BEVERLY HILLS, Calif. - Jan. 31, 2005 -- Hilton
Hotels Corporation (NYSE:HLT) today reported financial results for the
fourth quarter and fiscal year ended December 31, 2004. Fourth quarter
highlights:
-
Reported EPS of $.16 vs. $.17 in Q4 2003
-
Excluding non-comparable items, EPS of $.18; a 64% increase from $.11 in
Q4 2003
-
Strong rate increases resulting from increased business transient and group
demand drive 8.3% RevPAR gain at comparable owned hotels; strong operating
margins reported as well
-
Strong RevPAR growth, new units fuel 17% increase in fees
-
Timeshare unit sales up 45%
The company reported fourth quarter 2004 net income of $65 million, a 3
percent decline from $67 million in the 2003 period. Diluted net income
per share was $.16 in the fourth quarter, compared with $.17 in the 2003
quarter. On a comparable basis, however, diluted earnings per share in
the fourth quarter 2004 were $.18, compared with $.11 in the 2003 quarter,
an increase of 64 percent.
Three non-comparable items combined to adversely impact fourth quarter
2004 EPS by $.02 per share: 1) a pre-tax loss on asset dispositions totaling
$3 million, primarily from the December sale of two Doubletree properties
near Portland, Oregon for $29 million; 2) a pre-tax impairment charge of
$5 million related to the write down of an asset to its estimated fair
value, and 3) the impact of implementing a new accounting rule for contingently
convertible debt in the diluted EPS calculation.
The fourth quarter 2003 included two non-comparable items that combined
to benefit EPS in that quarter by $.06 per share: 1) a $27 million reduction
in the provision for income taxes (a $.07 per share benefit), and 2) pre-tax
losses totaling $8 million related to an impairment charge and asset dispositions
(a negative $.01 per share impact).
Hilton reported fourth quarter 2004 total operating income of $168 million
(a 21 percent increase from $139 million in the 2003 period), on total
revenue of $1.054 billion (a 7 percent increase from $982 million in the
2003 quarter). Total company earnings before interest, taxes, depreciation,
amortization and non-recurring items ("Adjusted EBITDA") were $267 million,
compared with $239 million in the 2003 period, an increase of 12 percent.
Adjusting for the impact of owned hotel sales since the end of the third
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 9 percent, 21 percent and 14 percent, respectively.
For full-year 2004, Hilton reported net income of $238 million, a 45
percent increase from $164 million in 2003; diluted net income per share
was $.60 for full-year 2004, compared with $.43 in 2003. Total company
operating income was $658 million in 2004 (a 28 percent increase from $515
million in 2003), on revenue of $4.146 billion (up 9 percent from $3.819
billion in 2003). Total company Adjusted EBITDA was $1.021 billion in 2004,
a 13 percent increase from $906 million in 2003.
Owned Hotel Results
Increased demand in the business transient and group segments -- resulting
in both occupancy and average daily rate (ADR) gains in these two categories
-- along with improved pricing power in leisure, enabled most of the company's
major owned hotels to report strong results in the quarter. Company-owned
hotels reporting particularly good results in the quarter included those
in New York City, Boston, New Orleans, Hawaii, Phoenix, Portland and Atlanta.
Most of the company's owned hotels in those markets reported double-digit
revenue per available room (RevPAR) gains in the quarter. Chicago remained
a comparatively soft market in the quarter.
Across all brands, revenue from the company's owned hotels (majority
owned and controlled hotels) was $542 million in the fourth quarter, a
2 percent increase from $530 million in the 2003 period. Revenue growth
was limited by the impact of property sales. Total revenue from comparable
owned hotels was up 7 percent in the quarter. RevPAR from comparable owned
hotels increased 8.3 percent in the quarter. Comparable owned hotel occupancy
increased 2.1 points to 70.3 percent, while ADR increased 5.1 percent to
$164.61. Approximately 65 percent of the quarterly RevPAR increase at the
comparable owned hotels was attributable to the ADR gains.
Total owned hotel expenses in the fourth quarter were up 1 percent to
$385 million. Expenses at the comparable owned hotels increased 7 percent
in the quarter, primarily due to an increase in occupied rooms, and one-time
costs associated with the new bedding program at Hilton brand hotels and
the San Francisco labor situation. Cost-per-occupied-room increased 3.5
percent in the quarter.
Comparable owned hotel margins in the 2004 fourth quarter improved 40
basis points to 28.9 percent. Margin growth was impacted by the aforementioned
one-time costs.
For full-year 2004, revenue from the company's owned hotels totaled
$2.062 billion, compared with $2.031 billion in 2003, a 2 percent increase.
Total revenue from comparable owned hotels was up 7 percent from 2003.
RevPAR from comparable owned hotels increased 6.8 percent for full-year
2004 when compared with full-year 2003; occupancy improved 2.6 points in
2004 to 73.3 percent, and ADR showed a 3.1 percent increase to $153.72.
Total owned hotel expenses in 2004 were flat with 2003 at $1.501 billion;
expenses at the comparable owned hotels increased 5 percent in 2004.
System-wide RevPAR; Management/Franchise Fees
The strong demand among all business segments -- business transient,
groups and leisure -- that benefited the company's owned hotels, also resulted
in strong fourth quarter RevPAR gains for each of the company's brands
on a system-wide basis (including managed and franchised properties). RevPAR
in the fourth quarter 2004 improved at each brand as follows: Hampton Inn,
10.9 percent; Hilton Garden Inn, 8.1 percent; Hilton, 8.0 percent; Doubletree,
7.9 percent; Homewood Suites by Hilton, 7.4 percent; Embassy Suites, 5.7
percent.
Management and franchise fees increased 17 percent in the fourth quarter
to $96 million as a result of the aforementioned RevPAR gains along with
the addition of new units. Of the fourth 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 November 2004 as measured by Smith
Travel Research) for each of the company's brands were as follows: Embassy
Suites, 122.0; Homewood Suites by Hilton, 118.2; Hampton Inn, 117.9; Hilton
Garden Inn, 115.4; Hilton, 108.4; and Doubletree, 98.4.
For full-year 2004, system-wide RevPAR at Hilton's brands improved as
follows: Hilton Garden Inn, 8.7 percent; Hilton, 7.8 percent; Doubletree,
7.8 percent; Hampton Inn, 7.3 percent; Homewood Suites by Hilton, 6.4 percent;
Embassy Suites, 5.4 percent.
Management and franchise fees in 2004 increased 14 percent from 2003
to $384 million.
Brand Development/Unit Growth
In the fourth quarter 2004, the company added 27 properties and 4,017
rooms to its system as follows: Hampton Inn, 12 hotels and 1,255 rooms;
Hilton Garden Inn, 6 hotels and 841 rooms; Homewood Suites by Hilton, 5
hotels and 521 rooms; Doubletree, 2 hotels and 929 rooms; and Hilton, 2
hotels and 471 rooms. Twelve hotels and 2,133 rooms were removed from the
system during the quarter.
For full-year 2004, the company added 128 properties and 16,968 rooms
to its system, in line with the company's expectations and guidance. During
the year, Hilton Family of Brands hotels opened in 31 of the 50 U.S. states.
Forty-two properties and 7,043 rooms were removed from the system during
2004.
At December 31, 2004, the Hilton system consisted of a total of 2,259
properties and 358,408 rooms. Continuing to lead the industry in U.S. hotel
development activity, the company had approximately 450 hotels and 58,000
rooms in its development pipeline at December 31, 2004.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, reported fourth quarter 2004 revenue of $105 million, a 9 percent
increase from $96 million in the 2003 quarter. Expenses were $83 million
in the fourth quarter, compared with $73 million in the 2003 period. Unit
sales continue to be strong across the HGVC system; fourth quarter unit
sales were up 45 percent, while the average unit sales price increased
1 percent. Impacting HGVC's results in the quarter was the deferral of
revenue and expenses at the company's Waikoloa property, due to the required
percentage of completion accounting.
During the fourth quarter, development continued on schedule at HGVC
properties on the Las Vegas Strip and at the Tuscany Village property on
International Drive in Orlando. The 431-unit Phase II of the Las Vegas
project is scheduled for completion in summer 2006. Ground will be broken
in February 2005 on the 70-unit Phase V of the Tuscany Village property,
with completion scheduled for spring 2006.
For full-year 2004, HGVC revenue was $421 million, compared with $345
million in 2003; expenses were $316 million versus $259 million in 2003.
Distribution/Technology
Reflecting strength in all business segments -- business transient,
group and leisure -- Hilton reported significant increases in both call
volume and gross reservations for the fourth quarter and full-year 2004.
In the fourth quarter, gross reservations through Hilton Reservations
Worldwide (HRW), the Global Distribution System (GDS) and all internet
sources were up 11 percent over the 2003 period. For full-year 2004, gross
reservations through HRW, GDS and the internet were up 13 percent from
2003.
In the fourth quarter, online bookings through the company's proprietary
branded websites increased 34 percent over the 2003 period. In the month
of October 2004, bookings on the company's branded websites exceeded call
center bookings from 800 numbers for that particular month, a company first
since the advent of website reservations.
For full-year 2004, online bookings through the company's branded websites
increased 28 percent over 2003.
Hilton noted that at year-end 2004, high speed internet access was deployed
at virtually all of the company's hotels system-wide. Additionally, the
company had self-service check-in kiosks installed at 47 of its owned and/or
managed properties at year-end. The company also successfully introduced
a check-in kiosk at Honolulu International Airport baggage claim, allowing
customers to check in to the Hilton Hawaiian Village while waiting for
their luggage, an industry first.
Corporate Finance
At December 31, 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 $466 million at December 31, 2004, an increase
of $101 million during the fourth quarter.
The company's average basic and diluted share counts for the fourth
quarter were 388 million and 422 million, respectively. For full-year 2004,
the company's average basic and diluted share counts were 384 million and
418 million, respectively. The diluted share counts for the fourth quarter
and full year reflect the required implementation of new accounting rules
for contingently convertible debt.
Hilton's debt currently has an average life of 8.8 years, at an average
cost of approximately 6.8 percent. The company's debt is rated investment
grade by the three major rating agencies, Moody's, Standard & Poor's
and Fitch.
The company's effective tax rate in the fourth quarter 2004 was 32 percent,
and benefited from tax credits associated with the company's synthetic
fuel investment. The 2003 fourth quarter reflected a tax benefit of $2
million due to the utilization of capital loss tax carryforwards.
During the fourth quarter, the company repurchased 2.3 million shares
of its stock at a total cost of $48 million (an average cost of $20.82
per share). Approximately 7 million shares remain available for repurchase
under the company's existing Board authorization.
Total hotel capital expenditures in the fourth quarter were $72 million,
with an additional $20 million expended for timeshare development. For
full-year 2004, total hotel capital expenditures were $178 million, with
an additional $46 million expended for timeshare development.
Updated 2005 Outlook
The company in 2005 anticipates a favorable economic environment and
continuation of strong hotel demand among business, group and leisure travelers,
coupled with limited new full-service hotel supply growth. The company
expects that approximately 75 percent of the anticipated 2005 RevPAR gain
at its comparable owned hotels will come from ADR increases.
The company provided the following updated estimates for full-year 2005:
Total revenue
$4.500 - 4.525 billion
Total Adjusted EBITDA
$1.090 - 1.105 billion
Total operating income
$735 - 750 million
Comparable owned hotel RevPAR Increase of 7.5%
- 8.5%
Diluted earnings per share
Low $.70 range
The 2005 diluted EPS guidance includes the following three items which
combine to adversely impact diluted EPS by a total of $.06 per share: 1)
the new accounting rules for contingently convertible debt, 2) the required
accounting change related to expensing of unvested stock options, and 3)
the required accounting for restricted stock costs.
Anticipated total capital spending in 2005 remains consistent with previously
issued guidance, approximately $430 million broken out as follows: 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: "The momentum that built in our business starting
in late 2003 continued throughout 2004 and culminated in a very strong
fourth quarter for our company. We ended a highly successful year by seeing
a return to pricing power that enabled us to raise room rates at our big-city
hotels and across our system. We also continued to grow our development
pipeline -- the most vibrant U.S. pipeline in the industry, achieved record
sales in our timeshare business, built on our technology advantage and
further strengthened our balance sheet.
"Even more exciting, though, are the indications that we are still in
the early stages of what we believe will be a period of long-term strength
in our industry and for our company. Our strength in owned hotels, franchise/management
fees and timeshare -- and track record of executing well in each of these
businesses -- has us well-positioned to take full advantage of these trends."
Mr. Bollenbach continued: "Pent-up demand for travel and a shortage
of first-class hotel rooms in most major cities should generate continued
strong results -- particularly in increased room rates -- in many of our
most important markets, including New York, Washington, Boston and Hawaii.
We also look forward to improvement in Chicago in 2005. The upshot is that
we have the right properties in the right locations to take full advantage
of this improving environment.
"Because our hotel brands, from Hampton to Conrad and everything in
between, resonate with owners and travelers alike, we will continue to
aggressively add units to the Hilton Family; we envision our 2005 unit
growth being 10 percent or more above 2004's impressive total. Our initiatives
to further strengthen the Hilton brand are underway and will bring a new
excitement to that brand in 2005 and beyond.
"And our strategy of selective timeshare development -- focusing on
high-traffic, year-round destinations -- will enable us to continue effectively
managing new growth opportunities in this business, while providing high
quality products and amenities for our customers."
Mr. Bollenbach concluded: "With this bright future ahead, we look forward
to generating significant free cash flow over the next few years. Our priority,
and our commitment, is to carefully evaluate and then act on opportunities
for using our excess cash to bring maximum benefit to our shareholders.
As we enter 2005, we are very optimistic about our prospects."
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31
December 31
2003 2004 % Change 2003
2004 % Change
----- ------ --------- ------- ------- ---------
Revenue
Owned hotels
$530 $542 2% $2,031 $2,062
2%
Leased hotels
24 26
8 103 111
8
Management and
franchise fees
82 96
17 337 384
14
Timeshare and other
income
106 117 10
378 463
22
----- ------
------- -------
742 781
5 2,849 3,020
6
Other revenue from
managed and
franchised
properties
240 273 14
970 1,126 16
----- ------
------- -------
982 1,054 7
3,819 4,146
9
Expenses
Owned hotels
380 385
1 1,500 1,501
-
Leased hotels
24 25
4 96 101
5
Depreciation and
amortization
85 83
(2) 334 330
(1)
Impairment loss and
related costs
5 5
- 22
5 (77)
Other operating
expenses
92 104 13
335 395
18
Corporate expense
24 22
(8) 81 85
5
----- ------
------- -------
610 624
2 2,368 2,417
2
Other expenses from
managed and
franchised
properties
240 271 13
970 1,120 15
----- ------
------- -------
850 895
5 3,338 3,537
6
Operating income from
unconsolidated
affiliates
7 9
29 34 49
44
----- ------
------- -------
Operating income 139
168 21
515 658
28
Interest and dividend
income
8 7 (13)
29 26
(10)
Interest expense
(71) (65) (8)
(295) (274) (7)
Net interest from
unconsolidated
affiliates and non-
controlled interests (7)
(6) (14) (20)
(26) 30
Net loss on asset
dispositions and
other
(3) (3) -
(6) (5) (17)
Loss from non-
operating affiliates -
(3) -
- (6)
-
----- ------
------- -------
Income before taxes
and minority and
non-controlled
interests
66 98
48 223 373
67
Tax benefit
(provision)
2 (31) -
(53) (127) -
Minority and non-
controlled
interests, net
(1) (2) -
(6) (8) 33
----- ------
------- -------
Net income
$67 $65 (3)%
$164 $238 45%
===== ======
======= =======
Net income per
share(1)
---------------------
Basic
$.18 $.17 (6)%
$.43 $.62 44%
===== ======
======= =======
Diluted
$.17 $.16 (6)%
$.43 $.60 40%
===== ======
======= =======
Average shares -
basic
380 388
2% 378 384
2%
===== ======
======= =======
Average shares -
diluted(2)
414 422
2% 410 418
2%
===== ======
======= =======
(1) EPS for the full year differs from the sum of quarterly
EPS
amounts due to the required method
of computing EPS in the
respective periods.
(2) Average diluted shares for prior periods reflect
the required
retroactive application of EITF 04-8
"The Effect of Contingently
Convertible Debt on Diluted Earnings
per Share".
HILTON HOTELS CORPORATION
U.S. Owned Statistics(1)
Three Months Ended Twelve Months
Ended
December 31
December 31
%/pt
%/pt
2003 2004 Change
2003 2004 Change
-------- -------- -------- -------- -------- --------
Hilton
----------------
Occupancy
69.0% 71.0% 2.0 pts 71.2%
73.9% 2.7 pts
Average Rate $162.27 $171.24
5.5% $153.57 $158.61 3.3%
RevPAR
$112.04 $121.65 8.6% $109.31
$117.21 7.2%
All Other
----------------
Occupancy
61.8% 64.4% 2.6 pts 67.4%
68.3% 0.9 pts
Average Rate $108.00 $108.47
0.4% $113.00 $113.11 0.1%
RevPAR
$66.71 $69.90 4.8% $76.20
$77.30 1.4%
Total
----------------
Occupancy
68.2% 70.3% 2.1 pts 70.7%
73.3% 2.6 pts
Average Rate $156.61 $164.61
5.1% $149.09 $153.72 3.1%
RevPAR
$106.83 $115.69 8.3% $105.47
$112.62 6.8%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2004 and owned by us since
January 1, 2003.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months Ended Twelve Months
Ended
December 31
December 31
%/pt
%/pt
2003 2004 Change
2003 2004 Change
-------- -------- -------- -------- -------- --------
Hilton
----------------
Occupancy
64.1% 65.5% 1.4 pts 66.7%
69.5% 2.8 pts
Average Rate $128.63 $136.00
5.7% $125.57 $130.15 3.6%
RevPAR
$82.49 $89.13 8.0% $83.82
$90.39 7.8%
Hilton Garden
Inn
----------------
Occupancy
63.1% 65.2% 2.1 pts 65.5%
69.0% 3.5 pts
Average Rate $93.50
$97.82 4.6% $95.05 $98.11
3.2%
RevPAR
$58.99 $63.79 8.1% $62.30
$67.70 8.7%
Doubletree
----------------
Occupancy
61.6% 63.6% 2.0 pts 65.2%
68.4% 3.2 pts
Average Rate $99.49
$103.98 4.5% $100.37 $103.11
2.7%
RevPAR
$61.31 $66.15 7.9% $65.40
$70.50 7.8%
Embassy Suites
----------------
Occupancy
65.5% 66.8% 1.3 pts 69.2%
71.3% 2.1 pts
Average Rate $118.40 $122.61
3.6% $119.94 $122.72 2.3%
RevPAR
$77.51 $81.89 5.7% $83.05
$87.52 5.4%
Homewood Suites
by Hilton
-----------------
Occupancy
67.0% 69.6% 2.6 pts 70.7%
73.4% 2.7 pts
Average Rate $93.47
$96.53 3.3% $94.36 $96.78
2.6%
RevPAR
$62.58 $67.22 7.4% $66.76
$71.03 6.4%
Hampton
----------------
Occupancy
61.5% 64.5% 3.0 pts 66.0%
68.3% 2.3 pts
Average Rate $77.37
$81.86 5.8% $78.73 $81.64
3.7%
RevPAR
$47.59 $52.78 10.9% $51.93
$55.73 7.3%
Other
----------------
Occupancy
67.1% 66.7% (0.4) pts 57.5%
69.4% 11.9 pts
Average Rate $127.37 $141.94
11.4% $123.33 $131.31 6.5%
RevPAR
$85.41 $94.63 10.8% $70.94
$91.14 28.5%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2004 and owned, operated
or franchised by us since January
1, 2003.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
December
Change to
2003
2004 December 2003
Number of Number of
Number of
Proper- Rooms Proper- Rooms
Proper- Rooms
ties
ties
ties
-------- ----------------- -------- -------- -------
Hilton
-----------------
Owned
36 27,496 36
27,492 -
(4)
Leased
1 499
1 499
- -
Joint Venture
10 4,177 10
4,177 -
-
Managed
24 14,103 24
13,822 - (281)
Franchised
159 42,737 159 43,266
- 529
-------- -------- -------- -------- -------- -------
230 89,012 230 89,256
- 244
Hilton Garden Inn
-----------------
Owned
1 162
1 162
- -
Joint Venture
2 280
1 128
(1) (152)
Managed
3 391
6 796
3 405
Franchised
177 24,177 211 28,755
34 4,578
-------- -------- -------- -------- -------- -------
183 25,010 219 29,841
36 4,831
Doubletree
-----------------
Owned
9 3,156 4
1,702 (5) (1,454)
Leased
6 2,144 6
2,144 -
-
Joint Venture
25 7,427 24
7,208 (1) (219)
Managed
44 11,585 38
10,074 (6) (1,511)
Franchised
71 16,302 82
19,794 11 3,492
-------- -------- -------- -------- -------- -------
155 40,614 154 40,922
(1) 308
Embassy Suites
-----------------
Owned
4 881
4 881
- -
Joint Venture
27 7,279 27
7,279 -
-
Managed
54 14,136 54
14,134 -
(2)
Franchised
89 20,257 90
20,421 1
164
-------- -------- -------- -------- -------- -------
174 42,553 175 42,715
1 162
Homewood Suites
by Hilton
-----------------
Owned
3 398
3 398
- -
Managed
36 4,304 36
4,304 -
-
Franchised
91 10,058 104 11,352
13 1,294
-------- -------- -------- -------- -------- -------
130 14,760 143 16,054
13 1,294
Hampton
-----------------
Owned
1 133
1 133
- -
Managed
34 4,323 35
4,462 1
139
Franchised
1,220 123,087 1,254 125,803
34 2,716
-------- -------- -------- -------- -------- -------
1,255 127,543 1,290 130,398
35 2,855
Timeshare
30 3,644 31
3,740 1
96
-----------------
Other
-----------------
Owned
1 300
1 300
- -
Joint Venture
3 1,393 3
1,394 -
1
Managed
11 3,246 13
3,788 2
542
Franchised
1 408
- -
(1) (408)
-------- -------- -------- -------- -------- -------
16 5,347 17
5,482 1
135
Total
-----------------
Owned
55 32,526 50
31,068 (5) (1,458)
Leased
7 2,643 7
2,643 -
-
Joint Venture
67 20,556 65
20,186 (2) (370)
Managed
206 52,088 206 51,380
- (708)
Timeshare
30 3,644 31
3,740 1
96
Franchised
1,808 237,026 1,900 249,391
92 12,365
-------- ----------------- -------- -------- -------
TOTAL PROPERTIES 2,173 348,483
2,259 358,408 86
9,925
======== ================= ======== ======== =======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Ended Twelve Months Ended
December 31
December 31
2003 2004 % Change 2003 2004
% Change
----- ----- --------- ----- ------- ---------
Adjusted EBITDA
$239 $267 12% $906
$1,021 13%
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(9) (8) (11) (30)
(28) (7)
Non-recurring items
(5) (5) -
(22) (5) (77)
Operating interest and
dividend income
(1) (5) -
(5) (8) 60
Operating income of
non-controlled
interests
- 2
- - 8
-
Net loss on asset
dispositions and other (3)
(3) - (6)
(5) (17)
Loss from non-operating
affiliates
- (3) -
- (6)
-
Minority and non-
controlled interests,
net
(1) (2) -
(6) (8) 33
----- -----
----- -------
EBITDA
220 243 10
837 969
16
Depreciation and
amortization
(85) (83) (2) (334)
(330) (1)
Interest expense, net (70)
(64) (9) (286) (274)
(4)
Tax benefit (provision) 2
(31) - (53)
(127) -
----- -----
----- -------
Net income
$67 $65 (3)% $164
$238 45%
===== =====
===== =======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2005 Outlook
($ in millions, except per share amounts)
Estimated Estimated
Full Year Full Year
2005 2005
Low End High End
--------- ---------
Adjusted EBITDA(1)
$1,090 $1,105
Proportionate share of depreciation and
amortization of unconsolidated affiliates
(28) (28)
Operating interest and dividend income
(6) (6)
Operating income of non-controlled interests
10 10
Loss from non-operating affiliates
(16) (16)
Minority and non-controlled interests, net
(6) (6)
--------- ---------
EBITDA
1,044 1,059
Depreciation and amortization
(331) (331)
Interest expense, net
(267) (267)
Provision for income taxes
(160) (165)
--------- ---------
Net income
$286 $296
========= =========
Diluted EPS
$.70 $.72
========= =========
(1) Includes estimated stock compensation expense of approximately
$30
million.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales
($ in millions)
Three Months Ended Twelve Months Ended
December 31
December 31
%
%
2003 2004 Change 2003 2004
Change
----- ----- -------- ------- ------- --------
Revenue - owned hotels $530 $542
2% $2,031 $2,062 2%
Less sold hotels
(31) (6)
(138) (36)
----- ----- -------
-------
Revenue - comparable
owned hotels
$499 $536 7% $1,893
$2,026 7%
===== ===== =======
=======
Expenses - owned hotels $380 $385
1% $1,500 $1,501 -%
Less sold hotels
(23) (4)
(102) (28)
----- ----- -------
-------
Expenses - comparable
owned hotels
$357 $381 7% $1,398
$1,473 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.
The forward-looking statements in this press release are subject to numerous
risks and uncertainties, including the effects of economic conditions;
supply and demand changes for hotel rooms; competitive conditions in the
lodging industry, relationships with clients and property owners; the impact
of government regulations; and the availability of capital to finance growth,
which could cause actual results to differ materially from those expressed
in or implied by the statements herein.
|
