Hyatt Hotels Corp. Q1 2011 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2011. Hyatt Hotels Corporation operates a global portfolio of 451 properties (126,645 rooms/units) across 43 countries, including owned, leased, managed, and franchised hotels, as well as vacation ownership properties. The company is a large accelerated filer incorporated in Delaware.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Total Revenues | $875 million | $841 million |
| Net Income (Attributable to HHC) | $10 million | $5 million |
| Earnings Per Share (Diluted) | $0.06 | $0.03 |
| Adjusted EBITDA | $109 million | $112 million |
| Cash from Operating Activities | $41 million | $60 million |
| Cash and Cash Equivalents | $1,136 million | $1,308 million |
| Short-term Investments | $527 million | $524 million |
| Total Debt | $768 million | $771 million |
| Debt to Capital Ratio | 13.0% | 13.1% |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenues increased 4.0% ($34 million) year-over-year, driven by a $13 million increase in management and franchise fees and a $37 million increase in other revenues from managed properties (cost reimbursements).
- Owned Segment Decline: Revenues from owned and leased hotels decreased $19 million due to the sale or transfer of eight hotels and major renovations at several properties, which reduced room inventory.
- Profitability: Net income doubled to $10 million, aided by a $11 million improvement in equity earnings from unconsolidated ventures (turning from an $8 million loss to a $3 million gain) and a lower effective tax rate (37.8% vs. 70.4% in 2010).
- EBITDA: Adjusted EBITDA decreased slightly by $3 million (2.7%) due to the impact of renovations and asset sales, partially offset by strong performance in management and franchising segments.
- Cash Flow: Operating cash flow decreased to $41 million from $60 million, primarily due to higher tax payments and the absence of a favorable cash settlement received in Q1 2010 related to a timeshare construction dispute.
Outlook, Risks, and Management Commentary
- Operational Outlook: Management expects transient and group demand to continue positively impacting RevPAR in 2011. However, major renovations at owned properties are expected to negatively impact results in Q2 and Q3 2011 due to reduced room inventory, with benefits anticipated in Q3 and Q4 upon completion.
- Global Events: Political unrest in the Middle East and the earthquake/tsunami in Japan had a negligible impact on Q1 results, and management does not currently expect significant future impact.
- Liquidity: The company maintains a strong liquidity position with over $1.6 billion in cash, cash equivalents, and short-term investments. Approximately $1.1 billion remains available under the revolving credit facility.
- Risks: Key risks include the pace of economic recovery, declines in occupancy and average daily rates, hostilities or natural disasters affecting travel, and the financial condition of third-party property owners and franchisees.
- Commitments: The company has commitments to invest up to $543 million in various business ventures, including a $375 million purchase price commitment for a hotel in New York City (66.67% share) and a $122 million commitment for a Hawaii joint venture.
Investor Verification Checklist
- Verify the timeline and expected revenue impact of the major renovations at owned properties in Q2 and Q3 2011.
- Review the details of the $543 million in investment commitments, specifically the contingent milestones for the New York City hotel purchase.
- Monitor the performance of unconsolidated hospitality ventures, which contributed significantly to the Q1 earnings improvement.
- Assess the impact of the $2 million tax contingencies and $1 million in interest/penalties on the effective tax rate.
- Confirm the status of the $25 million loan guarantee related to the Hyatt Regency Minneapolis joint venture.