Company Quick10K Filing
Hilton
Price91.45 EPS3
Shares292 P/E29
MCap26,703 P/FCF23
Net Debt7,082 EBIT1,265
TEV33,785 TEV/EBIT27
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-11
10-Q 2019-09-30 Filed 2019-10-23
10-Q 2019-06-30 Filed 2019-07-24
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-13
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-07-25
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-26
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-15
10-Q 2016-09-30 Filed 2016-10-26
10-Q 2016-06-30 Filed 2016-07-27
10-Q 2016-03-31 Filed 2016-04-27
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-10-28
10-Q 2015-06-30 Filed 2015-07-29
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-02-18
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-01
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-27
8-K 2020-06-15
8-K 2020-06-05
8-K 2020-05-07
8-K 2020-04-21
8-K 2020-04-16
8-K 2020-03-10
8-K 2020-03-05
8-K 2020-03-04
8-K 2020-02-11
8-K 2019-10-23
8-K 2019-08-02
8-K 2019-07-24
8-K 2019-06-20
8-K 2019-06-10
8-K 2019-06-05
8-K 2019-05-13
8-K 2019-05-01
8-K 2019-02-13
8-K 2018-10-24
8-K 2018-08-03
8-K 2018-07-25
8-K 2018-05-10
8-K 2018-04-26
8-K 2018-04-19
8-K 2018-04-10
8-K 2018-04-09
8-K 2018-02-14

HLT 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1: Organization and Basis of Presentation
Note 2: Recently Issued Accounting Pronouncements
Note 3: Revenues From Contracts with Customers
Note 4: Consolidated Variable Interest Entities
Note 5: Finite - Lived Intangible Assets
Note 6: Debt
Note 7: Fair Value Measurements
Note 8: Leases
Note 9: Income Taxes
Note 10: Share - Based Compensation
Note 11: Earnings per Share
Note 12: Stockholders' Equity (Deficit) and Accumulated Other Comprehensive Loss
Note 13: Business Segments
Note 14: Commitments and Contingencies
Note 15: Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-4.1 exhibit41-secondsupple.htm
EX-4.2 exhibit42-thirdsupplem.htm
EX-4.3 exhibit43-secondsupple.htm
EX-4.4 exhibit44-thirdsupplem.htm
EX-4.5 exhibit45-thirdsupplem.htm
EX-4.6 exhibit46-fourthsupple.htm
EX-4.7 exhibit47-seventhsuppl.htm
EX-4.8 exhibit48-eighthsupple.htm
EX-10.1 exhibit101-hiltonx2020.htm
EX-10.2 exhibit102-hiltonx2020.htm
EX-10.3 exhibit103-hiltonx2020.htm
EX-10.4 exhibit104-hiltonx2020.htm
EX-10.5 exhibit105-witterrelea.htm
EX-10.6 exhibit106-finalexecse.htm
EX-31.1 exhibit311-q12020cert3.htm
EX-31.2 exhibit312-q12020cert3.htm
EX-32.1 exhibit321-q12020cert3.htm
EX-32.2 exhibit322-q12020cert3.htm

Hilton Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
30231711502014201620182020
Assets, Equity
3.12.41.71.00.3-0.42014201620182020
Rev, G Profit, Net Income
1.00.60.1-0.3-0.8-1.22014201620182020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 001-36243
Hilton Worldwide Holdings Inc.
(Exact name of registrant as specified in its charter)

Delaware
27-4384691
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
7930 Jones Branch Drive, Suite 1100, McLean, VA
22102
(Address of Principal Executive Offices)(Zip Code)

Registrant’s telephone number, including area code: (703) 883-1000
N/A
(Former name, former address and former fiscal year, if changed since last report)

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐ 

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

The number of shares outstanding of the registrant's common stock, par value $0.01 per share, as of April 30, 2020 was 277,261,486.



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

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

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
March 31,December 31,
20202019
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$1,734  $538  
Restricted cash and cash equivalents
71  92  
Accounts receivable, net of allowance for credit losses of $55 and $44
1,111  1,261  
Prepaid expenses138  130  
Other
95  72  
Total current assets (variable interest entities $75 and $100)
3,149  2,093  
Intangibles and Other Assets:
Goodwill
5,146  5,159  
Brands
4,867  4,877  
Management and franchise contracts, net734  780  
Other intangible assets, net353  421  
Operating lease right-of-use assets
770  867  
Property and equipment, net
356  380  
Deferred income tax assets
116  100  
Other
297  280  
Total intangibles and other assets (variable interest entities $185 and $179)
12,639  12,864  
TOTAL ASSETS$15,788  $14,957  
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts payable, accrued expenses and other
$1,460  $1,703  
Current maturities of long-term debt
41  37  
Current portion of deferred revenues
242  332  
Current portion of liability for guest loyalty program477  799  
Total current liabilities (variable interest entities $48 and $64)
2,220  2,871  
Long-term debt9,455  7,956  
Operating lease liabilities966  1,037  
Deferred revenues
929  827  
Deferred income tax liabilities750  795  
Liability for guest loyalty program1,437  1,060  
Other935  883  
Total liabilities (variable interest entities $243 and $260)
16,692  15,429  
Commitments and contingencies see Note 14
Equity (Deficit):
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of March 31, 2020 and December 31, 2019
    
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 334,072,979 issued and 277,152,629 outstanding as of March 31, 2020 and 333,159,770 issued and 278,985,125 outstanding as of December 31, 2019
3  3  
Treasury stock, at cost; 56,920,350 shares as of March 31, 2020 and 54,174,645 shares as of December 31, 2019
(4,462) (4,169) 
Additional paid-in capital
10,443  10,489  
Accumulated deficit(5,999) (5,965) 
Accumulated other comprehensive loss
(899) (840) 
Total Hilton stockholders' deficit
(914) (482) 
Noncontrolling interests
10  10  
Total deficit(904) (472) 
TOTAL LIABILITIES AND EQUITY (DEFICIT)$15,788  $14,957  

See notes to condensed consolidated financial statements.
2


HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31,
20202019
Revenues
Franchise and licensing fees$339  $382  
Base and other management fees60  80  
Incentive management fees23  55  
Owned and leased hotels210  312  
Other revenues23  26  
655  855  
Other revenues from managed and franchised properties
1,265  1,349  
Total revenues1,920  2,204  
Expenses
Owned and leased hotels
239  298  
Depreciation and amortization91  84  
General and administrative60  107  
Impairment losses112    
Other expenses14  20  
516  509  
Other expenses from managed and franchised properties
1,336  1,383  
Total expenses1,852  1,892  
Operating income68  312  
Interest expense(94) (98) 
Gain on foreign currency transactions
9    
Other non-operating income, net
  4  
Income (loss) before income taxes(17) 218  
Income tax benefit (expense)
35  (59) 
Net income18  159  
Net income attributable to noncontrolling interests
  (1) 
Net income attributable to Hilton stockholders$18  $158  
Earnings per share:
Basic$0.06  $0.54  
Diluted$0.06  $0.54  
Cash dividends declared per share$0.15  $0.15  

See notes to condensed consolidated financial statements.
3


HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended
March 31,
20202019
Net income$18  $159  
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $8 and $(8)
(24) (3) 
Pension liability adjustment, net of tax of $ and $(1)
1  2  
Cash flow hedge adjustment, net of tax of $13 and $5
(36) (15) 
Total other comprehensive loss(59) (16) 
Comprehensive income (loss)(41) 143  
Comprehensive income attributable to noncontrolling interests
  (1) 
Comprehensive income (loss) attributable to Hilton stockholders
$(41) $142  

See notes to condensed consolidated financial statements.
4


HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
March 31,
20202019
Operating Activities:  
Net income$18  $159  
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of contract acquisition costs8  7  
Depreciation and amortization  91  84  
Impairment losses112    
Gain on foreign currency transactions(9)   
Share-based compensation(12) 34  
Deferred income taxes(37) (26) 
Contract acquisition costs(11) (15) 
Working capital changes and other(31) 121  
Net cash provided by operating activities129  364  
Investing Activities:  
Capital expenditures for property and equipment
(12) (23) 
Capitalized software costs(17) (19) 
Other(18) (2) 
Net cash used in investing activities(47) (44) 
Financing Activities:  
Borrowings1,690  375  
Repayment of debt(205) (336) 
Dividends paid(42) (44) 
Repurchases of common stock(296) (296) 
Share-based compensation tax withholdings and other(47) (42) 
Net cash provided by (used in) financing activities1,100  (343) 
Effect of exchange rate changes on cash, restricted cash and cash equivalents  (7)   
Net increase (decrease) in cash, restricted cash and cash equivalents1,175  (23) 
Cash, restricted cash and cash equivalents, beginning of period  630  484  
Cash, restricted cash and cash equivalents, end of period  $1,805  $461  
Supplemental Disclosures:  
Cash paid during the year:
Interest$94  $71  
Income taxes, net of refunds50  13  

See notes to condensed consolidated financial statements.
5


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

Note 1: Organization and Basis of Presentation

Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest hospitality companies in the world and is engaged in managing, franchising, owning and leasing hotels and resorts, and licensing its brands and intellectual property ("IP"). As of March 31, 2020, we managed, franchised, owned or leased 6,162 hotels and resorts, including timeshare properties, totaling 977,939 rooms in 118 countries and territories.

Basis of Presentation

The accompanying condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and are unaudited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Additionally, interim results are not necessarily indicative of full year performance. In particular, the crisis related to the novel coronavirus ("COVID-19") had a material adverse impact on our results for the three months ended March 31, 2020, and we expect it to continue to have a material adverse impact on our results. As such, this interim period, as well as upcoming periods, are unlikely to be comparable to past performance or indicative of future performance. In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All material intercompany transactions have been eliminated in consolidation.

Note 2: Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-13 ("ASU 2016-13"), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. On January 1, 2020, we adopted ASU 2016-13 and subsequent ASUs issued to clarify its application, on a prospective basis, and recognized a $10 million cumulative adjustment, net of taxes, to accumulated deficit. As a result of the adoption, we consider forecasted business conditions, in addition to current business conditions and historical collection activity, in calculating our allowance for credit losses on accounts receivable. The cumulative adjustment to accumulated deficit that we recognized upon adoption of this ASU did not include the impact of the COVID-19 crisis as a forecasted business condition. By applying ASU 2016-13 at the adoption date, the presentation of credit losses for periods prior to January 1, 2020 remains unchanged and in accordance with Receivables (Topic 310).

6


Note 3: Revenues from Contracts with Customers

Contract Liabilities

The following table summarizes the activity of our contract liabilities, which are classified as a component of current and long-term deferred revenues, during the three months ended March 31, 2020:

(in millions)
Balance as of December 31, 2019  $1,041  
Cash received in advance and not recognized as revenue(1)
106  
Revenue recognized(1)
(54) 
Other(2)
(10) 
Balance as of March 31, 2020
$1,083  
____________
(1)Primarily related to Hilton Honors, our guest loyalty program, which included $40 million for revenue recognized.
(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 $57 million during the three months ended March 31, 2019.

Performance Obligations

As of March 31, 2020, we had $423 million of deferred revenues for unsatisfied performance obligations related to Hilton Honors that will be recognized as revenues when the points are redeemed, which we estimate will occur over approximately the next two to three years. Additionally, we had $660 million of deferred revenues for unsatisfied performance obligations 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 4: Consolidated Variable Interest Entities

As of March 31, 2020 and December 31, 2019, we consolidated two variable interest entities ("VIEs") that lease hotel properties. We consolidated these VIEs since we are the primary beneficiary, having the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our consolidated VIEs are only available to settle the obligations of the respective entities. Our condensed consolidated balance sheets included the assets and liabilities of these entities, which primarily comprised the following:

March 31,December 31,
20202019
(in millions)
Cash and cash equivalents$62  $81  
Property and equipment, net71  69  
Deferred income tax assets51  48  
Other non-current assets62  61  
Accounts payable, accrued expenses and other32  49  
Long-term debt(1)
193  194  
Other long-term liabilities17  17  
____________
(1)Includes finance lease liabilities of $175 million and $177 million as of March 31, 2020 and December 31, 2019, respectively.

We did not provide any financial or other support to any consolidated VIEs that we were not previously contractually required to provide during the three months ended March 31, 2020 and 2019, and we are not aware of any future obligations to do so.

7


Note 5: Finite-Lived Intangible Assets

Finite-lived intangible assets were as follows:

March 31, 2020
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger(1)
$2,156  $(2,009) $147  
Contract acquisition costs
602  (126) 476  
Development commissions and other
131  (20) 111  
$2,889  $(2,155) $734  
Other intangible assets:
Leases(1)(2)
$144  $(83) $61  
Capitalized software costs
642  (425) 217  
Hilton Honors(1)
337  (262) 75  
$1,123  $(770) $353  

December 31, 2019
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
(in millions)
Management and franchise contracts:
Management and franchise contracts recorded at Merger(1)
$2,163  $(1,974) $189  
Contract acquisition costs
604  (121) 483  
Development commissions and other
127  (19) 108  
$2,894  $(2,114) $780  
Other intangible assets:
Leases(1)
$290  $(176) $114  
Capitalized software costs
625  (399) 226  
Hilton Honors(1)
338  (257) 81  
Other(1)
34  (34)   
$1,287  $(866) $421  
____________
(1)Represents intangible assets that were initially recorded at their fair value as part of the October 24, 2007 transaction whereby we became a wholly owned subsidiary of affiliates of The Blackstone Group Inc. (the "Merger").
(2)We recognized impairment losses during the three months ended March 31, 2020 that reduced the gross carrying value of our leases intangible asset by $138 million, the accumulated amortization by $92 million and the net carrying value by $46 million. See Note 7: "Fair Value Measurements" for additional information.

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

Three Months Ended
March 31,
20202019
(in millions)
Recognized in depreciation and amortization expense(1)
$77  $70  
Recognized as a reduction of franchise and licensing fees and base and other management fees
8  7  
____________
(1)Includes amortization expense of $49 million and $51 million for the three months ended March 31, 2020 and 2019, respectively, associated with assets that were initially recorded at their fair value at the time of the Merger.

8


We estimate future amortization of our finite-lived intangible assets as of March 31, 2020 to be as follows:

Recognized in Depreciation and Amortization ExpenseRecognized as a Reduction of Franchise and Licensing Fees and Base and Other Management Fees
Year(in millions)
2020 (remaining)$197  $21  
2021126  28  
202297  26  
202358  25  
202412  25  
Thereafter121  351  
$611  $476  

Note 6: Debt

Long-term debt balances, including obligations for finance leases, and associated interest rates and maturities as of March 31, 2020, were as follows:

March 31,December 31,
20202019
(in millions)
Senior secured revolving credit facility with a weighted average rate of 2.06%, due 2024
$1,690  $195  
Senior secured term loan facility with a rate of 2.70%, due 2026
2,619  2,619  
Senior notes with a rate of 4.250%, due 2024
1,000  1,000  
Senior notes with a rate of 4.625%, due 2025
900  900  
Senior notes with a rate of 5.125%, due 2026
1,500  1,500  
Senior notes with a rate of 4.875%, due 2027
600  600  
Senior notes with a rate of 4.875%, due 2030
1,000  1,000  
Finance lease liabilities with a weighted average rate of 5.74%, due 2020 to 2030
249  245  
Other debt with a rate of 3.08% due 2026
18  17  
9,576  8,076  
Less: unamortized deferred financing costs and discount  (80) (83) 
Less: current maturities of long-term debt(1)
(41) (37) 
$9,455  $7,956  
____________
(1)Represents current maturities of finance lease liabilities.

In April 2020, we issued $1.0 billion aggregate principal amount of senior notes, which are outstanding as of the date of this report, in addition to the other long-term debt balances above. See Note 15: "Subsequent Events" for additional information.

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

As a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic, we fully drew down on our Revolving Credit Facility during the three months ended March 31, 2020, and, as of March 31, 2020, had outstanding borrowings of $1.69 billion, after giving effect to $60 million letters of credit outstanding.

9


The 4.250% Senior Notes due 2024 (the "2024 Senior Notes"), the 4.625% Senior Notes due 2025 (the "2025 Senior Notes"), the 5.125% Senior Notes due 2026 (the "2026 Senior Notes"), the 4.875% Senior Notes due 2027 (the "2027 Senior Notes") and the 4.875% Senior Notes due 2030 ("2030 Senior Notes") are collectively referred to as the Senior Notes and are jointly and severally guaranteed on a senior unsecured basis by the Parent and substantially all of its direct and indirect wholly owned domestic subsidiaries that are themselves not an issuer of the applicable series of senior notes.

The contractual maturities of our long-term debt as of March 31, 2020 were as follows:

Year(in millions)
2020 (remaining)$41  
202133  
202223  
202321  
20242,712  
Thereafter6,746  
$9,576  

Note 7: Fair Value Measurements

Estimates of the fair values of our financial instruments and nonfinancial assets were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

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

March 31, 2020
Hierarchy Level
Carrying ValueLevel 1Level 2Level 3
(in millions)
Assets:
Cash equivalents$1,385  $—  $1,385  $—  
Restricted cash equivalents10  —  10  —  
Liabilities:
Long-term debt(1)
9,229  4,671  —  4,134  
Interest rate swaps92  —  92  —  

December 31, 2019
Hierarchy Level
Carrying ValueLevel 1Level 2Level 3
(in millions)
Assets:
Cash equivalents$117  $—  $117  $—  
Restricted cash equivalents32  —  32  —  
Liabilities:
Long-term debt(1)
7,731  5,230  —  2,834  
Interest rate swaps37  —  37  —  
____________
(1)The carrying values include unamortized deferred financing costs and discount. The carrying values and fair values exclude finance lease liabilities and other debt.

We measure our interest rate swaps at fair value, which was estimated using a discounted cash flow analysis that reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs of similar instruments, including interest rate curves, as applicable. Our interest rate swaps are included in other long-term liabilities in our condensed consolidated balance sheets.

10


The estimated fair values of our nonfinancial assets that were measured at fair value on a non-recurring basis during the three months ended March 31, 2020 were as follows:

Carrying ValueImpairment Losses
Fair Value(1)
(in millions)
Other intangible assets, net(2)
$46  $(46) $  
Operating lease right-of-use assets(2)
86  (45) 41  
Property and equipment, net(2)
29  (21) 8  
____________
(1)Fair value measurements using significant Level 3 unobservable inputs.
(2)Related to certain hotel properties under operating and finance leases in our ownership segment.

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

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

Note 8: Leases

We lease hotel properties, land, corporate office space and equipment used at hotels and corporate offices, with our most significant lease liabilities related to hotel properties. As of March 31, 2020, we leased 52 hotels under operating leases and six hotels under finance leases, two of which were the liabilities of consolidated VIEs and were non-recourse to us. Our hotel leases expire at various dates, with varying renewal and termination options. During the three months ended March 31, 2020, we recognized $45 million and $2 million of impairment losses related to certain operating and finance lease right-of-use ("ROU") assets, respectively, included in impairment losses in our condensed consolidated statement of operations; see Note 7: "Fair Value Measurements" for additional information.
Supplemental balance sheet information related to leases was as follows:

March 31,December 31,
20202019
(dollars in millions)
Operating leases:
Operating lease right-of-use assets$