| BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Oct. 22, 2003--Hilton Hotels
Corporation (NYSE:HLT) today reported financial results for the third quarter
and nine months ended September 30, 2003.
The company reported third quarter 2003 net income of $34 million, versus
$48 million in the 2002 quarter. Diluted net income per share was $.09
in the third quarter 2003, compared with $.13 in the 2002 quarter. The
2002 third quarter included two items with a combined benefit of $.02 per
diluted share: 1) a $15.6 million reduction in the provision for income
taxes ($.04 per diluted share), and 2) a pre-tax impairment charge of $10
million ($.02 per diluted share).
Hilton reported 2003 third quarter total company operating income of
$126 million (compared with $127 million in the 2002 period), on total
revenue of $964 million (compared with $934 million in the corresponding
2002 period). Total company earnings before interest, taxes, depreciation,
amortization and non-recurring items (�Adjusted EBITDA,� see attachment)
were $218 million in the 2003 third quarter, compared with $224 million
in the 2002 quarter.
Continued pressure on room rates and higher costs that adversely impacted
margins at the company�s owned hotels were factors affecting the quarterly
results. Helping partially offset these items were increases in management
and franchise fees, along with strong results from the company�s timeshare
business.
Owned Hotel Results
The company�s owned hotels maintained solid occupancy levels during
the third quarter as a result of strong leisure travel during the summer
months. Hilton�s owned properties in New York, Hawaii, San Diego, Chicago,
Santa Barbara, Minneapolis and Anchorage reported occupancy levels of 75
percent-plus during the quarter as leisure travelers filled hotel rooms.
Offsetting the solid occupancies were soft room rates, owing to relative
weakness in group and business transient demand. San Francisco, while improving,
remains a sluggish market.
Across all brands, revenue from the company�s owned hotels (majority
owned and controlled hotels) totaled $487 million in the third quarter,
a 3 percent decline from the 2002 period. The company�s comparable owned
hotels reported a 2 percent revenue decline during the quarter. Contributing
to the revenue decline was a 1.9 percent decline in revenue per available
room (RevPAR) from comparable owned hotels during the quarter. Occupancy
at these hotels was flat at 73.6 percent, while average daily rate (ADR)
declined 1.8 percent to $139.03. Revenue was also adversely impacted by
reduced business from food and beverage and other hotel items (such as
telephone and retail).
Total owned hotel expenses increased 2 percent to $372 million. Expenses
at the company�s comparable owned hotels increased 3 percent in the quarter.
Owned hotel profitability continued to be impacted by the aforementioned
RevPAR, food and beverage and other declines, as well as increases in insurance
and healthcare costs and property taxes.
System-wide RevPAR; Management/Franchise Fees
Third quarter system-wide RevPAR performance at each of the company�s
brands (including franchise properties) was consistent with the strength
of summer leisure travel, as the company�s midscale brands generally fared
better than the full-service hotels. Third quarter RevPAR increased 3.0
percent at Hilton Garden Inn; 1.0 percent at Homewood Suites by Hilton;
and 1.0 percent at Hampton Inn. Embassy Suites RevPAR declined a modest
0.2 percent, with the Hilton and Doubletree brands down 1.1 percent and
2.5 percent, respectively.
Management and franchise fees for the quarter totaled $87 million, compared
with $83 million a year ago, as a result of RevPAR increases at franchised
hotels and the addition of new franchised units.
Brand Development/Unit Growth
Year-to-date August 2003 (the latest period for which data is available),
all but one of the company�s brands were significantly above their fair
share of RevPAR versus their segment competitors. With 100 representing
a brand�s fair share of the market, the Hilton brands, according to Smith
Travel Research, posted RevPAR index numbers as follows for the first eight
months of 2003: Embassy Suites, 126.2; Homewood Suites by Hilton, 119.9;
Hampton Inn, 117.7; Hilton Garden Inn, 114.2; Hilton, 108.9; Doubletree,
99.8.
In the third quarter, the company added 43 hotels and 5,350 rooms to
its system as follows: Hampton Inn, 23 hotels and 1,944 rooms; Hilton Garden
Inn, 8 hotels and 1,118 rooms; Doubletree, 5 hotels and 1,119 rooms; Homewood
Suites by Hilton, 5 hotels and 482 rooms; Embassy Suites, 1 hotel and 512
rooms; Hilton, 1 hotel and 175 rooms. Five hotels and 1,260 rooms were
removed from the system during the quarter. As of September 30, 2003, the
Hilton system consisted of 2,157 properties and 345,141 rooms.
Highlighting brand development activity during the quarter were: the
opening of the first Doubletree hotel in Canada, a 433-room property at
Toronto Airport; the first Hampton Inn in Manhattan (144 rooms) with a
total of five Hampton Inns expected to open in New York City by 2005; and
the opening of the 512-suite Embassy Suites - Niagara Falls in Ontario,
Canada. Additionally, Conrad Hotels announced that two Conrad properties
will open in Asia in 2004: in Phuket, Thailand (currently operating as
the Panwaburi Resort & Spa) and in Bali, along with the Conrad Miami
in Florida, scheduled for opening in January 2004. New Hilton-managed convention
hotels are on track to open in Houston, Texas (December 2003); Austin,
Texas (February 2004); and Omaha, Nebraska (April 2004).
T
he Hilton Family of Brands continues to be recognized for quality,
value and service by the traveling public. In August, three of the company�s
brands earned first place awards from J.D. Power & Associates for customer
satisfaction: Embassy Suites in the upscale hotel category (the fifth consecutive
win for that brand); Hilton Garden Inn in the mid-priced category (its
second win in as many years of eligibility); and Homewood Suites by Hilton
in the extended-stay category.
The continued strong performance of Hilton�s brands has enabled the
company to significantly enhance its development pipeline versus its industry
competitors. In October, Lodging Econometrics noted that for the first
time Hilton had, by a wide margin, more rooms in the active U.S. development
pipeline than any other company.
Hilton Grand Vacations
The company�s vacation ownership business, Hilton Grand Vacations Company
(HGVC), reported third quarter revenue (included in �other fees and income�)
of $94 million, compared to $72 million in the 2002 quarter, an increase
of 31 percent. Third quarter expenses were $71 million, compared with $52
million in the 2002 quarter.
Overall unit sales were up 9 percent over the 2002 period, with strong
sales at the company�s new projects in Las Vegas and Orlando. The first
phase of the Orlando project is on track for sell-out when it opens in
early 2004. The average unit sales price increased 5 percent across the
HGVC system during the quarter.
Margins in the quarter were lower primarily due to a shift in the sales
mix across the company�s various projects. Specifically, the company sold
less (as a percentage of total sales) of its highly profitable Hawaii project
in the 2003 quarter than it did in the prior year quarter. Timeshare profitability
in the quarter was also impacted by the required lease accounting for the
Hilton Club in New York, and the sale of timeshare receivables in 2002.
Corporate Finance
At September 30, 2003, Hilton had total debt of $4.08 billion (net of
$325 million allocated to Park Place Entertainment), a reduction of $22
million during the third quarter. Approximately 23 percent of the company�s
debt is floating rate debt. Cash and equivalents totaled approximately
$115 million at September 30, 2003. The company�s average basic and diluted
share counts for the third quarter were 378 million and 385 million, respectively.
Consolidated net interest expense (interest expense net of interest
and dividend income) declined $3 million in the third quarter due to lower
average debt balances.
Hilton�s debt currently has an average life of 9.5 years, at an average
cost of approximately 6.2 percent. During the third quarter, Hilton completed
a new $1 billion revolving credit facility with a consortium of banks.
The new facility expires August 2008, with pricing remaining at LIBOR+125
basis points. The company noted that with this facility in place, it has
no significant debt maturities until November 2007.
At September 30, 2003, the company had approximately $400 million of
available capacity under its line of credit.
The company�s effective tax rate for the third quarter was approximately
38 percent, versus 8 percent last year. As previously mentioned, the 2002
quarter included a $15.6 million reduction in the provision for income
taxes, due to the utilization of capital loss carryforwards.
Total hotel capital expenditures in the quarter were $44 million, with
an additional $31 million expended for timeshare development.
Nine-Month Results
For the nine-month period ended September 30, 2003, Hilton reported
net income of $97 million, compared to $158 million in the corresponding
2002 period. Diluted net income per share was $.25 versus $.42 in the 2002
period. Operating income for the nine months was $376 million (compared
with $467 million in the 2002 period) based on revenue of $2.86 billion
(versus $2.89 billion in the 2002 period). For the 2003 nine-month period,
when compared to the same period last year, total company Adjusted EBITDA
declined 12 percent to $667 million.
2003 Outlook
The company is seeing what appear to be initial and moderate signs of
improvement in business travel in certain markets, including New York and
Washington, D.C., as well as favorable leisure trends in Hawaii and San
Diego. It noted, however, that other markets�notably San Francisco, Chicago
and Boston�remain challenging for the fourth quarter. Group business overall
is expected to remain relatively weak for the balance of the year. Pricing
power is expected to remain limited for both the group and business transient
segments.
Based on its nine-month results and expectations for the fourth quarter
2003, the company provided the following updated guidance for full year
2003:
Full Year 2003 Estimates
Total revenue
$3.84 billion range
Total operating income $515 million range
Total Adjusted EBITDA $900 million range
Comparable owned hotel RevPAR Decline of 3 - 4%
Diluted earnings per share $.37 range
Total capital spending in 2003 is expected to be in the $350 million
range, with approximately $165 million being spent on routine improvements
and technology, $110 million on timeshare projects, $40 million on hotel
special projects and $35 million at the Hilton Hawaiian Village related
to the mold situation. The company successfully reopened the Kalia Tower
at the Hilton Hawaiian Village to guests in early September 2003.
Hilton remains on track to add approximately 112 hotels and 15,000 rooms
to its system in 2003. Conversions to one of Hilton�s brands are expected
to account for approximately 15 percent of the unit growth. As noted,
the company�s current U.S. development pipeline remains strong with approximately
385 hotels and 52,000 rooms approved and in design, or under construction.
�With travelers taking to the road in significant numbers for vacations
and other leisure activities during the summer months, our properties�including
many of our owned hotels and our midscale franchised properties�ran at
strong occupancy levels,� said Stephen F. Bollenbach, president and chief
executive officer of Hilton Hotels Corporation. �However, we experienced
a continuation of the rate pressure from weakness in groups and business
transient travel that has characterized the industry all year.�
Mr. Bollenbach continued: �We get a sense that we are in the initial
stages of an improved business environment in certain markets, but it may
be a couple of quarters before this improvement is fully realized. Should
economic conditions continue to improve, we believe our owned hotels will
be major beneficiaries from this increased demand and a limited new supply
environment.
�In terms of our franchise business, we now have the most active U.S.
development pipeline in the industry. These brands�supported by our proprietary
technology system, �OnQ,� and the loyalty of 13 million Hilton HHonors
members�continue to strengthen their positions as brands-of-choice for
owners, and hotels-of-choice for travelers.�
Mr. Bollenbach concluded: �As a result of our owned hotel assets, great
brands, supportive owners, investment in technology, solid financial position
and the industry�s most talented people, we are well positioned to benefit
from a more favorable business environment over the coming months.�
|
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months
Ended
September 30
September 30
2002 2003 % Change 2002
2003 % Change
---- ---- -------- ----
---- --------
Revenue
Owned hotels
$502 $487 (3)% $1,555
$1,501 (3)%
Leased hotels
27 28
4 86
79 (8)
Management and
franchise fees 83
87 5
251 255
2
Other fees and
income
88 113 28
280 299
7
----- -----
----- -----
700 715 2
2,172 2,134 (2)
Other revenue
from managed
and franchised
properties
234 249 6
718 730
2
----- -----
----- -----
934 964 3
2,890 2,864 (1)
Expenses
Owned hotels
365 372 2
1,080 1,120
4
Leased hotels
24 25
4 77
72 (6)
Depreciation and
amortization 86
84 (2)
258 249
(3)
Impairment loss
and related costs 10 --
-- 20
17 (15)
Other operating
expenses
71 89 25
223 243
9
Corporate
expense, net
17 19 12
47 57
21
----- -----
----- -----
573 589 3
1,705 1,758
3
Other expenses
from managed
and franchised
properties
234 249 6
718 730
2
----- -----
----- -----
807 838 4
2,423 2,488
3
Operating income 127
126 (1)
467 376 (19)
Interest and
dividend income
9 6 (33)
37 21
(43)
Interest expense
(78) (72) (8)
(252) (224) (11)
Net interest from
unconsolidated
affiliates
(5) (4) (20)
(15) (13) (13)
Net loss on asset
dispositions
(1) -- --
(16) (3) (81)
----- -----
----- -----
Income before taxes
and minority interest 52 56
8 221 157
(29)
Provision for income
taxes
(4) (21) --
(58) (55) (5)
Minority interest, net -- (1)
-- (5) (5)
--
----- -----
----- -----
Net income
$48 $34 (29)%
$158 $97 (39)%
===== =====
===== =====
Net income per share (1)
Basic
$.13 $.09 (31)% $.42
$.26 (38)%
===== =====
===== =====
Diluted
$.13 $.09 (31)% $.42
$.25 (40)%
===== =====
===== =====
Average shares
? basic
376 378 1 %
373 377
1 %
===== =====
===== =====
Average shares
? diluted
402 385 (4)%
400 394
(2)%
===== =====
===== =====
(1) The sum of EPS for the first three quarters
of 2003 differs
from the year to date EPS and
EPS for the nine month period in
2002 differs from the sum of
the six month and third quarter EPS
due to the required method of
computing EPS in the respective
periods.
HILTON HOTELS CORPORATION
U.S. Owned Statistics (1)
Three Months Ended
September 30
%/pt
2002 2003
Change
---- ----
------
Hilton
Occupancy
74.5 % 74.3 % (0.2) pts
Average Rate
$147.82 $144.97 (1.9) %
RevPAR
$110.17 $107.76 (2.2) %
All Other
Occupancy
69.4 % 69.8 % 0.4 pts
Average Rate
$106.84 $106.07 (0.7) %
RevPAR
$74.11 $74.05 (0.1)
%
Total
Occupancy
73.7 % 73.6 % (0.1) pts
Average Rate
$141.59 $139.03 (1.8) %
RevPAR
$104.35 $102.33 (1.9) %
Nine Months Ended
September 30
%/pt
2002 2003
Change
---- ----
------
Hilton
Occupancy
72.9 % 71.8 % (1.1) pts
Average Rate
$154.81 $150.38 (2.9) %
RevPAR
$112.80 $108.01 (4.2) %
All Other
Occupancy
68.1 % 69.1 % 1.0 pts
Average Rate
$108.77 $106.58 (2.0) %
RevPAR
$74.02 $73.64 (0.5)
%
Total
Occupancy
72.1 % 71.4 % (0.7) pts
Average Rate
$147.80 $143.54 (2.9) %
RevPAR
$106.54 $102.47 (3.8) %
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September 30, 2003 and owned
by us since January 1, 2002.
HILTON HOTELS CORPORATION
System-wide Statistics (1)
Three Months Ended
September 30
%/pt
2002 2003
Change
Hilton
---- ----
------
Occupancy
70.4 % 70.5 % 0.1
pts
Average Rate
$122.10 $120.43 (1.4)
%
RevPAR
$85.92 $84.95 (1.1)
%
Hilton Garden Inn
Occupancy
68.8 % 71.4 % 2.6
pts
Average Rate
$95.65 $95.05 (0.6)
%
RevPAR
$65.84 $67.83
3.0 %
Doubletree
Occupancy
68.7 % 67.6 % (1.1) pts
Average Rate
$99.54 $98.59 (1.0)
%
RevPAR
$68.37 $66.68 (2.5)
%
Embassy Suites
Occupancy
71.8 % 72.5 % 0.7
pts
Average Rate
$119.02 $117.68 (1.1)
%
RevPAR
$85.51 $85.34 (0.2)
%
Homewood Suites by Hilton
Occupancy
75.5 % 77.0 % 1.5
pts
Average Rate
$94.87 $93.93 (1.0)
%
RevPAR
$71.63 $72.34
1.0 %
Hampton
Occupancy
71.3 % 71.3 % --
pts
Average Rate
$79.09 $79.85
1.0 %
RevPAR
$56.35 $56.90
1.0 %
Other
Occupancy
63.9 % 68.2 % 4.3
pts
Average Rate
$121.49 $120.15 (1.1)
%
RevPAR
$77.69 $81.93
5.5 %
Nine Months Ended
September 30
%/pt
2002 2003
Change
---- ----
------
Hilton
Occupancy
69.3 % 68.4 % (0.9) pts
Average Rate
$127.26 $124.24 (2.4)
%
RevPAR
$88.15 $84.96 (3.6)
%
Hilton Garden Inn
Occupancy
66.2 % 67.7 % 1.5
pts
Average Rate
$96.16 $94.91 (1.3)
%
RevPAR
$63.70 $64.23
0.8 %
Doubletree
Occupancy
67.4 % 66.0 % (1.4) pts
Average Rate
$102.62 $100.46 (2.1)
%
RevPAR
$69.18 $66.29 (4.2)
%
Embassy Suites
Occupancy
70.6 % 70.6 % --
pts
Average Rate
$121.36 $119.06 (1.9)
%
RevPAR
$85.65 $84.01 (1.9)
%
Homewood Suites by Hilton
Occupancy
74.1 % 74.0 % (0.1) pts
Average Rate
$95.41 $94.23 (1.2)
%
RevPAR
$70.66 $69.70 (1.4)
%
Hampton
Occupancy
68.5 % 67.7 % (0.8) pts
Average Rate
$78.12 $78.53
0.5 %
RevPAR
$53.54 $53.15 (0.7)
%
Other
Occupancy
61.0 % 53.8 % (7.2) pts
Average Rate
$123.42 $125.77 1.9
%
RevPAR
$75.33 $67.61 (10.2)
%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September 30, 2003 and owned,
operated or franchised by us since January 1, 2002.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
September
2002
2003
Number of
Number of
Properties Rooms Properties Rooms
---------- ----- ---------- -----
Hilton
Owned
39 28,981
38 28,434
Leased
1 499
1 499
Joint Venture
5 1,863
7 2,739
Managed
16 10,343
20 11,664
Franchised
170 45,791
163 43,777
--------------- ---------------
231 87,477
229 87,113
Hilton Garden Inn
Owned
1 162
1 162
Joint Venture
2 280
2 280
Managed
-- --
2 251
Franchised
151 20,866
170 23,266
--------------- ---------------
154 21,308
175 23,959
Doubletree
Owned
9 3,156
9 3,156
Leased
6 2,151
6 2,145
Joint Venture
30 8,271
27 8,193
Managed
59 16,552
45 11,696
Franchised
50 11,440
70 16,319
--------------- ---------------
154 41,570
157 41,509
Embassy Suites
Owned
5 1,023
5 1,023
Joint Venture
24 6,581
27 7,279
Managed
61 15,589
57 14,699
Franchised
78 17,776
84 19,300
--------------- ---------------
168 40,969
173 42,301
Homewood Suites by Hilton
Owned
7 905
3 398
Managed
30 3,605
35 4,221
Franchised
80 8,650
91 10,002
--------------- ---------------
117 13,160
129 14,621
Hampton
Owned
1 133
1 133
Managed
26 3,431
24 3,101
Franchised
1,165 118,479 1,225 123,760
--------------- ---------------
1,192 122,043 1,250 126,994
Timeshare
26 3,039
28 3,289
Other
Owned
1 300
1 300
Joint Venture
4 1,598
3 1,393
Managed
11 3,240
11 3,254
Franchised
-- --
1 408
--------------- ---------------
16 5,138
16 5,355
Total
-----
Owned
63 34,660
58 33,606
Leased
7 2,650
7 2,644
Joint Venture
65 18,593
66 19,884
Managed
203 52,760
194 48,886
Timeshare
26 3,039
28 3,289
Franchised
1,694 223,002 1,804 236,832
--------------- ---------------
TOTAL PROPERTIES
2,058 334,704 2,157 345,141
=============== ===============
Change to
September 2002 December 2002
Number of Number
of
Properties Rooms Properties Rooms
---------- ----- ---------- -----
Hilton
Owned
(1) (547)
(1) (551)
Leased
-- --
-- --
Joint Venture
2 876
1 448
Managed
4 1,321
3 1,063
Franchised
(7) (2,014) (5)
(1,557)
--------------- ---------------
(2) (364)
(2) (597)
Hilton Garden Inn
Owned
-- --
-- --
Joint Venture
-- --
-- --
Managed
2 251
2 251
Franchised
19 2,400
12 1,611
--------------- ---------------
21 2,651
14 1,862
Doubletree
Owned
-- --
-- --
Leased
-- (6)
-- (6)
Joint Venture
(3) (78)
(3) (348)
Managed
(14) (4,856) (12)
(4,006)
Franchised
20 4,879
18 4,527
--------------- ---------------
3 (61)
3 167
Embassy Suites
Owned
-- --
-- --
Joint Venture
3 698
3 698
Managed
(4) (890)
(4) (890)
Franchised
6 1,524
5 1,351
--------------- ---------------
5 1,332
4 1,159
Homewood Suites by Hilton
Owned
(4) (507)
(4) (507)
Managed
5 616
5 616
Franchised
11 1,352
7 784
--------------- ---------------
12 1,461
8 893
Hampton
Owned
-- --
-- --
Managed
(2) (330)
(1) (167)
Franchised
60 5,281
45 4,120
--------------- ---------------
58 4,951
44 3,953
Timeshare
2 250
1 172
Other
Owned
-- --
-- --
Joint Venture
(1) (205)
-- (7)
Managed
-- 14
-- 15
Franchised
1 408
1 408
--------------- ---------------
? 217
1 416
Total
Owned
(5) (1,054) (5)
(1,058)
Leased
-- (6)
-- (6)
Joint Venture
1 1,291
1 791
Managed
(9) (3,874) (7)
(3,118)
Timeshare
2 250
1 172
Franchised
110 13,830
83 11,244
--------------- ---------------
TOTAL PROPERTIES
99 10,437
73 8,025
=============== ===============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Ended Nine Months Ended
September 30
September 30
2002 2003 % Change 2002
2003 % Change
---- ---- -------- ----
---- --------
Adjusted EBITDA
$224 $218 (3)% $758
$667 (12)%
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(7) (7) --
(20) (21) 5
Non-recurring items
(1) -- --
(3) (17) --
Pre-opening expense
-- -- --
(1) -- --
Operating interest
and dividend income (3)
(1) (67) (9)
(4) (56)
Net loss on asset
dispositions
(1) -- --
(16) (3) (81)
Minority interest, net --
(1) -- (5)
(5) --
------ ------
------ ------
EBITDA
212 209 (1)
704 617 (12)
Depreciation and
amortization
(86) (84) (2) (258)
(249) (3)
Interest expense, net (74)
(70) (5) (230) (216)
(6)
Provision for
income taxes
(4) (21) --
(58) (55) (5)
------ ------
------ ------
Net income
$48 $34 (29)% $158
$97 (39)%
====== ======
====== ======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Future Performance - Full Year 2003 Outlook
($ in millions, except per share amounts)
Estimated
Full Year
2003
Adjusted EBITDA
$900
Proportionate share of depreciation and
amortization of unconsolidated affiliates
(29)
Non-recurring items
(17)
Operating interest and dividend income
(5)
Net loss on asset dispositions
(3)
Minority interest, net
(6)
EBITDA
840
Depreciation and amortization
(332)
Interest expense, net
(285)
Provision for income taxes
(83)
Net income
$140
Diluted EPS
$.37
NON-GAAP FINANCIAL MEASURES
Regulation G, �Conditions for Use of Non-GAAP Financial
Measures,� prescribes the conditions for use of non-GAAP financial information
in public disclosures. We believe that our presentation of EBITDA and Adjusted
EBITDA, which are non-GAAP financial measures, are important supplemental
measures of operating performance to investors. The following discussion
defines these terms and why we believe they are useful measures of our
performance.
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in our industry which,
when considered with GAAP measures, we believe gives investors a more complete
understanding of operating results before the impact of investing and financing
transactions and income taxes and facilitates comparisons between us and
our competitors. Management has historically adjusted EBITDA when evaluating
operating performance because we believe that the inclusion or exclusion
of certain recurring and non-recurring items described below is necessary
to provide the most accurate measure of our core operating results and
as a means to evaluate period-to-period results. We have chosen to provide
this information to investors to enable them to perform more meaningful
comparisons of past, present and future operating results and as a means
to evaluate the results of core on-going operations. Due to recent
guidance from the Securities and Exchange Commission, we now do not reflect
such items when calculating EBITDA, however, we continue to adjust for
these items and refer to this measure as Adjusted EBITDA. We have historically
reported this measure to our investors and believe that the continued inclusion
of Adjusted EBITDA provides consistency in our financial reporting. We
use Adjusted EBITDA in this press release because we believe it is useful
to investors in allowing greater transparency related to a significant
measure used by management in its financial and operational decision-making.
Adjusted EBITDA is among the more significant factors in management�s internal
evaluation of total company and individual property performance and in
the evaluation of incentive compensation related to property management.
Management also uses Adjusted EBITDA as a measure in determining the value
of acquisitions and dispositions. Adjusted EBITDA is also widely used by
management in the annual budget process. Externally, we believe these measures
continue to be used by investors in their assessment of our operating performance
and the valuation of our company. Adjusted EBITDA for 2003 reflects EBITDA
adjusted for the following items:
--
Gains and Losses on Asset Dispositions and Non-Recurring
Items: We exclude the effect of gains and losses on asset
dispositions and non-recurring items, such as asset
write-downs and impairment losses, from Adjusted EBITDA.
We
believe the inclusion of these items is not consistent
with
reflecting the on-going performance of our assets. Management
believes it is useful to exclude gains and losses on
asset
dispositions as these amounts are not reflective of our
operating performance or the performance of our assets
and the
amount of such items can vary dramatically from period
to
period. The timing of, and selection of, an asset for
disposition is subject to a number of variables that
are
generally unrelated to our on-going operations.
--
Proportionate Share of Depreciation and Amortization
of
Unconsolidated Affiliates: Our consolidated results include
the equity earnings from our unconsolidated affiliates
after
the deduction of our proportionate share of depreciation
and
amortization expense from unconsolidated affiliates.
We
exclude our proportionate share of depreciation and
amortization expense from unconsolidated affiliates from
Adjusted EBITDA to provide a more accurate measure of
our proportionate share of core operating results before investing activities
and to provide consistency with the performance measure we use for our
consolidated properties.
--
Operating Interest and Dividend Income: Interest and
dividend income from investments related to operating activities is included
in our calculation of Adjusted EBITDA. We consider this income, primarily
interest on notes receivable issued to properties we manage or franchise
and dividend income from investments related to the development of our
core businesses, to be a part of our core operating results.
--
Minority Interest, Net: We exclude the minority interest
in
the income or loss of our consolidated joint ventures
because
these amounts effectively include our minority partners�
proportionate share of depreciation, amortization, interest
and taxes, which are excluded from EBITDA.
Prior to January 1, 2003, we also adjusted EBITDA for
pre-opening expense, which we no longer exclude, and adjusted only the
non-cash portion of non-recurring items.
Limitations on the Use of Non-GAAP Measures
The use of EBITDA and Adjusted EBITDA has certain limitations.
Our presentation of EBITDA and Adjusted EBITDA may be different from the
presentation used by other companies and therefore comparability may be
limited. Depreciation expense for various long-term assets, interest expense,
income taxes and other items have been and will be incurred and are not
reflected in the presentation of EBITDA or Adjusted EBITDA. Each of these
items should also be considered in the overall evaluation of our results.
Additionally, EBITDA and Adjusted EBITDA do not consider capital expenditures
and other investing activities and should not be considered as a measure
of our liquidity. We compensate for these limitations by providing
the relevant disclosure of our depreciation, interest and income tax expense,
capital expenditures and other items both in our reconciliations to the
GAAP financial measures and in our consolidated financial statements, all
of which should be considered when evaluating our performance.
EBITDA and Adjusted EBITDA are used in addition to and
in conjunction with results presented in accordance with GAAP. EBITDA and
Adjusted EBITDA should not be considered as an alternative to net income,
operating income, or any other operating performance measure prescribed
by GAAP, nor should these measures be relied upon to the exclusion of GAAP
financial measures. EBITDA and Adjusted EBITDA reflect additional ways
of viewing our operations that, when viewed with our GAAP results and the
reconciliations to the corresponding GAAP financial measures, we believe
provide a more complete understanding of factors and trends affecting our
business than could be obtained absent this disclosure. Management strongly
encourages investors to review our financial information in its entirety
and not to rely on a single financial measure. |
Note: This press release contains �forward-looking statements� within
the meaning of federal securities law, including statements concerning
business strategies and their intended results, and similar statements
concerning anticipated future events and expectations that are not historical
facts.
|
