-
Comparable owned hotel RevPAR increases 8.3%, margins 30.5%
-
Fees increase 10% from RevPAR growth, new units
-
Timeshare revenue up 24%
-
Diluted EPS increases 36% to $.19
BEVERLY HILLS, Calif. - July 28, 2004 -- Hilton Hotels Corporation (NYSE:HLT):
today reported financial results for the second quarter and six months
ended June 30, 2004, with the quarter's results highlighted by strong revenue
per available room (RevPAR) growth at its comparable owned hotels, a significant
increase in fee income and continued strong brand performance, another
outstanding quarter in its vacation ownership business, and significant
margin gains.
The company reported second quarter 2004 net income of $75 million,
a 39 percent increase from $54 million in the 2003 period. Diluted net
income per share was $.19 in the second quarter, compared with $.14 in
the 2003 quarter, a 36 percent increase. The 2004 second quarter was impacted
by the following non-recurring items, which combined to benefit the quarter
by approximately $.01 per share: 1) a $3 million pre-tax gain on asset
dispositions, 2) a $2 million pre-tax note receivable reserve, and 3) a
$5 million benefit to the tax provision from the utilization of tax loss
carryforwards.
Hilton reported second quarter total operating income of $188 million
(a 15 percent increase from $164 million in the 2003 period) on total revenue
of $1.065 billion (a 9 percent increase from $976 million in the 2003 quarter).
Total company earnings before interest, taxes, depreciation, amortization,
and non-recurring items ("Adjusted EBITDA") were $278 million, compared
with $252 million in the 2003 period, an increase of 10 percent. Adjusting
for the impact of owned hotel sales since the first quarter of 2003 and
the consolidation of a previously unconsolidated managed property in the
2004 first quarter, revenue, operating income, and Adjusted EBITDA increased
11 percent, 16 percent, and 13 percent, respectively.
Owned Hotel Results
Continued strong business transient trends, improvement in group travel,
and the start of a strong summer travel season combined to bring significant
occupancy and/or rate increases to most of the company's major owned hotels
in both business and leisure destinations.
Particularly good results were posted by company-owned hotels in New
York City, the Washington, D.C. area, Hawaii, New Orleans, Boston, Phoenix,
and San Diego. Occupancy levels at or near 90 percent, with significant
rate increases as well, were achieved in New York and Boston. San Francisco
continues to show improvement, while Chicago -- owing to a comparative
lack of citywide conventions -- remains a challenging market for 2004.
Across all brands, revenue from the company's owned hotels (majority
owned and controlled hotels) were $546 million, a 3 percent increase from
$531 million in the 2003 period. The impact of property sales limited the
revenue growth. Total revenue from comparable owned properties was up 8
percent in the quarter. RevPAR from comparable owned hotels increased 8.3
percent, in spite of the aforementioned softness in Chicago, which adversely
impacted RevPAR growth by 2.3 points. Comparable owned hotel occupancy
increased 3.3 points in the quarter to 76.7 percent, while average daily
rate (ADR) increased 3.6 percent to $153.00. Continued improvement in the
mix of business enabled second quarter RevPAR growth to be more ADR-driven
than in previous periods.
Total owned hotel expenses in the second quarter were up marginally
at $380 million (a 1 percent increase), reflecting the previously mentioned
property sales. Expenses at the comparable owned hotels increased 6 percent
in the quarter, primarily due to an increase in occupied rooms.
Excluding the impact of property sales on owned hotel revenue and expenses,
owned hotel margins in the 2004 second quarter, when compared to the 2003
period, improved 140 basis points to 30.5 percent. Margin improvement resulted
from a combination of the aforementioned ADR increase, an increase in food-and-beverage
revenue resulting from more group room nights, and cost-per-occupied room
that was approximately flat with the 2003 quarter.
Systemwide RevPAR; Management/Franchise Fees
The improved business trends that benefited the company's owned hotels
in the second quarter, combined with favorable year-over-year comparisons,
resulted in each of Hilton's brands reporting significant RevPAR increases
in the quarter. Systemwide RevPAR growth at the company's brands (including
franchise properties) was as follows: Hilton Garden Inn, 9.6 percent; Hilton,
9.5 percent; Doubletree, 8.5 percent; Embassy Suites, 6.9 percent; Hampton
Inn, 6.0 percent; and Homewood Suites by Hilton, 5.9 percent.
These RevPAR gains (which accounted for approximately half of the company's
fee growth in the quarter) and the addition of new units (which accounted
for the other half) enabled the company to show a 10 percent increase in
management and franchise fees in the quarter to $97 million.
RevPAR index figures (year-to-date May 2004 as measured by Smith Travel
Research) show continued and significant occupancy and rate premiums for
the following Hilton brands: Embassy Suites, 123.3; Homewood Suites by
Hilton, 119.0; Hampton Inn, 117.9; Hilton Garden Inn, 116.1; and Hilton,
108.8. Doubletree's RevPAR index was 98.9.
Brand Development/Unit Growth
In the second quarter 2004, the company added 38 properties and 4,938
rooms to its system as follows: Hampton Inn, 21 hotels and 1,815 rooms;
Hilton Garden Inn, 9 hotels and 1,183 rooms; Homewood Suites by Hilton,
4 hotels and 374 rooms; Doubletree, 3 hotels and 1,116 rooms; and Hilton,
1 property and 450 rooms.
Seven hotels and 922 rooms were removed from the system during the quarter.
At June 30, 2004, the Hilton system consisted of 2,216 properties and 352,885
rooms. The company had more than 425 hotels and approximately 58,000 rooms
in its development pipeline at June 30, 2004.
Development highlights during the quarter and early July included the
conversion to the Hilton brand of a 332-room full-service hotel in Indianapolis,
scheduled for mid-August; the beginning of renovation of six Doubletree
properties recently acquired by USAA Real Estate Co. in suburban Kansas
City, Houston, Anaheim, St. Louis, and Tulsa; the opening of Doubletree's
first hotel in Canada, at Niagara Falls; and a new-build Doubletree in
Bay City, Mich. (outside Detroit); groundbreaking for the first Homewood
Suites by Hilton hotel in Canada, in Toronto; the opening of the Conrad
Miami, the first freestanding Conrad Hotel in North America; and the signing
of a management contract for a new Conrad Hotel in Indianapolis, scheduled
to open in 2006.
In July, it was announced that both Hilton Garden Inn and Homewood Suites
by Hilton earned first-place rankings for customer satisfaction in their
respective categories from J.D. Power & Associates, while Embassy Suites
and Hampton Inn each garnered top three rankings in their categories.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, had another strong quarter with increases in overall unit sales
and average unit sales price. HGVC had second quarter revenue of $98 million,
an increase of 24 percent from $79 million in the 2003 period. Expenses
were $71 million in the 2004 second quarter compared with $58 million in
the 2003 period. Overall unit sales in the quarter were up 34 percent,
while the average unit sales price increased 7 percent.
HGVC sales continue to be strong in its three focus destinations of
Hawaii, Las Vegas, and Orlando, with a particularly exceptional sales pace
at its two newest properties in the latter two markets. Development of
Phase II at HGVC's new Las Vegas Strip resort is on schedule to begin by
year-end 2004, and development of another phase at its new Orlando property
is expected to begin in early 2005.
Distribution/Technology
Improving demand in all segments -- business transient, group, and leisure
-- resulted in significant increases in both call volume and gross reservations.
In the second quarter 2004, call volume through Hilton's call centers was
up 6 percent over the 2003 period, with gross reservations through Hilton
Reservations Worldwide (HRW), the Global Distribution System (GDS), and
all Internet sources up almost 12 percent (up nearly 14 percent in June
alone.) Year-to-date June 30, 2004, call volume through Hilton's call centers
was up more than 7 percent from the 2003 period, with gross reservations
through HRW, GDS, and the Internet up approximately 14 percent.
In the second quarter, online bookings through the company's proprietary
branded websites increased approximately 25 percent over the 2003 period.
Furthering its industry leadership position in the use of technology
to enhance customer service, and based on successful tests at the Hilton
New York and Hilton Chicago, the company said that self-service check-in
kiosks would be installed at approximately 45 of its owned and/or managed
hotels by year-end 2004.
Corporate Finance
At June 30, 2004, Hilton had total debt of $3.6 billion (net of $325
million allocated to Caesars Entertainment, Inc. and repaid by Caesars
in July 2004, and $100 million of debt resulting from the consolidation
of a managed hotel, which is non-recourse to Hilton.) This represents a
reduction of $81 million during the second quarter. Borrowings under the
company's $1 billion revolving credit facility were completely repaid during
the second quarter. Approximately 13 percent of the company's debt is floating
rate debt. Total cash and equivalents (including restricted cash) were
approximately $295 million at June 30, 2004. The company's average basic
and diluted share counts for the second quarter were 383 million and 391
million, respectively.
Consolidated net interest expense (interest expense net of interest
and dividend income) declined by $4 million in the second quarter due primarily
to lower average debt balances.
Hilton's debt currently has an average life of 9.4 years, at an average
cost of approximately 6.7 percent.
Net corporate expense increased to $25 million due to the aforementioned
$2 million note receivable reserve, the corporate-related costs associated
with awards under the company's equity compensation plan, and higher legal
costs.
The company's effective tax rate in the second quarter was 34 percent.
During the quarter, the company's provision for income tax benefited from
the utilization of tax loss carryforwards of approximately $5 million as
a result of the sale of its interest in Travelweb, and the sale of Doubletree
properties in Bakersfield and Modesto, Calif. Excluding this benefit, the
company's effective tax rate was approximately 38 percent.
Total hotel capital expenditures in the quarter were $38 million, with
an additional $6 million expended for timeshare development.
Six-Month Results
For the six-month period ended June 30, 2004, Hilton reported net income
of $112 million, compared to $63 million in the corresponding 2003 period.
Diluted net income per share was $.29 versus $.17 in the 2003 period. Operating
income for the six months was $319 million (compared with $250 million
in the 2003 period) based on revenue of $2.059 billion (versus $1.885 billion
in the 2003 period.) For the 2004 six-month period, when compared to the
same period last year, total company Adjusted EBITDA increased 11 percent
to $497 million. Excluding the impact of owned hotel sales since the first
quarter 2003, Adjusted EBITDA increased 14 percent.
Updated 2004 Outlook
Based on its strong second quarter results and positive outlook for
the remainder of the year, the company updated and increased its estimates
for full-year 2004 as follows:
-
Total revenue - $4.170 billion range
-
Total Adjusted EBITDA - $1 billion range
-
Total operating income - $650 million range
-
Comparable owned hotel RevPAR - Increase of 6-8%
-
Diluted earnings per share - Mid to high $.50 range
Total capital spending in 2004 remains consistent with previously published
guidance, approximately $275 million broken out as follows: approximately
$155 for routine improvements and technology, $60 million for timeshare
projects, and $60 million for hotel special projects.
The company expects to add 115-130 hotels and 15,000-17,000 rooms to
its system in 2004, consistent with previous guidance.
"We are very pleased with a second quarter that, even when considering
the benefit of favorable year-over-year comparisons, demonstrates that
our business is improving in a big way, with all aspects of our company
capitalizing on these strengthening trends," said Stephen F. Bollenbach,
co-chairman and chief executive officer of Hilton Hotels Corporation.
"With the strength in business transient travel that we began seeing
last year and the more recent upturn in group travel, a return to true
pricing power is nearing. It is significant that of the RevPAR growth at
our owned hotels in the second quarter, about 40 percent came from rate
increases, so we're seeing a more rate-driven environment. Demand in markets
like New York, Washington, D.C., Boston, and Hawaii, coupled with little
new full-service supply, will help maximize our ability to raise room rates
in the future. The summer started out great, with record numbers of travelers,
and we're looking forward to that continuing the rest of the summer.
"The fee income side of our business is firing on all cylinders; our
fee growth is now a nice balance of new unit additions -- which we've become
accustomed to over the years -- along with RevPAR growth across our system.
In addition, our strategy of focusing on selective timeshare development
in important year-round destinations like Hawaii, Las Vegas, and Orlando
is paying off; our timeshare business had yet another banner quarter."
Mr. Bollenbach concluded: "Our continued emphasis on, and industry leadership
position in, the creation and utilization of technology-based programs
gives us a sustainable competitive advantage in attracting owners to our
brands, enhancing the performance of those brands, maximizing customer
loyalty, and bringing new customers to our properties. This kind of innovation
will help us take even further advantage of the continually improving fundamentals
in our industry, paving the way for even greater success in the months
and years ahead."
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Six Months
Ended
June 30,
June 30,
2003 2004 % Change 2003
2004 % Change
----- ------ --------- ------- ------- ---------
Revenue
Owned hotels
$531 $546 3%
$1,014 $1,028 1%
Leased hotels
27 29
7 51
55 8
Management and
franchise fees
88 97
10 168 186
11
Timeshare and other
income
88 107 22
171 227
33
----- ------
------- -------
734 779
6 1,404 1,496
7
Other revenue from
managed and
franchised
properties
242 286 18
481 563
17
----- ------
------- -------
976 1,065 9
1,885 2,059
9
Expenses
Owned hotels
376 380
1 748 751
-
Leased hotels
24 25
4 47
50 6
Depreciation and
amortization
79 83
5 165 166
1
Impairment loss and
related costs
- -
- 17
- -
Other operating
expenses
79 89
13 154 190
23
Corporate expense,
net
19 25
32 38
44 16
----- ------
------- -------
577 602
4 1,169 1,201
3
Other expenses from
managed and
franchised
properties
242 285 18
481 559
16
----- ------
------- -------
819 887
8 1,650 1,760
7
Operating income
from unconsolidated
affiliates
7 10
43 15
20 33
----- ------
------- -------
Operating income 164
188 15
250 319
28
Interest and
dividend income
8 7 (13)
15 17
13
Interest expense (77)
(72) (6) (152)
(142) (7)
Net interest from
unconsolidated
affiliates and non-
controlled interests (4)
(8) -
(9) (14) 56
Net (loss) gain on
asset dispositions (2)
3 -
(3) (1) (67)
----- ------
------- -------
Income before taxes
and minority and
non-controlled
interests
89 118 33
101 179
77
Provision for income
taxes
(33) (40) 21
(34) (61) 79
Minority and non-
controlled
interests, net
(2) (3) 50
(4) (6) 50
----- ------
------- -------
Net income
$54 $75 39%
$63 $112 78%
===== ======
======= =======
Net income per share(1)
--------------------------
Basic
$.14 $.20 43%
$.17 $.29 71%
===== ======
======= =======
Diluted
$.14 $.19 36%
$.17 $.29 71%
===== ======
======= =======
Average shares -
basic
377 383
2% 377 382
1%
===== ======
======= =======
Average shares -
diluted
395 391 (1)%
399 390 (2)%
===== ======
======= =======
(1) EPS for the six month periods differs from the sum
of quarterly
EPS amounts due to the required method
of computing EPS in the
respective periods.
HILTON HOTELS CORPORATION
U.S. Owned Statistics(1)
Three Months Ended
Six Months Ended
June 30,
June 30,
%/pt
%/pt
2003 2004 Change
2003 2004 Change
-------- -------- ------------------ -------- ---------
Hilton
--------------
Occupancy
74.2% 78.3% 4.1 pts 70.5%
73.4% 2.9 pts
Average Rate $153.23 $158.58
3.5% $153.10 $156.12 2.0%
RevPAR
$113.72 $124.11 9.1% $107.96
$114.66 6.2%
All Other
--------------
Occupancy
68.1% 66.9% (1.2) pts 66.7%
66.3% (0.4) pts
Average Rate $109.57 $110.71
1.0% $108.31 $109.72 1.3%
RevPAR
$74.62 $74.01 (0.8)% $72.29
$72.72 0.6%
Total
--------------
Occupancy
73.4% 76.7% 3.3 pts 70.0%
72.5% 2.5 pts
Average Rate $147.75 $153.00
3.6% $147.33 $150.44 2.1%
RevPAR
$108.44 $117.40 8.3% $103.14
$109.05 5.7%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of June 30,
2004, and owned by us since
January 1, 2003.
HILTON HOTELS CORPORATION
Systemwide Statistics(1)
Three Months Ended
Six Months Ended
June 30,
June 30,
%/pt
%/pt
2003 2004 Change
2003 2004 Change
--------- -------- ------------------ -------- --------
Hilton
--------------
Occupancy
69.0% 73.1% 4.1 pts 66.5%
70.0% 3.5 pts
Average Rate $126.21 $130.49
3.4% $126.81 $129.95 2.5%
RevPAR
$87.13 $95.39 9.5%
$84.33 $90.96 7.9%
Hilton Garden
Inn
--------------
Occupancy
67.9% 72.1% 4.2 pts 64.5%
69.3% 4.8 pts
Average Rate $95.71
$98.82 3.2% $95.52
$97.87 2.5%
RevPAR
$64.98 $71.23 9.6%
$61.60 $67.83 10.1%
Doubletree
--------------
Occupancy
67.8% 71.9% 4.1 pts 65.3%
69.2% 3.9 pts
Average Rate $100.47 $102.82
2.3% $101.56 $103.07 1.5%
RevPAR
$68.13 $73.92 8.5%
$66.29 $71.33 7.6%
Embassy Suites
--------------
Occupancy
71.5% 74.4% 2.9 pts 69.5%
72.2% 2.7 pts
Average Rate $120.23 $123.56
2.8% $121.08 $123.21 1.8%
RevPAR
$85.95 $91.88 6.9%
$84.15 $88.95 5.7%
Homewood Suites by
Hilton
------------------
Occupancy
74.0% 76.6% 2.6 pts 70.4%
73.5% 3.1 pts
Average Rate $94.97
$97.24 2.4% $95.03
$96.83 1.9%
RevPAR
$70.29 $74.45 5.9%
$66.86 $71.18 6.5%
Hampton
--------------
Occupancy
70.0% 71.6% 1.6 pts 65.5%
67.4% 1.9 pts
Average Rate $79.00
$81.77 3.5% $78.41
$80.73 3.0%
RevPAR
$55.27 $58.59 6.0%
$51.36 $54.42 6.0%
Other
--------------
Occupancy
40.9% 71.9% 31.0 pts 46.8%
68.2% 21.4 pts
Average Rate $135.16 $131.39
(2.8)% $125.51 $126.14 0.5%
RevPAR
$55.26 $94.53 71.1% $58.73
$86.03 46.5%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of June 30,
2004, and owned, operated, or
franchised by us since January 1,
2003.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
June
2003
2004
Number of
Number of
Properties Rooms Properties Rooms
----------- -------------------- --------
Hilton
----------------------------
Owned
38 28,572
36 27,492
Leased
1 499
1 499
Joint Venture
7 2,739
10 4,177
Managed
20 11,664
24 13,904
Franchised
165 44,341
159 42,973
----------- -------- ----------- --------
231 87,815
230 89,045
Hilton Garden Inn
----------------------------
Owned
1 162
1 162
Joint Venture
2 280
2 280
Managed
- -
6 796
Franchised
164 22,401
191 26,161
----------- -------- ----------- --------
167 22,843
200 27,399
Doubletree
----------------------------
Owned
9 3,156
6 2,374
Leased
6 2,151
6 2,144
Joint Venture
28 8,420
25 7,427
Managed
48 12,474
40 10,553
Franchised
61 14,420
75 17,762
----------- -------- ----------- --------
152 40,621
152 40,260
Embassy Suites
----------------------------
Owned
5 1,023
4 881
Joint Venture
27 7,279
27 7,279
Managed
57 14,699
54 14,136
Franchised
83 18,788
89 20,264
----------- -------- ----------- --------
172 41,789
174 42,560
Homewood Suites by Hilton
----------------------------
Owned
3 398
3 398
Managed
34 4,135
36 4,304
Franchised
87 9,606
97 10,617
----------- -------- ----------- --------
124 14,139
136 15,319
Hampton
----------------------------
Owned
1 133
1 133
Managed
24 3,101
35 4,461
Franchised
1,204 121,966 1,241 124,809
----------- -------- ----------- --------
1,229 125,200 1,277 129,403
Timeshare
28 3,289
31 3,740
----------------------------
Other
----------------------------
Owned
1 300
1 300
Joint Venture
3 1,393
3 1,394
Managed
11 3,254
12 3,465
Franchised
1 408
- -
----------- -------- ----------- --------
16 5,355
16 5,159
Total
----------------------------
Owned
58 33,744
52 31,740
Leased
7 2,650
7 2,643
Joint Venture
67 20,111
67 20,557
Managed
194 49,327
207 51,619
Timeshare
28 3,289
31 3,740
Franchised
1,765 231,930 1,852 242,586
----------- -------------------- --------
TOTAL PROPERTIES
2,119 341,051 2,216 352,885
=========== ==================== ========
Change to
June 2003 December 2003
Number of Number
of
Properties Rooms Properties Rooms
----------- ------- ----------- -------
Hilton
------------------------------
Owned
(2) (1,080) -
(4)
Leased
- -
- -
Joint Venture
3 1,438
- -
Managed
4 2,240
- (199)
Franchised
(6) (1,368) -
236
----------- ------- ----------- -------
(1) 1,230
- 33
Hilton Garden Inn
------------------------------
Owned
- -
- -
Joint Venture
- -
- -
Managed
6 796
3 405
Franchised
27 3,760
14 1,984
----------- ------- ----------- -------
33 4,556
17 2,389
Doubletree
------------------------------
Owned
(3) (782) (3)
(782)
Leased
- (7)
- -
Joint Venture
(3) (993)
- -
Managed
(8) (1,921) (4) (1,032)
Franchised
14 3,342
4 1,460
----------- ------- ----------- -------
- (361)
(3) (354)
Embassy Suites
------------------------------
Owned
(1) (142)
- -
Joint Venture
- -
- -
Managed
(3) (563)
- -
Franchised
6 1,476
- 7
----------- ------- ----------- -------
2 771
- 7
Homewood Suites by Hilton
------------------------------
Owned
- -
- -
Managed
2 169
- -
Franchised
10 1,011
6 559
----------- ------- ----------- -------
12 1,180
6 559
Hampton
------------------------------
Owned
- -
- -
Managed
11 1,360
1 138
Franchised
37 2,843
21 1,722
----------- ------- ----------- -------
48 4,203
22 1,860
Timeshare
3 451
1 96
------------------------------
Other
------------------------------
Owned
- -
- -
Joint Venture
- 1
- 1
Managed
1 211
1 219
Franchised
(1) (408) (1)
(408)
----------- ------- ----------- -------
- (196)
- (188)
Total
------------------------------
Owned
(6) (2,004) (3)
(786)
Leased
- (7)
- -
Joint Venture
- 446
- 1
Managed
13 2,292
1 (469)
Timeshare
3 451
1 96
Franchised
87 10,656 44
5,560
----------- ------- ----------- -------
TOTAL PROPERTIES
97 11,834 43
4,402
=========== ======= =========== =======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Ended Six Months Ended
June 30,
June 30,
2003 2004 % Change 2003 2004 % Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA
$252 $278 10% $449
$497 11%
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(7) (6) (14) (14)
(13) (7)
Non-recurring items
- -
- (17) -
-
Operating interest and
dividend income
(2) (2) -
(3) (3) -
Operating income from
non-controlled interests -
1 -
- 4
-
Net (loss) gain on asset
dispositions
(2) 3
- (3) (1) (67)
Minority and non-
controlled interests,
net
(2) (3) 50
(4) (6) 50
----- -----
----- -----
EBITDA
239 271 13
408 478 17
Depreciation and
amortization
(79) (83) 5 (165)
(166) 1
Interest expense, net
(73) (73) - (146)
(139) (5)
Provision for income
taxes
(33) (40) 21 (34)
(61) 79
----- -----
----- -----
Net income
$54 $75 39%
$63 $112 78%
===== =====
===== =====
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2004 Outlook
($ in millions, except per share amounts)
Estimated
Full Year
2004
-----------------------------
Adjusted EBITDA
$1,005
Proportionate share of depreciation and
amortization of unconsolidated
affiliates
(30)
Operating interest and dividend income
(5)
Operating income from non-controlled
interests
8
Net loss on asset dispositions
(1)
Minority and non-controlled interests,
net
(9)
-----------------------------
EBITDA
968
Depreciation and amortization
(330)
Interest expense, net
(280)
Provision for income taxes
(134)
-----------------------------
Net income
$224
=============================
Diluted EPS
$.57
=============================
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales
($ in millions)
Three Months Ended Six Months Ended
June 30,
June 30,
2003 2004 % Change 2003 2004
% Change
----- ----- --------- ------- ------- ---------
Revenue - owned hotels $531 $546
3% $1,014 $1,028
1%
Less sold hotels
(30) (7)
(65) (15)
----- -----
------- -------
Revenue - comparable
owned hotels
$501 $539 8%
$949 $1,013 7%
===== =====
======= =======
Expenses - owned
hotels
$376 $380 1%
$748 $751
-%
Less sold hotels
(21) (5)
(45) (11)
----- -----
------- -------
Expenses - comparable
owned hotels
$355 $375 6%
$703 $740
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.
|
