Hyatt Hotels Corporation (H, Financial) filed Quarterly Report for the period ended 2010-03-31.
Hyatt Hotels Corporation has a market cap of $1.84 billion; its shares were traded at around $41.86 with and P/S ratio of 0.6. H is in the portfolios of Bill Ackman of Pershing Square Capital Management, L.P., Ron Baron of Baron Funds, John Paulson of Paulson & Co., HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Manning & Napier Advisors, Inc, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
Selling, general and administrative expenses. Selling, general and administrative costs increased by $16 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Included in selling, general and administrative expenses is an increase of $9 million in benefits costs resulting from improved performance of the underlying assets for benefit programs funded through rabbi trusts. These expenses are offset in net gains (losses) and interest income from marketable securities held to fund operating programs, thus having no net impact to our earnings. Excluding this amount, selling, general and administrative costs increased $7 million, or 12%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. This increase was primarily driven by increased bad debt expense of $3 million and increased professional fee expenses of $3 million.
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 $5 million in the three months ended March 31, 2010, compared to the net loss of $6 million in the three months ended March 31, 2009 due to improved performance of the underlying securities. The gains and losses on securities held in the rabbi trusts are offset by expenses in our owned and leased hotels expense and in selling, general and administrative expenses for our managed and franchised hotels, having no net impact on our earnings. Of the $11 million change in the underlying securities, $9 million was offset in selling, general and administrative expenses and $2 million was offset in owned and leased hotel expenses. Marketable securities held to fund our Gold Passport program generated a net gain of $2 million in the three months ended March 31, 2010, compared to a $1 million net gain for the three months ended March 31, 2009. The gains and losses on securities held to fund our Gold Passport program are offset by corresponding changes to our owned and leased hotel revenues, thus having no net impact on our earnings.
Equity losses from unconsolidated hospitality ventures. Equity losses from unconsolidated hospitality ventures were $8 million in the three months ended March 31, 2010, compared to $2 million for the three months ended March 31, 2009. There was a $6 million decline attributable to lower earnings generated by the underlying hotels, of which $3 million related to losses in 2010 on hotels newly opened in 2009.
Interest expense. Interest expense decreased $4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. There was a $9 million reduction in interest expense relating to the repayment of $600 million of senior subordinated notes in May 2009. Additionally, in 2009 we repaid two hotel loans resulting in a $3 million reduction in interest expense. This reduction was partially offset by an $8 million increase in interest expense related to the issuance of the senior notes in August 2009.
For the three months ended March 31, 2010, the effective tax rate differed from the U.S statutory federal income tax rate of 35% primarily due to an increase in unrecognized tax benefits of $4 million (including $3 million of interest and penalties), an adjustment to deferred taxes of $2 million due to an international tax rate change, and other adjustments to deferred taxes of $2 million.
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Hyatt Hotels Corporation has a market cap of $1.84 billion; its shares were traded at around $41.86 with and P/S ratio of 0.6. H is in the portfolios of Bill Ackman of Pershing Square Capital Management, L.P., Ron Baron of Baron Funds, John Paulson of Paulson & Co., HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Manning & Napier Advisors, Inc, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
Highlight of Business Operations:
Revenues. Consolidated revenues for the three months ended March 31, 2010 increased $52 million, or 7%, compared to the three months ended March 31, 2009, including $11 million in net favorable currency effects and a $19 million increase in other revenues from managed properties. The increase in other revenues from managed properties was due to higher cost reimbursements to us by managed properties, which have increased in-line with higher revenues. Included in other revenues from managed properties is an increase of $6 million in benefits costs resulting from improved performance of the underlying assets for benefit programs funded through rabbi trusts. These expenses are offset in other costs from managed properties, thus having no net impact to our earnings. Excluding this amount, other revenues from managed properties increased $13 million, or 4%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Comparable owned and leased hotel revenue increased $35 million over the same period, which includes net favorable currency effects of $9 million. We also experienced a $3 million increase in management and franchise fee revenues, driven entirely by increased base management fees and franchise fees. Included in consolidated management fees for the three months ended March 31, 2010 were base management fees of $30 million, a 3% increase from the three months ended March 31, 2009, and incentive management fees of $20 million which were flat when compared to the same period ended March 31, 2009. This increase in hotel revenue and management fees was primarily driven by an increase in demand which was reflected in higher occupancy levels, particularly from smaller short-term group business and increased transient corporate and leisure travel. Offsetting the increased revenues were corporate and other revenues, which represent the revenues of our vacation ownership business. These revenues decreased $5 million, or 25%, as a result of a decrease in revenue recognized for sales contracts written in prior periods. The table below provides a breakdown of revenues by segment for the three months ended March 31, 2010 and 2009. For further discussion of segment revenues for the periods presented, please refer to Segment Results, below.Selling, general and administrative expenses. Selling, general and administrative costs increased by $16 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Included in selling, general and administrative expenses is an increase of $9 million in benefits costs resulting from improved performance of the underlying assets for benefit programs funded through rabbi trusts. These expenses are offset in net gains (losses) and interest income from marketable securities held to fund operating programs, thus having no net impact to our earnings. Excluding this amount, selling, general and administrative costs increased $7 million, or 12%, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. This increase was primarily driven by increased bad debt expense of $3 million and increased professional fee expenses of $3 million.
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 $5 million in the three months ended March 31, 2010, compared to the net loss of $6 million in the three months ended March 31, 2009 due to improved performance of the underlying securities. The gains and losses on securities held in the rabbi trusts are offset by expenses in our owned and leased hotels expense and in selling, general and administrative expenses for our managed and franchised hotels, having no net impact on our earnings. Of the $11 million change in the underlying securities, $9 million was offset in selling, general and administrative expenses and $2 million was offset in owned and leased hotel expenses. Marketable securities held to fund our Gold Passport program generated a net gain of $2 million in the three months ended March 31, 2010, compared to a $1 million net gain for the three months ended March 31, 2009. The gains and losses on securities held to fund our Gold Passport program are offset by corresponding changes to our owned and leased hotel revenues, thus having no net impact on our earnings.
Equity losses from unconsolidated hospitality ventures. Equity losses from unconsolidated hospitality ventures were $8 million in the three months ended March 31, 2010, compared to $2 million for the three months ended March 31, 2009. There was a $6 million decline attributable to lower earnings generated by the underlying hotels, of which $3 million related to losses in 2010 on hotels newly opened in 2009.
Interest expense. Interest expense decreased $4 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. There was a $9 million reduction in interest expense relating to the repayment of $600 million of senior subordinated notes in May 2009. Additionally, in 2009 we repaid two hotel loans resulting in a $3 million reduction in interest expense. This reduction was partially offset by an $8 million increase in interest expense related to the issuance of the senior notes in August 2009.
For the three months ended March 31, 2010, the effective tax rate differed from the U.S statutory federal income tax rate of 35% primarily due to an increase in unrecognized tax benefits of $4 million (including $3 million of interest and penalties), an adjustment to deferred taxes of $2 million due to an international tax rate change, and other adjustments to deferred taxes of $2 million.
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