Hotel Online  Special Report


advertisements

.

Hilton Reports 1st Qtr Net Income of $37 million,
Nearly 4 Times Higher than a Year Ago; 
Timeshare Income up 45%
Hotel Operating Statistics

 
  • Comparable owned hotel RevPAR increases 2.9%
  • Fees increase 11% from RevPAR growth across all brands, unit growth
  • Timeshare revenue increases 45%
  • Strong performance results in diluted EPS of $.10
BEVERLY HILLS, Calif. - April 28, 2004 - Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the first quarter ended March 31, 2004. Contributing to strong quarterly results were significant increases in the company's management/franchise fee and timeshare businesses, along with strong revenue per available room (RevPAR) gains at the company's comparable owned hotels and each of the company's brands.
    
The company reported first quarter 2004 net income of $37 million, versus $9 million in the 2003 quarter. Diluted net income per share was $.10 in the first quarter, compared with $.02 in the 2003 period. The 2004 quarter was impacted by the following non-recurring items, which combined to benefit the quarter by less than $.01 per share: 1) $4 million of pre-tax losses on asset dispositions; 2) a $3 million pre-tax increase to interest income related to interest received on a favorable settlement of a prior year Federal income tax matter; and 3) a $2.5 million benefit to the tax provision from the utilization of tax loss carryforwards.
    
The 2003 quarter included two non-recurring items (a charge related to the impairment of certain public company equity securities held by the company and a benefit from utilization of tax loss carryforwards) that combined to adversely impact that quarter by approximately $.02 per share.
    
The 2004 first quarter also reflects the implementation of Financial Accounting Standards Board Interpretation No. 46 (FIN 46), which resulted in the consolidation of a previously unconsolidated managed hotel. The implementation of FIN 46 resulted in an increase in other revenue and expenses from managed and franchised properties and certain other expenses in the 2004 period. However, it had no impact on reported net income or net income per share.
    
Hilton reported 2004 first quarter total company operating income of $131 million (a 52 percent increase from $86 million in the 2003 period) on total revenue of $994 million (an increase of 9 percent from $909 million in the 2003 quarter.) Total company earnings before interest, taxes, depreciation, amortization and non-recurring items ("Adjusted EBITDA") were $219 million in the 2004 quarter, compared with $197 million in the 2003 period, an increase of 11 percent. Adjusting for the impact of owned hotel sales since the first quarter of 2003, the aforementioned non-recurring items in 2003 and the implementation of FIN 46, revenue, operating income and Adjusted EBITDA increased 11 percent, 31 percent and 15 percent, respectively.
    
Owned Hotel Results
    
Hilton's owned hotels showed both occupancy and average daily rate (ADR) increases during the quarter as a result of continued improvement in business transient and group travel. In addition, many of the company's owned hotels in U.S. gateway cities benefited from increased demand from international visitors (primarily from Europe due to the weak dollar), while resort and leisure destinations benefited from continuing strong leisure demand.
    
Company-owned hotels in New York, the Washington, D.C. area, Hawaii and Phoenix posted particularly strong results in the quarter. San Francisco, while improving, remains a generally soft market. As anticipated, the company's owned hotels in Chicago posted weak results in the quarter owing to a reduction in the number of citywide conventions in the market compared to 2003.
    
Across all brands, revenues from the company's owned hotels (majority owned and controlled hotels) in the first quarter were essentially flat with the 2003 period at $482 million, due primarily to property sales. Total revenues from comparable owned properties were up approximately 6 percent in the quarter. RevPAR from comparable owned hotels increased 2.9 percent in the quarter (in spite of weakness in Chicago which adversely impacted RevPAR growth by two points), with occupancy increasing 1.6 points to 68.3 percent and ADR increasing 0.6 percent to $146.65. Group room nights (up more than 3 percent) and revenues from food-and-beverage were both strong in the quarter.
    
Total owned hotel expenses in the first quarter were essentially flat with the year-ago period at $371 million, again as a result of property sales. Expenses at the comparable owned hotels increased approximately 5 percent in the quarter, due primarily to the increase in occupied rooms.
    
Excluding the impact of property sales on owned hotel revenues and expenses, owned hotel margins in the 2004 first quarter, when compared to the 2003 quarter, improved 50 basis points to 23 percent.
    
System-wide RevPAR; Management/Franchise Fees
    
Improved business trends, particularly in business transient travel, along with continued strong leisure demand and favorable year-over-year comparisons, enabled all of Hilton's brands to report significant RevPAR increases in the first quarter, contributing to an exceptionally strong quarter for the company's fee-based business. Systemwide RevPAR growth at the company's brands (including franchise properties) was as follows: Hilton Garden Inn, 10.7 percent; Homewood Suites by Hilton, 7.1 percent; Doubletree, 6.7 percent; Hilton, 6.2 percent; Hampton Inn, 6.0 percent; and Embassy Suites, 4.5 percent.
    
Management and franchise fees for the quarter totaled $89 million, an 11 percent increase from $80 million in the 2003 period. The aforementioned RevPAR increases accounted for approximately half of the fee increase, with the addition of new units accounting for the other half.
    
Brand Development/Unit Growth
    
RevPAR index figures (year-to-date February 2004 as measured by Smith Travel Research) show continued and significant occupancy and rate premiums for the following Hilton brands: Embassy Suites, 123.9; Homewood Suites by Hilton, 122.3; Hampton Inn, 118.9; Hilton Garden Inn, 118.0; and Hilton, 109.8. Doubletree's RevPAR index for the period was 97.7.
    
In the first quarter 2004, the company added 27 properties and 3,238 rooms to its system as follows: Hampton Inn, 14 hotels and 1,196 rooms; Hilton Garden Inn, 8 hotels and 1,206 rooms; Homewood Suites by Hilton, 2 hotels and 185 rooms; Doubletree, 1 hotel and 290 rooms; Conrad, 1 hotel and 313 rooms; and Hilton Grand Vacations, 1 property and 48 units. Fifteen hotels and 2,852 rooms were removed from the system during the quarter due primarily to product quality issues. At March 31, 2004, the Hilton system consisted of 2,185 properties and 348,869 rooms.
    
The company had approximately 400 hotels and 55,000 rooms in its development pipeline at March 31, 2004. Hilton has more hotel rooms under construction in the U.S. than any other company, according to data from Smith Travel Research.
    
Brand development activity in the first quarter and April 2004 included the opening of the new 450-room Hilton Omaha at the Omaha Convention Center. In January, the company introduced "Make It Hampton," an innovative brand transformation program that will bring a wide range of new products and services to the 1,260-unit Hampton Inn system by 2005.
    
Also during the quarter, Hampton Inn and Hilton Garden Inn opened their 15th and sixth hotels, respectively, in Canada, while Embassy Suites announced development of its first hotel in Mexico, scheduled to open in Mexico City in early 2005. The company also announced development of a new 387-room Hilton and 79-suite Homewood Suites by Hilton hotel at the new Buffalo Thunder Resort near Santa Fe, New Mexico. Conrad Hotels opened its newest property in Bali and signed an agreement to manage a new Conrad on the Las Vegas Strip; the first freestanding Conrad Hotel in North America, located in Miami, is scheduled to open in summer 2004. Additionally, a survey of customers by Business Travel News named Homewood Suites by Hilton the #1 upper upscale extended-stay brand.
    
Hilton Grand Vacations
    
Continuing a string of strong performances, the company's vacation ownership business, Hilton Grand Vacations Company (HGVC), posted another exceptional quarter, reporting first quarter revenue of $109 million, an increase of 45 percent from $75 million in the 2003 period. First quarter expenses were $82 million in the 2004 quarter compared with $56 million in the 2003 period. Overall unit sales in the quarter were up 29 percent, while the average unit sales price increased 2 percent.
    
HGVC results were strong across the system, with particularly robust sales at its new properties in Orlando and Las Vegas. The first phase of 96 units at the Orlando property (the company's second timeshare development in that market) is virtually sold out, and in Las Vegas, the first phase of 283 units at HGVC's new property on the Las Vegas Strip (its third development in Las Vegas) is exceeding original expectations in terms of unit sales and profitability. Hilton recently announced it would begin development of the second phase (a 38-story, 431-unit tower) of the Las Vegas Strip property by year-end 2004, with occupancy expected in summer 2006. Upon opening of Phase II, approximately half of the planned four-tower, 1,577-unit project will have been completed.
    
Distribution/Technology
    
During the first quarter, Hilton reported significant increases in both call volume and gross reservations, confirming the improving demand trends the company has experienced since the third quarter 2003. Year-to-date March 31, call volume through Hilton's call centers was up 10 percent (up 17 percent in March alone) over the 2003 period, while gross reservations through Hilton Reservations Worldwide, the Global Distribution System and all Internet sources increased 16 percent (up 24 percent in March alone.)
    
Reservations made via Hilton's proprietary brand websites continue to grow at a rapid pace. In February 2004, the company reported record-breaking gross online reservations and revenue from bookings on its brand websites; such reservations increased 34 percent over February 2003, while expected revenue from such bookings increased 41 percent. For the month, 83 percent of all online room nights came directly through the company's own brand websites. Online reservations (from all sources) account for roughly 13 percent of Hilton's total bookings.
    
During the quarter the company successfully tested self-service check-in kiosks at the Hilton New York and Hilton Chicago. Based on enthusiastic customer response on ease-of-use and time-saving, the company in 2004 will be placing kiosks at the majority of its owned hotels and several of its larger managed properties.
    
Corporate Finance
    
At March 31, 2004, Hilton had total debt of $3.7 billion (net of $325 million allocated to Caesars Entertainment, Inc. and $100 million of debt resulting from the consolidation of a managed hotel upon the implementation of FIN 46, which is non-recourse to Hilton.) This represents a reduction of $100 million during the first quarter. Approximately 15 percent of the company's debt is floating rate debt. Cash and equivalents totaled approximately $144 million at March 31, 2004. The company's average basic and diluted share counts for the first quarter were 381 million and 389 million, respectively.
    
Consolidated net interest expense (interest expense net of interest and dividend income) declined $8 million in the first quarter due to lower average debt balances and the aforementioned benefit to interest income due to the settlement of a prior year Federal tax matter.
    
Hilton's debt currently has an average life of 9.5 years, at an average cost of approximately 6.6 percent.
    
At March 31, 2004, the company had approximately $770 million of available capacity under its line of credit.
    
The company's effective tax rate in the first quarter was 34 percent. During the quarter, the company's provision for income tax benefited from the utilization of tax loss carryforwards ($2.5 million) as a result of the sale of the Doubletree La Posada. Excluding this benefit, the company's effective tax rate was 38.5 percent.
    
Total hotel capital expenditures in the quarter were $28 million, with an additional $9 million expended for timeshare development.
    
Revised 2004 Outlook
    
The company provided a revised and more optimistic outlook for 2004 based on its strong first quarter results, along with the following factors: a continued strengthening of the U.S. economy; steady improvement in business transient and group travel expected to result in increased pricing power; an increase in international visitors from Europe to such U.S. gateway destinations as New York and Washington, D.C.; and an anticipated strong summer travel season. Strong leisure travel is expected to benefit such markets as San Diego, Santa Barbara and Hawaii, while Boston and New York will benefit this summer from the two political conventions. Hawaii continues to experience robust visitation from the U.S. mainland, and is seeing improvement in travel from Japan.
    
Hilton provided the following updated guidance for full-year 2004:
  • Total revenue: $4.155 billion range
  • Total Adjusted EBITDA: $990 million range
  • Total operating income: $635 million range
  • Comparable owned hotel RevPAR: Increase of 5 - 7%
  • Diluted earnings per share: Low to mid $.50 range
 
Total capital spending in 2004 remains on track with previous guidance, approximately $275 million, broken out as follows: approximately $155 million for routine improvements and technology, $60 million for timeshare projects and $60 million for hotel special projects.
    
Unit growth for 2004 continues to anticipate 115-130 hotels and 15,000-17,000 rooms added to the Hilton system.
    
"The positive trends that we began seeing in the fourth quarter last year gained strength as we entered 2004, resulting not only in a very strong first quarter but confirming our belief that the turnaround in the lodging business is firmly underway," said Stephen F. Bollenbach, president and chief executive officer of Hilton Hotels Corporation. "All facets of our business performed extremely well, and the indicators we are currently seeing -- such as the significant increases in call and reservations volume, improved group business and a steady decline in full-service supply growth -- bode well certainly for the remainder of this year and, we believe, for future years.
    
"Achieving a more desirable mix of business as a result of increased business and group travel should enable us to command greater pricing power in 2004 than at any time in the last four years; this year, for the first time since 2000, we expect that about half of our owned hotel RevPAR growth will come from room rate increases.  Along with our continuing focus on cost management, this will help us grow our margins."
    
Mr. Bollenbach continued: "We are particularly excited about the performance of our fee-based and timeshare businesses, both of which have shown consistently outstanding results over the last several quarters. Hotel owners continue to prefer Hilton brands due to the RevPAR premiums these brands command, as well as for innovative programs such as `Make It Hampton', and our OnQ technology platform.
    
Mr. Bollenbach concluded: "Travelers are taking to the road in ever-increasing numbers, a strong summer travel season is just around the corner and the long-awaited industry recovery is on track. We are enthusiastic about the outlook for our industry and our company, and confident in our ability to leverage our owned asset base, Family of Brands, distribution capabilities and technology leadership position to take full advantage of this upswing and grow our company for our shareholders."
 
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
                                              Three Months Ended
                                                   March 31,
                                          2003       2004     % Change
                                        ---------- ---------- ---------
 Revenue
  Owned hotels                               $483       $482         -%
  Leased hotels                                24         26         8
  Management and franchise fees                80         89        11
  Timeshare and other income                   83        120        45
                                        ---------- ----------
                                              670        717         7
  Other revenue from managed and
   franchised properties                      239        277        16
                                        ---------- ----------
                                              909        994         9
 Expenses
  Owned hotels                                372        371         -
  Leased hotels                                23         25         9
  Depreciation and amortization                86         83        (3)
  Impairment loss and related costs            17          -         -
  Other operating expenses                     75        101        35
  Corporate expense, net                       19         19         -
                                        ---------- ----------
                                              592        599         1
  Other expenses from managed and
   franchised properties                      239        274        15
                                        ---------- ----------
                                              831        873         5
 Operating income from
  unconsolidated affiliates                     8         10        25
                                        ---------- ----------
 
 Operating income                              86        131        52
 
 Interest and dividend income                   7         10        43
 Interest expense                             (75)       (70)       (7)
 Net interest from unconsolidated
  affiliates and non-controlled
  interests                                    (5)        (6)       20
 Net loss on asset dispositions                (1)        (4)      300
                                        ---------- ----------
 Income before taxes and minority
  and non-controlled interests                 12         61       408
 Provision for income taxes                    (1)       (21)        -
 Minority and non-controlled
  interests, net                               (2)        (3)       50
                                        ---------- ----------
 Net income                                    $9        $37       311%
                                        ========== ==========
 
 Net income per share
 Basic                                       $.02       $.10       400%
                                        ========== ==========
 Diluted                                     $.02       $.10       400%
                                        ========== ==========
 
 Average shares - basic                       377        381         1%
                                        ========== ==========
 Average shares - diluted                     403        389       (3)%
                                        ========== ==========
 
  Results in the 2004 first quarter reflect the implementation,
  effective January 1, 2004, of Financial Accounting Standards Board
  Interpretation No. 46, revised December 2003 (FIN 46), "Consolidation
  of Variable Interest Entities."  FIN 46 requires that a variable
  interest entity (VIE), as defined, be consolidated by the company
  that is subject to the majority of the risk of loss from the VIE's
  activities, or is entitled to receive a majority of the entity's
  residual returns, or both.  We identified one management contract,
  which due to the terms of an existing performance guarantee,
  qualifies as a VIE and of which we are the primary beneficiary.  As a
  result, this previously unconsolidated managed hotel has been
  consolidated as of January 1, 2004.  The revenue and operating
  expenses of this property are included in other revenue and expenses
  from managed and franchised properties in the accompanying financial
  highlights.  Implementation of FIN 46 had no impact on reported net
  income, net income per share or Adjusted EBITDA.
 
                       HILTON HOTELS CORPORATION
                       U.S. Owned Statistics (1)
                                              Three Months Ended
                                                  March 31,
                                         2003      2004    %/pt Change
                                       --------- --------- ------------
 Hilton
  Occupancy                                66.8%     68.6%      1.8 pts
  Average Rate                          $152.96   $153.32          0.2%
  RevPAR                                $102.13   $105.22          3.0%
 
 All Other
  Occupancy                                66.6%     66.3%    (0.3) pts
  Average Rate                          $104.81   $106.90          2.0%
  RevPAR                                 $69.77    $70.91          1.6%
 
 Total
  Occupancy                                66.7%     68.3%      1.6 pts
  Average Rate                          $145.79   $146.65          0.6%
  RevPAR                                 $97.30   $100.15          2.9%
 
 (1) Statistics are for comparable hotels, and include only those
     hotels in the system as of March 31, 2004, and owned by us since 
     January 1, 2003.
 
                       HILTON HOTELS CORPORATION
                       Systemwide Statistics (1)
                                               Three Months Ended
                                                   March 31,
                                            2003     2004  %/pt Change
                                         -------- -------- ------------
 Hilton
  Occupancy                                 64.0%    67.0%      3.0 pts
  Average Rate                           $127.42  $129.31          1.5%
  RevPAR                                  $81.56   $86.60          6.2%
 
 Hilton Garden Inn
  Occupancy                                 61.1%    66.5%      5.4 pts
  Average Rate                            $95.30   $96.85          1.6%
  RevPAR                                  $58.19   $64.43         10.7%
 
 Doubletree
  Occupancy                                 62.8%    66.6%      3.8 pts
  Average Rate                           $102.73  $103.32          0.6%
  RevPAR                                  $64.46   $68.78          6.7%
 
 Embassy Suites
  Occupancy                                 67.5%    70.0%      2.5 pts
  Average Rate                           $122.00  $122.84          0.7%
  RevPAR                                  $82.33   $86.03          4.5%
 
 Homewood Suites by Hilton
  Occupancy                                 66.6%    70.5%      3.9 pts
  Average Rate                            $95.10   $96.38          1.3%
  RevPAR                                  $63.37   $67.90          7.1%
 
 Hampton
  Occupancy                                 61.0%    63.2%      2.2 pts
  Average Rate                            $77.74   $79.54          2.3%
  RevPAR                                  $47.43   $50.26          6.0%
 
 Other
  Occupancy                                 52.8%    64.5%     11.7 pts
  Average Rate                           $117.94  $120.29          2.0%
  RevPAR                                  $62.25   $77.53         24.5%
 
 (1) Statistics are for comparable hotels, and include only those 
     hotels in the system as of March 31, 2004, and owned, operated or
     franchised by us since January 1, 2003.
 
                       HILTON HOTELS CORPORATION
                 Supplementary Statistical Information
                                                March
                                     2003                 2004
 
                                    Number of            Number of
                               Properties   Rooms   Properties   Rooms
                              ----------- -------------------- --------
 Hilton
  Owned                               38   28,568          36   27,492
  Leased                               1      499           1      499
  Joint Venture                        7    2,737          10    4,177
  Managed                             17   10,601          24   13,750
  Franchised                         168   45,213         158   42,361
                              ----------- -------- ----------- --------
                                     231   87,618         229   88,279
 Hilton Garden Inn
  Owned                                1      162           1      162
  Joint Venture                        2      280           2      280
  Managed                              -        -           3      391
  Franchised                         160   21,941         185   25,383
                              ----------- -------- ----------- --------
                                     163   22,383         191   26,216
 Doubletree
  Owned                                9    3,156           8    2,894
  Leased                               6    2,151           6    2,144
  Joint Venture                       30    8,868          25    7,427
  Managed                             57   15,375          38   10,035
  Franchised                          52   11,787          73   17,020
                              ----------- -------- ----------- --------
                                     154   41,337         150   39,520
 Embassy Suites
  Owned                                5    1,023           4      881
  Joint Venture                       27    7,279          27    7,279
  Managed                             57   14,699          54   14,136
  Franchised                          82   18,540          89   20,257
                              ----------- -------- ----------- --------
                                     171   41,541         174   42,553
 Homewood Suites by Hilton
  Owned                                3      398           3      398
  Managed                             34    4,135          36    4,304
  Franchised                          85    9,302          93   10,243
                              ----------- -------- ----------- --------
                                     122   13,835         132   14,945
 Hampton
  Owned                                1      133           1      133
  Managed                             23    3,018          35    4,461
  Franchised                       1,198  121,502       1,225  123,409
                              ----------- -------- ----------- --------
                                   1,222  124,653       1,261  128,003
 
 Timeshare                            28    3,289          31    3,692
 
 Other
  Owned                                1      300           1      300
  Joint Venture                        3    1,392           3    1,394
  Managed                             12    3,639          12    3,559
  Franchised                           -        -           1      408
                              ----------- -------- ----------- --------
                                      16    5,331          17    5,661
 Total
  Owned                               58   33,740          54   32,260
  Leased                               7    2,650           7    2,643
  Joint Venture                       69   20,556          67   20,557
  Managed                            200   51,467         202   50,636
  Timeshare                           28    3,289          31    3,692
  Franchised                       1,745  228,285       1,824  239,081
                              ----------- -------------------- --------
 
 TOTAL PROPERTIES                  2,107  339,987       2,185  348,869
                              =========== ==================== ========
 
 
                                               Change to
                                    March 2003         December 2003
 
                                     Number of           Number of
                                 Properties  Rooms   Properties  Rooms
                                ----------- ------- ----------- -------
 Hilton
  Owned                                 (2) (1,076)          -      (4)
  Leased                                 -       -           -       -
  Joint Venture                          3   1,440           -       -
  Managed                                7   3,149           -    (353)
  Franchised                           (10) (2,852)         (1)   (376)
                                ----------- ------- ----------- -------
                                        (2)    661          (1)   (733)
 Hilton Garden Inn
  Owned                                  -       -           -       -
  Joint Venture                          -       -           -       -
  Managed                                3     391           -       -
  Franchised                            25   3,442           8   1,206
                                ----------- ------- ----------- -------
                                        28   3,833           8   1,206
 Doubletree
  Owned                                 (1)   (262)         (1)   (262)
  Leased                                 -      (7)          -       -
  Joint Venture                         (5) (1,441)          -       -
  Managed                              (19) (5,340)         (6) (1,550)
  Franchised                            21   5,233           2     718
                                ----------- ------- ----------- -------
                                        (4) (1,817)         (5) (1,094)
 Embassy Suites
  Owned                                 (1)   (142)          -       -
  Joint Venture                          -       -           -       -
  Managed                               (3)   (563)          -       -
  Franchised                             7   1,717           -       -
                                ----------- ------- ----------- -------
                                         3   1,012           -       -
 Homewood Suites by Hilton
  Owned                                  -       -           -       -
  Managed                                2     169           -       -
  Franchised                             8     941           2     185
                                ----------- ------- ----------- -------
                                        10   1,110           2     185
 Hampton
  Owned                                  -       -           -       -
  Managed                               12   1,443           1     138
  Franchised                            27   1,907           5     322
                                ----------- ------- ----------- -------
                                        39   3,350           6     460
 
 Timeshare                               3     403           1      48
 
 Other
  Owned                                  -       -           -       -
  Joint Venture                          -       2           -       1
  Managed                                -     (80)          1     313
  Franchised                             1     408           -       -
                                ----------- ------- ----------- -------
                                         1     330           1     314
 Total
  Owned                                 (4) (1,480)         (1)   (266)
  Leased                                 -      (7)          -       -
  Joint Venture                         (2)      1           -       1
  Managed                                2    (831)         (4) (1,452)
  Timeshare                              3     403           1      48
  Franchised                            79  10,796          16   2,055
                                ----------- ------- ----------- -------
 
 TOTAL PROPERTIES                       78   8,882          12     386
                                =========== ======= =========== =======
 
 
                       HILTON HOTELS CORPORATION
             Supplemental Financial Information (Unaudited)
       Reconciliation of Adjusted EBITDA to EBITDA and Net Income
                            Historical Data
                            ($ in millions)
 
                                             Three Months Ended
                                                  March 31,
                                         2003        2004     % Change
                                      ----------- ----------- ---------
 
 Adjusted EBITDA                            $197        $219        11%
  Proportionate share of
   depreciation and amortization
   of unconsolidated affiliates               (7)         (7)        -
  Non-recurring items                        (17)          -         -
  Operating interest and dividend
   income                                     (1)         (1)        -
  Operating income from non-
   controlled interests                        -           3         -
  Net loss on asset dispositions              (1)         (4)      300
  Minority and non-controlled
   interests, net                             (2)         (3)       50
                                      ----------- -----------
 EBITDA                                      169         207        22
  Depreciation and amortization              (86)        (83)       (3)
  Interest expense, net                      (73)        (66)      (10)
  Provision for income taxes                  (1)        (21)        -
                                      ----------- -----------
 Net income                                   $9         $37       311%
                                      =========== ===========
 
 
                       HILTON HOTELS CORPORATION
             Supplemental Financial Information (Unaudited)
       Reconciliation of Adjusted EBITDA to EBITDA and Net Income
              Future Performance - Full Year 2004 Outlook
               ($ in millions, except per share amounts)
 
                                                              Estimated
                                                              Full Year
                                                                 2004
 
 Adjusted EBITDA                                                  $990
  Proportionate share of depreciation and amortization of
   unconsolidated affiliates                                       (30)
  Operating interest and dividend income                            (3)
  Operating income from non-controlled interests                     8
  Net loss on asset dispositions                                    (4)
  Minority and non-controlled interests, net                        (9)
 EBITDA                                                            952
  Depreciation and amortization                                   (332)
  Interest expense, net                                           (280)
  Provision for income taxes                                      (132)
 Net income                                                       $208
 
 Diluted EPS                                                      $.53
 
 
                       HILTON HOTELS CORPORATION
             Supplemental Financial Information (Unaudited)
                    Owned Hotel Revenue and Expenses
                        Adjusted for Asset Sales
                            ($ in millions)
 
                                             Three Months Ended
                                                 March 31,
                                        2003         2004     % Change
                                     ------------ ----------- ---------
 
 Revenue - owned hotels                     $483        $482
 Less sold hotels                            (30)         (3)
                                     ------------ -----------
 Revenue - comparable owned hotels          $453        $479         6%
                                     ============ ===========
 
 Expenses - owned hotels                    $372        $371
 Less sold hotels                            (21)         (2)
                                     ------------ -----------
 Expenses - comparable owned hotels         $351        $369         5%
                                     ============ ===========
 
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 we believe, when considered with measures calculated in
accordance with United States Generally Accepted Accounting Principles
(GAAP), 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. We do not reflect such items when calculating
EBITDA; however, we 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 2004
reflects EBITDA adjusted for the following items:
 

    -- Gains and Losses on Asset Dispositions and Non-Recurring

    Items
 

    We exclude from Adjusted EBITDA the effect of gains and
    losses on asset dispositions and non-recurring items, such
    as asset write-downs and impairment losses. 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 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.
 

    -- Non-Controlled Interest
 
 

    The consolidation of non-controlled interests in accordance
    with Financial Accounting Standards Board Interpretation No.
    46 (FIN 46) resulted in an increase in certain revenue and
    expenses in the 2004 period, however, it had no net impact
    to our consolidated net income. We exclude from Adjusted
    EBITDA the corresponding amounts of operating income, net
    interest expense, tax provision and non-controlled interest
    reported on our income statement to the extent these amounts
    belong to other ownership interests. These exclusions are
    shown in their respective lines on the Reconciliation of
    Adjusted EBITDA to EBITDA and Net Income.
 

    -- 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.
 

    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 we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, 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.

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. 


 
Contact:
Hilton Hotels Corporation
Marc Grossman
310-205-4030
marc_grossman@hilton.com

 
Also See: Hilton Reports Solid Occupancy Levels for 4th Quarter; For the Full Year 2003 Net Income Down 17% to $164 million from $198 million a Year Earlier / Hotel Operating Statistics / January 2004


To search Hotel Online data base of News and Trends Go to Hotel.Online Search

Home | Welcome! | Hospitality News | Classifieds | Catalogs & Pricing | Viewpoint Forum | Ideas/Trends
Please contact Hotel.Online with your comments and suggestions.