| BEVERLY HILLS, Calif.--Oct. 25, 2004 -- Hilton Hotels Corporation (NYSE:HLT)
today reported financial results for the third quarter and nine months
ended September 30, 2004. The quarter benefited from strong revenue per
available room (RevPAR) growth at the company's comparable owned hotels
owing to increased demand from business travelers in many of Hilton's key
markets; significant margin gains at comparable owned hotels due, in part,
to improved room rates; an increase in fee income resulting from both RevPAR
growth at managed and franchised hotels and the addition of new units,
and another strong quarter from the company's vacation ownership business.
The company reported third quarter 2004 net income of $61 million, a
79 percent increase from $34 million in the 2003 period. Diluted net income
per share was $.16 in the third quarter, compared with $.09 in the 2003
quarter, a 78 percent increase. The 2004 quarter includes $10 million in
pre-tax earnings from an unconsolidated joint venture that developed a
251-unit condominium project in Myrtle Beach, S.C. The project closed on
the sale of all units in the third quarter.
Hilton reported third quarter total operating income of $171 million
(a 36 percent increase from $126 million in the 2003 period) on total revenue
of $1.033 billion (a 9 percent increase from $952 million in the 2003 quarter).
Total company earnings before interest, taxes, depreciation, amortization
and non-recurring items ("Adjusted EBITDA") were $257 million, compared
with $218 million in the 2003 period, an increase of 18 percent. Adjusting
for the impact of owned hotel sales since the end of the second quarter
of 2003 and the consolidation of a previously unconsolidated managed property
beginning in the 2004 first quarter, revenue, operating income and Adjusted
EBITDA increased 10 percent, 36 percent and 20 percent, respectively.
Owned Hotel Results
Vibrant summer travel demand, coupled with continually improving business
transient and group trends, enabled most of the company's major owned hotels
to report strong results. Hilton-owned hotels in New York and Boston showed
particularly good results owing in part to the two political conventions
held in those cities; occupancy levels at those hotels were in the high-80
to low-90 percent range, along with significant rate increases. Strong
markets in the quarter also included Honolulu, the Washington, D.C. area,
San Diego, Portland and Anchorage. Chicago showed improved occupancy levels
in the quarter, and San Francisco continued to show signs of gradual improvement.
New Orleans, due to a comparative paucity of citywide conventions and the
impact of the hurricanes in the Southeast, experienced a difficult quarter.
Across all brands, revenue from the company's owned hotels (majority
owned and controlled hotels) was $492 million, a 1 percent increase from
$487 million in the 2003 period. The impact of property sales limited the
revenue growth. Total revenue from comparable owned properties was up 7
percent in the quarter. RevPAR from comparable owned hotels increased 7.3
percent. Comparable owned hotel occupancy increased 2.7 points to 76.7
percent, while average daily rate (ADR) increased 3.5 percent to $146.84.
Improvement in overall demand and in the mix of business enabled the trend
of more ADR-driven RevPAR gains to continue in the third quarter.
Total owned hotel expenses in the third quarter were down slightly at
$365 million (a 2 percent decrease). Expenses at the comparable owned hotels
increased 4 percent in the quarter, primarily due to an increase in occupied
rooms. Owned hotel expenses in the third quarter benefited from property
tax adjustments totaling approximately $4 million, primarily at the company's
owned hotels in Chicago.
Excluding the impact of property sales on owned hotel revenue and expenses,
owned hotel margins in the 2004 third quarter, when compared to the 2003
period, improved 210 basis points to 25.8 percent. Margin improvement resulted
primarily from the aforementioned ADR increase and property tax adjustments,
as well as the company's continued focus on costs. Cost-per-occupied-room
(factoring out this quarter's property tax adjustments) increased less
than 1 percent.
System-wide RevPAR; Management/Franchise Fees
Each of the company's brands reported significant RevPAR gains in the
third quarter. On a system-wide basis RevPAR growth by brand was as follows:
Hilton, 7.6 percent; Doubletree, 7.5 percent; Hampton Inn, 6.8 percent;
Hilton Garden Inn, 6.4 percent; Homewood Suites by Hilton, 5.4 percent,
and Embassy Suites, 4.5 percent.
Management and franchise fees in the third quarter increased by $15
million, or 17 percent, over the 2003 period. Adjusting for the impact
of the consolidation of a managed hotel in 2004, fees increased 13 percent
from the 2003 quarter. Of the third quarter 2004 fee growth, approximately
40 percent came from RevPAR gains at franchised/ managed hotels, and 60
percent from the addition of new units.
RevPAR index figures (year-to-date August 2004 as measured by Smith
Travel Research) continue to show occupancy and rate premiums for the majority
of Hilton's brands: Embassy Suites, 123.4; Homewood Suites by Hilton, 118.6;
Hampton Inn, 117.1; Hilton Garden Inn, 115.5; Hilton, 108.8. Doubletree's
RevPAR index was 99.4.
Brand Development/Unit Growth
In the third quarter 2004, the company added 36 properties and 4,775
rooms to its system as follows: Hampton Inn, 14 hotels and 1,371 rooms;
Hilton Garden Inn, 13 hotels and 1,600 rooms; Hilton, 3 hotels and 887
rooms; Homewood Suites by Hilton, 2 hotels and 214 rooms; Doubletree, 2
hotels and 343 rooms; Embassy Suites, 1 hotel and 157 rooms; Conrad, 1
hotel and 203 rooms.
Eight hotels and 1,136 rooms were removed from the system during the
quarter. At September 30, 2004, the Hilton system consisted of 2,244 properties
and 356,524 rooms. The company had approximately 450 hotels and 58,000
rooms in its development pipeline at September 30, 2004.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, reported another strong quarter with third quarter 2004 revenue
of $109 million, an increase of 16 percent from $94 million in the 2003
period. Expenses were $80 million in the third quarter compared with $71
million in the 2003 period. Overall unit sales in the quarter were up 36
percent, while the average unit sales price increased 9 percent.
Sales continue to be strong across the HGVC system, which features high-quality
resort properties in Hawaii, Las Vegas and Orlando. During the quarter,
HGVC announced it would break ground in February 2005 on the 70-unit Phase
V of its International Drive property in Orlando, with completion scheduled
for spring 2006. Also in Orlando, the company is adding 48 units to its
existing property at Sea World. Development of the 431-unit Phase II tower
at its Las Vegas Strip property began during the third quarter.
Distribution/Technology
Hilton noted significant increases in both call volume and gross reservations
in the quarter, reflecting improving demand among all business segments
-- business transient, group and leisure. In the third quarter 2004, call
volume through Hilton's call centers was up 7 percent over the 2003 period,
with gross reservations through Hilton Reservations Worldwide (HRW), the
Global Distribution System (GDS) and all Internet sources up 12 percent.
Year-to-date September 2004, call volume through Hilton's call centers
was up 7 percent over the 2003 period, with gross reservations through
HRW, GDS and the Internet up 13 percent.
In the third quarter, online bookings through the company's proprietary
branded websites increased 34 percent over the 2003 period.
As part of its ongoing commitment to using technology to enhance customer
service and strengthen its industry leadership position in this area, the
company announced two new initiatives. Remote, Web-based check-in 24 hours
prior to arrival will be available during the fourth quarter at selected
hotels across all Hilton brands. This program enables guests with password-protected
online accounts to select their room type and features based on preferences
and history, and prints confirmation documents. The second program, Electronic
Folio Access, enables travelers to review online and print hotel folios
following stays at any of the 2,200-plus Hilton Family of hotels, a first
for a multi-brand hotel company.
Hilton said also that as of September 2004, high speed Internet access
(HSIA) was deployed in 95 percent of its hotels system-wide; that number
is expected to reach 100 percent by year-end 2004. Additionally, Hilton
confirmed that it was on pace to have self-service check-in kiosks in place
at 45 of its owned and/or managed hotels by year-end 2004.
Corporate Finance
At September 30, 2004, Hilton had total debt of $3.6 billion (net of
$100 million of debt resulting from the consolidation of a managed hotel,
which is non-recourse to Hilton.) Approximately 13 percent of the company's
debt is floating rate debt. Total cash and equivalents (including restricted
cash) were approximately $365 million at September 30, 2004, an increase
of $70 million during the third quarter. The company's average basic and
diluted share counts for the third quarter were 385 million and 393 million,
respectively.
Hilton's debt currently has an average life of 9.1 years, at an average
cost of approximately 6.8 percent. In September 2004, Moody's Investors
Service raised its rating on Hilton to investment grade (Baa3,) citing
the company's successful debt reduction program and an improved demand
environment in the lodging industry. Hilton is now rated investment grade
by two of the major rating agencies, Moody's and Standard & Poor's.
The company's effective tax rate in the third quarter was 36.5 percent.
Total hotel capital expenditures in the quarter were $40 million, with
an additional $11 million expended for timeshare development.
Nine-Month Results
For the nine-month period ended September 30, 2004, Hilton reported
net income of $173 million, compared to $97 million in the corresponding
2003 period. Diluted net income per share was $.44 versus $.25 in the 2003
period. Operating income for the nine months was $490 million (compared
with $376 million in the 2003 period) based on revenue of $3.092 billion
(compared with $2.837 billion in the 2003 period). For the 2004 nine-month
period, when compared to the same period last year, total company Adjusted
EBITDA increased 13 percent to $754 million. Excluding the impact of owned
hotel sales since the first quarter 2003, Adjusted EBITDA increased 16
percent.
Updated 2004 Outlook
The company's updated estimates for full-year 2004 are as follows:
Total revenue - $4.140 billion range
Total Adjusted EBITDA - $1 billion range
Total operating income - $650 million range
Comparable owned hotel RevPAR - Increase of approximately 7%
Diluted earnings per share - High $.50 range
Total capital spending in 2004 remains consistent with previously published
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 renovation, return-on-investment (ROI)
and special projects.
The company expects to add approximately 122 hotels and 16,000 rooms
to its system in 2004.
Preliminary 2005 Outlook
While the company noted it was currently in the initial stages of its
2005 budgeting process, based on the company's expectation of continuing
strong demand trends, Hilton provided the following preliminary estimates
for full-year 2005:
Comparable owned hotel RevPAR - Increase of 5 - 7%
Diluted earnings per share - Low to mid $.70 range
Total capital spending in 2005 is expected to be in the $430 million
range, with approximately $140 million for routine improvements, $190 million
for timeshare projects and $100 million in hotel renovation, ROI and special
projects.
The company expects to add 130 - 150 hotels and 16,000 - 20,000 rooms
to its system in 2005.
Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton
Hotels Corporation, said: "Our third quarter results were very gratifying
and reflect the continuing recovery of the hotel business. All aspects
of our company -- our city-center owned hotels, fee business and timeshare
operations -- are turning in exceptional performances, and our focus on
technology and financial management continues to bring benefits to our
guests, customers, franchisees and shareholders.
"More important, however, than this past quarter's results is how well
positioned Hilton is to take advantage of improving trends in our industry.
"Most of the hotels we own are in the markets that historically have
been the high-demand locations for business and leisure travelers, and
where new competitive supply will be limited for the foreseeable future.
Our fee and brand development business is second to none. We are opening
more hotels in the U.S. than any other company, demonstrating the appeal
of our hotel brands among owners, and have put the resources in place to
enhance product and service consistency, particularly at the Hilton brand.
Timeshare has been, and will continue to be, a great business for us, and
we remain focused on our strategy of concentrating our efforts in Las Vegas,
Hawaii and Orlando."
Bollenbach concluded: "What investors should take away, not just from
this past quarter's results, but as they look to the future, are five main
points. First, demand is getting stronger all the time. Second, operationally
we are in the right places with the right products, brands and services.
Third, we have staked out a clear industry leadership position in the use
of technology to serve our guests. Fourth, we remain committed to prudent
financial management. And finally, we expect to be strong generators of
excess cash for the next several years. Along with reinvesting in our business,
we will look for opportunities to return capital to our shareholders; our
bias for accomplishing the latter would be to buy in our stock. This is
the Hilton story, and we are looking forward with optimism and enthusiasm
to the remainder of 2004 and the coming years."
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30
September 30
2003 2004 % Change 2003
2004 % Change
----- ------ --------- ------- ------- ---------
Revenue
Owned hotels
$487 $492 1%
$1,501 $1,520 1%
Leased hotels
28 30
7 79
85 8
Management and
franchise fees
87 102 17
255 288 13
Timeshare and other
income
101 119 18
272 346 27
----- ------
------- -------
703 743 6
2,107 2,239 6
Other revenue from
managed and
franchised
properties
249 290 16
730 853 17
----- ------
------- -------
952 1,033 9
2,837 3,092 9
Expenses
Owned hotels
372 365 (2)
1,120 1,116 -
Leased hotels
25 26
4 72
76 6
Depreciation and
amortization
84 81 (4)
249 247 (1)
Impairment loss and
related costs
- -
- 17
- -
Other operating
expenses
89 101 13
243 291 20
Corporate expense 19
19 -
57 63
11
----- ------
------- -------
589 592 1
1,758 1,793 2
Other expenses from
managed and
franchised
properties
249 290 16
730 849 16
----- ------
------- -------
838 882 5
2,488 2,642 6
Operating income
from unconsolidated
affiliates
12 20 67
27 40
48
----- ------
------- -------
Operating income 126
171 36
376 490 30
Interest and
dividend income
6 2 (67)
21 19 (10)
Interest expense (72)
(67) (7) (224)
(209) (7)
Net interest from
unconsolidated
affiliates and non-
controlled
interests
(4) (6) 50
(13) (20) 54
Net loss on asset
dispositions and
other
- (1) -
(3) (2) (33)
Loss from non-
operating
affiliates
- (3) -
- (3)
-
----- ------
------- -------
Income before taxes
and minority and
non-controlled
interests
56 96 71
157 275 75
Provision for income
taxes
(21) (35) 67
(55) (96) 75
Minority and non-
controlled
interests, net
(1) -
- (5) (6)
20
----- ------
------- -------
Net income
$34 $61 79%
$97 $173 78%
===== ======
======= =======
Net income per share
(1)
--------------------
Basic
$.09 $.16 78%
$.26 $.45 73%
===== ======
======= =======
Diluted
$.09 $.16 78%
$.25 $.44 76%
===== ======
======= =======
Average shares -
basic
378 385 2%
377 383
2%
===== ======
======= =======
Average shares -
diluted
385 393 2%
394 391 (1)%
===== ======
======= =======
(1) EPS for the nine 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
Nine Months Ended
September 30
September 30
%/pt
%/pt
2003 2004 Change
2003 2004 Change
--------- --------- -------- --------- --------- --------
Hilton
------
Occupancy 74.6%
77.7% 3.1 pts 71.9%
74.9% 3.0 pts
Average
Rate $146.34
$151.71 3.7% $150.73 $154.58
2.6%
RevPAR $109.18
$117.82 7.9% $108.37 $115.72
6.8%
All Other
---------
Occupancy 69.8%
70.3% 0.5 pts 67.8%
67.6% (0.2)pts
Average
Rate $111.14
$112.00 0.8% $109.29 $110.52
1.1%
RevPAR $77.61
$78.73 1.4% $74.08
$74.74 0.9%
Total
-----
Occupancy 74.0%
76.7% 2.7 pts 71.3%
73.9% 2.6 pts
Average
Rate $141.87
$146.84 3.5% $145.42 $149.19
2.6%
RevPAR $104.93
$112.59 7.3% $103.74 $110.24
6.3%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September
30, 2004 and owned by us
since January 1, 2003.
HILTON HOTELS CORPORATION
System-wide Statistics (1)
Three Months Ended
Nine Months Ended
September 30
September 30
%/pt
%/pt
2003 2004 Change
2003 2004 Change
--------- --------- -------- --------- --------- --------
Hilton
------
Occupancy 69.8%
72.3% 2.5 pts 67.6%
70.7% 3.1 pts
Average
Rate $120.40
$125.24 4.0% $124.61 $128.37
3.0%
RevPAR $84.10
$90.49 7.6% $84.25
$90.81 7.8%
Hilton
Garden Inn
-----------
Occupancy 70.3%
72.4% 2.1 pts 66.4%
70.3% 3.9 pts
Average
Rate $95.62
$98.82 3.3% $95.55
$98.20 2.8%
RevPAR $67.24
$71.55 6.4% $63.49
$69.08 8.8%
Doubletree
----------
Occupancy 68.5%
71.0% 2.5 pts 66.3%
69.9% 3.6 pts
Average
Rate $97.90
$101.48 3.7% $100.24 $102.51
2.3%
RevPAR $67.02
$72.07 7.5% $66.50
$71.62 7.7%
Embassy
Suites
-------
Occupancy 72.6%
74.2% 1.6 pts 70.5%
72.9% 2.4 pts
Average
Rate $119.19
$121.89 2.3% $120.43 $122.76
1.9%
RevPAR $86.55
$90.42 4.5% $84.96
$89.45 5.3%
Homewood
Suites by
Hilton
----------
Occupancy 75.3%
76.9% 1.6 pts 72.0%
74.6% 2.6 pts
Average
Rate $93.91
$96.93 3.2% $94.64
$96.86 2.3%
RevPAR $70.71
$74.54 5.4% $68.16
$72.31 6.1%
Hampton
-------
Occupancy 71.3%
73.8% 2.5 pts 67.4%
69.5% 2.1 pts
Average
Rate $80.47
$83.10 3.3% $79.14
$81.57 3.1%
RevPAR $57.38
$61.31 6.8% $53.38
$56.71 6.2%
Other
-----
Occupancy 69.1%
74.5% 5.4 pts 54.3%
70.3% 16.0 pts
Average
Rate $116.50
$131.16 12.6% $121.65 $127.93
5.2%
RevPAR $80.45
$97.77 21.5% $66.05
$89.97 36.2%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September
30, 2004 and owned, operated
or franchised by us since January
1, 2003.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
September
2003
2004
Number of
Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
------
Owned
38 28,434
36 27,492
Leased
1 499
1 499
Joint Venture
7 2,739
10 4,177
Managed
20 11,664
24 13,904
Franchised
163 43,777
161 43,574
----------- -------- ----------- --------
229 87,113
232 89,646
Hilton Garden Inn
-----------------
Owned
1 162
1 162
Joint Venture
2 280
2 280
Managed
2 251
6 796
Franchised
170 23,266
204 27,761
----------- -------- ----------- --------
175 23,959
213 28,999
Doubletree
----------
Owned
9 3,156
6 2,374
Leased
6 2,145
6 2,144
Joint Venture
27 8,193
24 7,208
Managed
45 11,696
39 10,179
Franchised
70 16,319
79 18,694
----------- -------- ----------- --------
157 41,509
154 40,599
Embassy Suites
--------------
Owned
5 1,023
4 881
Joint Venture
27 7,279
27 7,279
Managed
57 14,699
54 14,136
Franchised
84 19,300
90 20,422
----------- -------- ----------- --------
173 42,301
175 42,718
Homewood Suites by Hilton
-------------------------
Owned
3 398
3 398
Managed
35 4,221
36 4,304
Franchised
91 10,002
99 10,831
----------- -------- ----------- --------
129 14,621
138 15,533
Hampton
-------
Owned
1 133
1 133
Managed
24 3,101
35 4,461
Franchised
1,225 123,760 1,248 125,252
----------- -------- ----------- --------
1,250 126,994 1,284 129,846
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
13 3,749
Franchised
1 408
- -
----------- -------- ----------- --------
16 5,355
17 5,443
Total
-----
Owned
58 33,606
52 31,740
Leased
7 2,644
7 2,643
Joint Venture
66 19,884
66 20,338
Managed
194 48,886
207 51,529
Timeshare
28 3,289
31 3,740
Franchised
1,804 236,832 1,881 246,534
----------- -------- ----------- --------
TOTAL PROPERTIES
2,157 345,141 2,244 356,524
=========== ======== =========== ========
Change to
September 2003 December 2003
Number of Number
of
Properties Rooms Properties Rooms
----------- ------- ----------- -------
Hilton
------
Owned
(2) (942)
- (4)
Leased
- -
- -
Joint Venture
3 1,438
- -
Managed
4 2,240
- (199)
Franchised
(2) (203)
2 837
----------- ------- ----------- -------
3 2,533
2 634
Hilton Garden Inn
-----------------
Owned
- -
- -
Joint Venture
- -
- -
Managed
4 545
3 405
Franchised
34 4,495
27 3,584
----------- ------- ----------- -------
38 5,040
30 3,989
Doubletree
----------
Owned
(3) (782) (3)
(782)
Leased
- (1)
- -
Joint Venture
(3) (985) (1)
(219)
Managed
(6) (1,517) (5) (1,406)
Franchised
9 2,375
8 2,392
----------- ------- ----------- -------
(3) (910) (1)
(15)
Embassy Suites
--------------
Owned
(1) (142)
- -
Joint Venture
- -
- -
Managed
(3) (563)
- -
Franchised
6 1,122
1 165
----------- ------- ----------- -------
2 417
1 165
Homewood Suites by Hilton
-------------------------
Owned
- -
- -
Managed
1 83
- -
Franchised
8 829
8 773
----------- ------- ----------- -------
9 912
8 773
Hampton
-------
Owned
- -
- -
Managed
11 1,360
1 138
Franchised
23 1,492
28 2,165
----------- ------- ----------- -------
34 2,852
29 2,303
Timeshare
3 451
1 96
---------
Other
-----
Owned
- -
- -
Joint Venture
- 1
- 1
Managed
2 495
2 503
Franchised
(1) (408) (1)
(408)
----------- ------- ----------- -------
1 88
1 96
Total
-----
Owned
(6) (1,866) (3)
(786)
Leased
- (1)
- -
Joint Venture
- 454
(1) (218)
Managed
13 2,643
1 (559)
Timeshare
3 451
1 96
Franchised
77 9,702
73 9,508
----------- ------- ----------- -------
TOTAL PROPERTIES
87 11,383 71
8,041
=========== ======= =========== =======
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
2003 2004 % Change 2003 2004 % Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA
$218 $257 18% $667
$754 13%
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(7) (7) -
(21) (20) (5)
Non-recurring items
- - -
(17) - -
Operating interest and
dividend income
(1) - -
(4) (3) (25)
Operating income of non-
controlled interests
- 2 -
- 6 -
Net loss on asset
dispositions and other
- (1) -
(3) (2) (33)
Loss from non-operating
affiliates
- (3) -
- (3) -
Minority and non-
controlled interests,
net
(1) - -
(5) (6) 20
----- -----
----- -----
EBITDA
209 248 19
617 726 18
Depreciation and
amortization
(84) (81) (4) (249) (247)
(1)
Interest expense, net
(70) (71) 1 (216)
(210) (3)
Provision for income
taxes
(21) (35) 67 (55)
(96) 75
----- -----
----- -----
Net income
$34 $61 79%
$97 $173 78%
===== =====
===== =====
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2004 Outlook
($ in millions, except per share amounts)
Estimated
Full Year
2004
---------
Adjusted EBITDA
$1,007
Proportionate share of depreciation and amortization
of
unconsolidated affiliates
(28)
Operating interest and dividend income
(5)
Operating income of non-controlled interests
9
Net loss on asset dispositions and other
(1)
Loss from non-operating affiliates
(7)
Minority and non-controlled interests, net
(8)
---------
EBITDA
967
Depreciation and amortization
(330)
Interest expense, net
(281)
Provision for income taxes
(126)
---------
Net income
$230
=========
Diluted EPS
$.59
=========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales
($ in millions)
Three Months Ended Nine Months Ended
September 30
September 30
2003 2004 % Change 2003
2004 % Change
----- ----- --------- ------- ------- ---------
Revenue - owned hotels $487 $492
1% $1,501 $1,520
1%
Less sold hotels
(26) -
(91) (15)
----- -----
------- -------
Revenue - comparable
owned hotels
$461 $492 7% $1,410
$1,505 7%
===== =====
======= =======
Expenses - owned
hotels
$372 $365 (2)% $1,120 $1,116
-%
Less sold hotels
(20) -
(65) (11)
----- -----
------- -------
Expenses - comparable
owned hotels
$352 $365 4% $1,055
$1,105 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. |
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.
|
