hyatt annual report done

Finance Management Hyatt Hotel CorporationHFT 6477 Spring 2015

GETTING ACQUAINTED WITH THE ANNUAL REPORT

GENERAL INFORMATION

General information may be in several places of annual reports. This information generally appears at the beginning of the report, the end of the annual report, or on or near the inside back cover.

Answer the following questions about the annual report you have selected:

1. What is the name of the corporation you will analyze?

Hyatt Hotel Corporation

2. The corporate headquarters is located in what city?Chicago, Illinois

3. When is the fiscal year end of the corporation?

2013

4. What is (are) the primary product(s) or service(s) of the corporation

Full service hotel and resorts Develop, sell, manage vacation properties

Consult with third parties in design and development of mix-used projects based on expertise

Manage, provide services to, or license trademarks to residential ownership units adjacent to a Hyatt full service hotel

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5. The corporation must show high and low selling prices of the corporation's common stock each quarter for the last two years. Chart the common stock prices over the last two years (Replace the below chart with the chart for this company’s analysis):

In the chart, mark the high price of each quarter with a diamond shape in blue. Then, mark the low price of each quarter with a circle in red.

Connect the high prices with a line to indicate the trend. Then connect the low prices with a dotted line.

1st Qtr 2012

2nd Qtr 2012

3rd Qtr 2012

4th Qtr 2012

1st Qtr 2013

2nd Qtr 2013

3rd Qtr 2013

4th Qtr 2013

0

10

20

30

40

50

60

HighLow

6. Describe the trend in the price of the common stock over the last two years (for example, was it upward, downward, volatile, or constant).

The price of the common stock had a steady increase until September 2013 where it experienced a downfall. The price did manage to rise again, so the price has not been entirely consistent, but has not been very volatile.

7. Did the stock trade within a narrow or wide price range? (For a two-year period, a range in excess of 15% of the lowest price would likely be considered wide.)

The stock trade was within a wide range of price. The highest was 65, the lowest 43; the difference is 22, over 50% of the lowest price.

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INTERNET INFORMATION

The Corporate Website

1. What is the internet address of the corporationwww.hyatt.com

2. Corporations often provide financial information in websites under link names such as "investor relations" or investor information." Indicate which items appear in the part of the website that relates to investors:

× Operating highlights × Annual reports× Information relating to corporate governance × SEC filings× Stock price information Proxy statements× Press releases × Investor relations contacts

3. What are other purposes of this website?

× Describe the corporation × Provide customer service× Advertise corporate products or services × Publicize corporate citizenship

×Facilitate the sales of company products or services Publicize recent corporate events

Provide product financing informationPromote the industry the corporation is in

Identify the location of retail sales sites × Provide employment information

The Securities and Exchange Commission's EDGAR DatabaseThe primary purpose of the Securities and Exchange Commission (SEC) is to protect investors and maintain the integrity of the securities markets. The commission regulates the issuance and trading of publicly held securities.

The SEC requires filing of several forms including annual financial reports (10-K), quarterly financial reports (10-Q), registration statements for newly offered securities (S-1, S-3), current reports of material events or changes (8-K), and others. These forms are publicly available on the internet (www.sec.gov) in a database called the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR). A tutorial on how to use EDGAR is at www.sec.gov/edgar/quickedgar.htm.

Form 10-K is particularly useful in analyzing a corporation because it contains information that sometimes does not appear in the annual report to stockholders. For example Form 10-K contains a detailed description of the business (Item 1) and its properties (Item 2), a description

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of executive compensation (Item 11), and description of management controls (Item 14).

Find the latest Form 10-K of your corporation and answer the following questions:

1. What is the date of the latest Form 10-K?

December 31, 2013

2. What is the primary Standard Industrial Classification (SIC)?

7011

3. The Central Index Key (CIK) is a unique number assigned to corporations that file with the SEC.

What is the corporation’s CIK? 0001468174

THE PRIMARY FINANCIAL STATEMENTS

Income Statement

The income statement (sometimes called the "statement of earnings" or "statement of operations") is usually the first major financial statement appearing in the report. The income statement summarizes corporate revenues and expenses for a period of time. Corporations provide three years of income statements for comparative purposes (if the corporation has been in operation for three years).

1. Growth in Revenues and Profits - Revenue growth is determined by the percentage increase (decrease) of revenues in comparison with the previous year:

Percentage of Revenue Growth

=Current Year Revenue - Previous Year Revenue

Previous Year Revenue

Indicate the growth in revenue during the current year (Ratio Analysis worksheet):

Percentage of

Revenue Growth

=4184-3949= 235

=0.06%3949

2. Corporations are required to show summarized historical data. Label the vertical axis of the following chart with a scale that will accommodate revenue over the last five years. Then

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chart the level of revenue for the last five years (Replace the below bar graph with a graph from the company under analysis.)

2009 2010 2011 2012 2013 $-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00

$4,500.00

Revenue

Revenue

3. Did revenue increase or decrease over the last few years? An explanation of the change in revenue is often contained in the management discussion and analysis section. What reasons did management give for the change?

According to the Management Reason “These revenues have no effect on our profit, although they do increase our total revenues and the corresponding costs increase our total expenses”

4. Trends in corporate profits are determined by calculating the percentage of increase (decrease) in income from continuing operations over the previous year. Income from continuing operations is net income without the effects of any discontinued operations or extraordinary items.

Percentage Growth in

Profits=

Current Year Income from Continuing Operations– Previous Year Income from Continuing Operations

Previous Year Revenue

Determine the percentage growth in profits during the current year (Ratio Analysis worksheet):

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Percentage Growth in

Profits=

207-88= 119= 3.01%

3949

Common-Size Analysis

Common-size (or percentage) analysis expresses items in a financial statement as a percentage of a single item. This analysis permits comparisons between two or more years, or between two or more corporations. In an income statement, items are usually expressed as a percentage of revenue. Perform common-size analysis in relation to revenue for the following items in the income statement for the current and previous years (Insert your common-size analysis below):

Current Year Previous Year

Revenue 100.0 % 100.0%

Cost of Goods/Service 78.47 79.03

Gross Profit 21.53 20.97

Operating Expense 15.97 16.94

Interest Expense 1.55 1.77

Research & Development Expense 0 0

Income Tax Expense 2.77 0.20

Income from Continuing Operations 5.57 4.03

Net Income 4.95 2.23

Based on your common-size analysis, compare current year operating results in terms of cost control, debt servicing, tax burdens, and profitability. Information concerning the reasons for change may be found in the management discussion and analysis.

1. Product or Service Cost Control- Did the percent of product costs (cost of goods or services) to revenue change in the current year in comparison to the previous year? What are possible explanations for changes, if any, that may have occurred?

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Total Product cost and the services increased by $83 million in the year ended December 31, 2013 compared to the year ended December 31, 2012. Comparable owned and leased hotels expense increased $56 million for the year ended December 31, 2013 compared to the year ended December 31, 2012, largely attributable to higher compensation, health insurance and employment related costs, rent expense and real estate taxes. Non-comparable owned and leased hotels expense increased $18 million in the year ended December 31, 2013 as compared to the year ended December 31, 2012 due to three new wholly owned full service hotels acquired in 2013, a full year of contribution from two properties acquired in 2012, and the opening of one leased property in 2012, partially offset by 11 hotels sold during 2013 and eight hotels sold in 2012. Additionally, expenses recognized with respect to our employee benefit programs funded through rabbi trusts increased $6 million driven by the performance of the underlying invested assets during the year ended December 31, 2013 as compared to the year ended December 31, 2012. Changes in these expenses are fully offset to the account net gains and interest income from marketable securities held to fund operating programs, thus having no net impact to our earnings. Direct costs of our vacation ownership operations increased $3 million. Total of 83 million cost of good sold increased

2. Operating Cost Control - Did the percentage of operating costs (selling and administrative expenses) to revenue change in the current year in comparison to the previous year? What are possible explanations for changes, if any, that may have occurred?

According to the 10K report: selling, general and administrative costs increased by $7 million or 2% in the year ended December 31, 2013 compared to the year ended December 31, 2012. Included in selling, general and administrative expenses is the financial performance of the investment securities held in rabbi trusts to fund certain benefit programs.

3. Debt Servicing- How did the percentage of interest expense to revenue compare to the previous year? What are possible explanations for changes, if any?

Interest expense decreased by $5 million in the year ended December 31, 2013 compared to the year ended December 31, 2012. The reduction in interest expense was primarily due to an increase in capitalized interest for construction in progress.

4. Tax Burden - Did the tax expense as a percentage of total revenue change in the current year? What are possible explanations for these changes, if any? (Without knowledge of the tax laws applying to the corporation, it may be impossible to determine specific reasons for the change.)

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Income taxes for the years ended December 31, 2013 and 2012 was a provision of $116 million and $8 million respectively, which resulted in effective income tax rates of 36.2% and 8.3%, respectively. Additional benefits arise from foreign earnings taxed at lower that the U.S. statutory rate.

5. Profitability- How did net income as a percentage of revenue change in the current year? What items in the income statement explain the change in income from continuing operations as a percentage of revenue?

Net income increased by 135%, which is 88 million. It is a lot of increased caused by owned and leased hotels. Also as I mentioned on the cost of good sold Primarily to three new wholly owned full service hotels acquired in 2013, a full year of contribution from two properties acquired in 2012, and the opening of one leased property in 2012, partially offset by 11 hotels sold during 2013 and eight hotels sold in 2012 including the increase in management and franchise fee revenues for the year ended December 31, 2013. During 2013, Hyatt Corp sold the Hyatt Fisherman’s Wharf, Hyatt Santa Barbara, and Hyatt Regency Denver Tech to unrelated third parties for a combined sale price of $219 million, net of closing costs, resulting in a pre-tax gain of $125 million. Hyatt entered into long-term franchise agreements for each of these properties and therefore recognized the full gain on sale of real estate in our consolidated statements of income in the period of sale. There were no gains on sales of real estate in the period ended December 31, 2012.

6. Other Income Statement Items- Generally accepted accounting principles in the U.S. require amounts related to discontinued operations and extraordinary items be shown, net of taxes, at the bottom of the income statement. If any of these items are present, describe the nature and amount.

Other income, net, increased by $10 million in the year ended December 31, 2013 compared to the year ended December 31, 2012, primarily due to the favorable impact of cost method investment income and a gain on the sale of artwork, partially offset by debt settlement costs and a charitable contribution to Hyatt Thrive Foundation.

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BALANCE SHEET

The balance sheet summarizes assets and equities (liabilities and stockholders' equity) of a corporation. Assets are usually grouped in one of five categories: current assets, investments, fixed assets (sometimes referred to as property, plant, and equipment), intangible assets, and other assets. Liabilities are typically grouped into current liabilities and long-term liabilities.

Asset Growth

The "size" of a corporation is commonly measured by the amount of total assets on the corporation's balance sheet. A corporation is considered "growing" if total assets increase from one year to the next. The rate of growth is measured by the change in total assets divided by the total assets of the previous year:

Percentage Growth of

Assets=

Current Year Total Assets– Previous Year Total AssetsPrevious Year Total Assets

1. Determine the percentage of growth in assets (Ratio Analysis worksheet):

Percentage Growth of

Assets=

8177-7630=547= 7.17%7630

2. Did total assets increase or decrease? What were the primary reasons for the change in total assets?

The total assets increased. Primary reasons for this increase are due to growth in the number of management and franchise agreements and earnings therefrom, The capital required to build and maintain hotels that Hyatt manages or franchises for third-party owners is typically provided by the owner of the respective property with minimal capital required by Hyatt as the manager or franchisor, and ownership of hotels allows Hyatt to capture the

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full benefit of increases in operating profits during periods of increasing demand and room rates.

COMMON-SIZED ANALYSIS

In the balance sheet, common-size analysis is performed by expressing accounts as a percentage of total assets. These percentages are often compared to the percentage of previous years or to the percentages calculated for another corporation in the same industry. Complete the common-size analysis for the following items in the balance sheet ( IHl Ratio Analysis worksheet):


Current Assets 14.22 23.01

Long-term Investments 4.02 3.84

Fixed Assets 57.12 54.18

Total Assets 100.0% 100.0%

Current Liabilities 10.65 8.09

Total Liabilities 41.68 36.90

Stockholders’ Equity 58.32 63.10

3. Which balance sheet accounts changed the most in comparison to the previous year? What events explain the reasons for the changes in these accounts?

The total liabilities changed the most in comparison to the previous year. Total liabilities of the Fund were $368 million and $345 million, respectively, including $106 million and $78 million of current liabilities, respectively. The current liabilities include $94 million and $68 million of accrued expenses and other current liabilities as of December 31, 2013 and 2012, respectively. The non-current liabilities of the Fund are included in other long-term liabilities. In connection with the inception of the performance guarantee, The Hyatt recognized a liability for the fair value of our guarantee obligation within other long-term liabilities on our consolidated balance sheets, with an offsetting intangible asset.

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CASH FLOW STATEMENT

1. Indicate the cash flows resulting from operating, investing, and financing activities. Be sure to identify whether the cash flow is positive or negative. Then indicate the change in cash, and the beginning and ending cash balances:

Cash Flow Activity Current Year Previous Year

Operating 456 499

Investing -747 -489

Increase (decrease) in cash 41 -121

Beginning cash balance 413 534

Ending cash balance 454 413

2. What were the three most significant sources of cash?

The three most significant sources of cash are marketable securities, short-term investments, sales of real estate, and assets held for sales.

3. What were the three most significant uses of cash?

The three most significant uses of cash are acquisitions net of cash acquired, sales perceived transferred to escrow as restricted cash, and contributions to investments.

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4. Chart the net income and cash flow from operations over the last three years (Replace the below chart with a chart from the company under analysis.):

a. Label the vertical axis of the following chart with a scale that will accommodate net income and cash flow from operations over the last three years.

b. Mark the level of net income for each year with an X. Then, mark the cash flow from operations for each year with a •.

c. Connect the net income amounts with a line to indicate the trend. Then connect the amounts of cash flow from operations with a dotted line.

2011 2012 20130

100

200

300

400

500

600

Net IncomeCash Flow form Opera-tions

5. Based on a comparison of the income statement to the statement of cash flows, what caused the greatest differences between net income (loss) and cash flow from operations?

The greatest differences between net income and cash flow from operation was the depreciation and amortization. These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our consolidated owned and leased hotels. Amortization expense primarily consists of amortization of management agreement acquisition costs and acquired franchise and management intangibles, which are amortized over their estimated useful lives. Non-comparable hotel depreciation and amortization expense increased $2 million in 2013 as compared to 2012 due primarily to hotels

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acquired or newly opened during the comparable periods partially offset by hotels sold in 2013 and 2012.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

The statement of changes in stockholders' equity explains the changes in individual equity accounts during the year. Most annual reports show the statement of changes in stockholders' equity as a formal financial statement; however, some corporations show the statement of stockholders' equity in the notes of the financial statements. If the retained earnings are the only capital account that changed during the fiscal year, a statement of changes in retained earnings is usually presented instead.

Shares Outstanding

Label the vertical axis of the chart with a scale that will accommodate number of shares over the last three years. Then chart the number of common shares outstanding over the last three years (Replace the below bar chart with one from the company under analysis.)

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2011 2012 2013 150,000,000

152,000,000

154,000,000

156,000,000

158,000,000

160,000,000

162,000,000

164,000,000

166,000,000

Number of Shares

Number of Shares

Did the number of common shares increase, decrease, or remain constant? What were the reasons, if any, for the changes?

The number decreased dramaticly, they have two different stocks, called Class A common stocks and Class B common stock. The Class A stocks were reserved for issuance under the Second Amended and Restated Hyatt Hotels Corporation Long-Term Incentive Plan. Unlike Class A common stock is available for public market, under LTIP. Class B common stock had 23.3% outstanding and that representing about 16.1% of the approximately 22.3% of our outstanding Class B common stock, representing approximately 16.1% of the outstanding shares of our common stock and approximately 21.5% of the total voting power of our outstanding common stock. The company has the availability of $400 million repurchase on the outstanding stock under the authorization of the Board of Director. In 2012, they repurchase $136 million outstanding stock, but in 2013, they repurchase $275 million outstanding stock

Retained earnings

Record the amounts in the statement of changes in stockholders' equity for the following items:


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Beginning Retained Earnings 1,614 1,517

Dividends (if any) 0 0

Net Income (Net Loss) 207 88

Other Items

Ending Retained Earnings 1,821 1,605

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NOTES AND SUPPORTING SCHEDULES TO THE FINANCIAL STATEMENTS

The notes and supporting schedules to the financial statements are located after the financial statements in the annual report. Notes, sometimes called "footnotes," provide additional explanations, descriptions, and supporting information not conveniently displayed within the body of the financial statements.

Inexperienced financial statement users sometimes regard the notes as unimportant. However, most of the information contained in the notes are required by GAAP and can make a difference in a decision the financial statement users make concerning the corporation. For example, a contingent liability considered "reasonably possible" may be shown in the notes rather than the liability section of the balance sheet. A financial statement user who ignores the notes would not be aware of contingencies that may affect the corporation in the future.

The first note in an annual report usually summarizes the significant accounting policies used by the corporation when preparing the financial statements. This note is generally followed by notes addressing more specific topics.

Some of the following topics may not apply to the corporation you selected. For example, if the corporation does not have a pension plan, there is no need for a pension note. If a note is not applicable, write "NA" in the blank.

Cash and Cash Equivalents Corporations often report "cash equivalents" along with cash on the balance sheet (FAS 95, lAS 7). Cash equivalents usually include short-maturity deposits and liquid savings accounts. How does the corporation define their cash equivalents?

We consider all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents

Accounts Receivable Corporations with receivables must disclose the net amount due and any allowance for amounts deemed uncollectible. The percentage of uncollectibles is calculated by dividing the allowance for uncollectibles by the gross accounts receivable. Gross accounts receivable are net receivables before the allowance for uncollectibles is removed. (Receivables worksheet)

Percent Uncollectible

=Allowance for UncollectibleGross Accounts Receivable

Determine the percentage of uncollectibles for the current and previous year

Current Year Previous Year38 = 13.92% 37 = 6.97%

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273 531

The receivables turnover ratio is an indication of the number of times a year the corporation collects its accounts receivables. The ratio is determined by dividing credit sales by the average accounts receivable. Average accounts receivable is usually determined by dividing beginning and ending accounts receivable by two.

Receivables Turnover

=Credit Sales

Average Receivables

Compute the receivables turnover ratio for the corporation in the current and previous year. If credit sales are not available, assume that all sales are on credit. Beginning accounts receivable for the previous year may be unavailable in the current annual report. The amount is easily obtained from a previous year annual report (for example, Form 10-K on EDGAR at www.sec.gov) (IHl Ratio Analysis worksheet).

Current Year Previous Years4184

= 10.41times3949

=10.45 times(273+531)/2=402 (531+225)/2=378

How did the receivable turnover ratio change from the previous year to the current year? What are the implications of this change?

It decreased by 0.05 times mainly because of their deduction on the average receivables at 2013 compared with 2012. There are no significant changes from previous year to this year to implicate.

Inventories Material classifications of inventories must be itemized on the balance sheet or in a corresponding note (ARB 43, Chapter 4, Paragraph 15; lAS 2). Is the inventory classified into more than one category? If so, what are those categories?

Food and beverage Vacation ownership

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The inventory flow method [for example, first-in, first-out (FIFO); average; or last-in, first-out (LIFO)] selected by a corporation can significantly affect the amount allocated to inventory on the balance sheet and cost of goods sold on the income statement.

A corporation is required to disclose flow method(s) used to value its inventory (W ARB 43, Chapter 3A, Paragraph 9). In some cases, the corporation will value foreign and domestic inventory groups in different ways. What method(s) is (are) used to account for inventories? ('11 inventory, last-in, first-in, first-out)

Inventory Group Inventory Flow Method

Domestic Inventories: FIFO

Foreign Inventories: FIFO

If the corporation uses a LIFO flow method, it must disclose the LIFO reserve, which is the difference between the LIFO inventory amount and the current value or FIFO inventory amount typically used for internal reporting. If the corporation uses LIFO to value the inventory, indicate the following for the current year:

Inventory using LIFO (as shown on the balance sheet)

$ N/A

LIFO Reserve $ N/A

Inventory at Current Cost / FIFO / Replacement Cost

$ N/A

The inventory turnover ratio indicates of the number of times a year the corporation sells its inventory during a year. It is determined by dividing cost of sales by the average inventory. Average inventory is determined by dividing the sum of beginning and ending inventory by two.

Inventory Turnover

=Cost of Sales

Average Inventory

Compute the inventory turnover ratio for the corporation in the current and previous year. If beginning inventory for the previous year is not available in the current annual report it may be obtained from a previous year annual report.

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Cost of Sales 3283

= 41.82 times

Cost of Sales 3121

= 37.38 timesAverage Inventory

(77+80)/2=78.5

Average Inventory

(80+87)/2=83.5

How did the inventory turnover ratio change from the previous year to the current year? What are the implications of this change?

They increased 4.44 times. In Hyatt Their inventories are comprised principally of unsold vacation ownership intervals of $64 million and $66 million at December 31, 2013 and 2012, respectively, and food and beverage inventories at they’re owned and leased hotels. Vacation ownership inventory is carried at the lower of cost or market, based on relative sales value or net realizable value. Food and beverage inventories are generally valued at the lower of cost (first-in, first-out) or market. Vacation ownership interval inventory, which has an operating cycle that exceeds 12 months, is classified as a current asset consistent with recognized industry practice. Based on management's assessment, no impairment charges were recorded in 2013 or 2012

Property and Depreciation If material, separate categories of property, plant, and equipment should be disclosed. Identify the categories of property, plant, and equipment. Corporations must also disclose the depreciation method(s) used to value property, plant, and equipment (IJJ APB 12, 16). In some cases, the corporations will use more than one depreciation method. What methods(s) is (are) used to depreciate property, plant, and equipment? (Buildings, machinery, equipment, land depreciation, straight-line, accelerated)

Fixed Asset Group Depreciation Method

Property and Equipment

Buildings

Straight Line

Straight Line

Leasehold improvements Straight Line

Furniture, equipment and computers Straight Line

Land N/A

Construction in progress N/A

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Impairment of fixed assets occurs when the market value of an asset is significantly lower than the carrying amount and that amount is not considered recoverable. Losses resulting from impairment of long-lived assets must be charged against income (FAS 121 and 144, IAS 36). Were any assets recognized as impaired during the current year? If so, what was the nature of the impaired assets and the amount charged against income to recognize the impairment?

Changes in economic and operating conditions impacting these judgments could result in impairments to their long-lived assets in future periods, which could be material to their earnings. Hyatt had $5,255 million and $4,527 million of long-lived assets and definite-lived intangibles as of December 31, 2013 and December 31, 2012, respectively

An approximation of the remaining usefulness of property, plant, and equipment may be determined by computing the percentage that assets are depreciated. The ratio is calculated by dividing accumulated depreciation by the gross depreciable fixed assets. Depreciable fixed assets do not include land or construction in progress. (Fixed Assets worksheet)

Percentage of Fixed Asset Depreciation

=Accumulated Depreciation

Gross Depreciable Fixed Assets

Calculate the percentage of fixed asset depreciation for the corporation in the current and previous year.

Current Year Current Year2345

= 37.47 %2212

= 39.51 %(7016-672-86)=6258 (6351-688-65)=5598

How did the percentage of fixed asset depreciation change from previous year to the current year? What might be the reasons for this change? What are the implications of this change for the future?

Most assets are not depreciated each year. The company is using partially depreciation method and only the percentage of the debt is paid each year. The implication will be that the debt should lessen each year. Changes in depreciation expenses may be driven by renovations of existing properties, acquisition or development of new properties or the disposition of existing properties through sale or closure. Hyatt intends to consider strategic and complementary acquisitions of and investments in businesses, properties or other assets. If Hyatt consummates any asset acquisitions, Hyatt would likely add depreciable assets, which would result in an increase in depreciation expense.

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The fixed asset turnover ratio indicates how efficiently fixed assets are used to generate revenue. The ratio is particularly useful in a capital intensive corporation in which plant and equipment are used to generate revenue. The ratio is calculated by dividing revenue by the fixed assets held during the year.

Fixed Asset Turnover Ratio

=Revenue

Average Net Fixed Assets

Compute the fixed asset turnover ratio for the corporation in the current and previous year. If beginning fixed assets for the previous year is not available in the current annual report, it may be obtained by from a previous year annual report (for example, Form 10-K on EDGAR at www.sec.gov) Ratio Analysis worksheet, Fixed Asset worksheet).

4184= 0.943 times

3949= 0.965 times

(4671+4139)/2=4405 (4139+4043)/2=4091

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Capitalized Leases Some corporations lease, rather than purchase, fixed assets. Capitalized leases (referred to as "finance leases in international standards) transfer the benefits and risks of ownership to the lessee. An asset and a liability approximately equal to the present value of the rental payments is recorded. The asset associated with a capital lease is periodically amortized in the same way that owned assets are depreciated. In addition, the lessee will make rental payment that consists of interest and principal. (FAS 13, lAS 17) If the corporation uses capital leases ('1l lease, capital(ized)) lease, lease obligation, imputed interest) (!Hl Leases worksheet):

What is the total amount of payments due over the life of the capitalized leases?

$ 221

Of the total payments due for capitalized leases, what amount is considered to be imputed interest?

$ N/A

What is the long-term liability associated with leases recognized on the balance sheet?$ 866

Assuming the corporation does not enter into additional lease agreements, what will be the amount of the payment associated with capital leases next year?

$ 194

Operating Leases Operating leases are legal obligations that require the corporation to make periodic payments for several years. These leases do not require recording of a long-term asset or liability. However, GAAP requires disclosure of the expected payments over the life of the lease. ('1l lease, operating lease, rent) (IHl Leases worksheet)

What was the total obligation associated with operating leases?

$487

What was the rent expense associated with the operating leases in the current year?

$79

Assuming the corporation does not enter into additional lease agreements, what will be the payment for operating leases next year?

$39

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Long-term Debt Long-term debt is usually organized by type of lender, for example, loans from banks and bond issues are usually grouped separately. Corporations disclose interest rates, due dates, collateral, and loan covenants of long-term debt. What long-term debt obligations does the corporation have? If the corporation has more than five debt instruments, list the five largest. ('1l debt, credit facility, loan, maturity)

Instrument Rate Amount

$250 million senior unsecured notes maturing in 2015

$250 million senior unsecured notes maturing in 2016

5.750% $ N/A

3.875% $259

$196 million senior unsecured notes maturing in 2019 6.875%$196



Debt payments for each of the next five years must be disclosed. In which of the next five years is the most long-term debt due?

Year: 2013 Amount to be paid $1.289

(Also There is Tax-Exempt Contract Revenue Empowerment Zone Bonds, Series 2005A. with $130, Contract Revenue Bonds, Senior Taxable Series 2005B with $70, Floating Average Rate construction loan with $32 and other (various, maturing through 2015) with $1)

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Contingencies Contingent liabilities are financial obligations that depend on the occurrence (or nonoccurrence) of future events. Disclosure of these obligations depends on whether or not the future event is probable, reasonably possible, or remote (tillFAS5, lAS37). For example, if losing a $2,000,000 lawsuit is probable, the amount is shown as a liability and an expense and the lawsuit is described in a note. If the loss of the lawsuit is reasonably possible, no liability is recognized; however, the lawsuit is described in a note. Remote losses need not be disclosed.

Identify any contingencies that potentially affect the financial position of the corporation. Are these contingencies probable or reasonably possible? Were any of the contingencies reported as an expense on the income statement and a liability on the balance sheet? (contingency (ies), legal, lawsuit)

According to Hyatt 10-k, they stated, “We are subject, from time to time, to various claims and contingencies related to lawsuits, taxes, and environmental matters, as well as commitments under contractual obligations. Many of these claims are covered under the current insurance programs, subject to deductibles. We reasonably recognize a liability associated with commitments and contingencies when a loss is probable and reasonably estimable. Although the ultimate liability for these matters cannot be determined at this point, based on information currently available, we do not expect that the ultimate resolution of such claims and litigation will have a material effect on our consolidated financial statements.”

Interim (Quarterly) Financial Data Disclosure of quarterly data aids the financial statement user in determining the seasonality of corporate operations. For example, American manufacturers of confectionery will typically experience much higher sales in the quarter that includes the Halloween and Christmas holidays. Large public companies are required by the SEC (Item 302(a), Reg. S-K) to include quarterly amounts for revenues, gross profit, net income, and net income per share. International standards also require interim reporting lAS 37) ('11 interim, quarterly)

Chart the quarterly revenue for the corporation over the current year:

a. Label the vertical axis of the following chart with a scale that will accommodate the quarterly revenue that occurred throughout the current year.

b. Mark the level of revenue for each year with an X.

c. Connect the revenue amounts with a line to indicate the trend.

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1st Qtr 2013 2nd Qtr 2013 3rd Qtr 2013 4th Qtr 2013900

950

1000

1050

1100

1150

Revenue

Revenue

Do you detect significant fluctuations in quarterly data for the corporation? If so, explain the reasons for the fluctuation(s)?

There is some fluctuation in quarterly data for the corporation over the year in 2013. The revenue for first quarter is 975 million dollars. Compare with the revenue for the second quarter, which is 1092 million dollars, there is a 117 million dollars differences. At the third quarter, the revenue drops a little to 1026 million dollars. And it goes back up to 1091 million dollars for the last quarter in 2013. The reason is the people prefer to go to the vacation during the second and forth quarter.

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REPORT OF THE INDEPENDENT AUDITORS

Auditing is a process by which an independent accounting firm accumulates and evaluates data to determine whether the financial statements are presented in accordance with GAAP. The Securities and Exchange Commission requires an annual audit for all companies whose capital stock is traded on a recognized stock exchange.

The purpose of the audit report is to communicate the findings of the auditor to financial statement users. The auditor's report usually appears immediately after the notes to the financial statements. Who is the corporation's auditor and where is the auditor located?

Auditor: Deloitte & Touche LLP

City where auditor is located

Chicago, Illinois

Report on the Financial Statements An audit report usually consists of three parts that (1) define the responsibility of management, (2) describe the nature of the audit, and (3) express an opinion on whether the financial statements are fairly presented and in conformity with generally accepted accounting principles. The following are types of audit opinions that commonly in annual reports:An unqualified opinion states that, in the auditor's opinion, the financial statements are in conformity with generally accepted accounting principles and that the auditor is reasonably assured that the financial statements are free from material misstatement.

A qualified opinion is issued when the auditor detects non-pervasive departures from GAAP or non- pervasive scope limitations. A qualified opinion includes the words "except for" in the paragraph in which the auditor expresses an opinion.

Disclaimer of opinion occurs when the auditor experiences severe limitations on the scope of the audit or if a non independent relationship exists between the auditor and the client. Each of these conditions makes it impossible for the auditor to express an opinion on the financial statements. A disclaimer of opinion will clearly state that the auditor does not render an opinion.

An adverse opinion is given only when the auditor believes the financial statements are materially misstated or misleading. An adverse opinion will state specifically that the financial statements do not in conform to GAAP.

Read the auditor's opinion carefully, then answer the following questions concerning the content of the opinion.

XUnqualified Disclaimer of opinion

Qualified Adverse opinion

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2. An auditor's report will state the responsibility of the auditor. What is the responsibility of the auditor with regard to the financial statements?

Plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects

3. What guidelines does the auditor use to conduct the 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 they considered necessary in the circumstances. They believe that their audit provides a reasonable basis for their opinion

4. Does the auditor believe the financial statements were presented fairly? What statements in the audit opinion support your conclusion?

Yes, the auditor believes the financial statements were presented fairly because the auditor states that in their opinion such consolidated financial statements are presented fairly, in all material respects, the financial position of Hyatt Hotels Corporation and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America

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Report on Internal Controls Internal control is the process of providing assurance regarding the reliability financial statement preparation. The auditor is required to express an opinion on the effectiveness of the company's internal control over financial reporting.

1. What authority provides the criteria for establishing internal controls?

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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.

2. Whose responsibility is it to maintain effective internal controls over financial statement preparation process?

The management of Hyatt Hotels Corporation 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.

3. Does the auditor believe the corporation maintained adequate internal control over financial reporting? If not, in what areas were there internal control deficiencies?

The auditor states that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission

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RATIO ANALYSIS

Ratio analysis is a way to compare current performance and financial position to (1) previous years, and (2) other corporations. Calculate the following ratios for your corporation. You should show all of your calculations. In other words, indicate the components of the numerator and the denominator for each ratio.

ANALYSIS OF PROFITABILITY

Ratios of profitability indicate the degree of success of the corporation's operations during the year. Profitability ratios show the amount of resources required to generate profits and the availability of profits to stockholders. These ratios are often used as a means for stockholders to evaluate the performance of corporate management.

1. Profit MarginThe profit margin on revenue shows the relation of profits to revenue. The percentage is computed by dividing income from continuing operations by net revenue for the year. Income from continuing operations is net income without the effects of any discontinued operations or extraordinary items.

Profit Margin = Net Income from Continuing

OperationsNet Revenue

A higher profit margin indicates less revenue is needed to generate a desired level of profit. Compute the profit margin on revenue for the current and previous years:

207= 4.95 %

88= 2.23%

4184 3949

2. Return on AssetsThe return on assets (ROA) ratio indicates how well the assets of the corporation are utilized to achieve a profit. The ratio demonstrates potential earning similar to the way a savings account interest rate indicates how much you can earn on money invested in savings. The percentage is computed by dividing income from continuing operations by average total assets held over the year. Average assets are usually computed by adding current year total assets to previous year total assets and dividing by two.

Return on Assets =Income from Continuing Operations

(current year Total Assets + Previous Year Total Asset)/2

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Total assets for the current and previous years appear on the balance sheet; however, because a balance sheet typically shows only two years of data, previous year total assets may appear in another section of the of the annual report. Compute the return on assets for the current and previous year:


207= 2.62 %

88= 1.16%

(8177+7630)/2 = 7903.5 (7630+7507)/2 = 7568.5

3. Stockholders' EquityReturn on stockholders' equity is similar to return on assets except it removes the effect of funds the corporation has borrowed. The ratio is calculated by dividing income from continuing operations by the average stockholders' equity through the year.

Return on Equity =Income from Continuing Operations for the Current Year

(Current year Equity + Previous Year Equity)/2

Total equity for the current and previous years appears on the balance sheet; however, because a balance sheet typically shows only two years of data, previous year total equity may appear in another section of the annual report.

Compute the return on stockholders' equity for the current and previous year:


207 = 4.31% 88 = 1.83%(4777+4821)/2 = 4799 (4821+4818)/2 = 4819.5

What corporate characteristic causes the return on assets and return on equity percentages to be different?

The biggest factor that changes the ROA and ROE is the income from continuing operation expense. The Income from the continuing operations for the current year shifted from 88 millions in 2012 to 207 millions in 2013.

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All three of the preceding ratios indicate profitability by comparing income from continuing operations to another number in the income statement or balance sheet.

In comparison to the previous year, has the corporation improved its ability to generate a profit? Justify your answer based on the ratios you calculated.

The Hyatt is improving their ability on generating a profit. The ROA of Hyatt was 1.16% in 2012, and it raised to 2.62% in 2013. They strive to enhance the operating revenues by focusing on increasing their share of hotel stays by their existing guests and increasing the number of new guests they serve on a regular basis, which helps them to establish their guest loyalty to Hyatt.

4. Earnings Per ShareThe earnings per share ratio (EPS) represents the amount of earnings attributable to each share of stock in the corporation. The ratio is considered so important that GAAP requires EPS disclosure on the face of the income statement (till FAS 128, 33). In its simplest form, EPS is calculated by dividing net income, less preferred stock dividends, by the average number of common shares outstanding. If the corporation has income or losses from discontinued operations or extraordinary items, the effects of these items on earning per share must be disclosed separately.

In the spaces below, record the basic earnings per share for continuing operations as it appears on the income statement:

$1.30 Amount Per Share $0.53 Amount Per Share

Did the current EPS improve compared to the previous year? Was the change in EPS a result of changes in the numerator or the denominator of the ratio? Explain.

Yes it did, it is improved $0.77. The major change in EPS for Hyatt in 2013 was in the numerator. The net income raised up from 88 million dollars in 2012 to 207 million dollars in 2013. Since the Hyatt Corporation has never declared or paid any cash dividends, the numerator is raised to 207 million in 2013.

The equity section of a balance sheet may have dilutive securities (such as options, convertible bonds and convertible preferred stock) that can decrease EPS by increasing the number of shares in the denominator. In this case, the corporation may be required to show a diluted EPS in addition to the basic EPS. Did the corporation disclose diluted EPS? If so, what equity securities in the balance sheet have the potential of increasing the EPS denominator?

Yes, the Hyatt disclosed the diluted EPS on their consolidated statements of income. Both

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EPS basic and EPS diluted for the December 31, 2013 is $1.3. The EPS stays the same.

5. Cash Dividends Per ShareCash dividends per share is similar to earnings per share except the numerator excludes the portion of earnings retained in the corporation. In other words, the ratio indicates the amount of cash dividends the stockholder received during the year for each share of stock owned.

Cash Dividends Per Share

=Cash Dividends Paid to Common Stockholders

(current year Number of Shares + Last Year Number of Shares)/2

The dividend paid to common stockholders appears in the statement of retained earnings. The number of common stock shares outstanding appears on the balance sheet; however, because a balance sheet typically shows only two years of data, the previous year number of shares may appear in the selected financial data section of the annual report. Compute the cash dividends per share for the current and previous year:


0 = $ 0 = $

0 0

6. Dividend Payout RatioThe dividend payout ratio indicates the percentage of earnings returned to the stockholder rather than retained in the corporation. The ratio is computed by dividing cash dividends paid to common stockholders by the amount of income available for payment of common stock dividends.

Dividend Payout Ratio

=Cash Dividends Paid to Common Stockholders

Net Income – Preferred Dividends Paid

The dividend paid to common and preferred stockholders appears in the statement of retained earnings. Net income appears on the income statement. Compute the dividend payout ratio for the current and previous year.

Current Year Previous Year of 51


0= %

0= %

0 0

7. Price/Earnings (PIE) RatioThe P/E ratio measures the relationship between the earnings of the corporation and the current market price. A corporation with a P/E ratio of 15 is said to be selling at 15 times its current earnings. Some analysts believe the P/E ratio is a good measure of the future earnings power of a corporation. Companies with high P/E ratios have a stock price that reflects the expectation of higher future earnings. A lower P/E ratio may indicate that lower earnings expectations are reflected in the corporation's stock price.

Price/Earnings Ratio =Market Price Per Share

Earnings Per Share

Calculate the P/E Ratio for the current and previous year. If end of the year market prices of common shares are not available, use an average of the high and low price during the last quarter of the year.

Current Year Previous Year48.12

= 37.02 times36.34

=68.57 times1.3 0.53

In the past decade, the average P/E ratio for major corporations has ranged from 14 to 25. How does the corporation's P/E ratio compare to this range? What may be concluded concerning the expected growth of the corporation?

Company is growing so the ranges are going down. Our range was 68.57 as of December 31, 2013, it goes down to 37.02, which is a good progress of a success. Compare with their earning per share ratio in 2012 with 2013, it raised up from 0.53 from 2012 to 1.3 in 2013, which was 145% increase. For the Market Price per share, it raised up only 32.4%. The Market Price Per Share is not rising as the same pace as the Earnings Per Share. And that is the reason the P/E ratio goes down. Hyatt was not doing as good as the other major corporation, which has 14 to 25 times in P/E ratio, but they are growing significantly.

ANALYSIS OF LIQUIDITYA common misconception is that corporations become bankrupt because they are unprofitable. In reality, bankruptcy is declared because a corporation is not able to meet the current obligations to the creditors, not when the corporation lacks profitability.

Current assets are called "current" because they are converted into cash during the operating cycle. Current liabilities are liabilities that will be liquidated by current assets or by the creation

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of other current liabilities.

Liquidity ratios indicate the corporation's ability to meet short-term cash requirements. For this reason, liquidity ratios are important to potential and existing creditors. There are two commonly computed liquidity ratios:

1. Current (or Working Capital) RatioThe current ratio indicates whether the firm will have enough resources to meet obligations becoming due during the next period. The current ratio is the quotient of current assets divided by current liabilities.The ratio is usually expressed in a format in which the denominator is equal to "1", for example, if current assets were twice as much as current liabilities the ratio is expressed as "2:1".

Current Ratio =Current Assets

Current Liabilities

Strictly speaking, a ratio less than one indicates a corporation will not meet obligations due during the next period without additional resources. On the other hand, a ratio of greater than one indicates the corporation is currently is able to meet current liabilities as they become due. All components of the current ratio appear in the current sections of the balance sheet. Compute the current ratio for the current and previous year:

1,163= 1.34: 1

1758= 2.84: 1

871 68

Based on the current ratio you calculated, do you believe the corporation able to meet the current obligations as they become due? Why? Has the corporation established lines of credit with lenders to obtain working capital if needed? ('11 lines of credit, revolving)

Yes I do Believe, They have a credit facility that provides them loans. They have a revolving credit facility and Hyatt just entered into a second Amended and restated credit agreement with a syndicate of lenders to make it better, and fix it the prior problems, so they restated their prior revolving credit facility to extend the facility’s expiration. Their revolving credit facility provide them financing for working capital and general corporate purposes, also their credit facility provide them additionally commercial paper back-up, permitted investment and acquisitions

Net working capital is equal to current assets minus current liabilities. What is the net working capital for the current year?

$1,163 – $871 = $292

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2. Quick (or Acid-Test) RatioThe quick ratio recognizes certain current assets are more liquid than others. For example, inventories are usually not immediately available for the liquidation of current liabilities because the corporation must first sell inventoried items to obtain cash.

The quick ratio is similar to the current ratio except the numerator includes only current assets, which may be readily turned into cash. These current assets include cash, marketable securities, and net receivables.

Quick Ratio =Cash + Marketable Securities + Net Receivables

Current Liabilities

All components of the quick ratio appear in the current sections of the balance sheet. Compute the quick ratio for the current and previous year:

1163-77 = 1,086= 1.25:1

1,758-80 = 1,678= 2.72:1

871 618

Based on your assessment of the two liquidity ratios you calculated, did the liquidity position of the corporation strengthen or weaken compared to the previous year? What were the reasons for the change, if any?

The reason why it weaken is because they are receivable are lowered compared to 2012, they are not receiving as they were on 2012, but As of December 31, 2013, $194 million of their outstanding debt will mature in the following twelve months. Hyatt believe that they will have adequate liquidity to meet requirements for scheduled maturities for 2014

ANALYSIS OF SOLVENCYSolvency ratios measure the corporation's ability to manage debt. The ratios indicate risk to long-term creditors and equity investors. (Debt worksheet)

1. Debt to Total AssetsThe debt to total assets ratio measures the amount of leverage used by the corporation. The ratio indicates what percentage of the assets of the corporation is financed by those other than stockholders of the corporation.

Debt to Total Assets =Total Liabilities

Total Assets

All components of the debt to total assets ratio appear on the balance sheet. Compute the debt to

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total assets ratio for the current and previous year:

Current Year Previous Year3400

= 41.58%2809

= 36.82%8177 7630

How did the debt position of the corporation change over the last year? What were the reasons for these changes if any?

They owe more debt. Last year it was 36.82% and now it is 41.58%. The reason why is that their market price raised up, which is their value of firm and they start to benefit more from their operations

Would potential lenders prefer the debt to total assets ratio to be larger or smaller? Why?

Potential lenders prefer the debt to total assets ratio for the Hyatt Corporation from 25% to 40% because the potential lenders may want a high return on their investment. They do not want the debt to total assets ratio to be lower than 25%. At the mean time the potential lender do not want to risk too much on their money. They want to control the debt to total assets ratio to be lower than 40%.

2. Times Interest Earned RatioWhen payment of interest on debt becomes significant in proportion to the corporation's annual income, it is often evidence the corporation is spending too much of its resources servicing debt. The times interest earned ratio indicates the relationship of interest expense to income. The ratio is computed by dividing income before tax and interest expense by interest expense.

Times Interest Earned

=Net Income + Interest Expense + Tax Expense

Interest Expense

All of the components of the times interest earned ratio appear on the income statement. Compute the times interest earned ratio for the current and previous year:

Current Year Previous Year207+65+116 = 388

= 5.97 times88+70+8 = 166

= 2.37 times65 70

Some believe the times interest earned ratio is more appropriately calculated on a cash basis. In this way, the ratio indicates the corporation's ability to pay interest from the cash from operations. (Cash paid in interest may differ from interest expense to the extent of accruals are

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made or a premium or discount is amortized.) In this case, the numerator includes cash flow from operations as it appears in the cash flow statement. The denominator is cash paid for interest, which appears in the cash flow statement or the note describing the corporation's debt obligations.

Times Interest Earned on the cash basis

=Cash Flow from Operations + Cash Paid for Interest

Cash Paid for Interest Expense

Compute the times interest earned on the cash basis for the current and previous year:

Current Year Previous Year456+66 = 522

= 8.03 times499+68 = 567

=8.1 times65 70

Zehra Seren Koprek

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3850518

INDUSTRY OR COMPETITOR COMPARISONSOne way to evaluate corporate success is to compare the corporation to others in the industry. Industry common-size percentages and ratios are easily obtained in most libraries. (See Appendix B, Obtaining Data for Industry Comparisons.) Most sources of industry wide data are organized by Standard Industrial Classification (SIC) codes and by corporation size within that code. SIC codes for a specific corporation are identified in the 10-K report of the corporation. ('11 standard, industrial)

Alternatively, you may want to compare your corporation to their closest competitor. Information concerning a primary competitor may be obtained in the annual report to stockholders or the Form 10-K of the competitor.

Mark the comparison method you will use:

Industry ComparisonSIC Code:Industry Name:Source of industry-wide data:All industry comparisons should be made using the same fiscal years. The most current year of operations may not yet be available in the industry source. What is the year of the comparison you will be making?

X Primary CompetitorName of Competitor:

In the following table, copy (1) common-size data and ratios calculated earlier for the appropriate year, and (2) the corresponding industry or comparison data. You may need to adjust certain ratios to make them comparable. For example, if the earnings before taxes are used to calculate return ratios for the industry, you should calculate your corporation's ratio in a similar manner. If the data is not available, indicate this by writing "NA" in the blank. (IHl Competitor Analysis worksheet)

Hyatt Hilton

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Corporation Industry or CompetitorIncome Statement Common-Size Data

Gross Profit/Sales 901/4,184=21.53% 5,858/9,735 =60.17%

Income from Continuing Operations/Sales

207/4.184=4.95% 460/9,735=4.73%

Balance Sheet Common-Size DataCurrent Assets/Total Assets 1,163/8,177=14.2% 2,383/26,562=9%

Current Liabilities/Total Assets

817/8,177= 10.0% 2,142/26,562=8.06%

Liabilities/Total Assets 3,400/8,177= 41.6% 22,199/26,562=83.57%

Equity/Total Assets 4,769/8,177=58.3% 4,363/26,562=16.43%

Profitability Ratios

Profit Margin 4.95 % 4.73% 460/9,735)

Return on Assets 2.62 %1.72% (460/(26,562+27,066)/2

Return on Equity 4.30 %14.31% (460/(4,276+2,155)/2

Dividend Payout Ratio N/A N/A

Liquidity Ratios

Current Ratio 1.34: 1 1.11:1 (2,383/2.142)

Quick Ratio1.25:1 0.93:1

(2,383-396/2.142)

Solvency RatiosDebt/Total Assets (3,400/8,177)=41.6%

41.6% 83.57%

Times Interest Earned 5.88 2.13(460+620+238)/620

Operational Ratios

Receivable Turnover 10.41 12.58 (92/731)

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Inventory Turnover 41.82 9.56 (3,877/(396+415)/2

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1. Based on the ratios, what are the primary differences between the corporation and other companies in the industry or the primary competitor? What specific ratios explain the reasons for these differences?

Return on Equity= as a percentage of shareholders equity. Hilton has more probability generated with the money shareholder invested unlike Hyatt is public company owe 275 million in repurchase common stock in capital. The main reason is because Hyatt classifies two different stock markets and stock market repurchase from trust held originally owned by pritzker family member that is retiring

Debt-Hyatt has 41.1% but Hilton has 83.57% Hilton Investing properties because hey want to purchase property while it s in current market price so that they can to pay less because they are expecting the property market price might raise up in future so they are eliminating their cash flow, and borrowing a lot of fund from third party. They have a significant amount of indebtedness. Their total indebtedness was approximately $12.7 billion, including $968 million of non-recourse debt, and their contractual debt maturities of their long-term debt and non-recourse debt for the years ending December 31, 2014,

Times Interest Earned: Since Hilton owes a lot of debt, and their interest earned is 2.13, they could be looking for a bankruptcy depending on their future performance and operating activities. Hilton is not likely being able to meet its interest payments, since the ratio Hilton has below 2,5; it is considered a warning sign of financial distress. They are trying to generate enough income to cover their required interest payments. On Hilton 10k it even says that they are now limited as to conduct their business and that they may not be able to raise any additional debt or equity financing to compete effectively or they ay not even take advantage of any new business opportunities. Hyatt is doing better, showing they can afford to pay their interest payments when they come due better than Hilton.

Sales- Hyatt has fewer sales than Hilton; also their gross profits are lowerInventory Turnover- on the other hand on the Inventory turnover Hilton is really good,

shows that they have a strong sales, Hilton using Timeshare like Hyatt does. Although Hilton have some unsold properties included in their inventory, their revenue increased from their operations, rentals, club fee, financing and sales commissions generated from projects developed by third parties, but Hyatt has unsold vacation ownership and their sales are not doing really good, but they are expecting to get better by 2014

:

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2. In your opinion, does the corporation compare favorably or unfavorably to the industry or the primary competitor? Give examples to support your conclusion.

In my opinion Hyatt is more favorable compare to Hilton. Hilton is now in a process of growing so they are dealing with a lot of debt. On the other hand Hyatt is also dealing with debt and their sales are not as good as Hilton. I think none of them are favorable in the industry, but they are getting there. Currently Hilton has a lot of long-term debt which reducing their ability to use their cash flow to fund their operations, their future business opportunities and much more, it is also limiting them to obtain any additional financing for working capital, product developing and their debt service requirement and all the other purposes. Their interest rate could increase. Hilton is now depending on their future performance of their operation to pay their interest on their debts and make principal payments.

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Zehra Seren Koprek

3850518

MAKING DECISIONS BASED ON THE ANNUAL REPORT

1. How would you assess the corporation's revenue performance over the last few years (for example, is it increasing, stagnant, declining)? What are the reasons for your assessment?

Hyatt revenue performance over the last few years shows a gradual increase. Hyatt revenue increasing because favorable currency effects, other managed properties. Their managed properties increased $67 million, which is 4%. Also including the increasing from other revenue from managed properties due to their higher volume of reimbursements paid by their managed properties, including new hotel openings, owned hotel that have been sold because of long term management agreements. Also their owned and leased hotels revenues increased $121 million, the reason for this increased were from the hotels in the United States, which benefit them higher average daily rates and growth in their food in beverage revenues. Even their non-comparable owned and leased hotels revenue increased by $25 million primarily due to their three new wholly owned full service hotels acquired in 2013. Although they did sold 11 hotels in 2013 and 8 hotels in 2012, it was partially offset. They also experiences a $35 million increase in their management and franchise fee including in consolidated management fees which is base of management fees of $163 million which is 6% in 2012. They had 20% increase from 2012 from franchise fees and 63% increase from other fee revenues. These increases were due to management fees based on base management and incentive fess from hotels newly converted to Hyatt brans in Asia, which also increased their average daily rate in Americas. The reasons for the franchise fee increase were because of their new and converted hotels in the Americas. They had $12 million termination fee received in 2012 and a $2 million increase because of their amortization of deferred gains from hotels sold subject to a management agreement and other revenues including vacation ownership businesses and their co-branded credit card were flat

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2. What factors (such as the economy, consumer demand, product innovation, competition, regulation, etc.) will have the greatest influence on in the determination of next year's revenue? In what way would these factor(s) influence revenues

There are so many factors that determine next year’s revenue, such as their Sales, Marketing, reservations, franchise fees, sold hotels, owned and leased hotels, vacation ownership, their loyalty program, branded residential properties, their competitions, seasonality.

Their key strategy is to maximize revenues and manage costs at their hotel property, focusing on increase share hotel stays and their existing guest, along with their increase number of new guest will enhance their revenues. They also were looking to increase their guest loyalty for their brand. Therefore, expanding their Hyatt’s share of hotel stays by providing genuine guest service and delivering satisfaction or value for their guest. They intend tot expand their presence with increasing number of hotels with entering into new management and franchising agreement

Consumer demand and global economic conditions; It is linked by their performance of their general economy and their sensitive business and personal spending levels. Hyatt is able to generate from their managed and franchised properties. Their vacation ownership business is also linked to general economy and consumer spending. Americas segment, transient business growth at both of there full service and their select service hotels, which helped them growth, their revenue on 2012. Hyatt also began to see their sigh growth in-group business with being cautious of their spending non related money. Their most significant improvement came from their long-term group business with short-term booking show them some weakness. Bookings for 2014 and beyond showed them strength throughout the year, so they expecting to see further improvement in group businesses. They’re owned and leased hotels, primarily in Americas, have benefited them and will continue benefiting them in future from those trends

Their greatest influence in revenue is Owned and leased hotels, which was primarily driven by increased revenue from hotels in United States, benefited them higher daily rates and growth in food and beverage revenues, even non-comparable owned and leased hotels increased due to there new wholly owned full service hotels

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Their competition exists for their hotel guest, management agreements, franchise agreements, sales of vacation ownership properties and branded residential properties, but their primary competitors are other operators of full service, select service and all inclusive and extended stay properties, including small chains and independent along with local owners and operators. They compete for sales of their vacation ownership based on the location, quality, price, financing, terms, quality of service, name recognition, reputation etc. Hyatt believes their costumer base prominent brand recognition, strategic property location and their global development team will enable them to compete effectively and effect their revenues positive Seasonality: In the hospitality industry seasonal is depending on nature. The periods when their lodging properties experience higher revenues vary from property to property depending on their location or costumer base served. According to their historical data result, their properties in the Americas typically generate the highest revenues in the second quarter and lowest in the first quarter, but in Asia their highest revenue typically generated in the fourth quarter along with the next highest revenues generated in their second quarter.

Cyclicality; it is follows on slow basis with the overall economy. Although there is a history of increase and decrease in demand for hotel rooms, occupancy levels, rates realized by owners of hotel through economic cycles. In an environment of their increase demand and room rates caused the rate of increase in their earning, normally higher than the rate of their increase revenue, however their vacation ownership business is also cyclical. Sales: Their corporate sales organizations are generally focusing on growing market share with identifying new business opportunity, maximizing local costumers base and key accounts. Hyatt is more trying to grow, their key accounts are consists of major corporations, national, state, regional associations, specialty market accounts including social, government, military, educational, religious etc. They also have travel organizations with diversity group of individual consumers.. Their global and regional sales team target these brands to key costumer accounts for those groups. Hyatt has 180 associations that focus on group business, leisure trailer accounts and travel agencies. They have global and regional offices all around the world. They also expand 15 associates in the Americas region to get new business opportunities with a goal of establishing new worldwide accounts

Marketing: They focus on meeting specific business that needs hotel operation along with maintaining and building brand value. This increases their Hyatt’s brand preference. Hyatt focuses of their each brand to serve and support their hotel needs by analysis and application of data and analytics. Their marketing strategy and their key components are Hyatt gold Passport and Hyatt.com. Hyatt Gold Passport is a service and a loyalty program focusing for guest satisfaction, enabling loyal guests to benefit more of Hyatt. Hyatt,com is their online distribution channel enabling costumers with an efficient source of their hotel and enabling them to book effectively. Hyatt gold passport is increased by 13.6% of total room nights during 2013. Their brand and Innovation has long track record of creative approaches for food and beverage throughout the world, which enable them to profitable that create and enhance demand for their hotel property

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Reservation; Hyatt enables costumer to book directly by hotels or via telephone, call centers, travel agents and online through Hyatt.com. Hyatt has 10 global contact centers globally 24 hours a day and seven days a week with 28 different languages. Although some rooms at the hotel and their resort they manager or franchise are also booked through Internet travel intermediaries, partners or online travel service providers. These third party intermediaries collect fees by charging their hotels and resorts a commission fee on from revenues.

Fees; their fees are generally from their franchisees pay them initial application fee and ongoing royalty fees depending on their franchised property select or full service hotel. Application fees are generally $60,000 with the greater of $100,000 or $300 per guest room of their full services hotels. Some service franchises pay continuing franchise fees with the percentage of their gross room revenues, such as 3% of first year, 4% in the second year and 5% through the remainder of the term. Full service franchisees pay them 6% gross room revenues along with 3% of gross food and beverage revenues.

3. What do you predict revenue to be next year? _______4,383,000________________

4. How would you assess the income performance of the corporation over the last few years?

Hyatt had a significantly increased from 2013 to 2012. They primarily receive their revenues from their hotel operations, management and franchise fess with other revenues from managed properties and sales of their vacation ownership properties. There net income totaled were $207 million, unlike 2012 it was $88 million. We are looking at a big increased. Hyatt also had available borrowing capacity of $1.4 billion under their revolving credit facility, which will provide them future growth. This significant increased primary was from owned and leased hotels, which increased $121 million, and their comparable owned and leased hotel, which increased $96 million. On 2011 there net income was $113 million and on 2010 they were $66 million. Their significantly dropped on from $113 million to $88 million from 2011 to 2012 were because of their investing and their net income from continuing operations were higher on 2011, but due to their renovations and income loss from continuing operations and due to their benefiting more for income taxes

5. What do you predict net income to be next year?

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As of the net income chart we did in our annual report, it was clearly showing us that there is a almost 5% move every year, from the chart, it was clear that they would be having 4,384,000 net incomes.

6. How would you assess the corporation's total asset growth rate (for example, rapid increase, stable increase, stagnant, declining)? What evidence justifies your answer?

They had a big growth rate because of their investment. Generally assets including liabilities and equities, so looking at a 10k report, found out that there is a lot of things they did on their equity, the reason of the total assets growth is mainly because of their investment. They increased on their intangibles generally from franchise fess and their brand. During 2013, Hyatt invested $325 million in a wholly owned Playa Hotels, their investment in common share gave them a common ownership interest of 21.8%. Also they invested $68 million in Wailea Hotel. That means they increased their long current asset. The hotel opened during the third quarter of 2013. During 2013 Hyatt also purchased the remained 70% interest of the entity that owns the Grand Hyatt San Antonio Hotel. Hyatt recorded income from cost method investments of $50 million in other income, which they received a complete pay off of their $63 million investment along with $30 million return on their equity interest, meaning they increased on their growth of total assets. During 2013 they also sold their interest in two joint ventures, which classified as equity method investment and included in their owned and leased segment, to the third party for $52 million. In 2013, They also launched Hyatt Ziva and Hyatt Zilara, which is their new all inclusive resort brands which developed to ensure their guest inclusive stay.

7. Do you expect total assets to increase, decrease, or remain relatively the same next year? Justify your answer.

I believe it will be slightly increase or remain the same. Although they do have a lot more franchise which mean more franchise fees and brand name, They also have availability of $1.4 billion in their revolving credit center for them invest more. They invested a lot during 2013. I believe they will have a lot more cash, including short term

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investment and their receivable will increase a lit due to those investments they did and their franchise fees they obtaining. Hyatt had fastest development compare with the previous year, but I don’t think they can keep their speed to develop and increase like 2013, but maybe they can remain the same. I don’t believe they will be investing a lot more because the market prices are going up in 2014. Which means the cost of the properties will increase for them to invest.

8. Do you believe the corporation will need additional financing to meet needs over the next few years? Why or why not? If financing is needed, do you believe the corporation would be able to obtain financing easily?

I don’t think they should not be involving in financial need anymore because the company will be in danger with the current debt of 41%, I think they already have the enough money to develop and if they do need financial meets, they have an availability of $1.4 billion in their revolving credit center and with the times interest ratio of 5.88, it will be easy for them to obtain and growth. They also just entered into Second Amended and restated credit agreement with a syndicate of lenders, so it is getting better and they are fixing their prior problems and extending the facilities expiration. Their Credit facility provides them financing for working capital, general corporate purposes and much more.

9. Identify what you believe to be the three strongest aspects of the corporation. Describe why these might be considered advantages.?

Hyatt is no risk takers with big debts, like Hilton has almost 80% debt while Starwood has almost 70% debt and Hyatt is at 40% they prefer to stay consisted and give their guest the same comfort every time, Although they are expanding, but it is little by little, but no big steps that could cause them any harm

Hyatt is growing significantly In 2013 Hyatt announced affiliate signed management agreements with Constellation Hotels Holding Ltd, which enabling them doubled number of Hyatt location in France located in Paris, Cannes and Nice that is converted to Hyatt brand. End of 2013 Hyatt open 80 hotels under development in China including Beijing, Hong Kong, Macau, Shanghai and Shanzhen. They also open or under developed 60 properties in India at 2013.

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Hyatt also announced expansion international markets including Austria, Russia, the Netherlands, Latin America and the Middle East. In 2013, they also open 4 Hyatt Place outside of the U.s operating Armenia, Costa Rica, India and Mexico. In addition to that Hyatt also announced new management agreements for select service properties that is under development in Brazil, China, India, Mexico, Morocco, Panama, Thailand and Saudi Arabia. Hyatt also launched Hyatt Ziva and Hyatt Zilara, which is their new all inclusive resort brands which developed to ensure their guest inclusive stay., A long with that Hyatt did a lot of investments for their growth

Their revenues are consistently increasing 5% on every year for 5 years.They are expanding aggressively overseas, with and emphasis on the luxury segment. Their

room growth rose by 21% between 2009 and 2013 with Asia leading the chargeAlso looking back 5 years their Sales, 5 Year Compound Annual Growth Rate is 5.8, which is better than other competitors.

Hyatt also has the availability to expand and grow more if they want to with their times earned interest of 5.8 unlike Hilton having it really low, where they are depending on their operation income to pay those debts in long term

Sometimes investors like to see if a company pays dividends so that they get dividends, and the cash payments will add up over the time which will result their account for a big chunk of total returns, but there are cases when investors might want to avoid dividends for tax reasons. This might increase Hyatt investor’s portfolio. Many investors nowadays, avoiding dividends. Dividends somewhat offer security because it is more of a sure thing, but with not paying dividend, you can avoid tax rates. Since Hyatt is growing rapidly, they refuse to pay dividends, so they can invest as much as possible for their future growth, which is a good sign. It also increases share price. Hyatt paying no dividend will enable them to start a new project, repurchase some of their shares, which they are already doing; they can even buy out another company. It is a win-win situation. Where investors will benefit from not paying tax, since dividends are taxable to investors as ordinary income. This can be a weakness of Hyatt, also since some investors see a dividend payment as a sign of company’s strength including their future earning, but according to Hyatt stocks, it has been increasing rapidly over the 5 years

Identify what you believe to be the three weakest aspects of the corporation. Is it likely these weaknesses can be overcome in the next few years?

Hyatt is not picking up trends like their other competitors are. Their competitors are way ahead of the game with picking up technology, new trends and making significant changes, Those competitors are risk taking and having more debt to adapt into technology, while Hyatt just staying consistent

Hyatt has not enough hotels. They are rounding around 500 hotels but that’s just the half the hotel of Starwood preferred guest. Hyatt makes itself a much smaller program than Marriot, Hilton and Priority Club. Compare to Marriott International and Hilton worldwide that

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have around 4,000 owned operated or franchised properties and Starwood Hotels and resorts has around 1,200

Unfortunately Hyatt is way behind the new generation. They do not have enough partners. Bonuses and not including a repeat of long standing promos like Faster free nights earning in the program could be difficult. Hyatt did announced their co- branded credit card, but they have no rental car or shopping partners and they don’t enable their guest to transfer points from airlines. This is a major problem because unlike Starwood, Priority Club and Hilton, Hyatt has no cash and points awards to stretch your points further. For example if we compare them with other competitors Hyatt = $4,400 for 22,000 points while Marriott = $4,000 for 40,000 points and HHonors = $3,334 for 50,000 points, SPG = $15,000 for at 30,000 points, and lastly IHG = $4,000 for top tier InterContinental at 40,000 points.

Lack of employees, unlike our competitors we only have 45,000 employees, where Hilton has 157,000, Marriott has 123,500 and Starwood has 180,400. This is because of Hyatt has a lot less hotels than their competitors, but expanding in the industry, employees could cause them some issues, since they have really lower employee. This means they will be dealing with a lot of hiring process, dealing with new employees and finding the appropriate one

10. Are you optimistic or pessimistic concerning the future of the corporation? What specific corporate or industry characteristics influence your opinion?

Optimistic because of their brand name is recognized and they have strong teams they call family. Hyatt has a lot of franchising; they can keep building their brand image and be more popular, growth more. They also have a strong Credit facility, which enables them to loan and be able to grow more. They’re Business strategy and their ability to reach variety of consumer with a quality and satisfaction. Their revenue keeps increasing every year. Their market prices of stocks are significantly increasing. They are no risk taking, and being consistent. They are also expanding and growing. Their net income increased significantly over the 5 years. Also as I mention on their strongest aspect Hyatt is expanding and growing rapidly. Just on 2013, they open 80 hotels under new management in Asia, they open 60 properties in India, announced expansion to other countries, open 4 Hyatt Place at Armenia, Costa Rica, India, Mexico, announces new management agreements currently under development in 8 countries. In addition to that Hyatt also launces their new resort brand Hyatt Ziva and Hyatt Zilara.

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11. Would you invest in the capital stock or bonds (if applicable) of this corporation if you had sufficient funds? Would you rather invest in one of the corporation's competitors? What are the reasons for your decision?

Even Though I am Optimistic about Hyatt, I wouldn’t invest in them yet, because Hyatt is still in the process of growth with not having as much as sales as their other competitors and not having enough hotels, which means they are not as big as their competitors. I would be investing in Starwood hotels, I am actually investing in Starwood on investopedia.com and they are doing just fine, since Starwood has a really different variety of hotels, under different names which enables consumer to choose their hotel, by their comfort, money or the quality. Also they are bigger company with bigger opportunities. Starwood has also a lot of debt but that is due to their growing and expanding to countries with their new technology and trending’s which they already have their hotel in those countries, but they are developing new brand names under their management, or developing their existing brand names with new cool trends. They also have a creative management, such as aloft; Their Aloft hotel is the first hotel that has the beyond technology, using robots instead of an employee and enabling smartphone room entries(keyless entry) and a lot more. They are reaching all kind costumers that are looking for something unique, different or being themselves.

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