What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-05-03 · 156 added, 84 removed, 362 unchanged (40% of the section changed)

3 unchanged sentences

(in millions, except share data)

March 31, December 31,

June 30, December 31,

Current Assets:

33 unchanged sentences

Preferred stock, $ 0.01 par value;

3,000,000,000 authorized shares, none issued or outstanding as of March 31, 2022 and December 31, 2021

3,000,000,000 authorized shares, none issued or outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value;

10,000,000,000 authorized shares, 332,821,509 issued and 278,994,111 outstanding as of March 31, 2022 and 332,011,359 issued and 279,091,009 outstanding as of December 31, 2021

10,000,000,000 authorized shares, 332,933,654 issued and 275,510,784 outstanding as of June 30, 2022 and 332,011,359 issued and 279,091,009 outstanding as of December 31, 2021

Treasury stock, at cost;

53,827,398 shares as of March 31, 2022 and 52,920,350 shares as of December 31, 2021

57,422,870 shares as of June 30, 2022 and 52,920,350 shares as of December 31, 2021

( 5,048 ) ( 4,443 )

13 unchanged sentences

(in millions, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Franchise and licensing fees $ 545 $ 369 $ 958 $ 611

3 unchanged sentences

Other revenues 25 21 43 38

973 574 1,643 927

Other revenues from managed and franchised properties

1,267 755 2,318 1,276

Total revenues 2,240 1,329 3,961 2,203

Owned and leased hotels

257 142 442 252

Depreciation and amortization 40 46 84 97

1 unchanged sentence

Other expenses 11 9 22 19

411 295 742 563

Other expenses from managed and franchised properties

1,231 810 2,252 1,395

Total expenses 1,642 1,105 2,994 1,958

6 unchanged sentences

Income tax benefit (expense)

Net income (loss) 211 ( 109 )

( 146 ) 1 ( 226 ) 36

Net income 367 128 578 19

Net loss attributable to noncontrolling interests

Net income (loss) attributable to Hilton stockholders $ 212 $ ( 108 )

Earnings (loss) per share:

Net income attributable to Hilton stockholders $ 368 $ 130 $ 580 $ 22

Earnings per share:

Basic $ 1.33 $ 0.47 $ 2.09 $ 0.08

Diluted $ 1.32 $ 0.46 $ 2.07 $ 0.08

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

See notes to condensed consolidated financial statements.

2 unchanged sentences

(in millions)

Three Months Ended

Net income (loss) $ 211 $ ( 109 )

Other comprehensive income (loss), net of tax expense:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Net income $ 367 $ 128 $ 578 $ 19

Other comprehensive income (loss), net of tax benefit (expense):

Currency translation adjustment, net of tax of $ 6 , $ 1 , $ 6 and $( 2 )

Pension liability adjustment, net of tax (1)

( 23 ) 8 ( 25 ) ( 21 )

Pension liability adjustment, net of tax of $( 1 ), $( 1 ), $( 1 ) and $( 1 )

Cash flow hedge adjustment, net of tax of $( 9 ), $( 2 ), $( 29 ) and $( 4 )

Total other comprehensive income (loss) 6 14 65 ( 6 )

Comprehensive income (loss) 270 ( 129 )

Comprehensive income 373 142 643 13

Comprehensive loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to Hilton stockholders

Comprehensive income attributable to Hilton stockholders

$ 374 $ 144 $ 645 $ 16

(1) Amounts were less than $ 1 million.

See notes to condensed consolidated financial statements.

2 unchanged sentences

(in millions)

Three Months Ended

Six Months Ended

Operating Activities:

Net income (loss) $ 211 $ ( 109 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net income $ 578 $ 19

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Amortization of contract acquisition costs 18 14

Depreciation and amortization expenses 84 97

Loss (gain) on foreign currency transactions 4 ( 2 )

Gain on foreign currency transactions ( 4 ) ( 1 )

Share-based compensation expense 84 92

5 unchanged sentences

Capital expenditures for property and equipment

Issuance of other financing receivables ( 46 ) —

Capitalized software costs ( 25 ) ( 16 )

Investments in unconsolidated affiliates ( 51 ) —

Other 8 ( 5 )

Net cash used in investing activities ( 94 ) ( 14 )

3 unchanged sentences

Debt issuance costs and redemption premium — ( 76 )

Dividends paid ( 41 ) —

Repurchases of common stock ( 586 ) —

1 unchanged sentence

Proceeds from share-based compensation 16 24

Settlements of interest rate swap with financing component ( 5 ) —

Net cash used in financing activities ( 679 ) ( 1,818 )

4 unchanged sentences

Supplemental Disclosures:

Cash paid (received) during the period:

Cash paid during the period:

Interest $ 183 $ 174

6 unchanged sentences

(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 intellectual property ("IP"), including brand names, trademarks and service marks.

As of March 31, 2022 , we managed, franchised, owned or leased 6,892 hotels and resorts, including timeshare properties, totaling 1,082,728 rooms in 122 countries and territories.

As of June 30, 2022 , we managed, franchised, owned or leased 6,983 hotels and resorts, including timeshare properties, totaling 1,098,321 rooms in 122 countries and territories.

Basis of Presentation

The accompanying condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and are unaudited.

The accompanying condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021 have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and are unaudited.

We have condensed or omitted certain disclosures normally included in annual financial statements presented in accordance with GAAP but that are not required for interim reporting purposes.

2 unchanged sentences

Additionally, interim results are not necessarily indicative of full year performance.

In particular, the coronavirus ("COVID-19") pandemic (the "pandemic") had an adverse impact on our results for the three months ended March 31, 2022 and 2021, when compared to periods prior to the onset of the pandemic;

however, our results experienced significant recovery during the three months ended March 31, 2022 when compared to the prior year period.

As such, this interim period, as well as upcoming periods, are unlikely to be comparable to periods prior to the onset of the pandemic or to other periods affected by the pandemic, and are not indicative of future performance.

In particular, the coronavirus ("COVID-19") pandemic (the "pandemic") had an adverse impact on our results for the three and six months ended June 30, 2022 and 2021, when compared to periods prior to the onset of the pandemic;

however, our results experienced significant recovery during the three and six months ended June 30, 2022 when compared to the prior year periods.

As such, these interim periods, as well as upcoming periods, are unlikely to be comparable to periods prior to the onset of the pandemic or to other periods affected by the pandemic, and are not indicative of future performance.

Management has made estimates and judgments in light of these circumstances.

3 unchanged sentences

Contract Liabilities

The following table summarizes the activity of our contract liabilities, which are classified as components of current and long-term deferred revenues, during the three months ended March 31, 2022:

The following table summarizes the activity of our contract liabilities, which are classified as components of current and long-term deferred revenues, during the six months ended June 30, 2022:

(in millions)

2 unchanged sentences

Revenue recognized (1)(2)

Balance as of March 31, 2022

Balance as of June 30, 2022

(1) Primarily related to Hilton Honors, our guest loyalty program, including co-branded credit card arrangements.

(2) Revenue recognized during the three months ended March 31, 2022 included $ 10 million for performance obligations that were satisfied in prior periods as a result of a change to the estimated breakage of Hilton Honors points for which point expirations have been temporarily suspended.

(2) Revenue recognized during the three months ended June 30, 2022 was $ 113 million.

Revenue recognized during the three and six months ended June 30, 2022 included a net reduction in revenue of $ 13 million and $ 3 million, respectively, as a result of a change to the estimated breakage of Hilton Honors points for which point expirations have been temporarily suspended.

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

2 unchanged sentences

Upon receipt of the cash in 2020, we recognized $ 636 million in deferred revenues and the remainder in liability for guest loyalty program.

The deferred revenues remaining as of March 31, 2022 is included in our co-branded credit card arrangement performance obligation described below.

During the six months ended June 30, 2022, the remaining points sold in the Honors Points Pre-Sale were used by American Express.

All deferred revenues related to points that were outstanding as of June 30, 2022 are included in our Hilton Honors unsatisfied performance obligation described below.

Performance Obligations

As of March 31, 2022 , we had deferred revenues for unsatisfied performance obligations consisting of:

As of June 30, 2022 , we had deferred revenues for unsatisfied performance obligations consisting of:

(i) $ 363 million related to Hilton Honors that will be recognized as revenue over approximately the next two years ;

4 unchanged sentences

Consolidated Variable Interest Entities

As of March 31, 2022 and December 31, 2021, we consolidated two variable interest entities ("VIEs") that each lease a hotel property.

As of June 30, 2022 and December 31, 2021, we consolidated two variable interest entities ("VIEs") that each lease a hotel property.

We consolidated these VIEs since we are the primary beneficiary, having the power to direct the activities that most significantly affect their economic performance.

2 unchanged sentences

Our condensed consolidated balance sheets include the assets and liabilities of these entities, which primarily comprised the following:

March 31, December 31,

June 30, December 31,

(in millions)

6 unchanged sentences

Other long-term liabilities 14 16

(1) Includes finance lease liabilities of $ 135 million and $ 153 million as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, our VIEs had revolving credit facilities with borrowing capacities totaling 4.5 billion Japanese yen ("JPY") (equivalent to $ 37 million as of March 31, 2022), with 500 million JPY (equivalent to $ 4 million as of March 31, 2022) drawn and included in long-term debt in our condensed consolidated balance sheets, resulting in available borrowing capacities totaling 4.0 billion JPY (equivalent to $ 33 million as of March 31, 2022).

During the three months ended March 31, 2022, our consolidated VIEs borrowed an aggregate of 2.1 billion JPY (equivalent to $ 17 million as of March 31, 2022), with a weighted average interest rate of 0.9 percent as of March 31, 2022 and maturity dates in February 2029, which was also included in long-term debt in our condensed consolidated balance sheet as of March 31, 2022.

(1) Includes finance lease liabilities of $ 118 million and $ 153 million as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, one of our consolidated VIEs had a revolving credit facility with a borrowing capacity of 2.0 billion Japanese yen ("JPY") (equivalent to $ 15 million), with no amounts drawn as of June 30, 2022 or December 31, 2021.

As of June 30, 2022 and December 31, 2021, our other consolidated VIE had drawn 300 million JPY (equivalent to $ 2 million) and 500 million JPY (equivalent to $ 4 million), respectively, under a revolving credit facility which did not have any remaining borrowing capacity as of June 30, 2022, and, in July 2022, the outstanding balance was repaid in full.

During the six months ended June 30, 2022, our consolidated VIEs borrowed an aggregate of 2.1 billion JPY (equivalent to $ 15 million as of June 30, 2022), with a weighted average interest rate of 0.9 percent as of June 30, 2022 and maturity dates in February 2029;

all of these borrowings were included in long-term debt in our condensed consolidated balance sheet as of June 30, 2022.

Finite-Lived Intangible Assets

1 unchanged sentence

Management and franchise contracts, net were as follows:

March 31, 2022

June 30, 2022

Gross Carrying Value Accumulated Amortization Net

22 unchanged sentences

Amortization of our finite-lived intangible assets was as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in millions)

Recognized in depreciation and amortization expenses (1)

Recognized as a reduction of franchise and licensing fees and

base and other management fees

(1) Includes amortization expense associated with assets that were initially recorded at fair value at the time of the Merger of $ 12 million for both the three months ended March 31, 2022 and 2021.

Long-term debt balances, including obligations for finance leases, and associated interest rates and maturities as of March 31, 2022, were as follows:

March 31, December 31,

$ 29 $ 33 $ 61 $ 71

Recognized as a reduction of franchise and licensing fees and base and other management fees

(1) Includes amortization expense associated with assets that were initially recorded at fair value at the time of the Merger of $ 11 million and $ 12 million for the three months ended June 30, 2022 and 2021, respectively, and $ 23 million and $ 24 million for the six months ended June 30, 2022 and 2021, respectively.

Long-term debt balances, including obligations for finance leases, and associated interest rates and maturities as of June 30, 2022, were as follows:

June 30, December 31,

(in millions)

18 unchanged sentences

(3) Represents current maturities of finance lease liabilities and the outstanding borrowings under the revolving credit facility of a consolidated VIE.

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.

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 Loan").

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 restricted subsidiaries.

As of March 31, 2022, we had $ 60 million of letters of credit outstanding under the Revolving Credit Facility, resulting in an available borrowing capacity of $ 1,690 million.

As of June 30, 2022, we had $ 60 million of letters of credit outstanding under the Revolving Credit Facility, resulting in an available borrowing capacity of $ 1,690 million.

Fair Value Measurements

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

March 31, 2022

June 30, 2022

Hierarchy Level

14 unchanged sentences

(1) Interest rate swaps are included in other non-current assets or other long-term liabilities in our condensed consolidated balance sheets depending on their value to us as of the balance sheet date.

During the three months ended March 31, 2022, one of the interest rate swaps that was outstanding as of December 31, 2021 matured.

The remaining interest rate swap as of March 31, 2022 will mature in March 2026.

(2) The carrying values include unamortized deferred financing costs and discount.

During the six months ended June 30, 2022, one of the interest rate swaps that was outstanding as of December 31, 2021 matured.

The remaining interest rate swap as of June 30, 2022 will mature in March 2026.

(2) The carrying values include the deduction for unamortized deferred financing costs and discount.

The carrying values and fair values exclude finance lease liabilities and other debt of consolidated VIEs.

We measure our interest rate swaps at fair value, which 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.

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of March 31, 2022 and December 31, 2021.

Our effective income tax rate for the three months ended March 31, 2022 was based on our estimated effective income tax rate expected to be applied for the full year.

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of June 30, 2022 and December 31, 2021.

At the end of each quarter, we estimate the effective income tax rate expected to be applied for the full year.

The effective income tax rate is determined by the level and composition of income (loss) before income taxes, which is subject to federal, state, local and foreign income taxes.

As of December 31, 2021, we had entered into a tentative agreement with the Internal Revenue Service, subject to approval by the Joint Committee on Taxation, to settle our federal examination through the 2010 tax year.

The settlement was approved by the Joint Committee on Taxation during the three months ended June 30, 2022.

The assets and liabilities relating to the settlement were previously recognized as of December 31, 2021, and no adjustments were necessary as a result of the settlement approval.

Share-Based Compensation

We recognized share-based compensation expense of $ 37 million and $ 39 million during the three months ended March 31, 2022 and 2021, respectively, which included amounts reimbursed by hotel owners.

We recognized share-based compensation expense of $ 47 million and $ 53 million during the three months ended June 30, 2022 and 2021, respectively, and $ 84 million and $ 92 million during the six months ended June 30, 2022 and 2021, respectively, which included amounts reimbursed by hotel owners.

Our share-based compensation primarily consists of awards that we grant to eligible employees under the Hilton 2017 Omnibus Incentive Plan (the "2017 Plan") and includes time-vesting restricted stock units ("RSUs"), nonqualified stock options ("options") and performance-vesting RSUs ("performance shares").

As of March 31, 2022, unrecognized compensation costs for unvested awards under the 2017 Plan were approximately $ 232 million, which are expected to be recognized over a weighted-average period of 1.9 years on a straight-line basis.

During the three months ended March 31, 2022, we granted 503,000 RSUs with a weighted average grant date fair value per share of $ 150.67 , which vest in equal annual installments over two or three years from the date of grant.

During the three months ended March 31, 2022, we granted 318,000 options with an exercise price per share of $ 150.67 , which vest in equal annual installments over three years from the date of grant and terminate 10 years from the date of grant or earlier if the individual’s service terminates under certain circumstances.

The grant date fair value per share of the options granted during the three months ended March 31, 2022 was $ 51.15 , which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

As of June 30, 2022, unrecognized compensation costs for unvested awards under the 2017 Plan were approximately $ 181 million, which are expected to be recognized over a weighted-average period of 1.8 years on a straight-line basis.

During the six months ended June 30, 2022, we granted 505,000 RSUs with a weighted average grant date fair value per share of $ 150.67 , which vest in equal annual installments over two or three years from the date of grant.

During the six months ended June 30, 2022, we granted 318,000 options with an exercise price per share of $ 150.67 , which vest in equal annual installments over three years from the date of grant and terminate 10 years from the date of grant or earlier if the individual’s service terminates under certain circumstances.

The grant date fair value per share of the options granted during the six months ended June 30, 2022 was $ 51.15 , which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

Expected volatility (1)

9 unchanged sentences

Performance Shares

During the three months ended March 31, 2022, we granted 216,000 performance shares with a grant date fair value per share of $ 150.67 .

During the six months ended June 30, 2022, we granted 216,000 performance shares with a grant date fair value per share of $ 150.67 .

We recognize compensation expense based on the total number of performance shares that are expected to vest as determined by the projected achievement of each of the performance measures, which are estimated each reporting period and range from zero percent to 200 percent, with 100 percent being the target.

As of March 31, 2022, we determined that all of the performance measures for the outstanding performance shares were probable of achievement, with the applicable achievement factors estimated to be between the target and maximum achievement percentages for the performance shares granted in 2020 and 2021 and at target for the performance shares granted in 2022.

Earnings (Loss) Per Share

The following table presents the calculation of basic and diluted earnings (loss) per share ("EPS"):

Three Months Ended

As of June 30, 2022, we determined that all of the performance measures for the outstanding performance shares were probable of achievement, with the average of the achievement factors estimated to be between the target and maximum achievement percentages for the performance shares granted in 2020 and 2021 and at target for the performance shares granted in 2022.

Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS"):

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in millions, except per share amounts)

Net income (loss) attributable to Hilton stockholders

Net income attributable to Hilton stockholders

$ 368 $ 130 $ 580 $ 22

1 unchanged sentence

Basic EPS $ 1.33 $ 0.47 $ 2.09 $ 0.08

Net income (loss) attributable to Hilton stockholders

Net income attributable to Hilton stockholders

$ 368 $ 130 $ 580 $ 22

Weighted average shares outstanding (1)

280 281 281 281

Diluted EPS $ 1.32 $ 0.46 $ 2.07 $ 0.08

(1) Certain shares related to share-based compensation were excluded from the calculations of diluted EPS because their effect would have been anti-dilutive under the treasury stock method, including less than 1 million and 3 million shares for the three months ended March 31, 2022 and 2021, respectively.

(1) Certain shares related to share-based compensation were excluded from the calculations of diluted EPS because their effect would have been anti-dilutive under the treasury stock method, including 1 million and less than 1 million shares for the three and six months ended June 30, 2022, respectively, and less than 1 million shares for both the three and six months ended June 30, 2021.

Stockholders' Equity (Deficit) and Accumulated Other Comprehensive Loss

The following tables present the changes in the components of stockholders' equity (deficit):

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Equity (Deficit) Attributable to Hilton Stockholders

5 unchanged sentences

(in millions)

Balance as of December 31, 2021 279 $ 3 $ ( 4,443 ) $ 10,720 $ ( 6,322 ) $ ( 779 ) $ 2 $ ( 819 )

Balance as of March 31, 2022 279.0 $ 3 $ ( 4,573 ) $ 10,702 $ ( 6,110 ) $ ( 720 ) $ 1 $ ( 697 )

Net income (loss) — — — — 368 — ( 1 ) 367

1 unchanged sentence

— — — — — 6 — 6

Dividends (1)

— — — — ( 41 ) — — ( 41 )

Repurchases of common stock (2)

2 unchanged sentences

0.1 — 5 51 — — — 56

Balance as of June 30, 2022 275.5 $ 3 $ ( 5,048 ) $ 10,753 $ ( 5,783 ) $ ( 714 ) $ — $ ( 789 )

Three Months Ended June 30, 2021

Equity (Deficit) Attributable to Hilton Stockholders

Treasury Stock Additional

Capital Accumulated Deficit Accumulated

Comprehensive

Common Stock Noncontrolling

Shares Amount Total

(in millions)

Balance as of March 31, 2021 278.5 $ 3 $ ( 4,453 ) $ 10,547 $ ( 6,840 ) $ ( 880 ) $ 3 $ ( 1,620 )

(1) Beginning in March 2022, we resumed share repurchases under our previously authorized stock repurchase program.

Three Months Ended March 31, 2021

Net income (loss) — — — — 130 — ( 2 ) 128

Other comprehensive income

— — — — — 14 — 14

Share-based compensation

0.2 — 6 56 — — — 62

Balance as of June 30, 2021 278.7 $ 3 $ ( 4,447 ) $ 10,603 $ ( 6,710 ) $ ( 866 ) $ 1 $ ( 1,416 )

Six Months Ended June 30, 2022

Equity (Deficit) Attributable to Hilton Stockholders

6 unchanged sentences

Balance as of December 31, 2021 279.1 $ 3 $ ( 4,443 ) $ 10,720 $ ( 6,322 ) $ ( 779 ) $ 2 $ ( 819 )

Net loss — — — — ( 108 ) — ( 1 ) ( 109 )

Net income (loss) — — — — 580 — ( 2 ) 578

Other comprehensive income

— — — — — 65 — 65

Dividends (1)

— — — — ( 41 ) — — ( 41 )

Repurchases of common stock (2)

( 4.5 ) — ( 610 ) — — — — ( 610 )

Share-based compensation

0.9 — 5 33 — — — 38

Balance as of June 30, 2022 275.5 $ 3 $ ( 5,048 ) $ 10,753 $ ( 5,783 ) $ ( 714 ) $ — $ ( 789 )

Six Months Ended June 30, 2021

Equity (Deficit) Attributable to Hilton Stockholders

Treasury Stock Additional

Capital Accumulated Deficit Accumulated

Comprehensive

Common Stock Noncontrolling

Shares Amount Total

(in millions)

Balance as of December 31, 2020 277.6 $ 3 $ ( 4,453 ) $ 10,552 $ ( 6,732 ) $ ( 860 ) $ 4 $ ( 1,486 )

Net- income (loss) — — — — 22 — ( 3 ) 19

Other comprehensive loss

2 unchanged sentences

1.1 — 6 51 — — — 57

Balance as of March 31, 2021 279 $ 3 $ ( 4,453 ) $ 10,547 $ ( 6,840 ) $ ( 880 ) $ 3 $ ( 1,620 )

Balance as of June 30, 2021 278.7 $ 3 $ ( 4,447 ) $ 10,603 $ ( 6,710 ) $ ( 866 ) $ 1 $ ( 1,416 )

(1) During the three months ended June 30, 2022, we resumed payment of regular quarterly cash dividends.

(2) Beginning in March 2022, we resumed share repurchases under our previously authorized stock repurchase program.

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

9 unchanged sentences

( 25 ) 3 87 65

Balance as of March 31, 2022 $ ( 542 ) $ ( 209 ) $ 31 $ ( 720 )

Balance as of June 30, 2022 $ ( 565 ) $ ( 207 ) $ 58 $ ( 714 )

Currency Translation Adjustment (1)

8 unchanged sentences

( 21 ) 4 11 ( 6 )

Balance as of March 31, 2021 $ ( 540 ) $ ( 287 ) $ ( 53 ) $ ( 880 )

Balance as of June 30, 2021 $ ( 532 ) $ ( 285 ) $ ( 49 ) $ ( 866 )

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

Amount reclassified during the three months ended March 31, 2022 related to the liquidation of an investment in a foreign entity and was recognized in loss on foreign currency transactions in our condensed consolidated statement of operations.

Amount reclassified during the six months ended June 30, 2022 related to the liquidation of an investment in a foreign entity and was recognized in gain on foreign currency transactions in our condensed consolidated statement of operations.

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

(3) Amounts reclassified were the result of hedging instruments, including:

(a) interest rate swaps, inclusive of interest rate swaps that were dedesignated and subsequently settled, with related amounts recognized in interest expense in our condensed consolidated statements of operations and (b) forward contracts that hedge our foreign currency denominated fees, with related amounts recognized in various revenue line items, as applicable, in our condensed consolidated statements of operations .

(a) interest rate swaps, inclusive of interest rate swaps that were dedesignated, with related amounts recognized in interest expense in our condensed consolidated statements of operations and (b) forward contracts that hedge our foreign currency denominated fees, with related amounts recognized in various revenue line items, as applicable, in our condensed consolidated statements of operations .

Business Segments

We are a hospitality company with operations organized in two distinct operating segments:

(i) management and franchise and (ii) ownership, each of which is reported as a segment based on (a) delivering a similar set of products and services and

(i) management and franchise and (ii) ownership, each of which is reported as a segment based on:

(a) delivering a similar set of products and services and

(b) being managed separately given its distinct economic characteristics.

5 unchanged sentences

and (iii) fees for managing hotels in our ownership segment.

As of March 31, 2022, this segment included 740 managed hotels and 6,038 franchised hotels consisting of 1,055,088 total rooms.

As of March 31, 2022, our ownership segment included 54 properties totaling 18,151 rooms.

As of June 30, 2022, this segment included 746 managed hotels and 6,115 franchised hotels consisting of 1,068,369 total rooms.

As of June 30, 2022, our ownership segment included 54 properties totaling 18,151 rooms.

The segment comprised 46 hotels that we leased, one hotel owned by a consolidated non-wholly owned entity, two hotels that were each leased by a consolidated VIE and five hotels owned or leased by unconsolidated affiliates.

As a result of the pandemic, the operations of approximately 15 hotels in our ownership segment were suspended for some period of time during the three months ended March 31, 2021, compared with no hotels in our ownership segment having suspended operations as a result of the pandemic during the three months ended March 31, 2022.

As a result of the pandemic, the operations of approximately 15 hotels in our ownership segment were suspended for some period of time during the six months ended June 30, 2021, while no hotels in our ownership segment suspended operations as a result of the pandemic during the six months ended June 30, 2022.

The performance of our operating segments is evaluated primarily on operating income (loss), without allocating amortization of contract acquisition costs, other revenues, other revenues and other expenses from managed and franchised properties, other expenses, depreciation and amortization expenses or general and administrative expenses.

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in millions)

8 unchanged sentences

Direct reimbursements from managed and franchised properties (2)

609 329 1,121 552

Indirect reimbursements from managed and franchised properties (2)

658 426 1,197 724

Intersegment fees elimination (1)

( 5 ) ( 2 ) ( 7 ) ( 3 )

Total revenues $ 2,240 $ 1,329 $ 3,961 $ 2,203

2 unchanged sentences

The following table presents operating income (loss) for our reportable segments, reconciled to consolidated income (loss) before income taxes:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in millions)

Management and franchise (1)

$ 681 $ 441 $ 1,193 $ 729

Ownership (1)

4 unchanged sentences

Net other revenues (expenses) from managed and franchised properties

36 ( 55 ) 66 ( 119 )

Depreciation and amortization expenses ( 40 ) ( 46 ) ( 84 ) ( 97 )

11 unchanged sentences

However, in limited cases, we are obligated to fund performance shortfalls, creating variable interests in the ownership entities of the hotels, of which we are not the primary beneficiary.

As of March 31, 2022, we had performance guarantees with expirations ranging from 2025 to 2043 and potential cash outlays totaling $ 9 million.

As of June 30, 2022, we had performance guarantees with expirations ranging from 2025 to 2043 and potential cash outlays totaling $ 8 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 for that particular hotel.

As of March 31, 2022, we had extended debt guarantees and letters of credit to owners of certain hotels that we will or currently manage or franchise with expirations ranging from 2023 to 2031 and potential cash outlays totaling $ 61 million.

As of June 30, 2022, we had extended debt guarantees and letters of credit to owners of certain hotels that we will or currently manage or franchise with expirations of such guarantees ranging from 2023 to 2031 and potential cash outlays totaling $ 124 million.

We receive fees from managed and franchised properties that we are contractually required to use to operate our marketing, sales and brand programs on behalf of hotel owners.

If we collect amounts in excess of amounts expended, we have a commitment to spend these amounts on the related programs.

As of March 31, 2022 and December 31, 2021, amounts expended and recognized on behalf of these programs exceeded the amounts collected.

As of June 30, 2022, amounts collected on behalf of these programs exceeded the amounts expended, and, as of December 31, 2021, amounts expended on behalf of these programs exceeded the amounts collected.

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 March 31, 2022 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

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, 2022 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements