets 8
16
Interest on lease liabilities 3
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 year ended December 31, 2018 included $225 million of fixed lease expense~~ROU assets, respectively, and, ~~$142 million of variable lease expense.~~

~~Supplemental cash flow information related to leases for~~during the six months ended June 30, ~~2019 was as follows:~~2020, we recognized $21 million of impairment losses related to property and equipment, including $2 million of finance lease ROU assets. All of these impairment losses were included in impairment losses in our condensed consolidated statements of operations; see Note 7: "Fair Value Measurements" for additional information.

(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 leases 21
ROU assets obtained in exchange for lease liabilities in non-cash transactions:
Operating leases 21
Finance leases 52

Our future minimum lease payments as of June 30, ~~2019~~2020 were as follows:

Operating
Leases Finance
Leases
Year (in millions)
2019 (remaining) $ 89
$ 26
2020 175
49
2021 161
40
2022 137
31
2023 122
30
Thereafter 872
166
Total minimum lease payments 1,556
342
Less: imputed interest (359 ) (82 )
Total lease liabilities $ 1,197
$ 260


	Operating Leases		Finance Leases
Year	(in millions)
2020 (remaining)	$	116	$	32
2021	167		48
2022	137		37
2023	123		30
2024	103		30
Thereafter	752		137
Total minimum lease payments	1,398		314
Less: imputed interest	(310)		(69)
Total lease liabilities	$	1,088	$	245

Note 9: Income Taxes

At the end of each quarter, we estimate the effective income tax rate expected to be applied for the full ~~year.~~year to ordinary income, which excludes discrete items. Discrete items that were recognized during the six months ended June 30, 2020 included impairment losses and the vesting of certain share-based compensation awards, which provided us with tax benefits. The effective income tax rate for the full year is determined by the level and composition of income (loss) before income taxes, excluding discrete items as discussed above, which is subject to federal, state, local and foreign income taxes. The Company's forecast includes losses for the full year in many foreign jurisdictions. For certain foreign jurisdictions, we expect to have net operating losses ("NOLs"), which we expect to be utilized in future periods. However, as future utilization of NOLs reduces

foreign taxes paid, we expect U.S. foreign tax credits to be reduced, thereby reducing or eliminating the tax benefit of the NOLs on a global basis. Because of the reduced global tax benefit of NOLs in these specific jurisdictions, our effective income tax rate estimate is lower than the combined U.S. statutory rate. Due to forecasted losses before income taxes for the full year, the Company is forecasting an overall tax benefit.

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,~~2020, we remain subject to federal and state examinations of our income tax returns for tax years from 2005 through ~~2017~~2018 and foreign examinations of our income tax returns for tax years from 1996 through ~~2018.~~2019.

Our total unrecognized tax benefits as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~$323~~$428 million and ~~$318~~$395 million, respectively. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had accrued approximately ~~$44~~$59 million and ~~$40~~$52 million, respectively, for interest and penalties related to ~~our~~these unrecognized tax ~~benefits in our condensed consolidated balance sheets.~~benefits. Included in the balances of unrecognized tax benefits as of June 30, ~~2019~~2020 and December 31, ~~2018 was $312~~2019 were $388 million and ~~$310~~$380 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective income tax rate.

In ~~April 2014,~~prior periods, we received 30-day Letters from the IRS and the Revenue Agents ~~Report~~Reports ("~~RAR"~~RARs") for the 2006 ~~and October 2007~~through the 2013 tax years. We disagreed with several of the proposed adjustments in the ~~RAR,~~RARs and 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 Hilton Honors, 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 EUR, instead of USD. In January 2016, we received a 30-day Letter from the IRS and the RAR for the December 2007 through 2010 tax years, which included proposed adjustments that reflect the carryover effect of the three protested issues from the 2006 through October 2007 tax years. These proposed adjustments are also being protested in appeals and formal appeals protests ~~have been submitted. In April 2016, we requested a Technical Advice Memorandum ("TAM") from~~with 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.IRS. 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 remainingunsettled proposed adjustments sought by the IRS for the tax years with open audits would result in additional U.S. federal ~~tax~~taxes owed of approximately $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~~their 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, ~~2019,~~2020, we had recorded ~~$55~~$78 million of unrecognized tax benefits related to these issues.

Note 10: Share-Based Compensation

We ~~grant~~recognized share-based compensation expense of $24 million and $47 million during the three months ended June 30, 2020 and 2019, respectively, and $12 million and $81 million during the six months ended June 30, 2020 and 2019, respectively, which included amounts reimbursed by hotel owners in all periods. The expenses recognized during the three and six months ended June 30, 2020 were net of the reversal of expenses recognized in prior periods, as a result of the determination that the performance conditions of certain share-based compensation awards were no longer probable of achievement, as described in further detail below.

As part of the Hilton 2017 Omnibus Incentive Plan (the "2017 Plan"), we award time-vesting restricted stock units and restricted stock (collectively, "RSUs"), nonqualified stock options ("options") and performance-vesting RSUs ("performance shares") to our employees and deferred share units ("DSUs") to members of our board of directors. We recognized share-based compensation expense of $47 million and $40 million during the three months ended June 30, 2019 and 2018, respectively, and $81 million and $68 million during the six months ended June 30, 2019 and 2018, respectively.eligible employees. As of June 30, ~~2019,~~2020, unrecognized compensation costs for unvested awards ~~was~~under the 2017 Plan were approximately ~~$190~~$138 million, which are expected to be recognized over a weighted-average period of ~~1.9~~2.0 years on a straight-line basis. As of June 30, ~~2019,~~2020, there were ~~14.2 million~~12,541,000 shares of common stock available for future issuance under the ~~Hilton~~ 2017 ~~Omnibus Incentive~~ Plan, plus any shares subject to awards outstanding under ~~our~~the 2013 Omnibus Incentive Plan, which will become available for issuance under the ~~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, ~~2019,~~2020, we granted ~~1.0 million~~907,000 RSUs with a weighted average grant date fair value per share of ~~$83.38,~~$93.43, 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, ~~2019,~~2020, we granted ~~0.8 million~~755,000 options with a weighted average exercise price per share of ~~$83.11,~~$93.33, 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, ~~2019~~2020 was ~~$21.08,~~$21.47, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

____________


⁽¹⁾ ⁽¹⁾Estimated using historical movement of Hilton's stock price. ⁽²⁾Estimated based on the 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.	~~Estimated using historical movement of Hilton's stock price.~~


⁽²⁾	~~Estimated based on the 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, ~~2019, 1.6 million~~2020, 1,965,000 options were exercisable.

Performance Shares

During the six months ended June 30, ~~2019,~~2020, we granted ~~0.4 million~~347,000 performance shares with a weighted average grant date fair value per share of ~~$83.11.~~$93.33. The performance shares are settled at the end of the three-year performance period with: (i) 50 percent of the awards subject to achievement based on the compound annual growth rate ("CAGR") of the Company's earnings before interest expense, ~~a provision for~~ income ~~taxes~~tax benefit (expense) and depreciation and amortization ("EBITDA"), adjusted to exclude certain items ("Adjusted EBITDA")~~, referred to as EBITDA CAGR~~ and (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. The total number of performance shares that vest related to each performance measure is based on an achievement factor, which is estimated each reporting period, that ranges from a ~~zero~~0 percent to 200 percent payout, with 100 percent being the target. As of June 30, ~~2019,~~2020, we determined that the performance conditions for the outstanding 2018 and 2019 performance shares ~~are~~were not probable of achievement and that the performance conditions for the outstanding 2020 performance shares were probable of achievement, for which we recognized compensation expense at the target achievement percentage. Based on revisions to our estimates of the achievement factor for ~~both our~~the outstanding ~~EBITDA CAGR~~2018 and ~~FCF CAGR~~2019 awards, the share-based compensation expense recognized during the three months ended June 30, 2020 is net of the reversal of prior expense recognized related to the outstanding 2019 performance shares, atand the ~~maximum achievement percentage for~~expense recognized during the ~~2017 grants, between target~~six months ended June 30, 2020 is net of the reversal of prior expense recognized related to the outstanding 2018 and ~~maximum for the 2018 grants and at target for the~~ 2019 ~~grants.~~performance shares.

Note 11: Earnings (Loss) Per Share

The following table presents the calculation of basic and diluted earnings (loss) 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 outstanding 290
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 outstanding 292
303
294
311
Diluted EPS $ 0.89
$ 0.71
$ 1.42
$ 1.21


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(in millions, except per share amounts)
Basic EPS:
Numerator:
Net income (loss) attributable to Hilton stockholders	$	(430)	$	260	$	(412)	$	418
Denominator:
Weighted average shares outstanding	277		290		277		291
Basic EPS	$	(1.55)	$	0.90	$	(1.49)	$	1.43

Diluted EPS:
Numerator:
Net income (loss) attributable to Hilton stockholders	$	(430)	$	260	$	(412)	$	418
Denominator:
Weighted average shares outstanding⁽¹⁾	278		292		279		294
Diluted EPS	$	(1.55)	$	0.89	$	(1.48)	$	1.42

~~Less than~~____________

⁽¹⁾Approximately 3 million and 1 million share-based compensation awards were excluded from the computation of diluted EPS for the three and six months ended June 30, ~~2019~~2020, respectively, and ~~2018~~1 million share-based compensation awards were excluded from the computation of EPS for the three and six months ended June 30, 2019 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, 2019 292
$ 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, 2019 288
$ 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, 2018 317
$ 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, 2018 298
$ 3
$ (2,330 ) $ 10,321
$ (6,697 ) $ (742 ) $ 5
$ 560


	Three Months Ended June 30, 2020
	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, 2020	277	$	3	$	(4,462)	$	10,443	$	(5,999)	$	(899)	$	10	$	(904)
Net loss	—	—		—		—		(430)		—		(2)		(432)
Other comprehensive income	—	—		—		—		—		18		—		18
Share-based compensation	—	—		5		22		—		—		—		27

Balance as of June 30, 2020	277	$	3	$	(4,457)	$	10,465	$	(6,429)	$	(881)	$	8	$	(1,291)

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, 2018 295
$ 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 compensation 1
—
—
47
—
—
—
47
Cumulative effect of the adoption of ASU 2016-02 —
—
—
—
(256 ) —
—
(256 )
Deconsolidation of a VIE —
—
—
—
—
—
(2 ) (2 )
Balance as of June 30, 2019 288
$ 3
$ (3,304 ) $ 10,419
$ (6,342 ) $ (806 ) $ 7
$ (23 )


	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, 2019	292	$	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, 2019	288	$	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, 2017 317
$ 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 compensation 1
—
—
23
—
—
—
23
Balance as of June 30, 2018 298
$ 3
$ (2,330 ) $ 10,321
$ (6,697 ) $ (742 ) $ 5
$ 560


	Six Months Ended June 30, 2020
	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, 2019	279	$	3	$	(4,169)	$	10,489	$	(5,965)	$	(840)	$	10	$	(472)
Net loss	—	—		—		—		(412)		—		(2)		(414)
Other comprehensive loss	—	—		—		—		—		(41)		—		(41)
Dividends	—	—		—		—		(42)		—		—		(42)
Repurchases of common stock	(3)	—		(279)		—		—		—		—		(279)
Share-based compensation	1	—		(9)		(24)		—		—		—		(33)

Cumulative effect of the adoption of ASU 2016-13	—	—		—		—		(10)		—		—		(10)
Balance as of June 30, 2020	277	$	3	$	(4,457)	$	10,465	$	(6,429)	$	(881)	$	8	$	(1,291)


	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, 2018	295	$	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 compensation	1	—		—		47		—		—		—		47
Cumulative effect of the adoption of ASU 2016-02	—	—		—		—		(256)		—		—		(256)
Deconsolidation of a VIE	—	—		—		—		—		—		(2)		(2)
Balance as of June 30, 2019	288	$	3	$	(3,304)	$	10,419	$	(6,342)	$	(806)	$	7	$	(23)

In March 2020, we suspended share repurchases and the payment of dividends. The stock repurchase program remains authorized by the board of directors, and we may resume share repurchases in the future at any time, depending on market conditions, our capital needs and other factors.

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 reclassifications 11
—
(35 ) (24 )
Amounts reclassified from accumulated other comprehensive loss 1
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⁽²⁾		Cash Flow Hedge Adjustment⁽³⁾		Total
	(in millions)
Balance as of December 31, 2019	$	(549)	$	(269)	$	(22)	$	(840)
Other comprehensive loss before reclassifications	(5)		(1)		(41)		(47)
Amounts reclassified from accumulated other comprehensive loss	1		4		1		6
Net current period other comprehensive income (loss)	(4)		3		(40)		(41)
Balance as of June 30, 2020	$	(553)	$	(266)	$	(62)	$	(881)


													Currency Translation Adjustment⁽¹⁾		Pension Liability Adjustment⁽²⁾		Cash Flow Hedge Adjustment⁽³⁾		Total
	Currency Translation Adjustment⁽¹⁾			Pension Liability Adjustment			Cash Flow Hedge Adjustment		Total				(in millions)
	(in millions)
Balance as of December 31, 2017	$	(513	)	$	(229	)	$	1	$	(741	)
Balance as of December 31, 2018												Balance as of December 31, 2018	$	(545)	$	(260)	$	23	$	(782)
Other comprehensive income (loss) before reclassifications	(45		)	—			36		(9		)	Other comprehensive income (loss) before reclassifications	11		—		(35)		(24)
Amounts reclassified from accumulated other comprehensive loss	—			3			5		8			Amounts reclassified from accumulated other comprehensive loss	1		4		(5)		—
Net current period other comprehensive income (loss)	(45		)	3			41		(1		)	Net current period other comprehensive income (loss)	12		4		(40)		(24)
Balance as of June 30, 2018	$	(558	)	$	(226	)	$	42	$	(742	)
Balance as of June 30, 2019												Balance as of June 30, 2019	$	(533)	$	(256)	$	(17)	$	(806)

____________


⁽¹⁾⁽¹⁾	Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature. Amounts reclassified related to the liquidation of investments in foreign entities and were recognized net of taxes in loss on 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:~~operations.

⁽²⁾Amounts reclassified related to the amortization of prior service cost and amortization of net loss and were recognized net of taxes in other non-operating loss, net in our condensed consolidated statements of operations.

⁽³⁾Amounts reclassified related to interest rate swaps and forward contracts that hedge our foreign currency denominated fees and were recognized net of taxes in interest expense and franchise and licensing fees, base and other management fees and other revenues from managed and franchised properties, respectively, 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 taxes 3
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~~2 distinct operating segments: (i) management and 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, 2019, this segment included 691 managed hotels and 5,059 franchised hotels consisting of 909,453 total rooms.~~ This segment also earns licensing fees from Hilton Grand Vacations Inc. ("HGV") and ~~co-brand credit card arrangements~~strategic partnerships 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, 2020, this segment included 690 managed hotels and 5,405 franchised hotels consisting of 953,946 total rooms. As a result of the COVID-19 pandemic, approximately 1,170 hotels in our management and franchise segment had temporarily suspended operations at some point in time during the six months ended June 30, 2020, largely beginning in mid-March. Of these hotels, more than half had reopened as of June 30, 2020.

As of June 30, ~~2019,~~2020, the ownership segment included 6765 properties totaling ~~20,928 rooms, comprising 59~~20,562 rooms. As a result of the COVID-19 pandemic, approximately 35 hotels in our ownership segment had temporarily suspended operations at some point in time during the six months ended June 30, 2020, largely beginning in mid-March, of which approximately 10 had reopened as of June 30, 2020. The segment comprised 57 hotels that we wholly owned or leased, ~~one~~1 hotel owned by a consolidated non-wholly owned entity, ~~two~~2 hotels leased by consolidated VIEs and ~~five~~5 hotels owned or leased by unconsolidated affiliates.

The performance of our operating segments is evaluated primarily on operating income (loss), without allocating 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 Ended							Three Months Ended						Six Months Ended
	June 30,						June 30,							June 30,						June 30,
	2019			2018			2019			2018				2020		2019		2020		2019
	(in millions)													(in millions)
Franchise and licensing fees	$	445		$	405		$	830		$	738		Franchise and licensing fees	$	134	$	445	$	476	$	830
Base and other management fees⁽¹⁾	106			101			198			191			Base and other management fees⁽¹⁾	12		106		78		198
Incentive management fees	58			59			113			114			Incentive management fees	(5)		58		18		113
Management and franchise	609			565			1,141			1,043			Management and franchise	141		609		572		1,141
Ownership	387			392			699			726			Ownership	31		387		241		699
Segment revenues	996			957			1,840			1,769			Segment revenues	172		996		813		1,840
Amortization of contract acquisition costs	(7		)	(7		)	(14		)	(14		)	Amortization of contract acquisition costs	(7)		(7)		(15)		(14)
Other revenues	26			22			52			45			Other revenues	10		26		33		52
Direct reimbursements from managed and franchised properties⁽²⁾	789			730			1,564			1,429			Direct reimbursements from managed and franchised properties⁽²⁾	196		789		941		1,564
Indirect reimbursements from managed and franchised properties⁽²⁾	691			600			1,265			1,155			Indirect reimbursements from managed and franchised properties⁽²⁾	192		691		712		1,265
Intersegment fees elimination⁽¹⁾	(11		)	(11		)	(19		)	(19		)	Intersegment fees elimination⁽¹⁾	1		(11)		—		(19)
Total revenues	$	2,484		$	2,291		$	4,688		$	4,365		Total revenues	$	564	$	2,484	$	2,484	$	4,688

____________


⁽¹⁾ ⁽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. 18	~~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 (loss) for our reportable segments, reconciled to consolidated income (loss) before income taxes:


	Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
	June 30,						June 30,							June 30,						June 30,
	2019			2018			2019			2018				2020		2019		2020		2019
	(in millions)													(in millions)
Management and franchise⁽¹⁾	$	609		$	565		$	1,141		$	1,043		Management and franchise⁽¹⁾	$	141	$	609	$	572	$	1,141
Ownership⁽¹⁾	42			29			48			35			Ownership⁽¹⁾	(63)		42		(93)		48
Segment operating income	651			594			1,189			1,078			Segment operating income	78		651		479		1,189
Amortization of contract acquisition costs	(7		)	(7		)	(14		)	(14		)	Amortization of contract acquisition costs	(7)		(7)		(15)		(14)
Other revenues, less other expenses	11			10			17			19			Other revenues, less other expenses	(3)		11		6		17
Net other revenues (expenses) from managed and franchised properties	22			3			(12		)	(18		)	Net other revenues (expenses) from managed and franchised properties	(166)		22		(237)		(12)
Depreciation and amortization	(86		)	(79		)	(170		)	(161		)	Depreciation and amortization	(88)		(86)		(179)		(170)
General and administrative	(113		)	(115		)	(220		)	(219		)
Operating income	478			406			790			685
General and administrative expenses													General and administrative expenses	(63)		(113)		(123)		(220)
Reorganization costs													Reorganization costs	(38)		—		(38)		—
Impairment losses													Impairment losses	(15)		—		(127)		—
Operating income (loss)													Operating income (loss)	(302)		478		(234)		790
Interest expense	(101		)	(95		)	(199		)	(178		)	Interest expense	(106)		(101)		(200)		(199)
Loss on foreign currency transactions	(3		)	(12		)	(3		)	(1		)	Loss on foreign currency transactions	(13)		(3)		(4)		(3)
Other non-operating income (loss), net	(12		)	(1		)	(8		)	13
Income before income taxes	$	362		$	298		$	580		$	519
Other non-operating loss, net													Other non-operating loss, net	(23)		(12)		(23)		(8)
Income (loss) before income taxes													Income (loss) before income taxes	$	(444)	$	362	$	(461)	$	580

____________


⁽¹⁾ ⁽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.	~~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,
2019 2018
(in millions)
Management and franchise $ 11,399
$ 11,362
Ownership 1,731
927
Corporate and other 2,010
1,706
$ 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 other 21
9
$ 46
$ 28


	June 30,		December 31,
	2020		2019
	(in millions)
Management and franchise	$	11,031	$	11,455
Ownership	1,323		1,610
Corporate and other	4,772		1,892
	$	17,126	$	14,957

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.~~shortfalls, creating variable interests in the ownership entities of the hotels, of which we are not the primary beneficiary. As of June 30, ~~2019,~~2020, we had ~~six~~4 performance guarantees, with expirations ranging from ~~December 2019~~2023 to 2039, and possible cash outlays totaling approximately ~~$39~~$19 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. AsWe have included the impact of the COVID-19 pandemic on these hotels in our expectations of their future operating performance and, as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we accrued current liabilities of $7$10 million and ~~$12~~$3 million, respectively, for ~~one~~our performance ~~guarantee related to a hotel owned by a VIE for which we were~~guarantees. We do not ~~the primary beneficiary.~~have any letters of credit pledged as collateral against our performance guarantees. We may enter into new contracts containing performance guarantees in the future, which could increase our possible cash outlays.

As of June 30, 2019, we had a $20 million guarantee for debt of a hotel that we franchise, which has an initial maturity date of February 2022 with two one-year extension options. Although we believe it is unlikely that material payments will be required under this guarantee, there can be no assurance that this will be the case. We do not have any letters of credit pledged as collateral against this guarantee or our performance guarantees.

We hold interests in VIEs, for which we are not the primary 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.

As of June 30, 2020, we guaranteed 2 loans for 3 hotels that we franchise or will franchise for a total of $30 million. One of the loans has an initial maturity date in 2022 with two one-year extension options, and the other loan will mature in 2023. As a result of the COVID-19 pandemic and our assessment of expected losses under these guarantees, we accrued a current liability of $20 million as of June 30, 2020 for the guarantee of 1 of these loans. We do not have any letters of credit pledged as collateral against these guarantees.

We have entered into ~~agreements~~an agreement with ~~owners~~the owner of ~~certain hotels~~a hotel that we ~~currently~~ manage ~~or will franchise~~ to finance capital expenditures at the ~~hotels for approximately $29 million.~~hotel. As of June 30, ~~2019,~~2020, we ~~expect~~had remaining possible cash outlays related to ~~fund $19 million~~this agreement of ~~these commitments in~~approximately $10 million; however, we cannot currently estimate the ~~remainder~~timing of ~~2019 and $10 million in 2020.~~the payments or if they will be made at all.

We receive fees from managed and franchised properties to operate our marketing, sales and brand programs on behalf of

hotel owners. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had collected an aggregate of ~~$392~~$150 million and ~~$375~~$350 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, ~~2019~~2020 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~~

Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (together, the "HWF Issuers"), which 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. Hilton Domestic Operating Company Inc. ("HOC"), which is 100 percent owned by Hilton Worldwide Finance LLC, assumed the 2024 Senior Notes, issued the 2026 Senior Notes and, in June 2019, issued the 2030 Senior Notes. The 2024 Senior Notes, 2025 Senior Notes, 2026 Senior Notes, 2027 Senior Notes and 2030 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 wholly 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 facilities 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, 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 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 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, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 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 subsidiaries 2
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 assets 4
7
86
—
146
(97 ) 146
Other —
12
31
17
162
—
222
Total intangibles and other assets 6
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 liabilities 36
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 liabilities 36
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

December 31, 2018
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
(in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ —
$ —
$ 3
$ 17
$ 383
$ —
$ 403
Restricted cash and cash equivalents —
—
34
15
32
—
81
Accounts receivable, net —
—
10
735
405
—
1,150
Intercompany receivables —
—
—
—
40
(40 ) —
Prepaid expenses —
—
52
37
80
(9 ) 160
Other —
1
1
36
154
(3 ) 189
Total current assets —
1
100
840
1,094
(52 ) 1,983
Intangibles and Other Assets:
Investments in subsidiaries 557
5,131
7,930
557
—
(14,175 ) —
Goodwill —
—
—
3,824
1,336
—
5,160
Brands —
—
—
4,404
465
—
4,869
Management and franchise contracts, net —
—
—
556
316
—
872
Other intangible assets, net —
—
—
287
128
—
415
Property and equipment, net —
—
27
65
275
—
367
Deferred income tax assets 4
—
94
—
90
(98 ) 90
Other —
23
33
22
161
—
239
Total intangibles and other assets 561
5,154
8,084
9,715
2,771
(14,273 ) 12,012
TOTAL ASSETS $ 561
$ 5,155
$ 8,184
$ 10,555
$ 3,865
$ (14,325 ) $ 13,995
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other $ 10
$ 19
$ 229
$ 529
$ 765
$ (3 ) $ 1,549
Current maturities of long-term debt —
—
—
—
16
—
16
Current portion of deferred revenues —
—
106
239
14
(9 ) 350
Intercompany payables —
—
40
—
—
(40 ) —
Current portion of liability for guest loyalty program —
—
—
700
—
—
700
Total current liabilities 10
19
375
1,468
795
(52 ) 2,615
Long-term debt —
4,573
2,467
—
226
—
7,266
Deferred revenues —
—
—
762
64
—
826
Deferred income tax liabilities —
6
—
962
28
(98 ) 898
Liability for guest loyalty program —
—
—
969
—
—
969
Other —
—
211
93
559
—
863
Total liabilities 10
4,598
3,053
4,254
1,672
(150 ) 13,437
Equity:
Total Hilton stockholders' equity 551
557
5,131
6,301
2,186
(14,175 ) 551
Noncontrolling interests —
—
—
—
7
—
7
Total equity 551
557
5,131
6,301
2,193
(14,175 ) 558
TOTAL LIABILITIES AND EQUITY $ 561
$ 5,155
$ 8,184
$ 10,555
$ 3,865
$ (14,325 ) $ 13,995

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 subsidiaries 260
306
355
260
—
(1,181 ) —

Net income 260
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, 2018
Parent HWF Issuers HOC Guarantors Non-Guarantors Eliminations Total
(in millions)
Revenues
Franchise and licensing fees $ —
$ —
$ 50
$ 322
$ 36
$ (4 ) $ 404
Base and other management fees —
—
1
55
28
—
84
Incentive management fees —
—
—
22
37
—
59
Owned and leased hotels —
—
—
—
392
—
392
Other revenues —
—
1
17
3
1
22
—
—
52
416
496
(3 ) 961
Other revenues from managed and franchised properties —
—
62
1,110
158
—
1,330
Total revenues —
—
114
1,526
654
(3 ) 2,291

Expenses
Owned and leased hotels —
—
—
—
352
—
352
Depreciation and amortization —
—
2
58
19
—
79
General and administrative —
—
83
—
32
—
115
Other expenses —
—
2
8
6
(4 ) 12
—
—
87
66
409
(4 ) 558
Other expenses from managed and franchised properties —
—
62
1,114
151
—
1,327
Total expenses —
—
149
1,180
560
(4 ) 1,885

Operating income (loss) —
—
(35 ) 346
94
1
406

Interest expense —
(57 ) (31 ) —
(9 ) 2
(95 )
Gain (loss) on foreign currency transactions —
—
6
(89 ) 71
—
(12 )
Other non-operating income (loss), net —
(7 ) 1
4
4
(3 ) (1 )

Income (loss) before income taxes and equity in earnings from subsidiaries —
(64 ) (59 ) 261
160
—
298

Income tax benefit (expense) —
16
14
(61 ) (50 ) —
(81 )

Income (loss) before equity in earnings from subsidiaries —
(48 ) (45 ) 200
110
—
217

Equity in earnings from subsidiaries 217
265
310
217
—
(1,009 ) —

Net income 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

Comprehensive income $ 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

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 subsidiaries 418
503
593
418
—
(1,932 ) —

Net income 418
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 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 subsidiaries 378
472
549
378
—
(1,777 ) —

Net income 378
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, 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 transfers 740
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 transfers 1,531
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

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, ~~2018.~~2019.

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 impact of the COVID-19 pandemic, 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, risks related to the impact of the COVID-19 pandemic, 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, ~~2018.~~2019 and "Part II. Other Information—Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. 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.

COVID-19 Pandemic

During the six months ended June 30, 2020, the COVID-19 pandemic significantly impacted the global economy and strained the hospitality industry due to travel restrictions and stay-at-home directives in place at various times during the period, resulting in cancellations and significantly reduced travel around the world. The reduction in travel has resulted in complete and partial suspensions of hotel operations in many of the locations in which our hotels are located for an indeterminate duration, which, outside of China, largely began in mid-March, and included approximately 20 percent of our global hotel properties for some portion of the reporting period. As such, it had a material adverse impact on our results for the three and six months ended June 30, 2020, and we expect it to continue to have a material adverse impact on our results in future periods, as described below under "—Results of Operations."

As of July 31, 2020, 96 percent of our global hotel properties were open, while 260 hotels had temporarily suspended operations. Hotels that have reopened generally have experienced significantly lower occupancy as compared with periods before the onset of the pandemic.

In response to this global crisis, we have taken actions to prioritize the safety and security of our guests, employees and owners and support our communities, which have included: (i) finding alternative uses for our hotel properties, such as providing housing for first responders and healthcare workers, which included our partnership with American Express to donate up to one million hotel room nights across the U.S. to frontline medical professionals; (ii) pledging financial assistance to organizations helping those affected by COVID-19 through our Hilton Effect Foundation; and (iii) providing the option for our Hilton Honors members to donate Hilton Honors points to select foundations aiding those impacted by COVID-19. Most recently, as properties around the world are reopening and certain travel restrictions are lifted, we launched a new program, Hilton CleanStay, that will deliver a new standard of cleanliness and disinfection to our properties worldwide, and Hilton EventReady, which focuses on cleanliness and customer service specific to meetings and events. Additionally, we have taken several steps to help our business withstand this uncertain time, as detailed in "—Liquidity."

Overview

Our Business

Hilton is one of the largest ~~and fastest growing~~ hospitality companies in the world, with ~~5,872~~6,215 properties comprising ~~939,297~~983,465 rooms in ~~114~~118 countries and territories as of June 30, ~~2019.~~2020. Our premier brand portfolio includes: our luxury and lifestyle hotel brands, Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Tempo by Hilton and ~~Canopy~~Motto by Hilton; our full service hotel brands, Signia by Hilton, Hilton Hotels & Resorts, Curio 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, ~~2019,~~2020, we had ~~more than 94~~108 million members in our award-winning guest loyalty program, Hilton ~~Honors,a 21 percent increase from June 30, 2018.~~Honors.

Segments and Regions

~~Management analyzes~~We analyze 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 and (ii) ownership. The management and franchise segment provides services, including hotel management and licensing of our ~~brands.~~brands and IP. This segment generates its revenue from: (i) management and franchise fees charged to third-party hotel owners; (ii) licensing fees from HGV and strategic partnerships 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 nightly hotel room sales, food and beverage sales and other services at our owned and leased hotels.

Geographically, ~~management conducts~~we conduct 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 7372 percent of our system-wide hotel rooms as of June 30, ~~2019;~~2020; therefore, the U.S. is often analyzed separately and apart from the Americas ~~geographic~~ region and, as such, it is presented separately within the analysis herein. The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from 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 Island nations.

System Growth and Development Pipeline

Our strategic objectives include the continued expansion of our global footprint 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 license our brand ~~names.~~names and IP. 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, over time we expect to increase revenues, overall return on invested capital and cash available ~~for return~~ to ~~stockholders.~~support our business needs. While these objectives have not changed as a result of the COVID-19 pandemic, the current economic environment has posed certain challenges to the execution of our strategy, which have and may continue to include delays in openings and new development. See further discussion on our cash management policy, as detailed in "—Liquidity."

As of June 30, ~~2019,~~2020, we had ~~nearly 2,490~~over 2,700 hotels in our development pipeline that we expect to add as open hotels in our system, representing ~~approximately 373,000~~nearly 414,000 rooms under construction or approved for development throughout ~~109~~121 countries and territories, including 3735 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, ~~201,000~~of the rooms in the development pipeline, 234,000 rooms were located outside the U.S., and ~~192,000~~222,000 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~~. The U.K.'s withdrawal from the E.U. occurred on January 31, ~~2019.~~2020, beginning the implementation period, which is set to end on December 31, 2020 and can be extended up to two years. The effects of Brexit will depend on the final terms ~~on which~~that will be negotiated during the ~~U.K. will leave the E.U.,~~implementation period, 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.~~markets. While our results as of and for the six months ended June 30, ~~2019~~2020 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 asduring the ~~deadline approaches later this year.~~implementation period.

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; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results ~~are~~were not available. Of the ~~5,817~~6,160 hotels in our system as of June 30, ~~2019, 4,692~~2020, 5,018 hotels ~~have been~~were classified as comparable hotels. Our ~~1,125~~1,142 non-comparable hotels included ~~234~~192 hotels, or approximately ~~four~~three 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 otherwise not available.

When considering business interruption in the context of our definition of comparable hotels, any hotel that had completely or partially suspended operations on a temporary basis at any point during the six months ended June 30, 2020 as a result of the COVID-19 pandemic was considered to be part of the definition of comparable hotels. Despite these temporary suspensions of hotel operations, we believe that including these hotels within occupancy, average daily rate and revenue per available room, reflects the underlying results of our business for the three and six months ended June 30, 2020.

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, 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, ~~2019~~2020 and ~~2018~~2019 use the exchange rates for the three and six months ended June 30, ~~2019,~~2020, respectively.

EBITDA and Adjusted EBITDA

EBITDA reflects net income (loss), excluding interest expense, ~~a provision for~~ income ~~taxes~~tax benefit (expense) 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 related expenses; ~~(ix)~~(vi) share-based compensation; (vii) non-cash impairment; (viii) amortization of contract acquisition costs; ~~(x)~~(ix) the net effect of reimbursable costs included in other revenues and other expenses from managed and franchised properties; and ~~(xi)~~(x) other items.

We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) these measures are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within our industry. For instance, interest expense and ~~the provision for~~ income taxes are dependent on company specifics, including, among other things, 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 for leased hotels 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 (benefit), 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 cost reimbursement revenues and reimbursed expenses, as we contractually do not operate the related programs to generate a profit over the terms of the respective contracts; and (iv) other items that are not core to our operations and are not reflective of our operating 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~~tax expenses or benefits 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			Variance				Three Months Ended			Variance						Six Months Ended			Variance
	June 30, 2019			2019 vs. 2018			June 30, 2019			2019 vs. 2018				June 30, 2020			2020 vs. 2019						June 30, 2020			2020 vs. 2019
U.S.													U.S.
Occupancy	80.7		%	0.2	%	pts.	76.6		%	0.4	%	pts.	Occupancy	24.4		%	(55.9)	%	pts.	41.5		%		(34.5)	%	pts.
ADR	$	152.75		0.7	%		$	150.35		0.9	%		ADR	$	101.17		(33.2)	%		$	129.02			(13.2)	%
RevPAR	$	123.32		1.0	%		$	115.09		1.4	%		RevPAR	$	24.68		(79.7)	%		$	53.56			(52.6)	%

Americas (excluding U.S.)													Americas (excluding U.S.)
Occupancy	72.2		%	1.0	%	pts.	69.4		%	1.0	%	pts.	Occupancy	10.3		%	(60.7)	%	pts.	32.4		%		(35.8)	%	pts.
ADR	$	123.37		1.9	%		$	124.84		2.6	%		ADR	$	76.72		(32.7)	%		$	109.78			(5.9)	%
RevPAR	$	89.09		3.3	%		$	86.59		4.1	%		RevPAR	$	7.93		(90.2)	%		$	35.58			(55.3)	%

Europe													Europe
Occupancy	80.6		%	2.0	%	pts.	74.8		%	0.9	%	pts.	Occupancy	7.1		%	(72.3)	%	pts.	30.0		%		(43.1)	%	pts.
ADR	$	147.36		2.4	%		$	138.55		2.9	%		ADR	$	84.21		(39.9)	%		$	115.43			(12.6)	%
RevPAR	$	118.77		5.0	%		$	103.64		4.2	%		RevPAR	$	5.98		(94.6)	%		$	34.68			(64.1)	%

MEA													MEA
Occupancy	70.8		%	2.5	%	pts.	73.0		%	2.6	%	pts.	Occupancy	15.4		%	(50.2)	%	pts.	38.6		%		(29.8)	%	pts.
ADR	$	153.48		(3.3	)%		$	147.03		(6.3	)%		ADR	$	103.91		(28.7)	%		$	128.99			(8.8)	%
RevPAR	$	108.62		0.2	%		$	107.32		(2.8	)%		RevPAR	$	16.01		(83.3)	%		$	49.85			(48.5)	%

Asia Pacific													Asia Pacific
Occupancy	72.0		%	0.9	%	pts.	70.5		%	1.3	%	pts.	Occupancy	28.8		%	(40.7)	%	pts.	33.4		%		(34.1)	%	pts.
ADR	$	123.25		0.7	%		$	126.03		(0.4	)%		ADR	$	74.09		(33.3)	%		$	96.70			(15.5)	%
RevPAR	$	88.76		2.0	%		$	88.88		1.6	%		RevPAR	$	21.31		(72.4)	%		$	32.31			(58.2)	%

System-wide													System-wide
Occupancy	79.4		%	0.5	%	pts.	75.5		%	0.6	%	pts.	Occupancy	22.3		%	(56.1)	%	pts.	39.3		%		(35.1)	%	pts.
ADR	$	148.93		0.7	%		$	146.33		0.9	%		ADR	$	97.18		(33.2)	%		$	124.94			(12.6)	%
RevPAR	$	118.27		1.4	%		$	110.48		1.6	%		RevPAR	$	21.67		(81.0)	%		$	49.06			(53.9)	%

During the three and six months ended June 30, ~~2019,~~2020, we experienced ~~system-wide~~significant declines in RevPAR ~~growth, largely driven by improved~~in all regions compared to the same periods in 2019, due to both occupancy and ADR ~~led by strong growth trends~~decreases resulting from the COVID-19 pandemic. Our Asia Pacific region experienced the effects of the pandemic early in ~~Europe and~~2020, with suspensions of hotel operations beginning in late January. Pronounced negative results in the Americas ~~(excluding U.S.). Continued strength in Europe resulted primarily from ADR growth in southern Europe, particularly in Italy~~ and ~~Turkey, as well as RevPAR growth in Germany driven by increased ADR and occupancy. In~~EMEA regions lagged the Americas (excluding U.S.), RevPAR growth was attributable to increased demand in the Caribbean and Latin America, as well as RevPAR growth in Colombia and Brazil driven by increases in both ADR and occupancy. RevPAR growth in the U.S. was driven by improved ADR, primarily due to transient demand, particularly at our luxury properties. Growth in Asia Pacific ~~was primarily attributable to RevPAR growth~~region, with hotel suspensions in ~~Japan due to increased demand, partially offset by relatively flat results~~those regions beginning in ~~China due to a decline in domestic travel. For~~mid-March. Of the three months ended June 30, 2019, RevPAR remained constant in the 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 forapproximately 1,205 properties that had suspended hotel operations at some point during the six months ended June 30, ~~2019.~~2020, approximately 46 percent were in the U.S., 10 percent were in the Americas (excluding U.S.), 23 percent were in Europe, 5 percent were in MEA and 16 percent were in Asia Pacific. As of July 31, 2020, the operations at 260 hotels, primarily located in the U.S., were temporarily suspended. However, properties that have reopened have experienced significantly lower occupancy compared with periods prior to the onset of the pandemic as business and transient demand remains lower and travel restrictions and stay-at-home directives are still in place in many areas.

On a global level, the pervasiveness of the COVID-19 impact began in late March, with its most significant adverse impact on occupancy and RevPAR seen in April. Since April, all regions, except for MEA, have experienced month over month increases in occupancy and RevPAR. We experienced the most notable recoveries in the U.S. and Asia Pacific with occupancy levels up approximately 20 percentage points and 15 percentage points, respectively, from April to June.

The table below provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:


												Three Months Ended						Six Months Ended
	Three Months Ended						Six Months Ended					June 30,						June 30,
	June 30,						June 30,					2020		2019		2020		2019
	2019			2018			2019		2018			(in millions)
	(in millions)
Net income	$	261		$	217		$	420	$	380
Net income (loss)											Net income (loss)	$	(432)	$	261	$	(414)	$	420
Interest expense	101			95			199		178		Interest expense	106		101		200		199
Income tax expense	101			81			160		139
Income tax expense (benefit)											Income tax expense (benefit)	(12)		101		(47)		160
Depreciation and amortization	86			79			170		161		Depreciation and amortization	88		86		179		170
EBITDA	549			472			949		858		EBITDA	(250)		549		(82)		949
Loss on foreign currency transactions	3			12			3		1		Loss on foreign currency transactions	13		3		4		3
FF&E replacement reserves	15			15			29		27		FF&E replacement reserves	7		15		21		29
Share-based compensation expense	47			40			81		68		Share-based compensation expense	24		47		12		81
Reorganization costs											Reorganization costs	38		—		38		—
Impairment losses											Impairment losses	15		—		127		—
Amortization of contract acquisition costs	7			7			14		14		Amortization of contract acquisition costs	7		7		15		14
Net other expenses (revenues) from managed and franchised properties	(22		)	(3		)	12		18		Net other expenses (revenues) from managed and franchised properties	166		(22)		237		12
Other adjustment items⁽¹⁾	19			12			29		14		Other adjustment items⁽¹⁾	31		19		42		29
Adjusted EBITDA	$	618		$	555		$	1,117	$	1,000	Adjusted EBITDA	$	51	$	618	$	414	$	1,117

____________


⁽¹⁾	~~Includes adjustments for expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities, severance and other items.~~

~~Revenues~~

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)
Franchise and licensing fees $ 444
$ 404
9.9 $ 826
$ 735
12.4

Base and other management fees $ 89
$ 84
6.0 $ 169
$ 161
5.0
Incentive management fees 58
59
(1.7) 113
114
(0.9)
Total management fees $ 147
$ 143
2.8 $ 282
$ 275
2.5

~~Franchise~~⁽¹⁾Includes severance not related to the reorganization and ~~licensing fees increased during~~other items. The three and six months ended June 30, 2020 also include losses related to the disposal of an investment and an accrual for a loan guarantee for a franchised hotel. The three and six months ended June 30, 2019 also include expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities.

Revenues


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Franchise and licensing fees	$	132	$	444	(70.3)	$	471	$	826	(43.0)

Base and other management fees	$	8	$	89	(91.0)	$	68	$	169	(59.8)
Incentive management fees	(5)		58		NM⁽¹⁾	18		113		(84.1)
Total management fees	$	3	$	147	(98.0)	$	86	$	282	(69.5)

____________

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

The COVID-19 pandemic and the related reduction in global travel and tourism resulted in the complete or partial suspensions of hotel operations at approximately 1,170 of our managed and franchised properties at some point during the six months ended June 30, 2020. Of these hotels, more than half had reopened as of June 30, 2020.

On a comparable basis, decreases in occupancy and ADR led to reduced RevPAR, resulting in decreases in franchise fees and management fees from our comparable managed and franchised properties. For the three months ended June 30, 2020, RevPAR decreased 77.9 percent at our comparable franchised properties and 88.3 percent at our comparable managed properties, resulting from reduced occupancy of 54.6 percentage points and 59.7 percentage points, respectively, and reduced ADR of 29.1 percent and 44.7 percent, respectively. For the six months ended June 30, 2020, RevPAR decreased 51.6 percent at our comparable franchised properties and 58.7 percent at our comparable managed properties, resulting from reduced occupancy of 33.6 percentage points and 39.3 percentage points, respectively, and reduced ADR of 12.2 percent and 10.7 percent, respectively.

Incentive fees decreased during the periods as they are based on hotels' operating profits, which have declined and are expected to continue to decline as a result of ~~increases~~the COVID-19 pandemic. For the three months ended June 30, 2020, we reversed incentive fees that were recognized in ~~RevPAR at our comparable franchised hotels of 1.2 percent~~the previous period due to the expectation that stated return thresholds to the hotel owners would no longer be met.

Management and ~~1.5 percent, respectively, driven by increases in both occupancy~~franchise and ~~ADR, which were partially offset by unfavorable foreign currency exchange rates. Additionally,~~ licensing fees also decreased on a non-comparable basis. Licensing and other fees ~~increased $16~~decreased $48 million and ~~$49~~$53 million during the three and six months ended June 30, ~~2019,~~2020, respectively, ~~which, for~~primarily due to decreased licensing fees from both our strategic partnerships and HGV as a result of the COVID-19 pandemic. The six months ended June 30, ~~2019,~~2020, also included ~~an increase~~a $12 million decrease in termination fees, ~~of $13 million, primarily related~~attributable to a termination fee that was recognized in 2019 for 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 1.7 percent and 1.6 percent, respectively, mainly driven by increases in occupancy, which were offset by unfavorable foreign currency exchange rates.

Including new development and ownership type transfers, from January 1, ~~2018~~2019 to June 30, ~~2019,~~2020, we added ~~587~~532 managed and franchised properties on a net basis, providing an additional ~~83,645~~71,073 rooms to our management and franchise segment. AsWhile we have historically experienced increases to management and franchise fees as new hotels ~~stabilize in our system, we expect the fees received from such hotels to increase as they~~ are a part of our system for full ~~periods.~~

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)

periods, the impact of the COVID-19 pandemic has outweighed the impact of these property additions in 2020.


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Owned and leased hotels	$	31	$	387	(92.0)	$	241	$	699	(65.5)

Owned and leased hotel ~~revenues~~revenues decreased ~~duri~~ngprimarily due to the COVID-19 pandemic and the related reduction in global travel and tourism. As a result of the COVID-19 pandemic, approximately 35 hotels in our ownership segment had temporarily suspended operations at some point in time during the six months ended June 30, 2020, of which nearly 10 hotels had reopened as of June 30, 2020. On a comparable basis, decreases in occupancy and ADR led to reduced RevPAR, resulting in decreases in revenues from our comparable owned and leased hotels. For the three and six months ended June 30, ~~2019 primarily as a result~~2020, RevPAR decreased 96.0 percent and 67.9 percent, respectively, resulting from reduced occupancy of ~~unfavorable fluctuations in foreign currency exchange rates, which decreased revenues by~~ ~~$20 million~~73.5 percentage points and ~~$42 million,~~45.1 percentage points, respectively, and reduced ADR of 41.6 percent and 16.1 percent, respectively.

~~On a currency neutral basis, revenues at our comparable~~ Additionally, owned and leased ~~hotels~~ ~~increased $14~~hotel revenues decreased $12 million and ~~$16~~$28 million during the three and six months ended June 30, ~~2019,~~2020, respectively, due tto properties that were transferred to our managed and franchised segment during 2019.


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Other revenues	$	10	$	26	(61.5)	$	33	$	52	(36.5)

The decreases in other revenues during the three and six months ended June 30, 2020 were primarily due to decreases in revenues from our purchasing operations related to delayed hotel improvement projects and lower volume purchasing based on reduced hotel demand as a result of the COVID-19 pandemic.

Operating Expenses


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Owned and leased hotels	$	95	$	334	(71.6)	$	334	$	632	(47.2)

Owned and leased hotel expen~~o 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.~~ses ~~Revenues~~decreased primarily due to decreases in occupancy resulting from the COVID-19 pandemic and approximately 35 hotels suspending operations at ~~our non-comparable~~some point during the six months ended June 30, 2020. Further, as a result of declining performance, variable rent expense was reduced at most leased hotels with a variable rent structure. However, certain fixed costs of maintaining these hotels, even while temporarily closed or operating with very low occupancy, could not be reduced at the same rate as the hotel revenue decreases during the periods. Additionally, owned and leased hotel expenses decreased $11 million and $25 million during the six months ended June 30, 2020 related to properties that were transferred to our managed and franchised segment during 2019.


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Depreciation and amortization	$	88	$	86	2.3	$	179	$	170	5.3
General and administrative	63		113		(44.2)	123		220		(44.1)
Reorganization costs	38		—		NM⁽¹⁾	38		—		NM⁽¹⁾
Impairment losses	15		—		NM⁽¹⁾	127		—		NM⁽¹⁾
Other expenses	13		15		(13.3)	27		35		(22.9)

____________

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

The increases in depreciation and amortization expense were primarily due to increases in amortization expense resulting from additions to capitalized software costs during 2020 and 2019, partially offset by reduced amortization expense due to impairment losses on other intangible assets related to our leased properties that were recognized during the six months ended June 30, 2020.

General and administrative expenses decreased primarily as a result of actions taken by the Company during the three and six months ended June 30, 2020 to reduce or eliminate certain corporate costs in response to the COVID-19 pandemic; refer to "—Liquidity and Capital Resources" for additional information. These actions are expected to also reduce costs in future periods. In addition, share-based compensation expense decreased due to the determination that the performance conditions of our outstanding 2018 and 2019 performance shares were no longer probable of achievement, resulting in a reversal of previously recognized expense for the outstanding 2019 performance awards during the three and six months ended June 30, 2020 and for the outstanding 2018 performance awards during the six months ended June 30, 2020; see Note 10: "Share-Based Compensation" in our unaudited condensed consolidated financial statements for additional information.

During the three and six months ended June 30, 2020, we recognized reorganization costs related to activities undertaken in response to the COVID-19 pandemic, primarily relating to reductions in our workforce and associated costs.

During the three months ended June 30, 2020, we recognized $6 million and $9 million of impairment losses on hotel operating lease ROU assets and management contract acquisition costs, respectively. During the six months ended June 30, 2020, we recognized $51 million, $21 million, $9 million and $46 million of impairment losses on hotel operating lease ROU assets, property and equipment related to our leased properties, management contract acquisition costs and other intangible assets related to our leased hotel properties, respectively. These impairment losses were due to a decline in results and expected future performance at the related hotels ~~remained relatively flat~~as a result of the COVID-19 pandemic.

Other expenses decreased primarily as a result of decreases in expenses from our purchasing operations, resulting from reduced demand, partially offset by an increase in amounts accrued related to our performance guarantees.

Non-operating Income and Expenses


	Three Months Ended					Percent		Six Months Ended			Percent
	June 30,					Change		June 30,			Change
	2020		2019		2020 vs. 2019	2020		2019		2020 vs. 2019
	(in millions)							(in millions)
Interest expense	$	(106)	$	(101)	5.0	$	(200)	$	(199)	0.5
Loss on foreign currency transactions	(13)		(3)		NM⁽¹⁾	(4)		(3)		33.3
Other non-operating loss, net	(23)		(12)		91.7	(23)		(8)		NM⁽¹⁾
Income tax benefit (expense)	12		(101)		NM⁽¹⁾	47		(160)		NM⁽¹⁾

____________

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

The increases in interest expense were primarily due to the issuance of the 4.875% Senior Notes due 2030 in June 2019, the full draw down on the Revolving Credit Facility in March 2020 and the issuances of the 5.375% 2025 Senior Notes and the 2028 Senior Notes in April 2020. The increases were partially offset by a decrease in interest expense on our Term Loans due to a 2019 principal repayment of $500 million and a lower variable interest rate, as well as decreased variable interest expense of certain finance leases for our hotels that resulted from a decline in operating performance.

The losses on foreign currency transactions included changes in foreign currency exchange rates on certain intercompany financing arrangements, including short-term cross-currency intercompany loans. The changes were the result of various currencies, but, for the three months ended June 30, 2020, were primarily related to changes in the Australian dollar.

Other non-operating loss, net for the three and six months ended June 30, ~~2019~~,2020 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, 2019 primarily as a result of increases in revenues from our purchasing operations.~~

~~Operating Expenses~~

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 expenses decreased during the three and six months ended June 30, 2019 primarily as a result of fluctuations in foreign currency exchange rates, which decreased~~ ~~expenses by~~ ~~$19 million and $41 million,~~ ~~respectively.~~

On a currency neutral basis, owned and leased hotel expenses remained flat for the three and six months ended June 30, 2019, primarily due to occupancy remaining flat at our comparable hotels and, at our non-comparable hotels, decreases in expenses resulting from lease terminations that occurred during the six months ended June 30, 2019, offset by increases in expenses from hotels that were under renovation in 2018.

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)
Depreciation and amortization $ 86
$ 79
8.9 $ 170
$ 161
5.6
General and administrative 113
115
(1.7) 220
219
0.5
Other expenses 15
12
25.0 35
26
34.6

The increases in depreciation and amortization expense during the three and six months ended June 30, 2019 were primarily the result of additions to capitalized software that were placed into service from January 1, 2018 to ~~June 30, 2019.~~

General and administrative expenses remained flat during the three and six months ended June 30, 2019 primarily as a result of increases in share-based compensation costs driven by Company performance being offset by other general corporate expenses.

~~Other~~ ~~expenses increased during the six months ended June 30, 2019 primarily as a result of increases in expenses from our purchasing operations.~~

~~Non-operating Income and Expenses~~

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)
Interest expense $ (101 ) $ (95 ) 6.3 $ (199 ) $ (178 ) 11.8
Loss on foreign currency transactions (3 ) (12 ) (75.0) (3 ) (1 )
NM⁽¹⁾
Other non-operating income (loss), net (12 ) (1 )
NM⁽¹⁾
(8 ) 13

NM⁽¹⁾
Income tax expense (101 ) (81 ) 24.7 (160 ) (139 ) 15.1

~~___________~~


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

The increases in interest expense during the three and six months ended June 30, 2019 were primarily due to the issuance of the 2026 Senior Notes in April 2018 and draws on the Revolving Credit Facility during 2019, partially offset by decreases in interest expense due to principal repayments on our Term Loans totaling $800 million during 2018 and a reduction in the interest 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 interest rate swaps in 2018 and 2017.

~~The net~~included losses ~~on foreign currency transactions primarily~~ related to ~~changes in foreign currency exchange rates on our short-term cross-currency intercompany loans. For the three and six months ended June 30, 2019, the changes were predominantly~~an accrual for ~~loans denominated in EUR~~a loan guarantee for a franchised hotel and 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 EUR, and, for the six months ended June 30, 2018, also AUD.

~~The increases in other~~disposal of an investment. Other non-operating loss, net for the three and six months ended June 30, 2019 ~~were~~ primarily ~~due to~~included a loss on the disposal of an unconsolidated real estate investment ~~in 2019~~ and expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities. ~~Additionally, for the six months ended June 30, 2019, we recognized a gain on the 2018 refinancing of a loan we issued to finance the construction of a hotel that we manage.~~

The ~~increases~~changes in the income tax ~~expense during the three and six months ended June 30, 2019~~provisions were primarily attributable to ~~increases~~decreases in income before income taxes, ~~during~~offset by reductions in the ~~periods.~~tax benefits recognized for the expected NOLs generated in 2020 in certain foreign jurisdictions. For additional information, see Note 9: "Income Taxes" in our unaudited condensed consolidated financial statements.

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~~reconciliations of revenues for our reportable segments to consolidated amounts and of segment operating income to consolidated income (loss) before income ~~taxes and additional information on the evaluation of the~~taxes. We evaluate our business segment operating performance ~~of our segments~~ using segment operating ~~income. The following table sets forth~~income (loss), without allocating other revenues and ~~operating income by segment:~~

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)
Revenues:
Management and franchise⁽¹⁾
$ 609
$ 565
7.8 $ 1,141
$ 1,043
9.4
Ownership 387
392
(1.3) 699
726
(3.7)
Segment revenues 996
957
4.1 1,840
1,769
4.0
Amortization of contract acquisition costs (7 ) (7 ) — (14 ) (14 ) —
Other revenues 26
22
18.2 52
45
15.6
Other revenues from managed and franchised properties 1,480
1,330
11.3 2,829
2,584
9.5
Intersegment fees elimination⁽¹⁾
(11 ) (11 ) — (19 ) (19 ) —
Total revenues $ 2,484
$ 2,291
8.4 $ 4,688
$ 4,365
7.4

Operating Income⁽¹⁾:

Management and franchise $ 609
$ 565
7.8 $ 1,141
$ 1,043
9.4
Ownership 42
29
44.8 48
35
37.1
Segment operating income $ 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.

expenses or general and administrative expenses.

~~Management and franchise segment revenues and operating income increa~~
~~sed $44 million and $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 th~~e increases~~the decreases in r~~evenues~~revenues from our managed and franchised ~~properties.~~

~~Ownership segment revenues decreased $5 million~~properties, which are correlated to our management and ~~$27 million~~ ~~during the three and six months ended June 30, 2019, respectively, primarily as a result of fluctuations in foreign currency exchange rates. Ownership operating income increased $13 million during both the three and six months ended June 30, 2019,~~ ~~as a result of decreases in owned and leased hotel expenses, which was primarily a result of fluctuations in foreign currency exchange rates, only partially offset by the decreases in~~franchise segment revenues ~~due to foreign currency exchange rates.~~and segment operating income. Refer to "—Revenues" and "—Operating Expenses" for further discussion of the ~~changes~~decreases in revenues and operating expenses at our owned and leased ~~hotels.~~hotels, which are correlated with our ownership segment revenues and segment operating income (loss).

Liquidity and Capital Resources

Overview

As of June 30, ~~2019,~~2020, we had total cash and cash equivalents of ~~$718~~$3,575 million, including ~~$83~~$72 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.~~programs and cash held for FF&E reserves.

~~In June 2019,~~Although we ~~issued~~cannot presently estimate the ultimate and total financial impact of the unprecedented COVID-19 pandemic, which is highly dependent on the severity and duration of the pandemic, we expect it will continue to have a significant adverse impact on our results of operations. As such, due to the uncertainties associated with the COVID-19 pandemic and the indeterminate length of time it will affect the hospitality industry, we have taken certain proactive measures to secure our liquidity position to be able to meet our obligations for the foreseeable future, which have included: (i) fully drawing down on our $1.75 billion Revolving Credit Facility; (ii) suspending dividend payments and share repurchases; (iii) implementing strict cost management measures, such as temporarily halting marketing programs, temporarily eliminating non-essential expenses, including capital expenditures, and reducing payroll and related costs through workforce reductions, furloughs and temporary salary reductions; (iv) consummating the Honors Points Pre-Sale; and (v) issuing $1.0 billion ~~2030 Senior Notes, and used a portion~~aggregate principal amount 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.senior notes.

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 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. We expect to pay a significant portion of the reorganization costs recognized during the three months ended June 30, 2020 in the three months ending September 30, 2020. While our accounts receivable balance as of June 30, 2020 is less than prior periods, we are generally experiencing slower payment of certain fees due to us. As such, we have considered the implications of these delayed payment trends in developing our estimates of expected future credit losses.

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 have currently suspended dividend payments and share repurchases, but expect that these activities will result in uses of liquidity in future periods.

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, while minimizing operational costs. Further, we have ana long-term 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. However, the COVID-19 pandemic has caused us to temporarily change our cash management strategy as described above. Within the framework of our long-term investment policy, we currently intend to continue to finance our business activities primarily with cash on our balance sheet as of June 30, 2020 and cash generated from our operations.

After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position 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 an estimated period of at least 24 months, even at very low occupancy levels. The objectives of our cash management policy are to maintain the availability of liquidity while minimizing operational costs.

We 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 transactions, privately negotiated transactions or otherwise. Issuances 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~~We formally suspended share repurchases given the current economic environment and our efforts to preserve cash, and no share repurchases were made after March 5, 2020. The stock repurchase program remains authorized by the board of directors, and we may resume share repurchases in the future at any time, depending on market conditions, our capital needs and other factors. Prior to the suspension, during the six months ended June 30, ~~2019,~~2020, we repurchased 82.6 million shares of our common stock under our stock repurchase program for ~~$679~~$279 million, which we funded principally with available cash. As of June 30, ~~2019,~~2020, approximately ~~$1.4~~$2.2 billion remained available for share repurchases under ~~our $3.5 billion stock repurchase~~the program.

Sources and Uses of Our Cash and Cash Equivalents

The following table summarizes our net cash flows:


	Six Months Ended					Percent
	June 30,					Change
	2020		2019		2020 vs. 2019
	(in millions)
Net cash provided by operating activities	$	946	$	650	45.5
Net cash used in investing activities	(76)		(95)		(20.0)
Net cash provided by (used in) financing activities	2,082		(323)		NM⁽¹⁾

Six Months Ended Percent
June 30, Change
2019 2018 2019 vs. 2018
(in millions)
Net cash provided by operating activities $ 650
$ 532
22.2
Net cash used in investing activities (95 ) (75 ) 26.7
Net cash used in financing activities (323 ) (616 ) (47.6)
____________

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

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 ~~$118 million~~ increase in net cash provided by operating activities was primarily the result of ~~improved operating results~~$1.0 billion of cash received in connection with the Honors Points Pre-Sale, offset by decreases in cash inflows generated from our management and franchise ~~business, including net growth~~properties and our owned and leased hotels. The decreases were largely the result of decreases in ~~properties,~~system-wide RevPAR due to the COVID-19 pandemic, as further discussed in "—Revenues." Additionally, cash paid for taxes decreased $104 million, primarily resulting from decreases in income before income taxes, as well as ~~an increase~~NOLs that were generated in ~~licensing and other fees. The increase was partially offset by an increase~~2020 in ~~cash paid for interest and~~many foreign tax jurisdictions that had taxable income ~~taxes.~~in 2019.

Investing Activities

~~For the six months ended June 30, 2019 and 2018, net~~Net cash used in investing activities ~~consisted~~ primarily ofrelated to capital expenditures for property and equipment and capitalized software costs. Beginning in March 2020, we took steps to temporarily eliminate non-essential expenses, including capital expenditures, in response to the COVID-19 pandemic. While we do not expect to be able to fully eliminate such expenditures, we expect to materially reduce our spending on an annual basis, when compared to the prior year. Our capital expenditures for property and equipment primarily consisted of expenditures related to our corporate facilities and the renovation of hotels in our ownership segment, and our ~~corporate facilities. Our~~ capitalized software costs related to various systems initiatives, for the benefit of both our hotel owners and our overall corporate operations.

Financing Activities

The ~~decrease~~change in ~~net~~ cash ~~used in~~flows related to financing activities ~~during the six months ended June 30, 2019~~ was primarily attributable to a ~~decrease~~$1.5 billion increase 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 Blackstone Group L.P.) as part of the full 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~~under our Revolving Credit Facility, a $500 million decrease in ~~proceeds received from the June 2019~~net borrowings 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~~repayments under our Term Loans and a $400 million decrease in ~~each respective period.~~share repurchases and dividend payments.

Debt and Borrowing Capacity

As of June 30, ~~2019,~~2020, our total indebtedness, excluding unamortized deferred financing costs and discount, was approximately ~~$7.9~~$10.6 billion. For additional information on our total indebtedness, including ~~our recent financing transactions, availability under~~fully drawing down our Revolving Credit Facility, our issuance of $1.0 billion aggregate principal amount of senior notes 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 or issue additional equity ~~securities or make draws on our Revolving Credit Facility.~~securities. 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. Although our operating activities provided cash during the six months ended June 30, 2020 it was primarily a result of the Honors Points Pre-Sale. The COVID-19 pandemic negatively impacted our cash flows from operations during the period, and will continue to do so for an indeterminate period of time. We have taken precautions to secure our cash position, as discussed above, and expect to be able to meet our current obligations. Furthermore, we do not have any material indebtedness outstanding that matures prior to June 2024.

Contractual Obligations

During the six months ended June 30, 2020, we fully drew down $1.69 billion under our Revolving Credit Facility, after giving effect to the letters of credit outstanding, which matures in 2024 and is repayable by us at any time. Further, we issued $500 million aggregate principal amount of senior notes due 2025 and $500 million aggregate principal amount of senior notes due 2028. Other than ~~the issuance of the 2030 Senior Notes and the repayment of the Term Loans as described above,~~these borrowings, 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, ~~2018.~~2019.

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.

Summarized Guarantor Financial Information

HOC is the issuer of the Senior Notes and is 100 percent owned by Hilton Worldwide Parent LLC ("HWP"), which, in turn, is 100 percent owned by the Parent. The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by the Parent, HWP and substantially all of the Parent's direct and indirect wholly owned domestic restricted subsidiaries, except for HOC, the issuer (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 facilities will guarantee the Senior Notes. As of June 30, 2020, none of our foreign subsidiaries or domestic subsidiaries owned by foreign subsidiaries or conducting foreign operations or our non-wholly owned subsidiaries guaranteed the Senior Notes.

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 facilities; (iii) the subsidiary is declared "unrestricted" for covenant purposes; or (iv) 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.

HOC nor any of the Guarantors have any reporting obligation under the Exchange Act in respect of the Senior Notes;

however, we are supplementally providing the information set forth below. The following tables present summarized financial information for HOC, along with the Parent and all other Guarantors, on a combined basis:


	As of June 30, 2020
	(in millions)
ASSETS
Total current assets	$	711
Intangible assets, net	8,862
Total intangibles and other assets	9,133
TOTAL ASSETS	9,844

LIABILITIES AND DEFICIT
Total current liabilities	1,714
Long-term debt	10,301
Total liabilities	16,127
Total Hilton stockholders' deficit	(6,283)
TOTAL LIABILITIES AND DEFICIT	9,844


	Six Months Ended June 30, 2020
	(in millions)
Revenues
Revenues	$	518
Other revenues from managed and franchised properties	1,493
Total revenues	$	2,011

Expenses
Expenses	$	245
Other expenses from managed and franchised properties	1,704
Total expenses	$	1,949

Operating income	$	62
Interest expense	(193)
Income tax benefit	47
Net loss	(115)
Net loss attributable to Hilton stockholders	(115)

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, ~~2018. Since~~2019.

As a result of the ~~date~~impact of the COVID-19 pandemic on our business, we have had to reevaluate certain estimates and assumptions that affect our reported amounts. In particular, we extended the expected redemption rate of our ~~Annual Report on Form 10-K~~Hilton Honors points over the next year, which, due to the re-evaluation at March 31, 2020, resulted in reclassifications of the liabilities for guest loyalty program and deferred revenues from current to long-term of $221 million and $50 million, respectively. We continued to use the ~~fiscal year~~revised methodology as of June 30, 2020. Additionally, we recognized impairment losses of $15 million and $127 million during the three and six months ended ~~December 31, 2018, we adopted ASU 2016-02,~~June 30, 2020, respectively, which ~~has changed our critical accounting policies~~required the use of significant judgments and ~~estimates related to leases.~~estimates. See Note ~~2: "Basis of Presentation~~7: "Fair Value Measurements" and ~~Summary of Significant Accounting Policies"~~Note 5: "Finite-Lived Intangible Assets" in our unaudited condensed consolidated financial statements ~~and the discussion below~~ for additional ~~information.~~information on the impairment losses.

~~Leases~~

We record lease liabilities as the present value of the future minimum lease payments using a discount rate that is 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 asset's fair value. Refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for additional information.

As of June 30, 2019, we had $1.5 billion of operating and finance lease liabilities. Changes in the estimates used in determining the collateralized incremental borrowing rate could result in material changes to our 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 instruments 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 they are not hedged. We enter into derivative financial instruments to the extent they meet the objectives described above, and we do not use derivatives for trading or speculative purposes. 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, ~~2018.~~2019; however, given the impact that the COVID-19 pandemic has had on the global market, we continue to monitor our exposure to market risk and have adjusted, and will continue to adjust, our hedge portfolios accordingly.

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

AsFor a discussion of ~~June 30, 2019, there have been no material changes from~~our potential risks and uncertainties, see the risk factor below and 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, ~~2018.~~2019 and "Part II —Item 1A. Risk Factors" of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.

Supplemental Risk Factor

The ongoing global COVID-19 pandemic has negatively affected and will continue to negatively affect our business, financial condition and results of operations.

The COVID-19 pandemic has significantly affected the global economy and strained the hospitality industry due to travel restrictions and stay-at-home directives that have resulted in cancellations and reduced travel around the world, as well as complete and partial suspensions of certain hotel operations for an indeterminate duration. Currently, there are no fully effective vaccines or treatments for COVID-19 and the timing and efficacy of any future vaccines and treatments are uncertain. As such, COVID-19 has had a material negative impact on our results for the three and six months ended June 30, 2020, and will continue to negatively affect future results. The current and uncertain future impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel and use our hotel properties for lodging, food and beverage and other services, is expected to continue to negatively affect our results, operations, outlook, plans, growth, cash flows and liquidity.

The U.S. and other national and local governments have restricted travel and could expand such restrictions, even after they are relaxed, and a number of our hotels have fully or partially suspended operations. We have been and expect to continue to be negatively affected by additional governmental regulations and travel advisories to fight the pandemic, including recommendations by the U.S. Department of State, the Centers for Disease Control and Prevention and the World Health Organization.

We cannot predict when any of our hotels that have completely or partially suspended operations will be able to fully reopen, the conditions upon which a full reopening may occur or the effects of any such conditions. We also cannot predict if any of our hotels that are currently operational will have to completely or partially suspend operations in the future. Moreover, even where travel advisories and restrictions have been lifted, travel demand has been and is increasingly likely to remain weak for a significant length of time and we cannot predict if or when our properties will return to pre-pandemic demand or pricing. Adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of COVID-19, will negatively affect travel demand.

The steps we have taken to reduce operating costs, including temporarily reducing compensation, reducing our workforce and furloughing a substantial number of our team members, and further steps we may take in the future to reduce costs for us or our third-party hotel owners, may negatively affect our brand reputation and ability to attract and retain team members. If our furloughed team members do not return to work with us when the COVID-19 pandemic subsides, including because they find new jobs during the furlough, we may experience operational challenges that could negatively affect hotel results, guest experience and loyalty. We also may face demands or requests from labor unions that represent team members at our hotels for additional compensation, healthcare benefits or other terms, including making payments to underfunded multi-employer pension plans for covered union employees, as a result of COVID-19 that could increase costs, and we could experience labor issues as we implement our COVID-19 mitigation plans. In addition, depending on the length of the furloughs, we may need to

make severance payments to some of our furloughed team members, even if we intend to have the team members return to work in the future. Even after the COVID-19 pandemic subsides, we could still experience long-term impacts on our operating costs as a result of attempts to counteract future outbreaks of COVID-19 or other viruses through, for example, enhanced health and hygiene requirements or other such measures in one or more regions.

We cannot predict the full impact that COVID-19 will have on our partners, such as third-party owners of our properties, third-party service providers, travel agencies, suppliers and other vendors. In particular, if third-party owners of our hotels are unable to maintain their hotels and service indebtedness secured by their hotels, our results of operations and reputation could suffer. Third-party owners of our hotels have experienced financing difficulties and significant declines in revenues, thereby making it more likely that they could declare bankruptcy or face other difficulties with their lenders. Bankruptcies, sales or foreclosures involving our hotels could, in some cases, result in the termination of our management or franchise contracts and eliminate our anticipated income and cash flows, which would negatively affect our results of operations. Hotel owners with financial difficulties may be unable or unwilling to pay us amounts that we are entitled to under our existing contracts on a timely basis or at all. Current and ongoing economic conditions also could affect our ability to enter into management and franchise contracts with potential third-party owners of our hotels, who may be unable to obtain financing or face other delays in developing hotel projects. As a result, some properties in our development pipeline may not enter our system when we anticipated, or at all, and new hotels may enter our pipeline at a slower rate than in the past, thereby negatively affecting our overall growth. Likewise, if we or our hotel owners or franchisees are unable to access capital to make physical improvements to our hotels, the quality of our hotels may suffer, which may negatively impact our reputation and guest loyalty, and our market share may suffer as a result.

We may be required to raise additional capital in the future and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. Certain of our credit ratings have been downgraded or placed on credit watch, and if our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry or us, our access to capital and the cost of any debt financing would be negatively affected. In addition, the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations. There is no guarantee that debt financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. In addition, because of reduced travel demand, certain of our leased properties will not generate revenue sufficient to meet operating expenses. If or when we determine the value of our leased properties has significantly declined, we have recognized and in the future could have to recognize significant non-cash impairment charges to our results of operations. Further, to the extent COVID-19 significantly impacts spending patterns of Hilton Honors co-branded credit cardholders or the acquisition of new cardholders, we will receive lower license fees under our co-brand credit card arrangements.

The COVID-19 pandemic has significantly increased economic and demand uncertainty and could cause a global recession, which would have a further adverse impact on our financial condition and operations. The significant increase in unemployment in the U.S. and other regions due to the adoption of social distancing and other policies to slow the spread of COVID-19 is likely to have a sustained negative impact on travel demand for an indefinite period of time. The extent of the effects of COVID-19 on our business and the travel industry at large remains highly uncertain and will ultimately depend on future developments, including, but not limited to, the duration and severity of the outbreak, the timing and availability of vaccinations and other treatments to combat COVID-19, and the length of time it takes for demand and pricing to stabilize and normal economic and operating conditions to resume. Given the uncertainty as to the extent and timing of the potential future spread or mitigation of COVID-19 and the imposition or relaxation of protective measures, we are presently unable to estimate the full impact to our future results of operations, cash flows or financial condition.

Additionally, COVID-19 could negatively affect our internal controls over financial reporting as we have reduced our workforce and placed many of our team members on temporary furlough. Our remaining team members are required to work from home and, therefore, new processes, procedures and controls could be required to respond to changes in our business environment. Further, should any key team members become ill from COVID-19 and unable to work, the attention of our management team could be diverted.

The potential effects of COVID-19 also could intensify or otherwise affect many of our other risk factors that are included in "Part I —Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including, but not limited to, 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 risks related to our indebtedness. Because the COVID-19 situation is unprecedented and

continuously evolving, the other potential impacts to our risk factors that are further described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 are uncertain.

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, 2019:~~

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, 2019 817,246
$ 87.30
817,246
$ 1,693
May 1, 2019 to May 31, 2019 1,438,604
91.09
1,438,604
1,562
June 1, 2019 to June 30, 2019 1,920,936
93.92
1,920,936
1,381
Total 4,176,786
91.65
4,176,786

~~____________~~


⁽¹⁾	~~This price includes per share commissions paid.~~

⁽²⁾

In February 2019, our board of directors authorized the repurchase of an additional $1.5 billion of our common stock under our existing stock repurchase program, which was initially announced in February 2017 and increased in November 2017. Under this publicly announced program, we 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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~Effective August 8, 2020, the temporary salary reductions that were implemented for our employees, including our named executive officers, in response to the COVID-19 pandemic will be discontinued. Our President and Chief Executive Officer will continue to forgo his salary for the remainder of 2020.

Item 6. Exhibits



Exhibit Number		Exhibit Description
3.1		Certificate of Incorporation of Hilton Worldwide Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 17, 2013).
3.2		Certificate of Amendment to Certificate of Incorporation of Hilton Worldwide Holdings Inc. effective as of January 3, 2017 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on January 4, 2017).
3.3		Amended and Restated By-Laws of Hilton Worldwide Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on ~~November 17, 2017)~~August 2, 2019).
4.1		Indenture, dated as of ~~June 20, 2019,~~April 21, 2020, by and among Hilton Domestic Operating Company Inc., the guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on ~~June 24, 2019)~~April 2 2 , 2020).
4.2		Form of ~~4.875%~~5.375% Senior Note due ~~2030~~2025 (included in Exhibit 4.1).
4.3		Form of 5.750% Senior Note due 2028 (included in Exhibit 4.1).
~~Registration Rights~~10.1		Separation Agreement and General Release, dated ~~as of~~ June ~~20, 2019, by~~15, 2020, between Ian Carter and ~~among~~ Hilton Domestic Operating Company Inc., the guarantors from time to time party thereto and BofA Securities, Inc., on behalf of the initial purchasers (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on June 24, 2019).*
~~10.1~~31.1		~~Hilton 2019 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 13, 2019).~~
~~10.2~~	Amendment No. 5, dated as of June 5, 2019, to the Credit Agreement, dated as of October 25, 2013 (as amended by Amendment No. 1 to the Credit Agreement dated as of August 18, 2016, as further amended by Amendment No. 2 to the Credit Agreement dated as of November 21, 2016, as further amended by Amendment No. 3 to the Credit Agreement dated as of March 16, 2017 and as further amended by Amendment No. 4 to the Credit Agreement dated as of April 19, 2018), by and among Hilton Worldwide Holdings Inc., Hilton Worldwide Parent LLC, Hilton Worldwide Finance LLC, the other guarantors party thereto from time to time, Deutsche Bank AG New York Branch as administrative agent, collateral agent, swing line lender and L/C issuer and the other lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 7, 2019).
~~10.3~~	Amendment No. 6, dated as of June 21, 2019, to the Credit Agreement, dated as of October 25, 2013 (as amended by Amendment No. 1 to the Credit Agreement dated as of August 18, 2016, as further amended by Amendment No. 2 to the Credit Agreement dated as of November 21, 2016, as further amended by Amendment No. 3 to the Credit Agreement dated as of March 16, 2017, as further amended by Amendment No. 4 to the Credit Agreement dated as of April 19, 2018 and as further amended by Amendment No. 5 to the Credit Agreement dated as of June 5, 2019), by and among Hilton Worldwide Holdings Inc., Hilton Worldwide Parent LLC, Hilton Worldwide Finance LLC, the other guarantors party thereto from time to time, Deutsche Bank AG New York Branch as administrative agent, collateral agent, swing line lender and L/C issuer and the other lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 24, 2019).
~~31.1~~	Certificate of Christopher J. Nassetta, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certificate of Kevin J. Jacobs, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certificate of Christopher J. Nassetta, President and Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certificate of Kevin J. Jacobs, Executive Vice President and Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS		Inline XBRL Instance 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		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.


Exhibit Number						Exhibit Description
104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

____________


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

*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.

~~HILTON WORLDWIDE HOLDINGS INC.~~

By:

~~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 24, 2019~~

August 6, 2020



Year	(in millions)
2019 (remaining)	$	19
2020	35
2021	28
2022	20
2023	21
Thereafter	7,774
	$	7,897



	(dollars in millions)
Operating leases:
Operating lease right-of-use assets	$	891
Accounts payable, accrued expenses and other	131
Operating lease liabilities	1,066
Finance leases:
Property and equipment, net	$	57
Current maturities of long-term debt	37
Long-term debt	223

Weighted average remaining lease term:
Operating leases	13.0 years
Finance leases	8.9 years
	��
Weighted average discount rate:
Operating leases	3.74		%
Finance leases	5.80		%



	(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 leases	21
ROU assets obtained in exchange for lease liabilities in non-cash transactions:
Operating leases	21
Finance leases	52



	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													Noncontrolling Interests		Total
	(in millions)
Balance as of March 31, 2018	317		$	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, 2018	298		$	3	$	(2,330	)	$	10,321	$	(6,697	)	$	(742	)	$	5	$	560



	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													Noncontrolling Interests		Total
	(in millions)
Balance as of December 31, 2017	317		$	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 compensation	1		—		—			23		—			—			—		23
Balance as of June 30, 2018	298		$	3	$	(2,330	)	$	10,321	$	(6,697	)	$	(742	)	$	5	$	560



	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 subsidiaries	2			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 assets	4			7		86		—		146		(97		)	146
Other	—			12		31		17		162		—			222
Total intangibles and other assets	6			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 liabilities	36			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 liabilities	36			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



	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, 2019	817,246	$	87.30	817,246	$	1,693
May 1, 2019 to May 31, 2019	1,438,604	91.09		1,438,604	1,562
June 1, 2019 to June 30, 2019	1,920,936	93.92		1,920,936	1,381
Total	4,176,786	91.65		4,176,786

Expected volatility⁽¹⁾

~~23.51~~23.69

Dividend yield⁽²⁾

~~0.81~~0.55

Risk-free rate⁽³⁾

~~2.47~~0.96

Expected term (in years)⁽⁴⁾