Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Management’s Report on Internal Control Over Financial Reporting	60
Report of Independent Registered Public Accounting Firm	61
Report of Independent Registered Public Accounting Firm	62
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2018 and 2017	63
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016	64
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016	65
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	66
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2018, 2017 and 2016	67
Notes to Consolidated Financial Statements	68

Management's Report on Internal Control Over Financial Reporting

Management of Hilton Worldwide Holdings Inc. (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States ("U.S.") generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control—Integrated Framework (2013). Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2018.

Ernst & Young LLP, the independent registered public accounting firm that has audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2018. The report is included herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Hilton Worldwide Holdings Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Hilton Worldwide Holdings Inc.'s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Hilton Worldwide Holdings Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Hilton Worldwide Holdings Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders' equity, for each of the three years in the period ended December 31, 2018 of the Company and the related notes, and our report dated February 13, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Tysons, Virginia

February 13, 2019

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Hilton Worldwide Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Hilton Worldwide Holdings Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders' equity, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 13, 2019 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606)

As discussed in Note 2 to the financial statements, the Company changed its method for recognizing revenue from contracts with customers due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-08, 2016-10 and 2016-12, on January 1, 2018 using the full retrospective adoption method.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2002.

Tysons, Virginia

February 13, 2019

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	December 31,
2018				2017
ASSETS
Current Assets:
Cash and cash equivalents	$	403			$	570
Restricted cash and cash equivalents	81				100
Accounts receivable, net of allowance for doubtful accounts of $42 and $29	1,150				1,005
Prepaid expenses	160				127
Income taxes receivable	20				36
Other	169				169
Total current assets (variable interest entities – $90 and $93)	1,983				2,007
Intangibles and Other Assets:
Goodwill	5,160				5,190
Brands	4,869				4,890
Management and franchise contracts, net	872				953
Other intangible assets, net	415				433
Property and equipment, net	367				353
Deferred income tax assets	90				111
Other	239				291
Total intangibles and other assets (variable interest entities – $178 and $171)	12,012				12,221
TOTAL ASSETS	$	13,995			$	14,228
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	1,530			$	1,416
Current portion of deferred revenues	350				366
Current maturities of long-term debt	16				46
Income taxes payable	19				12
Current portion of liability for guest loyalty program	700				622
Total current liabilities (variable interest entities – $56 and $58)	2,615				2,462
Long-term debt	7,266				6,556
Deferred revenues	826				829
Deferred income tax liabilities	898				931
Liability for guest loyalty program	969				839
Other	863				920
Total liabilities (variable interest entities – $263 and $271)	13,437				12,537
Commitments and contingencies – see Note 20
Equity:
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of December 31, 2018 and 2017	—				—
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 332,105,163 issued and 294,815,890 outstanding as of December 31, 2018 and 331,054,014 issued and 317,420,933 outstanding as of December 31, 2017	3				3
Treasury stock, at cost; 37,289,273 shares as of December 31, 2018 and 13,633,081 shares as of December 31, 2017	(2,625		)		(891		)
Additional paid-in capital	10,372				10,298
Accumulated deficit	(6,417		)		(6,981		)
Accumulated other comprehensive loss	(782		)		(741		)
Total Hilton stockholders' equity	551				1,688
Noncontrolling interests	7				3
Total equity	558				1,691
TOTAL LIABILITIES AND EQUITY	$	13,995			$	14,228

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year Ended December 31,
	2018				2017				2016
Revenues
Franchise and licensing fees	$	1,530			$	1,321			$	1,091
Base and other management fees	321				324				230
Incentive management fees	235				222				142
Owned and leased hotels	1,484				1,432				1,434
Other revenues	98				105				82
	3,668				3,404				2,979
Other revenues from managed and franchised properties	5,238				4,727				3,597
Total revenues	8,906				8,131				6,576
Expenses
Owned and leased hotels	1,332				1,269				1,279
Depreciation and amortization	325				336				353
General and administrative	443				439				409
Other expenses	51				56				66
	2,151				2,100				2,107
Other expenses from managed and franchised properties	5,323				4,899				3,609
Total expenses	7,474				6,999				5,716
Gain on sales of assets, net	—				—				8
Operating income	1,432				1,132				868
Interest expense	(371		)		(351		)		(334		)
Gain (loss) on foreign currency transactions	(11		)		3				(16		)
Loss on debt extinguishment	—				(60		)		—
Other non-operating income, net	28				29				22
Income from continuing operations before income taxes	1,078				753				540
Income tax benefit (expense)	(309		)		336				(557		)
Income (loss) from continuing operations, net of taxes	769				1,089				(17		)
Income from discontinued operations, net of taxes	—				—				371
Net income	769				1,089				354
Net income attributable to noncontrolling interests	(5		)		(5		)		(16		)
Net income attributable to Hilton stockholders	$	764			$	1,084			$	338
Earnings (loss) per share:
Basic:
Net income (loss) from continuing operations per share	$	2.53			$	3.34			$	(0.08	)
Net income from discontinued operations per share	—				—				1.11
Net income per share	$	2.53			$	3.34			$	1.03
Diluted:
Net income (loss) from continuing operations per share	$	2.50			$	3.32			$	(0.08	)
Net income from discontinued operations per share	—				—				1.11
Net income per share	$	2.50			$	3.32			$	1.03
Cash dividends declared per share	$	0.60			$	0.60			$	0.84

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Year Ended December 31,
	2018				2017				2016
Net income	$	769			$	1,089			$	354
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $6, $32 and $19	(70		)		162				(159		)
Pension liability adjustment, net of tax of $3, $(8) and $(2)	(9		)		22				(57		)
Cash flow hedge adjustment, net of tax of $(8), $(7) and $2	22				13				(2		)
Total other comprehensive income (loss)	(57		)		197				(218		)
Comprehensive income	712				1,286				136
Comprehensive income attributable to noncontrolling interests	(5		)		(5		)		(15		)
Comprehensive income attributable to Hilton stockholders	$	707			$	1,281			$	121

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2018				2017				2016
Operating Activities:
Net income	$	769			$	1,089			$	354
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of contract acquisition costs	27				17				16
Depreciation and amortization	325				336				673
Gain on sales of assets, net	—				—				(9		)
Loss (gain) on foreign currency transactions	11				(3		)		13
Loss on debt extinguishment	—				60				—
Share-based compensation	127				121				91
Amortization of deferred financing costs and other	16				15				32
Distributions from unconsolidated affiliates	4				1				22
Deferred income taxes	(14		)		(729		)		(85		)
Contract acquisition costs	(103		)		(75		)		(55		)
Changes in operating assets and liabilities:
Accounts receivable, net	(161		)		(204		)		(156		)
Prepaid expenses	(39		)		(11		)		(20		)
Income taxes receivable	17				(24		)		84
Other current assets	(4		)		—				(2		)
Accounts payable, accrued expenses and other	139				25				248
Income taxes payable	9				(42		)		28
Change in timeshare financing receivables	—				—				(54		)
Change in deferred revenues	(18		)		334				534
Change in liability for guest loyalty program	207				29				154
Change in other liabilities	(53		)		(95		)		(247		)
Other	(4		)		5				(311		)
Net cash provided by operating activities	1,255				849				1,310
Investing Activities:
Capital expenditures for property and equipment	(72		)		(58		)		(317		)
Payments received on other financing receivables	50				7				3
Capitalized software costs	(87		)		(75		)		(81		)
Other	(22		)		(21		)		(28		)
Net cash used in investing activities	(131		)		(147		)		(423		)
Financing Activities:
Borrowings	1,676				1,824				4,715
Repayment of debt	(1,005		)		(1,860		)		(4,359		)
Debt issuance costs and redemption premium	(21		)		(69		)		(76		)
Dividends paid	(181		)		(195		)		(277		)
Cash transferred in spin-offs of Park and HGV	—				(501		)		—
Repurchases of common stock	(1,721		)		(891		)		—
Distributions to noncontrolling interests	(1		)		(1		)		(32		)
Tax withholdings on share-based compensation	(44		)		(31		)		(15		)
Acquisition of noncontrolling interest	(3		)		—				—
Net cash used in financing activities	(1,300		)		(1,724		)		(44		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	(10		)		8				(15		)
Net increase (decrease) in cash, restricted cash and cash equivalents	(186		)		(1,014		)		828
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	670				1,183				633
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	—				501				223
Cash, restricted cash and cash equivalents, beginning of period	670				1,684				856
Cash, restricted cash and cash equivalents from continuing operations, end of period	484				670				1,183
Cash, restricted cash and cash equivalents from discontinued operations, end of period	—				—				501
Cash, restricted cash and cash equivalents, end of period	$	484			$	670			$	1,684

See notes to consolidated financial statements. For supplemental disclosures, see Note 22: "Supplemental Disclosures of Cash Flow Information."

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions)

	Equity Attributable to Hilton Stockholders
												Additional Paid-in Capital								Accumulated Other Comprehensive Loss
	Common Stock							Treasury Stock					Accumulated Deficit					Noncontrolling Interests				Total
	Shares			Amount
Balance as of December 31, 2015	329			$	3			$	—			$	10,158			$	(3,392	)		$	(784	)		$	(34	)		$	5,951
Net income	—			—				—				—				338				—				16				354
Other comprehensive loss, net of tax:
Currency translation adjustment	—			—				—				—				—				(158		)		(1		)		(159		)
Pension liability adjustment	—			—				—				—				—				(57		)		—				(57		)
Cash flow hedge adjustment	—			—				—				—				—				(2		)		—				(2		)
Other comprehensive loss	—			—				—				—				—				(217		)		(1		)		(218		)
Dividends	—			—				—				—				(279		)		—				—				(279		)
Share-based compensation	—			—				—				62				—				—				—				62
Distributions	—			—				—				—				—				—				(32		)		(32		)
Deconsolidation of a variable interest entity	—			—				—				—				—				—				(4		)		(4		)
Cumulative effect of the adoption of ASU 2014-09	—			—				—				—				(212		)		—				—				(212		)
Cumulative effect of the adoption of ASU 2015-02	—			—				—				—				—				—				5				5
Balance as of December 31, 2016	329			3				—				10,220				(3,545		)		(1,001		)		(50		)		5,627
Net income	—			—				—				—				1,084				—				5				1,089
Other comprehensive income, net of tax:
Currency translation adjustment	—			—				—				—				—				162				—				162
Pension liability adjustment	—			—				—				—				—				22				—				22
Cash flow hedge adjustment	—			—				—				—				—				13				—				13
Other comprehensive income	—			—				—				—				—				197				—				197
Dividends	—			—				—				—				(196		)		—				—				(196		)
Repurchases of common stock	(14	)		—				(891		)		—				—				—				—				(891		)
Share-based compensation	2			—				—				77				—				—				—				77
Distributions	—			—				—				—				—				—				(1		)		(1		)
Spin-offs of Park and HGV	—			—				—				—				(4,323		)		63				49				(4,211		)
Cumulative effect of the adoption of ASU 2016-09	—			—				—				1				(1		)		—				—				—
Balance as of December 31, 2017	317			3				(891		)		10,298				(6,981		)		(741		)		3				1,691
Net income	—			—				—				—				764				—				5				769
Other comprehensive income (loss), net of tax:
Currency translation adjustment	—			—				—				—				—				(70		)		—				(70		)
Pension liability adjustment	—			—				—				—				—				(9		)		—				(9		)
Cash flow hedge adjustment	—			—				—				—				—				22				—				22
Other comprehensive loss	—			—				—				—				—				(57		)		—				(57		)
Dividends	—			—				—				—				(184		)		—				—				(184		)
Repurchases of common stock	(23	)		—				(1,721		)		—				—				—				—				(1,721		)
Share-based compensation	1			—				(13		)		77				—				—				—				64
Distributions	—			—				—				—				—				—				(1		)		(1		)
Acquisition of noncontrolling interest	—			—				—				(3		)		—				—				—				(3		)
Cumulative effect of the adoption of ASU 2018-02	—			—				—				—				(16		)		16				—				—
Balance as of December 31, 2018	295			$	3			$	(2,625	)		$	10,372			$	(6,417	)		$	(782	)		$	7			$	558

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization

Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the

"Company"), a Delaware corporation, is one of the largest hospitality companies in the world and is engaged in managing, franchising, owning and leasing hotels and resorts, including timeshare properties. As of December 31, 2018, we managed, franchised, owned or leased 5,685 hotels and resorts, totaling 912,960 rooms in 113 countries and territories.

In March 2017, HNA Tourism Group Co., Ltd and certain affiliates ("HNA") acquired 82.5 million shares of Hilton common stock from affiliates of The Blackstone Group L.P. ("Blackstone"), resulting in a 25 percent equity interest of our common stock. In April and May 2018, HNA and Blackstone, respectively, fully divested of their investments in Hilton.

Spin-offs

On January 3, 2017, we completed the spin-offs of a portfolio of hotels and resorts, as well as our timeshare business, into two independent, publicly traded companies: Park Hotels & Resorts Inc. ("Park") and Hilton Grand Vacations Inc. ("HGV"), respectively, (the "spin-offs"). See Note 3: "Discontinued Operations" for additional information.

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

Basis of Presentation

These consolidated financial statements present the consolidated financial position and results of operations of Hilton as of and for the years ended December 31, 2018, 2017 and 2016, with the combined historical financial results of Park and HGV for the year ended December 31, 2016 reflected as discontinued operations. Unless otherwise indicated, the information in the notes to the consolidated financial statements refer only to Hilton's continuing operations and do not include discussion of balances or activity of Park or HGV.

Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly owned subsidiaries and entities in which we have a controlling financial interest, including variable interest entities ("VIEs") for which we are the primary beneficiary. Entities in which we have a controlling financial interest generally comprise majority owned real estate ownership and management enterprises.

The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by other ownership interests. If the entity is considered to be a VIE, we determine whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50 percent of the voting shares of a company or otherwise have a controlling financial interest.

All material intercompany transactions and balances have been eliminated in consolidation. References in these financial statements to net income (loss) attributable to Hilton stockholders and Hilton stockholders' equity (deficit) do not include noncontrolling interests, which represent the outside ownership interests of our consolidated, non-wholly owned entities and are reported separately.

Use of Estimates

The preparation of financial statements in conformity with United States ("U.S") generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.

Reclassifications

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

Summary of Significant Accounting Policies

Revenue Recognition

Revenues are primarily derived from management and franchise contracts with third-party hotel and resort owners, as well as from our owned and leased hotels. The majority of our performance obligations are a series of distinct goods or services, for which we receive variable consideration through our management and franchise fees or fixed consideration through our owned and leased hotels. We allocate the variable fees to the distinct services to which they relate applying the prescribed variable consideration allocation guidance, and we allocate fixed consideration to the related performance obligations based on their estimated standalone selling prices.

We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less, which it is in substantially all cases. Additionally, we do not typically include extended payment terms in our contracts with customers.

Management and franchise revenues

We identified the following performance obligations in connection with our management and franchise contracts:

•	Intellectual Property ("IP") licenses grant the right to access our hotel system IP, including brand IP, reservations systems and property management systems.

•	Hotel management services include providing day-to-day management services of the hotels for the property owners.

•	Development services include providing consultative services (e.g., design assistance and contractor selection) to the property owner to assist with the construction of the hotel prior to the hotel opening.

•	Pre-opening services include providing services (e.g., advertising, budgeting, e-commerce strategies, food and beverage testing) to the property owner to assist in preparing for the hotel opening.

•	Substantive rights for free or discounted goods or services to hotel guests are satisfied at the earlier point in time of either when the substantive right expires or the underlying free or discounted good or service is provided to the hotel guest.

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

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

•	Royalty fees are generally based on a percentage of the hotel's monthly gross room revenue and, in some cases, may also include a percentage of gross food and beverage revenues and other revenues, as applicable. These fees are typically billed and collected monthly, and revenue is generally recognized as services are provided.

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Application, initiation and other fees are charged when: (i) new hotels enter our system; (ii) there is a change of ownership of a hotel; or (iii) contracts with properties already in our system are extended. These fees are typically fixed and collected upfront and are recognized as revenue over the term of the franchise contract. We do not consider this advance consideration to include a significant financing component, since it is used to protect us from the property owner failing to adequately complete some or all of its obligations under the contract.

•	Licensing fees are earned from: (i) a license agreement with HGV to use certain Hilton marks and IP in its timeshare business, which are typically billed and collected monthly, and revenue is generally recognized at the same time the fees are billed and (ii) co-brand credit card arrangements, which are recognized as revenue when points for our guest

loyalty program, Hilton Honors, are issued, generally as spend on the co-branded credit card occurs; see further discussion below under "Hilton Honors."

Consideration paid or anticipated to be paid to incentivize hotel owners to enter into franchise contracts with us is amortized over the life of the applicable contract as a reduction to franchise and licensing fees.

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

•	Base management fees are generally based on a percentage of the hotel's monthly gross revenue. Base fees are typically billed and collected monthly, and revenue is generally recognized as services are provided.

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Incentive management fees are generally based on a percentage of the hotel's operating profits and in some cases may be subject to a stated return threshold to the property owner, normally over a one-calendar year period (the "incentive period"). Incentive fee revenue is recognized on a monthly basis, but only to the extent the cumulative fee earned does not exceed the probable fee for the incentive period. Incentive fee payment terms vary, but they are generally billed and collected monthly or annually upon completion of the incentive period.

Consideration paid or anticipated to be paid to incentivize hotel owners to enter into management contracts with us is amortized over the life of the applicable contract as a reduction to base and other management fees.

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

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

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Direct reimbursements include payroll and related costs and certain other operating costs of the managed and franchised properties' operations, which are contractually reimbursed to us by the property owners as expenses are incurred. Revenue is recognized based on the amount of expenses incurred by Hilton, which are presented as other expenses from managed and franchised properties in our consolidated statements of operations, that are then reimbursed to us by the property owner typically on a monthly basis, which results in no net effect on operating income (loss) or net income (loss).

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Indirect reimbursements include marketing expenses and other expenses associated with our brands and shared services, which are paid from fees collected by Hilton from the managed and franchised properties. Indirect reimbursements are typically billed and collected monthly, based on the underlying hotel's sales or usage (such as gross room revenue and number of reservations processed), and revenue is generally recognized as services are provided. System implementation fees charged to property owners are deferred and recognized as revenue over the term of the management or franchise contract. The corresponding expenses are expensed as incurred and are presented as other expenses from managed and franchised properties in our consolidated statements of operations and are expected to equal the revenues earned from indirect reimbursements over time.

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

Owned and leased hotel revenues

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

•	Cancellable room reservations or ancillary services are typically satisfied as the good or service is transferred to the hotel guest, which is generally when the room stay occurs.

•	Noncancellable room reservations and banquet or conference reservations represent a series of distinct goods or services provided over time and satisfied as each distinct good or service is provided, which is reflected by the duration of the reservation.

•	Substantive rights for free or discounted goods or services are satisfied at the earlier of when: (i) the substantive right expires or (ii) the underlying free or discounted good or service is provided to the hotel guest.

•	Other ancillary goods and services are purchased independently of the room reservation at standalone selling prices and are considered separate performance obligations, which are satisfied when the related good or service is provided to the hotel guest.

•	Components of package reservations for which each component could be sold separately to other hotel guests are considered separate performance obligations and are satisfied as set forth above.

Owned and leased hotel revenues primarily consist of hotel room sales, revenue from accommodations sold in

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

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

Other revenues

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

Taxes and fees collected on behalf of governmental agencies

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

Discontinued Operations

In determining whether a group of assets that is disposed (or to be disposed) should be presented as a discontinued operation, we analyze whether the group of assets being disposed represents a component of the Company; that is, whether it had historic operations and cash flows that were clearly distinguished, both operationally and for financial reporting purposes. In addition, we consider whether the disposal represents a strategic shift that has or will have a major effect on our operations and financial results. The historical results and financial position of discontinued operations are separately presented in our consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents include cash balances established as security for certain guarantees, ground rent and property tax escrows, insurance, including self-insurance collateral, and furniture, fixtures and equipment replacement reserves required under certain lease agreements.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided on accounts receivable when losses are probable based on historical collection activity and current business conditions.

Contract Assets

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

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below the carrying amount.

In connection with the October 24, 2007 transaction whereby we became a wholly owned subsidiary of affiliates of Blackstone (the "Merger"), we recorded goodwill representing the excess purchase price over the fair value of the other identified assets and liabilities. We evaluate goodwill for potential impairment by comparing the carrying values of our reporting units to their fair values. Our reporting units are the same as our operating segments as described in Note 19: "Business Segments." In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or if we decide to bypass the qualitative assessment, we perform a quantitative analysis. The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, including goodwill. The estimated fair value is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired; otherwise, an impairment loss would be recognized in our consolidated statements of operations in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Brands

We manage, franchise, own and lease hotels under our portfolio of brands. There are no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of these brands and, accordingly, the useful lives of these brands are considered to be indefinite. As of December 31, 2018, our brand portfolio included Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Curio Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Motto by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and our timeshare brand, Hilton Grand Vacations.

At the time of the Merger, our brands were assigned a fair value based on a common valuation technique known as the relief from royalty approach. LXR Hotels & Resorts, Canopy by Hilton, Curio Collection by Hilton, Tapestry Collection by Hilton, Motto by Hilton, Tru by Hilton, and Home2 Suites by Hilton were launched post-Merger and, as such, they were not assigned fair values, and we do not have any intangible assets for these brands recorded in our consolidated balances sheets. We evaluate our brands intangible assets for impairment on an annual basis or at other times during the year if indicators of

impairment exist. In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or if we decide to bypass the qualitative assessment, we perform a quantitative analysis. The estimated fair value is based on internal projections of expected future cash flows. If a brand intangible asset’s estimated current fair value is less than its respective carrying value, the excess of the carrying value over the estimated fair value is recognized in our consolidated statements of operations as an impairment loss.

Intangible Assets with Finite Useful Lives

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

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

We review all finite lived intangible assets for impairment when indicators of impairment exist. We perform an analysis to determine the recoverability of the asset group carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset group. If the carrying value of the asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the estimated fair value in our consolidated statements of operations.

Property and Equipment

Property and equipment are recorded at cost. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred.

Depreciation is recorded using the straight-line method over the assets’ estimated useful lives, which are generally as follows: buildings and improvements (8 to 40 years), furniture and equipment (3 to 8 years) and computer equipment (3 to 5 years). Leasehold improvements are depreciated over the shorter of the estimated useful life, based on the estimates above, or the lease term.

We evaluate the carrying value of our property and equipment if there are indicators of impairment. We perform an analysis to determine the recoverability of the asset group carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset group. If it is determined that the expected undiscounted future cash flows are less than the net carrying value of the asset group, the excess of the net carrying value over the estimated fair value is recorded in our consolidated statements of operations within impairment loss. Fair value is generally estimated using valuation techniques that consider the discounted cash flows of the asset group using discount and capitalization rates deemed reasonable for the type of assets, as well as prevailing market conditions, appraisals, recent similar transactions in the market and, if appropriate and available, current estimated net sales proceeds from pending offers.

If sufficient information exists to reasonably estimate the fair value of a conditional asset retirement obligation, including environmental remediation liabilities, we recognize the fair value of the obligation when the obligation is incurred, which is generally upon acquisition, construction or development or through the normal operation of the asset.

Contract Liabilities

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

Hilton Honors

Hilton Honors is our guest loyalty and marketing program provided to our hotel and resort properties. Nearly all of our managed, franchised, owned and leased properties participate in the Hilton Honors program. Hilton Honors members earn points based on their spending at our participating properties and through participation in affiliated partner programs. When points are earned by Hilton Honors members, they are provided with a substantive right to free or discounted goods or services in the future upon accumulation of the required level of Hilton Honors points. Points may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping and dining.

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

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

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

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

owned and leased hotels, we recognize room revenue, included in owned and leased hotel revenues in our consolidated statements of operations.

Fair Value Measurements – Valuation Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (i.e., an exit price). We use the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our own assumptions about the data market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:

•	Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

•	Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

•	Level 3 – Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety. Proper classification of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

Derivative Instruments

We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

We record all derivatives at fair value. On the date the derivative contract is entered into, we may designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid ("cash flow hedge"), a hedge of the fair value of a recognized asset or liability ("fair value hedge") or a hedge of our investment in a foreign operation ("net investment hedge"). Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in our consolidated statements of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. If we do not specifically designate a derivative as one of the above, changes in the fair value of the undesignated derivative instrument are reported in current period earnings. Likewise, the ineffective portion of designated derivative instruments is reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statements of cash flows, while cash flows from undesignated derivative financial instruments are included as an investing activity.

If we determine that we qualify for and will designate a derivative as a hedging instrument, at the designation date we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions, linking all derivatives designated as fair value hedges to specific assets and liabilities in the consolidated balance sheets and determining the foreign currency exposure of the net investment of the foreign operation for a net investment hedge.

On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations using the Hypothetical Derivative Method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging

instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively when the derivative is no longer highly effective as a hedge, the underlying hedged transaction is no longer probable or the hedging instrument expires, is sold, terminated or exercised.

Currency Translation

The United States dollar ("USD") is our reporting currency and is the functional currency of our consolidated and unconsolidated entities operating in the U.S. The functional currency for our consolidated and unconsolidated entities operating outside of the U.S. is the currency of the primary economic environment in which the respective entity operates. Assets and liabilities measured in foreign currencies are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive income (loss) in our consolidated balance sheets. Income and expense accounts are translated at the average exchange rate for the period. Gains and losses from foreign currency exchange rate changes related to transactions denominated in a currency other than an entity's functional currency or intercompany receivables and payables denominated in a currency other than an entity’s functional currency that are not of a long-term investment nature are recognized as gain (loss) on foreign currency transactions in our consolidated statements of operations. Where certain specific evidence indicates intercompany receivables and payables will not be settled in the foreseeable future and are of a long-term nature, gains and losses from foreign currency exchange rate changes are recognized as other comprehensive income (loss) in our consolidated statements of comprehensive income (loss).

Insurance

We are self-insured for losses up to our third-party insurance deductibles for general liability, auto liability and workers' compensation at our owned, leased and managed properties that participate in our programs. We purchase insurance coverage for claim amounts that exceed our deductible obligations. In addition, through our captive insurance subsidiary, we participate in reinsurance arrangements that provide coverage for a certain portion of our deductibles and/or acts as a financial intermediary for claim payments on our self-insurance program, along with property and casualty insurance for certain international hotels that are reinsured by other third parties. These obligations and reinsurance arrangements can cause timing differences in the recognition of assets, liabilities, gains and losses between reporting periods, although these amounts ultimately offset when the related claims are settled. Our insurance reserves are accrued based on our deductibles related to the estimated ultimate cost of claims that occurred during the covered period, which includes claims incurred but not reported, for which we will be responsible. These estimates are prepared with the assistance of outside actuaries and consultants. The ultimate cost of claims for a covered period may differ from our original estimates.

Share-based Compensation

As part of our 2013 and 2017 Omnibus Incentive Plans, we award time-vesting restricted stock units and restricted stock ("RSUs"), nonqualified stock options ("options") and performance-vesting restricted stock units and restricted stock (collectively, "performance shares") to our eligible employees and deferred share units ("DSUs") to members of our board of directors.

•	RSUs generally vest in equal annual installments over two or three years from the date of grant. Vested RSUs generally will be settled for the Company's common stock, with the exception of certain awards that will be settled in cash. The grant date fair value per share is equal to the closing stock price on the grant date.

•	Options vest over three years in equal annual installments from the grant date and terminate 10 years from the grant date or earlier if the individual’s service terminates under certain circumstances. The exercise price is equal to the closing stock price on the grant date. The grant date fair value per share is estimated using the Black-Scholes-Merton option-pricing model.

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Performance shares are settled at the end of a three-year performance period with 50 percent of the awards subject to achievement based on the compound annual growth rate ("CAGR") of the Company's adjusted earnings before interest expense, a provision for income taxes and depreciation and amortization ("Adjusted EBITDA"), referred to as EBITDA CAGR, and the other 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 that, in both cases, ranges from a zero percent to 200 percent payout. The grant date fair value per share for these awards is equal to the closing stock price on the grant date.

•	DSUs are issued to our independent directors and are fully vested and non-forfeitable on the grant date. DSUs are settled for shares of the Company's common stock, which are deliverable upon the earlier of termination of the individual's service on our board of directors or a change in control. The grant date fair value per share is equal to the closing stock price on the grant date.

We recognize these share-based payment transactions when services from the employees are received and recognize either a corresponding increase in additional paid-in capital or accounts payable, accrued expenses and other in our consolidated balance sheets, depending on whether the instruments granted satisfy the equity or liability classification criteria. The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation expense for an award classified as an equity instrument is recognized ratably over the requisite service period, which is the period during which an employee is required to provide service in exchange for an award. Liability awards are measured based on the award’s fair value and the fair value is remeasured at each reporting date until the date of settlement. Compensation expense for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period for such liability awards. Compensation expense for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not considered probable until they occur, no compensation expense for these awards is recognized.

Income Taxes

We account for income taxes using the asset and liability method. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and to recognize the deferred tax assets and liabilities that relate to tax consequences in future years, which result from differences between the respective tax basis of assets and liabilities and their financial reporting amounts and tax attribute carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the respective temporary differences or operating loss or tax credit carryforwards are expected to be recovered or settled. The realization of deferred tax assets and tax loss and tax credit carryforwards is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists. Valuation allowances are provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized.

On December 22, 2017, H.R.1, known as the Tax Cuts and Jobs Act of 2017 (the "TCJ Act") was signed into law and included widespread changes to the Internal Revenue Code including, among other items, the creation of new taxes on certain foreign earnings. The TCJ Act subjects a U.S. stockholder to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. In addition, the TCJ Act provides for foreign derived intangible income ("FDII") to be taxed at a lower effective rate than the statutory rate by allowing a tax deduction against the income. Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. We have elected to recognize the current tax on GILTI as an expense in the period the tax is incurred. We include the current tax impact of both GILTI and the FDII deduction in our effective tax rate. See Note 14: "Income Taxes" for additional information on the effects of the TCJ Act on our consolidated financial statements.

We use a prescribed recognition threshold for the financial statement recognition and measurement of a tax position taken in a tax return. For all income tax positions, we first determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If it is determined that a position meets the more-likely-than-not recognition threshold, the benefit recognized in the financial statements is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.

Recently Issued Accounting Pronouncements

Adopted Accounting Standards

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-02 ("ASU 2018-02"), Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU permits a reclassification from accumulated other comprehensive income (loss) to retained earnings (deficit) for stranded tax effects that do not reflect the appropriate tax rates as a result of the TCJ Act. We

early adopted, as permitted by the standard, the provisions of ASU 2018-02 during the fourth quarter of 2018 and reclassified $16 million from accumulated other comprehensive loss to accumulated deficit as of January 1, 2018.

In March 2017, the FASB issued ASU No. 2017-07 ("ASU 2017-07"), Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires employers to report the service cost component of net periodic pension cost in the same line item or items of the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic pension cost must be presented separately from the service cost component and outside of a subtotal of income (loss) from operations. We adopted ASU 2017-07 on January 1, 2018 on a retrospective basis in our consolidated statements of operations, which includes presenting: (i) the service cost component of net periodic pension cost in owned and leased hotel expenses and general and administrative expenses and (ii) the other components of net periodic pension cost in other non-operating income (loss), net. Prior to adoption, all net periodic pension costs were presented in owned and leased hotel expenses and general and administrative expenses. We have applied the practical expedient permitting us to use the amounts disclosed in Note 15: "Employee Benefit Plans" for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. See the "Prior Period Financial Information" below for the effect of the adoption of ASU 2017-07 on our consolidated statements of operations for the years ended December 31, 2017 and 2016.

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

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

•	Application, initiation and other fees are recognized over the term of the franchise contract, rather than upon execution of the contract and the unamortized portion of these fees is included in deferred revenues in our consolidated balance sheets.

•	Contract acquisition costs related to our management and franchise contracts are recognized over the term of the contracts as a reduction to revenue, instead of as amortization expense. This change does not affect net income (loss).

•	Incentive management fees are recognized to the extent that it is probable that a significant reversal will not occur as a result of future hotel profits or cash flows, as opposed to recognizing amounts that would be due if the management contract was terminated at the end of the reporting period. This change does not affect net income (loss) for any full year period.

•

Revenue related to our Hilton Honors guest loyalty program is recognized upon point redemption, net of any reward reimbursement paid to a third party, as opposed to recognized on a gross basis at the time points are issued in conjunction with the accrual of the expected future cost of the reward reimbursement. Additionally, points issued at owned and leased hotels are accounted for as a reduction of owned and leased hotel revenues, as opposed to owned and leased hotel expenses. Fees received in excess of the estimated liability for guest loyalty program are included in deferred revenues in our consolidated balance sheets.

•	Reimbursable fees related to our management and franchise contracts are recognized as they are billed, as opposed to when we incur the related expenses. Timing differences related to the receipt and spend of these fees will no longer be recorded in other assets and other liabilities in our consolidated balance sheets.

We have not retrospectively restated for contract modifications of management and franchise contracts that occurred before January 1, 2016. Instead, we have reflected the aggregate effect of all contract modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price. The estimated effect of applying this practical expedient is to use a longer period over which to recognize on a straight line basis any fixed consideration either received from the customer or paid to the customer, since all fees will be amortized over the full contract term beginning on the date of initial execution, rather than amortizing fees received upon contract modifications prospectively from the contract modification date. We do not anticipate that this effect is material given the insignificance of the fixed consideration compared to the overall consideration we expect to earn over the term of the contract. We also elected not to disclose the amount of the transaction price and timing of revenue recognition related to our remaining performance obligations as of December 31, 2017.

See the "Prior Period Financial Information" below for the effect of the adoption of ASU 2014-09 on our consolidated balance sheet as of December 31, 2017 and our consolidated statements of operations for the years ended December 31, 2017 and 2016.

Prior Period Financial Information

The following table presents the effect of the adoption of ASU 2014-09 for the line items affected in our consolidated balance sheet:

	December 31, 2017
	As Previously Reported				Adoption of ASU 2014-09				As Adjusted
	(in millions)
ASSETS
Accounts receivable, net	$	998			$	7			$	1,005
Prepaid expenses	111				16				127
Other current assets	171				(2		)		169
Management and franchise contracts, net	909				44				953
Deferred income tax assets	113				(2		)		111
Other non-current assets	434				(143		)		291
TOTAL ASSETS	14,308				(80		)		14,228
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued expenses and other(1)	1,487				(71		)		1,416
Current portion of deferred revenues(1)	41				325				366
Current portion of liability for guest loyalty program(1)	622				—				622
Deferred revenues	97				732				829
Deferred income tax liabilities	1,063				(132		)		931
Other long-term liabilities	1,470				(550		)		920
Total liabilities	12,233				304				12,537
Equity:
Accumulated deficit	(6,596		)		(385		)		(6,981		)
Accumulated other comprehensive loss	(742		)		1				(741		)
Total equity	2,075				(384		)		1,691
TOTAL LIABILITIES AND EQUITY	14,308				(80		)		14,228

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(1)	The current portion of deferred revenues and current portion of liability for guest loyalty program have been separated from accounts payable, accrued expenses and other in the "As Previously Reported" column to conform with current presentation.

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

	Year Ended December 31, 2017
	As Previously Reported				Adoption of ASU 2014-09				Adoption of ASU 2017-07				As Adjusted
	(in millions)
Revenues
Franchise and licensing fees	$	1,382			$	(61	)		$	—			$	1,321
Base and other management fees	336				(12		)		—				324
Incentive management fees	222				—				—				222
Owned and leased hotels	1,450				(18		)		—				1,432
Other revenues	105				—				—				105
	3,495				(91		)		—				3,404
Other revenues from managed and franchised properties	5,645				(918		)		—				4,727
Total revenues	9,140				(1,009		)		—				8,131
Expenses
Owned and leased hotels	1,286				(18		)		1				1,269
Depreciation and amortization	347				(11		)		—				336
General and administrative	434				—				5				439
Other expenses	56				—				—				56
	2,123				(29		)		6				2,100
Other expenses from managed and franchised properties	5,645				(746		)		—				4,899
Total expenses	7,768				(775		)		6				6,999
Operating income	1,372				(234		)		(6		)		1,132
Interest expense	(408		)		57				—				(351		)
Gain on foreign currency transactions	3				—				—				3
Loss on debt extinguishment	(60		)		—				—				(60		)
Other non-operating income, net	23				—				6				29
Income before income taxes	930				(177		)		—				753
Income tax benefit	334				2				—				336
Net income	1,264				(175		)		—				1,089
Net income attributable to noncontrolling interests	(5		)		—				—				(5		)
Net income attributable to Hilton stockholders	$	1,259			$	(175	)		$	—			$	1,084
Earnings per share:
Basic	$	3.88											$	3.34
Diluted	$	3.85											$	3.32

	Year Ended December 31, 2016
	As Previously Reported				Adoption of ASU 2014-09				Adoption of ASU 2017-07				As Adjusted
	(in millions)
Revenues
Franchise and licensing fees	$	1,154			$	(63	)		$	—			$	1,091
Base and other management fees	242				(12		)		—				230
Incentive management fees	142				—				—				142
Owned and leased hotels	1,452				(18		)		—				1,434
Other revenues	82				—				—				82
	3,072				(93		)		—				2,979
Other revenues from managed and franchised properties	4,310				(713		)		—				3,597
Total revenues	7,382				(806		)		—				6,576
Expenses
Owned and leased hotels	1,295				(18		)		2				1,279
Depreciation and amortization	364				(11		)		—				353
General and administrative	403				—				6				409
Other expenses	66				—				—				66
	2,128				(29		)		8				2,107
Other expenses from managed and franchised properties	4,310				(701		)		—				3,609
Total expenses	6,438				(730		)		8				5,716
Gain on sales of assets, net	8				—				—				8
Operating income	952				(76		)		(8		)		868
Interest expense	(394		)		60				—				(334		)
Loss on foreign currency transactions	(16		)		—				—				(16		)
Other non-operating income, net	14				—				8				22
Income from continuing operations before income taxes	556				(16		)		—				540
Income tax expense	(564		)		7				—				(557		)
Loss from continuing operations, net of taxes	(8		)		(9		)		—				(17		)
Income from discontinued operations, net of taxes	372				(1		)		—				371
Net income	364				(10		)		—				354
Net income attributable to noncontrolling interests	(16		)		—				—				(16		)
Net income attributable to Hilton stockholders	$	348			$	(10	)		$	—			$	338
Earnings (loss) per share:
Basic:
Net loss from continuing operations per share	$	(0.05	)										$	(0.08	)
Net income from discontinued operations per share	1.11												1.11
Net income per share	$	1.06											$	1.03
Diluted:
Net loss from continuing operations per share	$	(0.05	)										$	(0.08	)
Net income from discontinued operations per share	1.11												1.11
Net income per share	$	1.06											$	1.03

Accounting Standards Not Yet Adopted

In August 2018, the 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. The provisions of ASU 2018-15 are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years; early adoption is permitted. We intend to adopt ASU 2018-15 on January 1, 2019 on a prospective basis, and we do not expect it to have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases (Topic 842), which supersedes existing guidance on accounting for leases in Leases (Topic 840) and generally requires all leases, including operating leases, to be recognized in the statement of financial position of lessees as right-of-use ("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 at the adoption date and recognize a cumulative adjustment to the opening balance of retained earnings in the period of adoption.

We will adopt ASU 2016-02 on January 1, 2019 and apply the package of practical expedients included therein, as well as utilize 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 for periods prior to January 1, 2019 will remain unchanged and in accordance with Leases (Topic 840). On January 1, 2019, we expect to recognize additional ROU assets of between $0.9 billion and $1.1 billion and lease liabilities of between $1.2 billion and $1.4 billion in our consolidated balance sheet, with the difference recognized in accumulated deficit as a result of the impairment of ROU assets that occurred in periods prior to the adoption date. In preparation for the adoption, we have designed internal controls and information system functionality to enable the preparation of the necessary financial information and have reached conclusions on key accounting assessments.

Note 3: Discontinued Operations

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

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

Under the TSA with Park and HGV, Hilton or one of its affiliates provided Park and HGV certain services for a period of up to two years from the date of the TSA to facilitate an orderly transition following the Spin-Off Distribution. The services that Hilton provided under the TSA included: finance; information technology; human resources and compensation; facilities; legal and compliance; and other services. The entity that provided the services was compensated for such services at agreed amounts as set forth in the TSA.

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

Under the management and franchise contracts with Park, Park pays management fees for various services that Hilton provides to support the operations of their hotels, as well as royalty fees for the licensing of Hilton's hotel brands. Additionally,

payroll and related costs, certain other operating costs, marketing expenses and other expenses associated with Hilton's brands and shared services are reimbursed to Hilton by Park pursuant to the terms of the management and franchise contracts.

Financial Information

During the years ended December 31, 2018 and 2017, we recognized $154 million and $157 million, respectively, of management and franchise fees and $1,167 million and $1,197 million, respectively, of other revenues from managed and franchised properties under our management and franchise contracts with Park. We also recognized franchise and licensing fees under our license agreement with HGV of $98 million and $87 million, respectively.

Prior to the spin-offs, the results of Park were reported in our ownership segment and the results of HGV were reported in our timeshare segment. Following the spin-offs, we do not report a timeshare segment, as we no longer have timeshare operations.

The following table presents the results of operations of Park and HGV that were included in discontinued operations in our consolidated statement of operations for the year ended December 31, 2016:

	(in millions)
Total revenues from discontinued operations	$	4,236
Expenses
Owned and leased hotels	1,770
Timeshare	942
Depreciation and amortization	320
Other	298
Total expenses from discontinued operations	3,330
Gain on sales of assets, net	1
Operating income from discontinued operations	907
Non-operating loss, net	(210		)
Income from discontinued operations before income taxes	697
Income tax expense	(326		)
Income from discontinued operations, net of taxes	371
Income from discontinued operations attributable to noncontrolling interests, net of taxes	(6		)
Income from discontinued operations attributable to Hilton stockholders, net of taxes	$	365

The following table presents selected financial information of Park and HGV that was included in our consolidated statement of cash flows for the year ended December 31, 2016:

	(in millions)
Non-cash items included in net income:
Depreciation and amortization	$	320
Gain on sales of assets, net	(1		)
Investing activities:
Capital expenditures for property and equipment	$	(255	)

Note 4: Revenues from Contracts with Customers

Contract Liabilities

The following table summarizes the activity of our contract liabilities during the year ended December 31, 2018:

	in millions
Balance as of December 31, 2017	$	1,087
Cash received in advance and not recognized as revenue(1)	377
Revenue recognized(1)	(229		)
Other(2)	(175		)
Balance as of December 31, 2018	$	1,060

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(1)	Primarily related to Hilton Honors.

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

We recognized revenues that were previously deferred as contract liabilities of $132 million and $211 million during the years ended December 31, 2017 and 2016, respectively.

Performance Obligations

As of December 31, 2018, we had $471 million of deferred revenues related to unsatisfied performance obligations under Hilton Honors that will be recognized as revenues when the points are redeemed, which we estimate will occur over the next two years. Additionally, we had $589 million of deferred revenues related to application, initiation and licensing fees, which are expected to be recognized as revenues in future periods over the terms of the related contracts.

Note 5: Consolidated Variable Interest Entities

As of December 31, 2018 and 2017, we consolidated three VIEs: two entities that lease hotel properties and one management company. We consolidated these VIEs, since we are the primary beneficiaries of them as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our consolidated VIEs are only available to settle the obligations of the respective entities. Our consolidated balance sheets included the assets and liabilities of these entities, which primarily comprised the following:

	December 31,
	2018				2017
	(in millions)
Cash and cash equivalents	$	71			$	73
Accounts receivable, net	15				16
Property and equipment, net	68				57
Deferred income tax assets	53				56
Other non-current assets	58				57
Accounts payable, accrued expenses and other	41				43
Long-term debt(1)	205				212
Other long-term liabilities	15				13

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(1)	Includes capital lease obligations of $187 million and $191 million as of December 31, 2018 and 2017, respectively.

During the years ended December 31, 2018, 2017 and 2016 we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.

Note 6: Goodwill and Intangible Assets

Goodwill

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

	Ownership(1)				Management and Franchise(2)				Total
	(in millions)
Balance as of December 31, 2016	$	184			$	5,034			$	5,218
Spin-off of Park	(91		)		—				(91		)
Foreign currency translation	11				52				63
Balance as of December 31, 2017	104				5,086				5,190
Foreign currency translation	(5		)		(25		)		(30		)
Balance as of December 31, 2018	$	99			$	5,061			$	5,160

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(1)	Amounts for the ownership reporting unit include the following gross carrying values and accumulated impairment losses for the periods presented:

	Gross Carrying Value				Accumulated Impairment Losses				Net Carrying Value
	(in millions)
Balance as of December 31, 2016	$	856			$	(672	)		$	184
Spin-off of Park	(423		)		332				(91		)
Foreign currency translation	11				—				11
Balance as of December 31, 2017	444				(340		)		104
Foreign currency translation	(5		)		—				(5		)
Balance as of December 31, 2018	$	439			$	(340	)		$	99

(2)	There were no accumulated impairment losses for the management and franchise reporting unit as of December 31, 2018, 2017 and 2016.

Intangible Assets

Changes to our brands intangible assets from December 31, 2017 to December 31, 2018 were due to foreign currency translations.

Amortizing intangible assets were as follows:

	December 31, 2018
	Gross Carrying Value				Accumulated Amortization				Net Carrying Value
	(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger(1)	$	2,228			$	(1,873	)		$	355
Contract acquisition costs	525				(101		)		424
Development commissions	108				(15		)		93
	$	2,861			$	(1,989	)		$	872
Other intangible assets:
Leases(1)	$	288			$	(161	)		$	127
Capitalized software costs	503				(321		)		182
Hilton Honors(1)	338				(236		)		102
Other(1)	38				(34		)		4
	$	1,167			$	(752	)		$	415

	December 31, 2017
	Gross Carrying Value				Accumulated Amortization				Net Carrying Value
	(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger(1)	$	2,242			$	(1,716	)		$	526
Contract acquisition costs	416				(74		)		342
Development commissions	97				(12		)		85
	$	2,755			$	(1,802	)		$	953
Other intangible assets:
Leases(1)	$	301			$	(153	)		$	148
Capitalized software costs	585				(428		)		157
Hilton Honors(1)	341				(217		)		124
Other(1)	38				(34		)		4
	$	1,265			$	(832	)		$	433

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(1)	Includes intangible assets that were initially recorded at their fair value at the time of the Merger.

Amortization of our amortizing intangible assets was as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Recognized in depreciation and amortization expense(1)	$	271			$	277			$	301
Recognized as a reduction of franchise and licensing fees and base and other management fees	27				17				16

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(1)	Includes amortization expense that was associated with assets recorded at their fair value at the time of the Merger of $204 million, $206 million and $208 million for the years ended December 31, 2018, 2017 and 2016, respectively, and amortization expense on capitalized software costs of $62 million, $67 million and $87 million, respectively.

We estimate future amortization of our amortizing intangible assets as of December 31, 2018 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	$	279			$	27
2020	236				25
2021	97				24
2022	66				22
2023	48				22
Thereafter	137				304
	$	863			$	424

Note 7: Property and Equipment

Property and equipment were as follows:

	December 31,
	2018				2017
	(in millions)
Land	$	12			$	12
Buildings and leasehold improvements(1)	456				428
Furniture and equipment	356				346
Construction-in-progress	24				17
	848				803
Accumulated depreciation(1)	(481		)		(450		)
	$	367			$	353

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(1)	Buildings and leasehold improvements included $65 million and $68 million of capital lease assets as of December 31, 2018 and 2017, respectively, with associated accumulated amortization of $45 million and $43 million, respectively.

Depreciation expense on property and equipment was $54 million, $59 million and $52 million during the years ended December 31, 2018, 2017 and 2016, respectively.

Note 8: Accounts Payable, Accrued Expenses and Other

Accounts payable, accrued expenses and other were as follows:

	December 31,
	2018				2017
	(in millions)
Accrued employee compensation and benefits	$	532			$	502
Accounts payable	283				282
Insurance reserves, current	199				189
Other accrued expenses(1)	516				443
	$	1,530			$	1,416

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(1)	Includes deposit liabilities related to hotel operations and application fees, taxes, interest and other accrued balances.

Note 9: Debt

Long-term Debt

Long-term debt balances, including obligations for capital leases, and associated interest rates as of December 31, 2018 were as follows:

	December 31,
	2018				2017
	(in millions)
Senior notes with a rate of 4.250%, due 2024	$	1,000			$	1,000
Senior notes with a rate of 4.625%, due 2025	900				900
Senior notes with a rate of 5.125%, due 2026	1,500				—
Senior notes with a rate of 4.875%, due 2027	600				600
Senior secured term loan facility with a rate of 4.26%, due 2023	3,119				3,929
Capital lease obligations with an average rate of 6.43%, due 2021 to 2030	225				233
Other debt with an average rate of 3.08%, due 2026	17				21
	7,361				6,683
Less: unamortized deferred financing costs and discount	(79		)		(81		)
Less: current maturities of long-term debt(1)	(16		)		(46		)
	$	7,266			$	6,556

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(1)	Balance as of December 31, 2017 is net of unamortized deferred financing costs and discount attributable to current maturities of long-term debt.

Senior Notes

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

In March 2017, we used the proceeds from issuances of the 4.625% Senior Notes due 2025 (the "2025 Senior Notes") and the 4.875% Senior Notes due 2027 (the "2027 Senior Notes"), to redeem in full $1.5 billion of Senior Notes due 2021 (the "2021 Senior Notes"). In connection with the repayment, we paid a redemption premium of $42 million and accelerated the recognition of $18 million of unamortized deferred financing costs, which were included in loss on debt extinguishment in our consolidated statement of operations for the year ended December 31, 2017.

The 4.250% Senior Notes due 2024 (the "2024 Senior Notes"), the 2025 Senior Notes, the 2026 Senior Notes and the 2027 Senior Notes are guaranteed on a senior unsecured basis by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries. See Note 23: "Condensed Consolidating Guarantor Financial Information" for additional information.

Senior Secured Credit Facilities

Our senior secured credit facility consists of a $1.0 billion Revolving Credit Facility and the Term Loans. The obligations of our senior secured credit facility are unconditionally and irrevocably guaranteed by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries. During the year ended December 31, 2018, we borrowed $150 million under the Revolving Credit Facility, and all amounts borrowed were repaid in the same period. Subsequent to December 31, 2018, we drew a net $100 million under the Revolving Credit Facility.

In December 2018, we repaid an additional $300 million outstanding under our Term Loans, and as a result of the repayments made during the year ended December 31, 2018, we accelerated the recognition of $8 million of unamortized deferred financing costs and discount, which were included in other non-operating income, net in our consolidated statement of operations. Additionally, the interest rate on the remaining balance of the Term Loans was reduced by 25 basis points to LIBOR plus 175 basis points.

As of December 31, 2018, we had $63 million of letters of credit outstanding under our Revolving Credit Facility and a borrowing capacity of $937 million. 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.

Debt Maturities

The contractual maturities of long-term debt as of December 31, 2018, were as follows:

Year	(in millions)
2019	$	16
2020	17
2021	18
2022	19
2023	3,139
Thereafter	4,152
	$	7,361

Note 10: Other Liabilities

Other long-term liabilities were as follows:

	December 31,
	2018				2017
	(in millions)
Pension obligations	$	145			$	165
Other long-term tax liabilities	395				397
Deferred employee compensation and benefits	113				117
Insurance reserves(1)	146				162
Other	64				79
	$	863			$	920

---

(1)	Obligations related to insurance claims are expected to be satisfied, on average, over the next three years.

Note 11: Derivative Instruments and Hedging Activities

Cash Flow Hedges

In May 2017, we began hedging foreign exchange-based cash flow variability in certain of our foreign currency denominated management and franchise fees using forward contracts (the "Fee Forward Contracts"). We elected to designate these Fee Forward Contracts as cash flow hedges for accounting purposes. As of December 31, 2018, the Fee Forward Contracts had an aggregate notional amount of $98 million and maturities of 24 months or less.

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

Non-designated Hedges

As of December 31, 2018, we held short-term forward contracts with an aggregate notional amount of $412 million to offset exposure to fluctuations in certain of our foreign currency denominated cash balances. We elected not to designate these forward contracts as hedging instruments. Depending on the fair value of each contract, we classify it as an asset or liability.

In 2016, we dedesignated four interest rate swaps that were previously designated as cash flow hedges as they no longer met the criteria for hedge accounting. These interest rate swaps, which had an aggregate notional amount of $1.45 billion and swapped three-month LIBOR on the Term Loans to a fixed rate of 1.87 percent, were settled in 2017.

Fair Value of Derivative Instruments

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

			December 31,
	Balance Sheet Classification		2018				2017
			(in millions)
Cash Flow Hedges:
Interest rate swaps	Other non-current assets		$	16			$	11
Forward contracts	Other current assets		1				—
Forward contracts	Accounts payable, accrued expenses and other		—				1
Non-designated Hedges:
Forward contracts	Other current assets		1				4
Forward contracts	Accounts payable, accrued expenses and other		2				1

Earnings Effect of Derivative Instruments

The gains and losses recognized in our consolidated statements of operations and consolidated statements of comprehensive income before any effect for income taxes were as follows:

			Year Ended December 31,
	Classification of Gain (Loss) Recognized		2018				2017				2016
			(in millions)
Cash Flow Hedges(1)(2):
Interest rate swaps	Other comprehensive income (loss)		$	22			$	(5	)		$	(15	)
Interest rate swaps	Interest expense		(1		)		(16		)		(8		)
Forward contracts	Other comprehensive income (loss)		2				(1		)		N/A
Non-designated Hedges:
Interest rate swaps(3)	Other non-operating income, net		N/A				2				4
Interest rate swaps(3)	Interest expense		(5		)		(10		)		(4		)
Forward contracts	Gain (loss) on foreign currency transactions		(9		)		12				7

---

(1)	There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the years ended December 31, 2018, 2017 and 2016.

(2)	The earnings effect of the Fee Forward Contracts on fee revenues for the years ended December 31, 2018 and 2017 was less than $1 million.

(3)	These amounts relate to the interest rate swaps that we have dedesignated and settled. The amounts recognized in interest expense were reclassified from accumulated other comprehensive loss as the underlying transactions occurred.

Note 12: Fair Value Measurements

We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair values of certain financial instruments and the hierarchy level we used to estimate the fair values are shown below; see Note 11: "Derivative Instruments and Hedging Activities" for the fair value information of our derivatives and Note 15: "Employee Benefit Plans" for fair value information of our pension assets:

	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				—
Liabilities:
Long-term debt(1)	7,040				3,809				—				3,039

	December 31, 2017
					Hierarchy Level
	Carrying Value				Level 1				Level 2				Level 3
	(in millions)
Assets:
Cash equivalents	$	284			$	—			$	284			$	—
Restricted cash equivalents	12				—				12				—
Liabilities:
Long-term debt(1)	6,348				2,575				—				3,954

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(1)	The carrying values include unamortized deferred financing costs and discount. The carrying values and fair values exclude capital lease obligations and other debt.

The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values as of December 31, 2018 and 2017. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

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

The estimated fair values of our Level 1 long-term debt were based on prices in active debt markets. The estimated fair values of our Level 3 long-term debt were based on indicative quotes received for similar issuances.

Note 13: Leases

We lease hotel properties, land, corporate office space and equipment used at hotels and corporate offices. As of December 31, 2018 and 2017, we leased 58 hotels and 59 hotels, respectively, under operating leases, and four hotels under capital leases, two of which were the liabilities of consolidated VIEs and were non-recourse to us. Our hotel leases expire at various dates from 2019 through 2067, with varying renewal and termination options, and the majority expire before 2029.

Our operating leases require: (i) fixed lease payments, or minimum payments, as contractually stated in the lease agreement; (ii) variable lease payments, or contingent rentals, which are generally based on a percentage of the underlying asset's revenues or are dependent on changes in an index; or (iii) lease payments equal to the greater of the fixed or variable rent. In addition, we may be required to pay some, or all, of the capital costs for furniture, equipment and leasehold improvements in the hotel during the term of the lease. For operating leases, lease expense relating to fixed or minimum 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 and general and administrative expenses in our consolidated statements of operations. For capital leases, the amortization of the asset is recognized in depreciation and

amortization expense in our consolidated statements of operations and is recognized over the shorter of the lease term or useful life of the underlying asset. The interest on the capital lease obligation is recognized in interest expense in our consolidated statements of operations.

The future minimum rent payments as of December 31, 2018, were as follows:

	Operating Leases				Capital Leases
Year	(in millions)
2019	$	206			$	30
2020	191				30
2021	166				30
2022	134				29
2023	119				29
Thereafter	865				164
Total minimum lease payments	$	1,681			312
Less: amount representing interest					(87		)
Present value of minimum lease payments					$	225

Lease expense for operating leases was as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Fixed	$	225			$	183			$	224
Contingent	142				101				98
	$	367			$	284			$	322

Note 14: Income Taxes

Income Tax Provision

Our tax provision includes federal, state and foreign income taxes payable. The domestic and foreign components of income from continuing operations before income taxes were as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
U.S. income before tax	$	881			$	632			$	906
Foreign income (loss) before tax	197				121				(366		)
Income from continuing operations before income taxes	$	1,078			$	753			$	540

The components of our provision (benefit) for income taxes were as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Current:
Federal	$	210			$	239			$	441
State	53				59				143
Foreign	60				95				70
Total current	323				393				654
Deferred:
Federal	(52		)		(667		)		(123		)
State	(14		)		(35		)		45
Foreign	52				(27		)		(19		)
Total deferred	(14		)		(729		)		(97		)
Total provision (benefit) for income taxes	$	309			$	(336	)		$	557

Reconciliations of our tax provision at the U.S. statutory rate to the provision (benefit) for income taxes were as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Statutory U.S. federal income tax provision	$	226			$	264			$	189
State income taxes, net of U.S. federal tax benefit	37				19				22
Impact of foreign operations	26				4				34
Effects of the TCJ Act	13				(600		)		—
Corporate restructuring	9				—				477
Change in deferred tax asset valuation allowance	(6		)		(48		)		(20		)
Provision (benefit) for uncertain tax positions	16				38				(139		)
Other, net	(12		)		(13		)		(6		)
Provision (benefit) for income taxes	$	309			$	(336	)		$	557

Restructuring

During the year ended December 31, 2018, our controlled foreign corporations ("CFC") distributed the stock of certain subsidiaries (the "Distributions"). Subsequent to the Distributions, the distributed subsidiaries will now be includible in our U.S. federal and state income tax filings. As a result of the Distributions, we incurred deferred income tax expense of $9 million, including: (i) recording U.S. deferred tax liabilities related to the distributed subsidiaries of $12 million and (ii) remeasuring our existing deferred tax assets and liabilities and other tax liabilities at the effective tax rates at which they will reverse in future periods, resulting in a reduction of liabilities of $3 million.

During the year ended December 31, 2016, we effected two corporate structuring transactions that included: (i) the organization of Hilton's assets and subsidiaries in preparation for the spin-offs and (ii) a restructuring of Hilton's international assets and subsidiaries (the "international restructuring"). The international restructuring involved a transfer of certain assets, including IP used in the international business, from U.S. subsidiaries to foreign subsidiaries, and became effective in December 2016. The transfer of the IP resulted in the recognition of tax expense representing the estimated U.S. tax expected to be paid in future years on income generated from the IP transferred to foreign subsidiaries. Due to the changes in the footprint of the Company and the expected applicable tax rates at which our domestic deferred tax assets and liabilities will reverse in future periods as a result of the described structuring activities, our estimated deferred effective tax rate increased for the year ended December 31, 2016. In total, these structuring transactions, which became effective in December 2016, resulted in additional income tax expense of $477 million in the period.

Tax Cuts and Jobs Act of 2017

We recognized a provisional benefit as of December 31, 2017 of $600 million, of which $569 million was the result of the remeasurement of U.S. deferred tax assets and liabilities and other tax liabilities. As of December 31, 2018, we made adjustments to the provisional amounts recorded as of December 31, 2017, as described below.

•

Deferred tax assets and liabilities and other tax liabilities. We remeasured deferred tax assets and liabilities and other tax liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The provisional amounts recorded as of December 31, 2017 related to the remeasurement of our deferred tax assets and liabilities, uncertain tax position reserves and other tax liabilities were income tax benefits of $452 million, $33 million and $84 million, respectively. However, this remeasurement was based on estimates as of the enactment date of the TCJ Act and our existing analysis of the numerous complex tax law changes in the TCJ Act. Upon completing our analysis of the TCJ Act and associated regulations, we adjusted our provisional amount by recording an additional tax benefit of $10 million during the year ended December 31, 2018, which was included in income tax expense in our consolidated statements of operations.

•

Foreign taxation changes. A one-time transition tax is applied to foreign earnings previously not subjected to U.S. tax. The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") that were previously deferred from U.S. income taxes, but is assessed at a lower tax rate than the federal corporate tax rate of 35 percent. We recorded a provisional amount for our one-time transition tax liability for our foreign subsidiaries based on estimates, as of the enactment date of the TCJ Act, for our controlled foreign subsidiaries and estimates of the total post-1986 E&P for noncontrolled foreign subsidiaries. We previously recorded a federal deferred tax liability for our deferred earnings at the statutory 35 percent rate, and the application of the transition tax results in these earnings being subjected to a lower rate, resulting in a provisional income tax benefit as of December 31, 2017 of $15 million. As a

result of additional guidance issued by the U.S. Treasury Department, we refined our calculations and recorded an additional tax benefit of $2 million during the year ended December 31, 2018. Additionally, we had not recorded certain deferred tax assets, primarily related to E&P deficits, for some foreign subsidiaries based upon an expectation that no tax benefit from such assets would be realized within the foreseeable future. The recognition of tax benefits from the deferred tax assets previously not recorded resulted in an income tax benefit of $16 million during the year ended December 31, 2017.

•

Outside basis differences. With the changes made to the U.S. taxation of foreign entities, including the change to a territorial system of taxation, the introduction of a dividend participation exemption and the changes to the current taxation of GILTI, we determined our current method of calculating CFC outside basis should be revised to incorporate the TCJ Act changes. As a result, we recorded additional deferred tax liabilities of $31 million during the year ended December 31, 2018 within income tax expense (benefit) in our consolidated statement of operations.

Our accounting for the effects of the TCJ Act was complete as of December 31, 2018.

Deferred Income Taxes

Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The tax effects of the temporary differences and carryforwards that give rise to our net deferred taxes were as follows:

	December 31,
	2018				2017
	(in millions)
Deferred tax assets:
Net operating loss carryforwards	$	389			$	395
Compensation	118				113
Reserves	18				39
Capital lease obligations	75				78
Deferred income	258				210
Other	42				52
Total gross deferred tax assets	900				887
Less: valuation allowance	(399		)		(408		)
Deferred tax assets	501				479
Deferred tax liabilities:
Brands	(1,123		)		(1,122		)
Amortizing intangible assets	(157		)		(177		)
Investment in foreign subsidiaries	(29		)		—
Deferred tax liabilities	(1,309		)		(1,299		)
Net deferred taxes	$	(808	)		$	(820	)

As of December 31, 2018, we had foreign net operating loss carryforwards of $1.5 billion, which resulted in deferred tax assets of $389 million for foreign jurisdictions. Approximately $11 million of our deferred tax assets as of December 31, 2018 related to net operating loss carryforwards that will expire between 2019 and 2038 with less than $1 million of that amount expiring in 2019. Approximately $378 million of our deferred tax assets as of December 31, 2018 resulted from net operating loss carryforwards that are not subject to expiration. We believe that it is more likely than not that the benefit from certain foreign net operating loss carryforwards will not be realized. In recognition of this assessment, we provided a valuation allowance of $379 million as of December 31, 2018 on the deferred tax assets relating to the foreign net operating loss carryforwards. Our total valuation allowance relating to these net operating loss carryforwards and other deferred tax assets decreased $9 million during the year ended December 31, 2018. Based on our consideration of all available positive and negative evidence, we determined that it was more likely than not that we would be able to realize the benefit of certain foreign deferred tax assets and released valuation allowances of $6 million against our foreign deferred tax assets. Additionally, other factors that did not have any impact on income tax expense, including revaluations of certain foreign deferred tax assets and their associated valuation allowances, resulted in a $3 million reduction of total valuation allowances.

Tax Uncertainties

We classify reserves for tax uncertainties within current income taxes payable and other long-term liabilities in our consolidated balance sheets. Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Balance at beginning of year	$	283			$	174			$	315
Additions for tax positions related to prior years	37				3				77
Additions for tax positions related to the current year	16				126				9
Reductions for tax positions related to prior years	(15		)		(10		)		(204		)
Settlements	—				(9		)		(21		)
Lapse of statute of limitations	(3		)		(2		)		(2		)
Currency translation adjustment	—				1				—
Balance at end of year	$	318			$	283			$	174

The changes to our unrecognized tax benefits during the year ended December 31, 2018 were primarily related to uncertainty regarding the calculations of tax deductions claimed in recently filed tax returns, as well as the addition of current year reserves related to our Hilton Honors guest loyalty program. The changes to our unrecognized tax benefits during the year ended December 31, 2017 were primarily related to uncertainty regarding the valuation of certain tax assets in the U.S. and the United Kingdom. The changes to our unrecognized tax benefits during the year ended December 31, 2016 were primarily the result of items identified, resolved and settled as part of our ongoing U.S. federal audit. We recognize interest and penalties accrued related to uncertain tax positions in income tax expense (benefit) in our consolidated statements of operations. As of December 31, 2018 and 2017, we had accrued approximately $40 million and $33 million, respectively, for interest and penalties related to our unrecognized tax benefits in our consolidated balance sheets. Included in the balances of unrecognized tax benefits as of December 31, 2018 and 2017 were $310 million and $285 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective income tax rate.

In April 2014, we received 30-day Letters from the Internal Revenue Service ("IRS") and the Revenue Agents Report ("RAR") for the 2006 and October 2007 tax years. We disagreed with several of the proposed adjustments in the RAR, filed a formal appeals protest with the IRS and did not make any tax payments related to this audit. The issues being protested in appeals relate to assertions by the IRS that: (i) certain foreign currency denominated intercompany loans from our foreign subsidiaries to certain U.S. subsidiaries should be recharacterized as equity for U.S. federal income tax purposes and constitute deemed dividends from such foreign subsidiaries to our U.S. subsidiaries; (ii) in calculating the amount of U.S. taxable income resulting from our Hilton Honors guest loyalty program, we should not reduce gross income by the estimated costs of future redemptions, but rather such costs would be deductible at the time the points are redeemed; and (iii) certain foreign currency denominated loans issued by one of our Luxembourg subsidiaries whose functional currency is USD, should instead be treated as issued by one of our Belgian subsidiaries whose functional currency is the euro, and thus foreign currency gains and losses with respect to such loans should have been measured in euros, instead of USD. 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 2006 through October 2007. 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 the IRS with respect to the treatment of the foreign currency gains and losses 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 IRS Appeals 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 2006 through October 2007. The adjustments for tax years 2011 through 2013 will also be protested in appeals, and formal protests have been submitted. After receipt of the TAM relating to the Luxembourg subsidiary, in total, the two remaining proposed adjustments sought by the IRS for the tax years with open audits would result in additional U.S. federal tax 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 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, we have recorded $52 million of unrecognized tax benefits related to these issues.

We file income tax returns, including returns for our subsidiaries, with federal, state, local and foreign tax jurisdictions. We are under regular and recurring audit by the IRS and other taxing authorities on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in federal, state, local and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. We are no longer subject to U.S. federal income tax examination for years through 2004. As of December 31, 2018, we remain subject to federal examinations from 2005 through 2017, state examinations from 2005 through 2017 and foreign examinations of our income tax returns for the years 1996 through 2017.

Note 15: Employee Benefit Plans

We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation. We have both a noncontributory retirement plan and multiple employee benefit plans (the "pension plans").

The noncontributory retirement plan is in the U.S. (the "Domestic Plan"), and it covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996; therefore, the projected benefit obligation is equal to the accumulated benefit obligation. The plan assets will be used to pay benefits due to employees for service through December 31, 1996. Since employees have not accrued additional benefits from that time, we do not utilize salary or pension inflation assumptions in calculating our benefit obligation for the Domestic Plan. The annual measurement date for the Domestic Plan is December 31.

The multiple employee benefit plans cover many of our international employees. These include: (i) a plan that covers workers in the United Kingdom (the "U.K. Plan"), which was frozen to further service accruals on November 30, 2013 and (ii) a number of smaller plans that cover workers in various countries around the world (the "International Plans"). The annual measurement date for all of these plans is December 31.

We are required to recognize the funded status of our pension plans, which is the difference between the fair value of plan assets and the projected benefit obligations, in our consolidated balance sheets and make corresponding adjustments for changes in the value through accumulated other comprehensive income (loss), net of taxes.

The following table presents the projected benefit obligation, fair value of plan assets, funded status and accumulated benefit obligation for the Domestic Plan, the U.K. Plan and the International Plans:

	Domestic Plan								U.K. Plan								International Plans
	2018				2017				2018				2017				2018				2017
	(in millions)
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	384			$	381			$	443			$	404			$	86			$	81
Service cost	—				—				3				2				2				1
Interest cost	12				12				9				10				2				1
Prior service cost(1)	—				—				4				—				—				—
Actuarial loss (gain)	(14		)		16				(39		)		4				—				3
Settlements and curtailments	(2		)		(1		)		—				—				(1		)		—
Effect of foreign exchange rates	—				—				(25		)		40				(1		)		4
Benefits paid	(23		)		(24		)		(20		)		(17		)		(5		)		(4		)
Benefit obligation at end of year	$	357			$	384			$	375			$	443			$	83			$	86
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	306			$	267			$	386			$	336			$	65			$	58
Actual return on plan assets, net of expenses	(23		)		43				(14		)		24				(1		)		6
Employer contributions	16				21				10				9				4				4
Settlements	(2		)		(1		)		—				—				—				—
Effect of foreign exchange rates	—				—				(22		)		34				—				1
Benefits paid	(23		)		(24		)		(20		)		(17		)		(5		)		(4		)
Fair value of plan assets at end of year	274				306				340				386				63				65
Funded status at end of year (underfunded)	(83		)		(78		)		(35		)		(57		)		(20		)		(21		)
Accumulated benefit obligation	$	357			$	384			$	375			$	443			$	83			$	86

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(1)	Relates to U.K. pension equalization requirements.

Amounts recognized in the consolidated balance sheets consisted of the following:

	Domestic Plan								U.K. Plan								International Plans
	2018				2017				2018				2017				2018				2017
	(in millions)
Other non-current assets	$	—			$	—			$	—			$	—			$	7			$	9
Other liabilities	(83		)		(78		)		(35		)		(57		)		(27		)		(30		)
Net amount recognized	$	(83	)		$	(78	)		$	(35	)		$	(57	)		$	(20	)		$	(21	)

Amounts recognized in accumulated other comprehensive loss consisted of the following:

	Domestic Plan												U.K. Plan												International Plans
	2018				2017				2016				2018				2017				2016				2018				2017				2016
	(in millions)
Net actuarial loss (gain)	$	22			$	(15	)		$	—			$	(14	)		$	13			$	41			$	3			$	—			$	3
Prior service cost (credit)	(4		)		(3		)		(3		)		4				—				—				—				—				—
Amortization of net loss	(3		)		(3		)		(3		)		(4		)		(4		)		(2		)		(1		)		—				(1		)
Net amount recognized	$	15			$	(21	)		$	(6	)		$	(14	)		$	9			$	39			$	2			$	—			$	2

The estimated unrecognized prior service cost and net loss that will be amortized into net periodic pension cost (credit) during the year ended December 31, 2019 are as follows:

	Domestic Plan				U.K. Plan				International Plans
	(in millions)
Unrecognized prior service cost(1)	$	3			$	—			$	—
Unrecognized net loss(1)	3				4				—
Amount unrecognized	$	6			$	4			$	—

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(1)	Unrecognized prior service cost amounts for the U.K. Plan and International Plans are less than $1 million and unrecognized net loss amounts for the International Plans are less than $1 million.

The net periodic pension cost (credit) was as follows:

	Domestic Plan												U.K. Plan												International Plans
	2018				2017				2016				2018				2017				2016				2018				2017				2016
	(in millions)
Service cost	$	6			$	8			$	8			$	3			$	2			$	2			$	2			$	2			$	3
Interest cost	12				12				13				9				10				12				2				2				2
Expected return on plan assets	(19		)		(19		)		(19		)		(21		)		(19		)		(22		)		(3		)		(3		)		(3		)
Amortization of prior service cost	3				3				4				—				—				—				—				—				—
Amortization of net loss	3				3				3				4				4				2				1				—				—
Net periodic pension cost (credit)	$	5			$	7			$	9			$	(5	)		$	(3	)		$	(6	)		$	2			$	1			$	2

The weighted-average assumptions used to determine benefit obligations were as follows:

	Domestic Plan						U.K. Plan						International Plans
	2018			2017			2018			2017			2018			2017
Discount rate	4.3	%		3.6	%		3.1	%		2.6	%		3.3	%		2.4	%
Salary inflation	N/A			N/A			1.8			1.8			2.2			2.2
Pension inflation	N/A			N/A			3.0			3.0			1.8			1.8

The weighted-average assumptions used to determine net periodic pension cost (credit) were as follows:

	Domestic Plan									U.K. Plan									International Plans
	2018			2017			2016			2018			2017			2016			2018			2017			2016
Discount rate	3.6	%		4.0	%		4.2	%		2.6	%		2.8	%		3.9	%		2.9	%		3.0	%		3.5	%
Expected return on plan assets	7.0			7.0			7.3			5.5			5.5			6.5			4.6			4.3			5.4
Salary inflation	N/A			N/A			N/A			1.8			1.9			1.7			2.2			2.1			2.1
Pension inflation	N/A			N/A			N/A			3.0			3.1			2.8			1.8			1.7			1.6

The investment objectives for the various plans are preservation of capital, current income and long-term growth of capital. All plan assets are managed by outside investment managers and do not include investments in Hilton stock. Asset allocations are reviewed periodically by the investment managers.

Expected long-term returns on plan assets are determined using historical performance for debt and equity securities held by our plans, actual performance of plan assets and current and expected market conditions. Expected returns are formulated based on the target asset allocation. The target asset allocation for the Domestic Plan, as a percentage of total plan assets, as of December 31, 2018 and 2017, was 80 percent in funds that invest in equity securities and 20 percent in funds that invest in debt securities. The target asset allocation for the U.K. Plan and the International Plans, as a percentage of total plan assets, as of December 31, 2018 and 2017, was 75 percent in funds that invest in equity and debt securities and 25 percent in bond funds.

The following tables present the fair value hierarchy of total plan assets measured at fair value by asset category:

	December 31, 2018
	Domestic Plan				U.K. Plan				International Plans
	(in millions)
Level 1
Cash and cash equivalents	$	—			$	34			$	11
Equity funds	—				33				2
Bond funds	—				39				—
Alternative investments	—				140				—
Level 2
Equity funds	—				—				4
Bond funds	—				—				6
Net asset value(1)
Bond funds	—				44				—
Common collective trusts	274				—				40
Other	—				50				—
	$	274			$	340			$	63

	December 31, 2017
	Domestic Plan				U.K. Plan				International Plans
	(in millions)
Level 1
Cash and cash equivalents	$	—			$	—			$	11
Level 2
Equity funds	—				—				6
Bond funds	—				—				5
Net asset value(1)
Common collective trusts	306				386				43
	$	306			$	386			$	65

---

(1)	Certain investments are measured at net asset value per share as a practical expedient and, therefore, have not been classified in the fair value hierarchy.

We expect to contribute approximately $8 million, $9 million and $4 million to the Domestic Plan, the U.K. Plan and the International Plans, respectively, in 2019.

As of December 31, 2018, the benefits expected to be paid in the next five years and in the aggregate for the five years thereafter were as follows:

	Domestic Plan				U.K. Plan				International Plans
Year	(in millions)
2019	$	35			$	19			$	11
2020	27				19				6
2021	27				20				5
2022	26				20				5
2023	26				20				5
2024-2028	121				107				24
	$	262			$	205			$	56

In January 2007, the Domestic Plan and plans maintained for certain domestic hotels currently or formerly managed by us were merged into a multiple employer plan. As of December 31, 2018 and 2017, the multiple employer plan had combined plan assets of $297 million and $331 million, respectively, and a projected benefit obligation of $380 million and $409 million, respectively.

We have various employee defined contribution investment plans whereby we contribute matching percentages of employee contributions. The aggregate expense under these plans totaled $16 million, $15 million and $17 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Note 16: Share-Based Compensation

We recognized share-based compensation expense of $127 million, $121 million and $81 million during the years ended December 31, 2018, 2017 and 2016, respectively, which included amounts reimbursed by hotel owners. The total tax benefit recognized related to share-based compensation expense was $42 million, $49 million and $31 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, we accrued $15 million in accounts payable, accrued expenses and other in our consolidated balance sheets for certain awards settled in cash.

As of December 31, 2018, unrecognized compensation costs for unvested awards was approximately $121 million, which is expected to be recognized over a weighted-average period of 1.7 years on a straight-line basis. As of December 31, 2018, there were 16.1 million shares of common stock available for future issuance under the Hilton 2017 Omnibus Incentive Plan, plus any shares subject to awards outstanding under our 2013 Omnibus Incentive Plan, which will become available for issuance under our 2017 Omnibus Incentive Plan as a result of such outstanding awards expiring or terminating or being canceled or forfeited.

RSUs

The following table provides information about our RSU grants for the last three fiscal years:

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share data)
Number of shares granted	0.9				1.5				1.2
Weighted average grant date fair value per share	$	79.31			$	58.80			$	59.73
Aggregate intrinsic value of shares vested	$	123			$	78			$	40

The following table summarizes the activity of our RSUs during the year ended December 31, 2018:

	Number of Shares			Weighted Average Grant Date Fair Value per Share
	(in millions)
Outstanding as of December 31, 2017	2.8			$	51.44
Granted	0.9			79.31
Vested	(1.5	)		49.56
Forfeited	(0.2	)		56.09
Outstanding as of December 31, 2018	2.0			64.88

Options

The following table provides information about our option grants for the last three fiscal years:

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share data)
Number of options granted	0.6				0.7				0.5
Weighted average exercise price per share	$	79.36			$	58.40			$	58.83
Weighted average grant date fair value per share	$	23.72			$	13.96			$	16.41

The weighted average grant date fair value per share of each of these option grants was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

	Year Ended December 31,
	2018			2017			2016
Expected volatility(1)	27.91	%		24.00	%		32.00	%
Dividend yield(2)	0.74	%		0.92% - 1.03%			1.43	%
Risk-free rate(3)	2.73	%		1.93% - 2.03%			1.36	%
Expected term (in years)(4)	6.0			6.0			6.0

---

(1)	Estimated using historical movement of Hilton's stock price.

(2)	For the year ended December 31, 2018, estimated based on the quarterly dividend and the three-month average stock price at the grant date; for the years ended December 31, 2017 and 2016, estimated based on the expected annualized dividend payment at the grant date.

(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.

The following table summarizes the activity of our options during the year ended December 31, 2018:

	Number of Shares			Weighted Average Exercise Price per Share
	(in millions)
Outstanding as of December 31, 2017	2.0			$	51.24
Granted	0.6			79.36
Exercised	(0.2	)		50.15
Outstanding as of December 31, 2018(1)	2.4			58.50
Exercisable as of December 31, 2018(2)	1.1			50.07

---

(1)	The aggregate intrinsic value was $36 million and the weighted average remaining contractual term was 8 years.

(2)	The aggregate intrinsic value was $25 million and the weighted average remaining contractual term was 7 years.

Performance Shares

During the years ended December 31, 2018 and 2017, we issued performance shares with 50 percent of the shares subject to achievement based on the Company's EBITDA CAGR and the other 50 percent of the shares subject to achievement based on the Company's FCF CAGR. The performance shares are settled at the end of the three-year performance period.

In 2016, we modified the performance shares that were outstanding as of December 31, 2016, which were based on a measure of the Company’s total shareholder return relative to the total shareholder returns of members of a peer company group and the Company’s EBITDA CAGR, such that, upon completion of the spin-offs, they were converted to RSUs. We recognized $2.3 million, $3.3 million, and $0.3 million of incremental expense related to the modification of these awards during the years ended December 31, 2018, 2017 and 2016, respectively.

We determined that the performance conditions for performance shares issued in 2018 and 2017 are probable of achievement and, as of December 31, 2018, we recognized compensation expense related to these awards based on the following anticipated achievement percentages:

	EBITDA CAGR			FCF CAGR
2017 performance shares	200	%		200	%
2018 performance shares	150	%		150	%

The following table provides information about our performance share grants for the last three fiscal years:

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share data)
EBITDA CAGR:
Number of shares granted	0.2				0.2				0.3
Weighted average grant date fair value per share	$	79.36			$	58.40			$	58.83
Aggregate intrinsic value of shares vested	$	—			$	—			$	12
FCF CAGR:
Number of shares granted	0.2				0.2				N/A
Weighted average grant date fair value per share	$	79.36			$	58.40			N/A
Aggregate intrinsic value of shares vested	$	—			$	—			N/A
Relative Shareholder Return:
Number of shares granted	N/A				N/A				0.3
Weighted average grant date fair value per share	N/A				N/A				$	62.43
Aggregate intrinsic value of shares vested	N/A				N/A				$	16

The following table summarizes the activity of our performance shares during the year ended December 31, 2018:

	EBITDA CAGR							FCF CAGR
	Number of Shares			Weighted Average Grant Date Fair Value per Share				Number of Shares			Weighted Average Grant Date Fair Value per Share
	(in millions)							(in millions)
Outstanding as of December 31, 2017	0.2			$	58.41			0.2			$	58.41
Granted	0.2			79.36				0.2			79.36
Outstanding as of December 31, 2018	0.4			69.53				0.4			69.53

Note 17: Earnings (Loss) Per Share

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

	Year Ended December 31,
	2018				2017				2016
	(in millions, except per share amounts)
Basic EPS:
Numerator:
Net income (loss) from continuing operations attributable to Hilton stockholders	$	764			$	1,084			$	(27	)
Denominator:
Weighted average shares outstanding	302				324				329
Basic EPS	$	2.53			$	3.34			$	(0.08	)
Diluted EPS:
Numerator:
Net income (loss) from continuing operations attributable to Hilton stockholders	$	764			$	1,084			$	(27	)
Denominator:
Weighted average shares outstanding	305				327				329
Diluted EPS	$	2.50			$	3.32			$	(0.08	)

Approximately 1 million, 1 million and 2 million share-based compensation awards were excluded from the weighted average shares outstanding used in the computation of diluted EPS for the years ended December 31, 2018, 2017 and 2016, respectively, because their effect would have been anti-dilutive under the treasury stock method.

Note 18: Accumulated Other Comprehensive Loss

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

	Currency Translation Adjustment(1)				Pension Liability Adjustment				Cash Flow Hedge Adjustment				Total
	(in millions)
Balance as of December 31, 2015	$	(580	)		$	(194	)		$	(10	)		$	(784	)
Other comprehensive loss before reclassifications	(157		)		(63		)		(9		)		(229		)
Amounts reclassified from accumulated other comprehensive loss	(1		)		6				7				12
Net current period other comprehensive loss	(158		)		(57		)		(2		)		(217		)
Balance as of December 31, 2016	(738		)		(251		)		(12		)		(1,001		)
Other comprehensive income (loss) before reclassifications	161				15				(4		)		172
Amounts reclassified from accumulated other comprehensive loss	1				7				17				25
Net current period other comprehensive income	162				22				13				197
Spin-offs of Park and HGV	63				—				—				63
Balance as of December 31, 2017	(513		)		(229		)		1				(741		)
Other comprehensive income (loss) before reclassifications	(70		)		(18		)		17				(71		)
Amounts reclassified from accumulated other comprehensive loss	—				9				5				14
Net current period other comprehensive income (loss)	(70		)		(9		)		22				(57		)
Cumulative effect of the adoption of ASU 2018-02	38				(22		)		—				16
Balance as of December 31, 2018	$	(545	)		$	(260	)		$	23			$	(782	)

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

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

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Currency translation adjustment:
Sale or liquidation of investment in foreign entity(1)	$	—			$	(2	)		$	—
Gains on net investment hedges(1)	—				1				1
Total currency translation adjustment reclassifications for the period, net of taxes	—				(1		)		1
Pension liability adjustment:
Amortization of prior service cost(2)	(3		)		(3		)		(4		)
Amortization of net loss(2)	(8		)		(7		)		(5		)
Tax benefit(3)	2				3				3
Total pension liability adjustment reclassifications for the period, net of taxes	(9		)		(7		)		(6		)
Cash flow hedge adjustment:
Dedesignated interest rate swaps(4)	(6		)		(26		)		(12		)
Tax benefit(3)	1				9				5
Total cash flow hedge adjustment reclassifications for the period, net of taxes	(5		)		(17		)		(7		)
Total reclassifications for the period, net of taxes	$	(14	)		$	(25	)		$	(12	)

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(1)	Reclassified out of accumulated other comprehensive loss to gain (loss) on foreign currency transactions in our consolidated statements of operations. The related tax benefits for the years ended December 31, 2017 and 2016 were less than $1 million and were reclassified out of accumulated other comprehensive loss to income tax benefit (expense) in our consolidated statements of operations.

(2)	Reclassified out of accumulated other comprehensive loss to other non-operating income, net in our consolidated statements of operations. These amounts were included in the computation of net periodic pension cost (credit). See Note 15: "Employee Benefit Plans" for additional information.

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

(4)	Reclassified out of accumulated other comprehensive loss to interest expense in our consolidated statements of operations. See Note 11: "Derivative Instruments and Hedging Activities" for additional information.

Note 19: Business Segments

We are a hospitality company with operations organized in two 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 December 31, 2018, this segment included 689 managed hotels and 4,874 franchised hotels consisting of 882,873 total rooms. This segment also earns licensing fees from HGV and co-brand credit card arrangements, as well as fees for managing properties in our ownership segment.

As of December 31, 2018, the ownership segment included 71 properties totaling 21,720 rooms, comprising 62 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, two hotels leased by consolidated VIEs and six hotels owned or leased by unconsolidated affiliates.

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

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

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Franchise and licensing fees	$	1,537			$	1,326			$	1,095
Base and other management fees(1)	385				379				284
Incentive management fees	235				222				142
Management and franchise	2,157				1,927				1,521
Ownership	1,484				1,432				1,434
Segment revenues	3,641				3,359				2,955
Amortization of contract acquisition costs	(27		)		(17		)		(16		)
Other revenues	98				105				82
Direct reimbursements from managed and franchised properties(2)	2,881				2,572				1,644
Indirect reimbursements from managed and franchised properties(2)	2,357				2,155				1,953
Intersegment fees elimination(1)	(44		)		(43		)		(42		)
Total revenues	$	8,906			$	8,131			$	6,576

---

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

(2)	Included in other revenues from managed and franchised properties in our consolidated statements of operations.

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

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Management and franchise(1)	$	2,157			$	1,927			$	1,521
Ownership(1)	108				120				113
Segment operating income	2,265				2,047				1,634
Amortization of contract acquisition costs	(27		)		(17		)		(16		)
Other revenues, less other expenses	47				49				16
Net other expenses from managed and franchised properties	(85		)		(172		)		(12		)
Depreciation and amortization	(325		)		(336		)		(353		)
General and administrative	(443		)		(439		)		(409		)
Gain on sales of assets, net	—				—				8
Operating income	1,432				1,132				868
Interest expense	(371		)		(351		)		(334		)
Gain (loss) on foreign currency transactions	(11		)		3				(16		)
Loss on debt extinguishment	—				(60		)		—
Other non-operating income, net	28				29				22
Income from continuing operations before income taxes	$	1,078			$	753			$	540

---

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

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

	December 31,
	2018				2017
	(in millions)
Management and franchise	$	11,362			$	11,505
Ownership	927				964
Corporate and other	1,706				1,759
	$	13,995			$	14,228

The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated capital expenditures of continuing operations:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
Ownership	$	42			$	32			$	45
Corporate and other	30				26				17
	$	72			$	58			$	62

Total revenues by country were as follows:

	Year Ended December 31,
	2018				2017				2016
	(in millions)
U.S.	$	6,848			$	6,046			$	4,524
United Kingdom	545				544				942
All other	1,513				1,541				1,110
	$	8,906			$	8,131			$	6,576

Other than the countries included above, there were no countries that individually represented more than 10 percent of total revenues for the years ended December 31, 2018, 2017 and 2016.

Property and equipment, net by country was as follows:

	December 31,
	2018				2017
	(in millions)
U.S.	$	109			$	105
Japan	106				94
United Kingdom	75				82
Germany	40				36
All other	37				36
	$	367			$	353

Other than the countries included above, there were no countries that individually represented more than 10 percent of total property and equipment, net as of December 31, 2018 and 2017.

Note 20: Commitments and Contingencies

We provide performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified operating performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of December 31, 2018, we had five performance guarantees, with expirations ranging from 2019 to 2030, and possible cash outlays totaling approximately $36 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. We do not have any letters of credit pledged as collateral against these guarantees. As of December 31, 2018 and 2017, we accrued liabilities of $12 million and $21 million, respectively, for our performance guarantees, which were related to one hotel and two hotels, respectively, of VIEs for which we were not the primary beneficiary. We may enter into new contracts containing performance guarantees in the future, which could increase our possible cash outlays.

We have entered into agreements with owners of certain hotels that we operate or will operate under a management or franchise contract to finance capital expenditures at the hotels for approximately $29 million. As of December 31, 2018, we had not funded any of these commitments and expect to fund $19 million in 2019 and $10 million in 2020.

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

hotel owners. As of December 31, 2018 and 2017, we had collected an aggregate of $375 million and $402 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 December 31, 2018 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Note 21: Related Party Transactions

Equity Investments

We hold equity investments in entities that own or lease properties that we manage. Amounts included in our consolidated balance sheets related to these management contracts as of December 31, 2018 and 2017 primarily included $19 million and $20 million, respectively, of management and franchise contracts, net. Amounts included in our consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016 primarily included: (i) management and franchise fees of $10 million, $10 million and $12 million, respectively; (ii) other revenues from managed and franchised properties of $22 million, $22 million and $21 million, respectively; and (iii) other expenses from managed and franchised properties of $22 million, $22 million and $21 million, respectively.

Blackstone

Blackstone directly and indirectly owns or controls hotels that we manage or franchise and for which we receive fees in connection with the related management and franchise contracts. Our maximum exposure to loss related to these hotels is limited to the amounts discussed below; therefore, our involvement with these hotels does not expose us to additional variability or risk of loss. Due to sales of the Company's common stock, Blackstone was no longer considered a related party of

the Company as of October 1, 2017. Amounts included in our consolidated statements of operations related to these management and franchise contracts, for the period of time Blackstone was considered a related party, for the years ended December 31, 2017 and 2016 primarily included: (i) management and franchise fees of $24 million and $42 million, respectively; (ii) other revenues from managed and franchised properties of $113 million and $144 million, respectively; and (iii) other expenses from managed and franchised properties of $113 million and $144 million, respectively. Additionally, our consolidated statements of cash flows included $11 million of contract acquisition costs related to these management and franchise contracts for the year ended December 31, 2017.

Note 22: Supplemental Disclosures of Cash Flow Information

Interest paid during the years ended December 31, 2018, 2017 and 2016, was $330 million, $314 million and $478 million, respectively.

Income taxes, net of refunds, paid during the years ended December 31, 2018, 2017 and 2016 were $288 million, $526 million and $677 million, respectively.

The following non-cash investing and financing activities were excluded from the consolidated statements of cash flows:

•	In 2017, we had non-cash financing activities of $25 million in connection with the spin-offs.

•	In 2016, we transferred $116 million of Park's property and equipment to HGV's timeshare inventory for conversion into timeshare units.

Note 23: Condensed Consolidating Guarantor Financial Information

In April 2018, Hilton Domestic Operating Company Inc. ("HOC"), which is 100 percent owned by Hilton Worldwide Finance LLC, issued the 2026 Senior Notes. In March 2017, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (the "HWF Issuers"), entities that are 100 percent owned by Hilton Worldwide Parent LLC ("HWP"), which is 100 percent owned by the Parent, issued the 2025 Senior Notes and 2027 Senior Notes. In September 2016, HOC assumed the 2024 Senior Notes that were issued in August 2016 by escrow issuers. In October 2013, the HWF Issuers issued the 2021 Senior Notes, which were redeemed in full in March 2017. See Note 9: "Debt" for additional information.

The HWF Issuers are guarantors of the 2026 Senior Notes and the 2024 Senior Notes. HOC is a guarantor of the 2025 Senior Notes and the 2027 Senior Notes and was a guarantor of the 2021 Senior Notes prior to their redemption. The 2024 Senior Notes, 2025 Senior Notes, 2026 Senior Notes and 2027 Senior Notes are collectively referred to as the Senior Notes. The HWF Issuers and HOC are collectively referred to as the Subsidiary Issuers.

The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by HWP, the Parent and certain of the Parent's 100 percent owned domestic restricted subsidiaries that are themselves not issuers of the applicable series of Senior Notes (together, the "Guarantors''). The indentures that govern the Senior Notes provide that any subsidiary of the Company that provides a guarantee of our senior secured credit facility will guarantee the Senior Notes. As of December 31, 2018, none of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign operations or our non-wholly owned subsidiaries guaranteed 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 facility; (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 December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, for the Parent, HWF Issuers, HOC, Guarantors and Non-Guarantors.

	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
Income taxes receivable	—				—				—				23				—				(3		)		20
Other	—				1				1				13				154				—				169
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			$	743			$	—			$	1,530
Current portion of deferred revenues	—				—				106				239				14				(9		)		350
Intercompany payables	—				—				40				—				—				(40		)		—
Current maturities of long-term debt	—				—				—				—				16				—				16
Income taxes payable	—				—				—				—				22				(3		)		19
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

	December 31, 2017
Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—			$	—			$	2			$	18			$	550			$	—			$	570
Restricted cash and cash equivalents	—				—				61				10				29				—				100
Accounts receivable, net	—				—				18				712				275				—				1,005
Intercompany receivables	—				—				—				—				40				(40		)		—
Prepaid expenses	—				—				25				24				84				(6		)		127
Income taxes receivable	—				—				—				60				—				(24		)		36
Other	—				—				1				13				155				—				169
Total current assets	—				—				107				837				1,133				(70		)		2,007
Intangibles and Other Assets:
Investments in subsidiaries	1,697				7,067				8,326				1,697				—				(18,787		)		—
Goodwill	—				—				—				3,824				1,366				—				5,190
Brands	—				—				—				4,405				485				—				4,890
Management and franchise contracts, net	—				—				2				645				306				—				953
Other intangible assets, net	—				—				1				283				149				—				433
Property and equipment, net	—				—				20				67				266				—				353
Deferred income tax assets	6				—				104				—				127				(126		)		111
Other	—				20				32				67				172				—				291
Total intangibles and other assets	1,703				7,087				8,485				10,988				2,871				(18,913		)		12,221
TOTAL ASSETS	$	1,703			$	7,087			$	8,592			$	11,825			$	4,004			$	(18,983	)		$	14,228
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	15			$	20			$	184			$	576			$	624			$	(3	)		$	1,416
Current portion of deferred revenues	—				—				90				266				13				(3		)		366
Intercompany payables	—				—				40				—				—				(40		)		—
Current maturities of long-term debt	—				32				—				—				14				—				46
Income taxes payable	—				—				—				—				36				(24		)		12
Current portion of liability for guest loyalty program	—				—				—				622				—				—				622
Total current liabilities	15				52				314				1,464				687				(70		)		2,462
Long-term debt	—				5,333				983				—				240				—				6,556
Deferred revenues	—				—				—				770				59				—				829
Deferred income tax liabilities	—				5				—				1,052				—				(126		)		931
Liability for guest loyalty program	—				—				—				839				—				—				839
Other	—				—				228				64				628				—				920
Total liabilities	15				5,390				1,525				4,189				1,614				(196		)		12,537
Equity:
Total Hilton stockholders' equity	1,688				1,697				7,067				7,636				2,387				(18,787		)		1,688
Noncontrolling interests	—				—				—				—				3				—				3
Total equity	1,688				1,697				7,067				7,636				2,390				(18,787		)		1,691
TOTAL LIABILITIES AND EQUITY	$	1,703			$	7,087			$	8,592			$	11,825			$	4,004			$	(18,983	)		$	14,228

	Year Ended December 31, 2018
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Franchise and licensing fees	$	—			$	—			$	227			$	1,182			$	139			$	(18	)		$	1,530
Base and other management fees	—				—				1				205				115				—				321
Incentive management fees	—				—				—				78				157				—				235
Owned and leased hotels	—				—				—				—				1,484				—				1,484
Other revenues	—				—				6				81				11				—				98
	—				—				234				1,546				1,906				(18		)		3,668
Other revenues from managed and franchised properties	—				—				245				4,376				617				—				5,238
Total revenues	—				—				479				5,922				2,523				(18		)		8,906
Expenses
Owned and leased hotels	—				—				—				—				1,332				—				1,332
Depreciation and amortization	—				—				6				237				82				—				325
General and administrative	—				—				323				—				130				(10		)		443
Other expenses	—				—				7				22				30				(8		)		51
	—				—				336				259				1,574				(18		)		2,151
Other expenses from managed and franchised properties	—				—				236				4,466				621				—				5,323
Total expenses	—				—				572				4,725				2,195				(18		)		7,474
Operating income (loss)	—				—				(93		)		1,197				328				—				1,432
Interest expense	—				(227		)		(106		)		—				(38		)		—				(371		)
Gain (loss) on foreign currency transactions	—				—				4				84				(99		)		—				(11		)
Other non-operating income (loss), net	—				(9		)		3				16				18				—				28
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(236		)		(192		)		1,297				209				—				1,078
Income tax benefit (expense)	—				57				39				(309		)		(96		)		—				(309		)
Income (loss) before equity in earnings from subsidiaries	—				(179		)		(153		)		988				113				—				769
Equity in earnings from subsidiaries	764				943				1,096				764				—				(3,567		)		—
Net income	764				764				943				1,752				113				(3,567		)		769
Net income attributable to noncontrolling interests	—				—				—				—				(5		)		—				(5		)
Net income attributable to Hilton stockholders	$	764			$	764			$	943			$	1,752			$	108			$	(3,567	)		$	764
Comprehensive income	$	707			$	784			$	932			$	1,751			$	48			$	(3,510	)		$	712
Comprehensive income attributable to noncontrolling interests	—				—				—				—				(5		)		—				(5		)
Comprehensive income attributable to Hilton stockholders	$	707			$	784			$	932			$	1,751			$	43			$	(3,510	)		$	707

	Year Ended December 31, 2017
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Franchise and licensing fees	$	—			$	—			$	143			$	1,077			$	118			$	(17	)		$	1,321
Base and other management fees	—				—				1				195				128				—				324
Incentive management fees	—				—				—				76				146				—				222
Owned and leased hotels	—				—				—				—				1,432				—				1,432
Other revenues	—				—				31				70				11				(7		)		105
	—				—				175				1,418				1,835				(24		)		3,404
Other revenues from managed and franchised properties	—				—				159				3,986				582				—				4,727
Total revenues	—				—				334				5,404				2,417				(24		)		8,131
Expenses
Owned and leased hotels	—				—				—				—				1,269				—				1,269
Depreciation and amortization	—				—				5				242				89				—				336
General and administrative	—				—				327				—				118				(6		)		439
Other expenses	—				—				17				29				27				(17		)		56
	—				—				349				271				1,503				(23		)		2,100
Other expenses from managed and franchised properties	—				—				147				4,147				605				—				4,899
Total expenses	—				—				496				4,418				2,108				(23		)		6,999
Gain (loss) on sales of assets, net	—				—				—				(1		)		1				—				—
Operating income (loss)	—				—				(162		)		985				310				(1		)		1,132
Interest expense	—				(244		)		(61		)		—				(47		)		1				(351		)
Gain (loss) on foreign currency transactions	—				—				10				124				(131		)		—				3
Loss on debt extinguishment	—				(60		)		—				—				—				—				(60		)
Other non-operating income (loss), net	—				(3		)		4				7				21				—				29
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(307		)		(209		)		1,116				153				—				753
Income tax benefit (expense)	(3		)		122				26				89				102				—				336
Income (loss) before equity in earnings from subsidiaries	(3		)		(185		)		(183		)		1,205				255				—				1,089
Equity in earnings from subsidiaries	1,087				1,272				1,455				1,087				—				(4,901		)		—
Net income	1,084				1,087				1,272				2,292				255				(4,901		)		1,089
Net income attributable to noncontrolling interests	—				—				—				—				(5		)		—				(5		)
Net income attributable to Hilton stockholders	$	1,084			$	1,087			$	1,272			$	2,292			$	250			$	(4,901	)		$	1,084
Comprehensive income	$	1,281			$	1,101			$	1,288			$	2,295			$	419			$	(5,098	)		$	1,286
Comprehensive income attributable to noncontrolling interests	—				—				—				—				(5		)		—				(5		)
Comprehensive income attributable to Hilton stockholders	$	1,281			$	1,101			$	1,288			$	2,295			$	414			$	(5,098	)		$	1,281

	Year Ended December 31, 2016
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Franchise and licensing fees	$	—			$	—			$	21			$	974			$	106			$	(10	)		$	1,091
Base and other management fees	—				—				—				122				108				—				230
Incentive management fees	—				—				—				16				126				—				142
Owned and leased hotels	—				—				—				—				1,434				—				1,434
Other revenues	—				—				10				61				11				—				82
	—				—				31				1,173				1,785				(10		)		2,979
Other revenues from managed and franchised properties	—				—				32				3,053				512				—				3,597
Total revenues	—				—				63				4,226				2,297				(10		)		6,576
Expenses
Owned and leased hotels	—				—				—				—				1,279				—				1,279
Depreciation and amortization	—				—				1				266				86				—				353
General and administrative	—				—				90				203				116				—				409
Other expenses	—				—				1				31				44				(10		)		66
	—				—				92				500				1,525				(10		)		2,107
Other expenses from managed and franchised properties	—				—				32				3,083				494				—				3,609
Total expenses	—				—				124				3,583				2,019				(10		)		5,716
Gain on sales of assets, net	—				—				—				—				8				—				8
Operating income (loss)	—				—				(61		)		643				286				—				868
Interest expense	—				(261		)		(14		)		(12		)		(47		)		—				(334		)
Gain (loss) on foreign currency transactions	—				—				11				(150		)		123				—				(16		)
Other non-operating income, net	—				1				1				7				13				—				22
Income (loss) from continuing operations before income taxes and equity in losses from subsidiaries	—				(260		)		(63		)		488				375				—				540
Income tax benefit (expense)	193				100				26				(297		)		(579		)		—				(557		)
Income (loss) from continuing operations before equity in losses from subsidiaries	193				(160		)		(37		)		191				(204		)		—				(17		)
Equity in losses from subsidiaries	(220		)		(60		)		(23		)		(220		)		—				523				—
Loss from continuing operations, net of taxes	(27		)		(220		)		(60		)		(29		)		(204		)		523				(17		)
Income from discontinued operations, net of taxes	365				365				365				426				375				(1,525		)		371
Net income	338				145				305				397				171				(1,002		)		354
Net income attributable to noncontrolling interests	—				—				—				—				(16		)		—				(16		)
Net income attributable to Hilton stockholders	$	338			$	145			$	305			$	397			$	155			$	(1,002	)		$	338
Comprehensive income	$	121			$	143			$	310			$	326			$	21			$	(785	)		$	136
Comprehensive income attributable to noncontrolling interests	—				—				—				—				(15		)		—				(15		)
Comprehensive income attributable to Hilton stockholders	$	121			$	143			$	310			$	326			$	6			$	(785	)		$	121

	Year Ended December 31, 2018
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—			$	(185	)		$	(8	)		$	1,267			$	181			$	—			$	1,255
Investing Activities:
Capital expenditures for property and equipment	—				—				(9		)		(7		)		(56		)		—				(72		)
Payments received on other financing receivables	—				—				—				49				1				—				50
Capitalized software costs	—				—				—				(87		)		—				—				(87		)
Other	—				—				—				(6		)		(16		)		—				(22		)
Net cash used in investing activities	—				—				(9		)		(51		)		(71		)		—				(131		)
Financing Activities:
Borrowings	—				175				1,500				—				1				—				1,676
Repayment of debt	—				(985		)		—				—				(20		)		—				(1,005		)
Debt issuance costs	—				—				(21		)		—				—				—				(21		)
Intercompany transfers	1,902				995				(1,444		)		(1,209		)		(244		)		—				—
Dividends paid	(181		)		—				—				—				—				—				(181		)
Repurchases of common stock	(1,721		)		—				—				—				—				—				(1,721		)
Distributions to noncontrolling interests	—				—				—				—				(1		)		—				(1		)
Tax withholdings on share-based compensation	—				—				(44		)		—				—				—				(44		)
Acquisition of noncontrolling interest	—				—				—				(3		)		—				—				(3		)
Net cash provided by (used in) financing activities	—				185				(9		)		(1,212		)		(264		)		—				(1,300		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				—				(10		)		—				(10		)
Net increase (decrease) in cash, restricted cash and cash equivalents	—				—				(26		)		4				(164		)		—				(186		)
Cash, restricted cash and cash equivalents, beginning of period	—				—				63				28				579				—				670
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	37			$	32			$	415			$	—			$	484

	Year Ended December 31, 2017
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—			$	(113	)		$	(103	)		$	950			$	285			$	(170	)		$	849
Investing Activities:
Capital expenditures for property and equipment	—				—				(12		)		(12		)		(34		)		—				(58		)
Payments received on other financing receivables	—				—				—				7				—				—				7
Capitalized software costs	—				—				—				(75		)		—				—				(75		)
Other	—				(13		)		—				(8		)		3				(3		)		(21		)
Net cash used in investing activities	—				(13		)		(12		)		(88		)		(31		)		(3		)		(147		)
Financing Activities:
Borrowings	—				1,822				—				—				2				—				1,824
Repayment of debt	—				(1,852		)		—				—				(8		)		—				(1,860		)
Debt issuance costs and redemption premium	—				(69		)		—				—				—				—				(69		)
Repayment of intercompany borrowings	—				—				(3		)		—				—				3				—
Intercompany transfers	1,086				225				122				(865		)		(568		)		—				—
Dividends paid	(195		)		—				—				—				—				—				(195		)
Intercompany dividends	—				—				—				—				(170		)		170				—
Cash transferred in spin-offs of Park and HGV	—				—				—				—				(501		)		—				(501		)
Repurchases of common stock	(891		)		—				—				—				—				—				(891		)
Distributions to noncontrolling interests	—				—				—				—				(1		)		—				(1		)
Tax withholdings on share-based compensation	—				—				(31		)		—				—				—				(31		)
Net cash provided by (used in) financing activities	—				126				88				(865		)		(1,246		)		173				(1,724		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				—				8				—				8
Net decrease in cash, restricted cash and cash equivalents	—				—				(27		)		(3		)		(984		)		—				(1,014		)
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	—				—				90				31				1,062				—				1,183
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	—				—				—				—				501				—				501
Cash, restricted cash and cash equivalents, beginning of period	—				—				90				31				1,563				—				1,684
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	63			$	28			$	579			$	—			$	670

	Year Ended December 31, 2016
	Parent				HWF Issuers				HOC				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—			$	(37	)		$	—			$	866			$	1,086			$	(605	)		$	1,310
Investing Activities:
Capital expenditures for property and equipment	—				—				—				(9		)		(308		)		—				(317		)
Payments received on other financing receivables	—				—				—				2				1				—				3
Issuance of intercompany receivables	—				—				—				(192		)		(42		)		234				—
Payments received on intercompany receivables	—				—				—				192				—				(192		)		—
Capitalized software costs	—				—				—				(73		)		(8		)		—				(81		)
Other	—				(6		)		—				(37		)		15				—				(28		)
Net cash used in investing activities	—				(6		)		—				(117		)		(342		)		42				(423		)
Financing Activities:
Borrowings	—				—				1,000				—				3,715				—				4,715
Repayment of debt	—				(266		)		—				—				(4,093		)		—				(4,359		)
Debt issuance costs	—				(17		)		(20		)		—				(39		)		—				(76		)
Intercompany borrowings	—				—				—				42				192				(234		)		—
Repayment of intercompany borrowings	—				—				—				—				(192		)		192				—
Intercompany transfers	277				326				(890		)		(854		)		1,141				—				—
Dividends paid	(277		)		—				—				—				—				—				(277		)
Intercompany dividends	—				—				—				—				(605		)		605				—
Distributions to noncontrolling interests	—				—				—				—				(32		)		—				(32		)
Tax withholdings on share-based compensation	—				—				—				(15		)		—				—				(15		)
Net cash provided by (used in) financing activities	—				43				90				(827		)		87				563				(44		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				—				(15		)		—				(15		)
Net increase (decrease) in cash, restricted cash and cash equivalents	—				—				90				(78		)		816				—				828
Cash, restricted cash and cash equivalents from continuing operations, beginning of period	—				—				—				109				524				—				633
Cash, restricted cash and cash equivalents from discontinued operations, beginning of period	—				—				—				—				223				—				223
Cash, restricted cash and cash equivalents, beginning of period	—				—				—				109				747				—				856
Cash, restricted cash and cash equivalents from continuing operations, end of period	—				—				90				31				1,062				—				1,183
Cash, restricted cash and cash equivalents from discontinued operations, end of period	—				—				—				—				501				—				501
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	90			$	31			$	1,563			$	—			$	1,684

Note 24: Selected Quarterly Financial Information

The following table sets forth the historical unaudited quarterly financial data for the periods indicated. The information for each of these periods has been prepared on the same basis as the audited consolidated financial statements and, in our opinion, reflects all adjustments necessary to fairly present our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period.

	2018
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
	(in millions, except per share data)
Revenues	$	2,074			$	2,291			$	2,253			$	2,288			$	8,906
Operating income	279				406				385				362				1,432
Net income	163				217				164				225				769
Net income attributable to Hilton stockholders	161				217				162				224				764
Basic earnings per share(1)	$	0.51			$	0.72			$	0.55			$	0.76			$	2.53
Diluted earnings per share(1)	$	0.51			$	0.71			$	0.54			$	0.75			$	2.50

	2017
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
	(in millions, except per share data)
Revenues	$	1,896			$	2,076			$	2,091			$	2,068			$	8,131
Operating income	217				324				332				259				1,132
Net income	48				151				160				730				1,089
Net income attributable to Hilton stockholders	47				150				158				729				1,084
Basic earnings per share(1)	$	0.14			$	0.46			$	0.49			$	2.29			$	3.34
Diluted earnings per share(1)	$	0.14			$	0.46			$	0.49			$	2.27			$	3.32

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(1)	The sum of the earnings per share for the four quarters differs from annual earnings per share due to the required method of computing the weighted average shares outstanding in interim periods.