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Hyatt Hotels Corporation Reports Operating Results (10-Q/A)

November 01, 2012 | About:
10qk

10qk

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Hyatt Hotels Corporation (H) filed Amended Quarterly Report for the period ended 2012-09-30.

Hyatt Hotels Corporation has a market cap of $6.31 billion; its shares were traded at around $36.5 with a P/E ratio of 51.4 and P/S ratio of 1.7.

Highlight of Business Operations:

We also experienced a $2 million and $16 million increase in management and franchise fee revenues for the three and nine month periods ending September 30, 2012, which includes net unfavorable currency impacts of $2 million and $4 million, respectively, when compared to the three and nine months ended September 30, 2011. Included in consolidated management fees for the three months and nine months ended September 30, 2012 were base management fees of $37 million and $115 million, respectively, and a 3% and 8% increase from the three and nine months ended September 30, 2011, respectively. Incentive management fees were $18 million and $70 million for the three months and nine months ended September 30, 2012, respectively, which were flat compared to the three month period ended September 30, 2011, and 1% greater compared to the nine months ended September 30, 2011. The increase in hotel revenue and fees was primarily driven by increases in average daily rate, as North America transient rates continue to increase compared to prior year with occupancy near historically high levels.

Net gains (losses) and interest income from marketable securities held to fund operating programs. Marketable securities held to fund our benefit programs funded through rabbi trusts resulted in a net gain of $7 million and $16 million in the three and nine months ended September 30, 2012, respectively, compared to a net loss of $17 million and $10 million in the three and nine months ended September 30, 2011, respectively. These changes are driven by the market performance of the underlying securities. The gains or losses on securities held in the rabbi trusts are offset to our owned and leased hotels expense for our hotel staff and selling, general and administrative expenses for our corporate staff and personnel supporting our business segments, having no net impact on our earnings. Of the $24 million change in the underlying securities in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, $17 million was offset in selling, general and administrative expenses and $7 million was offset in owned and leased hotel expenses. Of the $26 million change in the underlying securities in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, $18 million was offset in selling, general and administrative expenses and $8 million was offset in owned and leased hotel expenses.

For the three months ended September 30, 2012, the effective tax rate is lower than the U.S. statutory federal income tax rate of 35% primarily due to benefits from foreign tax credits of $8 million and from the reduction in statutory tax rates enacted by foreign jurisdictions during the quarter of $3 million. These benefits are offset by an adjustment to the deferred tax assets of certain non-consolidated investments in the amount of $7 million. The rate was further reduced by foreign earnings that are taxed at statutory rates below the U.S. rate. For the nine months ended September 30, 2012, the effective tax rate is lower than the U.S. statutory federal income tax rate of 35% primarily due to a benefit from foreign tax credits of $17 million and a release of $5 million in reserves for interest related to our treatment for expensing certain renovation costs in prior years. The interest was initially accrued during the fourth quarter of 2011 in response to the issuance of temporary IRS Treasury Regulations addressing the capitalization of tangible property. During the first quarter of 2012, the IRS issued transitional guidance related to these temporary regulations that resulted in our release of the accrued interest. Our rate was further reduced by foreign earnings subject to tax at rates below the U.S. rate. These benefits are partially offset by a provision of approximately $7 million resulting from a reduction in our deferred tax assets related to certain non-consolidated investments and by approximately $7 million (including $2 million of interest and penalties) for uncertain tax positions in foreign jurisdictions.

Owned and Leased Hotels. Revenues increased $33 million in the three months ended September 30, 2012, compared to the three months ended September 30, 2011, which included $10 million in net unfavorable currency impacts. Revenues increased $118 million in the nine months ended September 30, 2012, compared to the nine months ended September 30, 2011, which included $18 million in net unfavorable currency impacts. Worldwide comparable hotel revenues increased $8 million and $60 million in the three and nine months ended September 30, 2012, respectively, as compared to the three and nine months ended September 30, 2011, of which $10 million and $52 million, respectively, was from the North American hotels that were under significant renovation in 2011. These increases were partially offset by our comparable international hotel revenue which was negatively impacted by foreign currency of $10 million and $18 million in the three and nine months ended September 30, 2012, respectively, compared to the same periods in 2011. For the three months ended September 30, 2012, revenue growth at our comparable full service owned hotels was driven primarily by transient rate growth as compared to the same period in 2011, partially offset by an unfavorable demand impact from the timing of certain holidays in the third quarter. For the nine months ended September 30, 2012, revenue growth at our comparable full service owned hotels was driven primarily by increased occupancy and rate from both transient and group travelers compared to the same period in 2011. Non-comparable owned and leased hotel revenues increased $25 million and $58 million in the three and nine months ended September 30, 2012, respectively, compared to the three and nine months ended September 30, 2011, largely driven by 23 hotels purchased primarily during the second and third quarter of 2011 and one hotel purchased in the second quarter of 2012, partially offset by a decrease in revenues from the 11 hotels that were sold or otherwise left the chain throughout 2011. During the three and nine months ended September 30, 2012, no properties were removed from the comparable owned and leased hotel results.

The increase in other revenues from managed properties was driven by higher cost reimbursements from increased hotel payroll expense, partially due to hotel openings and newly converted hotels. Management and franchise fees increased $5 million compared to the three months ended September 30, 2011, due primarily to increased base fees of $3 million and increased franchise fees and other revenues of $2 million. Management and franchise fees increased $26 million compared to the nine months ended September 30, 2011, due to increased base fees of $14 million, increased incentive fees of $6 million, and increased franchise fees and other revenues of $6 million. Of the $5 million and $26 million improvement in total North American management and franchise fees, comparable systemwide North American management and franchise fees increased $3 million and $17 million, respectively, in the three and nine months ended September 30, 2012, respectively, compared to the three and nine months ended September 30, 2011. The comparable systemwide North American management and franchise fees were negatively impacted by significant renovations at some of our large managed hotels during the three months ended September 30, 2012.

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