BEVERLY HILLS, Calif - Jan. 31, 2006 -- Hilton Hotels Corporation (NYSE:HLT)
today reported financial results for the fourth quarter and fiscal year
ended December 31, 2005. Fourth quarter highlights:
-
Reported diluted EPS of $.26 versus $.16 in 2004 period, an increase of
63 percent; recurring EPS $.22 versus $.17 in 2004 period, an increase
of 29 percent.
-
Comparable owned hotel RevPAR up 13.5 percent; double-digit RevPAR growth
in virtually all major markets; comparable owned hotel margins increase
230 basis points from Q4 2004 to 31.4 percent (New Orleans excluded from
comparable numbers.)
-
Fees up 19 percent from RevPAR gains, new units.
-
Timeshare revenues up 24 percent; profitability declines 14 percent due
to comparatively higher costs.
-
All-cash acquisition of the lodging assets of Hilton Group plc expected
to be completed in the first quarter 2006.
Hilton reported fourth quarter 2005 net income of $105 million compared
with $65 million in the 2004 quarter. Diluted net income per share was
$.26 in the 2005 fourth quarter, versus $.16 in the 2004 period. Two non-recurring
items in the 2005 quarter impacted earnings per share by $.04: 1) a net
gain of $.06 per share from asset dispositions, and 2) a $.02 per share
hedging loss. EPS in the 2004 fourth quarter was impacted by $.01 as a
result of an impairment charge on a Red Lion hotel and the sale of two
Doubletree properties.
The company reported fourth quarter 2005 total operating income of $193
million (a 15 percent increase from $168 million in the 2004 period,) on
total revenue of $1.083 billion (a 3 percent increase from $1.054 billion
in the 2004 quarter.) Total company earnings before interest, taxes, depreciation
and amortization ("Adjusted EBITDA") were $273 million, an increase of
2 percent from $267 million in the 2004 quarter.
For full-year 2005, Hilton reported net income of $460 million versus
$238 million in 2004; diluted net income per share was $1.13 compared with
$.60 in 2004. Non-recurring items benefited the 2005 full year by $.28
per share, and benefited the 2004 year by $.02 per share. Total company
operating income was $805 million in 2005 (a 22 percent increase from $658
million in 2004,) on revenue of $4.437 billion (up 7 percent from $4.146
billion in 2004.) Total company Adjusted EBITDA was $1.140 billion, a 12
percent increase from $1.021 billion in 2004.
Fourth quarter and full-year 2005 revenue, operating income and Adjusted
EBITDA were impacted by asset sales completed during the year.
Owned Hotel Results
Increases in room nights and average daily rate (ADR) across all business
segments - particularly in the business transient category - resulted in
double-digit revenue-per-available-room (RevPAR) gains in the fourth quarter
at the company's owned hotels in New York City, Honolulu, Boston, Washington,
D.C., Chicago and the San Francisco/San Jose area.
Across all brands, revenue from the company's owned hotels (majority
owned and controlled hotels) was $490 million, a 10 percent decrease from
$542 million in the 2004 period. Total revenue from comparable owned hotels
(excluding New Orleans and the impact of 22 property sales dating back
to October 1, 2004) was up 10 percent. RevPAR from comparable owned hotels
increased a strong 13.5 percent. Comparable owned hotel occupancy increased
2.5 points to 74.2 percent, while ADR increased 9.7 percent to $195.53.
Approximately 75 percent of the quarterly RevPAR increase at the comparable
owned hotels was attributable to the ADR gains.
Total owned hotel expenses were down 11 percent in the quarter to $342
million. Expenses at the comparable owned hotels increased 6 percent, due
primarily to an increase in occupied rooms. Cost-per-occupied-room (CPOR)
increased 2.9 percent in the quarter.
Comparable owned hotel margins in the fourth quarter increased 230
basis points to 31.4 percent.
For full-year 2005, revenue from the company's owned hotels (majority
owned and controlled hotels) was $2.049 billion, compared with $2.062 billion
in 2004. Total revenue from comparable owned hotels (excluding New Orleans
and the impact of 25 property sales dating back to January 1, 2004) was
up 10 percent from 2004. RevPAR from comparable owned hotels (also excluding
New Orleans and the aforementioned property sales) increased 11.9 percent
for full-year 2005 when compared with full-year 2004; occupancy increased
2.2 points to 77.3 percent, and ADR showed an 8.7 percent increase to $178.35.
Total owned hotel expenses in 2005 were down 3 percent to $1.459 billion;
expenses at the comparable owned hotels increased 7 percent in 2005. Comparable
owned hotel margins increased 180 basis points in 2005 to 28.8 percent.
The company's two owned hotels in New Orleans - the Hilton New Orleans
Riverside and the Hilton New Orleans Airport - are excluded from the comparable
numbers due to interruptions in operations caused by Hurricane Katrina.
Both hotels are currently fully operational.
System-wide RevPAR; Management/Franchise Fees
Each of the company's brands reported significant system-wide RevPAR
increases, with particularly strong gains in ADR. On a system-wide basis
(including managed and franchised properties,) the company's brands showed
fourth quarter RevPAR gains as follows: Hilton, 12.5 percent; Doubletree,
10.7 percent; Hampton Inn, 9.8 percent; Embassy Suites, 9.4 percent; Hilton
Garden Inn, 8.0 percent, Homewood Suites by Hilton, 7.5 percent.
Management and franchise fees increased 19 percent in the fourth quarter
to $114 million, benefiting from both RevPAR gains and the addition of
new units.
For full-year 2005, system-wide RevPAR at Hilton's brands improved as
follows: Hilton, 11.8 percent; Hampton Inn, 11.1 percent; Doubletree, 10.4
percent; Embassy Suites, 9.3 percent; Hilton Garden Inn, 9.3 percent, Homewood
Suites by Hilton, 7.2 percent.
Management and franchise fees in 2005 increased 18 percent from 2004
to a record $452 million.
Brand Development/Unit Growth
In the fourth quarter, the company added 48 properties and 6,970 rooms
to its system as follows: Hampton Inn, 19 hotels and 1,690 rooms; Hilton
Garden Inn, 14 hotels and 1,913 rooms; Doubletree, 6 hotels and 1,686 rooms;
Homewood Suites by Hilton, 3 hotels and 302 rooms; Embassy Suites, 2 hotels
and 538 rooms; Hilton, 1 hotel and 289 rooms; Conrad, 1 hotel and 311 rooms;
Hilton Grand Vacations, 1 property and 22 units, and other non-branded,
1 hotel and 219 rooms. Seventeen hotels and 2,412 rooms were removed from
the system during the quarter.
During the fourth quarter, the Hilton brand added a new full-service
hotel in British Columbia, Canada (the Whistler Ski Resort and Spa), and
in early 2006 added new hotels in Dallas (the Anatole Hotel) and in San
Francisco's Financial District. Doubletree added hotels in the fourth quarter
in Milwaukee, Atlanta, St. Louis, Rochester, Cleveland, Newark and Houston,
and in early 2006 in Tampa, Detroit, Pittsburgh and Bloomington (Ill.)
Also in the fourth quarter, Conrad Hotels added a new luxury property in
Chicago.
In early 2006, the company introduced a new brand line, the Waldorf=Astoria
Collection. This new, elite brand designation debuts with New York's legendary
Waldorf=Astoria, along with three world-class luxury resorts newly managed
by Hilton: the Grand Wailea Resort Hotel & Spa on the island of Maui
in Hawaii; the Arizona Biltmore Resort & Spa in Phoenix, and La Quinta
Resort & Club in La Quinta, California.
For full-year 2005, the company added 175 properties and 24,631 rooms
to its system. Forty-six properties and 8,370 rooms were removed from the
system during 2005.
At December 31, 2005, the Hilton system consisted of 2,388 hotels and
374,669 rooms. The company's current development pipeline is its biggest
yet, with approximately 600 hotels and 78,000 rooms at December 31, 2005,
not including potential international development.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, reported a 14 percent decline in profitability in the fourth
quarter owing primarily to higher costs. Results in the 2005 period reflect
a comparatively higher cost of product, partially due to a change in the
sales mix, and an increase in corporate overhead. Unit sales declined 6
percent in the quarter, and average unit sales price increased 7 percent,
driven by Las Vegas, Orlando and Waikoloa. HGVC had fourth quarter revenue
of $130 million, a 24 percent increase from $105 million in the 2004 quarter.
Expenses were $111 million in the fourth quarter, compared with $83 million
in the 2004 period.
For full-year 2005, HGVC revenue was $554 million, compared with $421
million in 2004; expenses were $420 million versus $316 million in 2004.
Asset Dispositions
During the fourth quarter, the company sold six hotels - the Hilton
Dallas-Ft. Worth, Hilton Anchorage, Hilton Portland, Hilton San Diego Resort,
Hilton Boston Back Bay and Hilton Southfield (Michigan) - for a total of
approximately $420 million. Hilton is retaining management or franchise
agreements on all six properties. In 2005, the company sold 20 owned hotels
for more than $1 billion, retaining management or franchise contracts on
all but one property.
Acquisition of Hilton International
On December 29, 2005, the company announced an agreement to acquire
the lodging assets of Hilton Group plc (known collectively as Hilton International)
for approximately GBP 3.3 billion. The company will finance the transaction
with existing cash on hand at the time of the closing, and with borrowings
under a new bank facility that is being arranged through a large consortium
of banks.
The transaction received approval from Hilton Group shareholders January
27, and is on schedule to be completed in the first quarter 2006. Completion
of the transaction remains subject to a number of conditions, including
receipt of certain competition and governmental clearances.
Corporate Finance
At December 31, 2005, 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 $1.3 billion at December 31, 2005.
The company's average basic and diluted share counts for the fourth
quarter were 382 million and 415 million, respectively. For full-year 2005,
the company's average basic and diluted share counts were 383 million and
417 million, respectively.
Hilton's debt currently has an average life of 7.9 years, at an average
cost of approximately 7.1 percent.
The company's effective tax rate in the fourth quarter 2005 was 35 percent.
The effective tax rate benefited from tax credits associated with the company's
synthetic fuel investment.
Total hotel capital expenditures in the fourth quarter were $101 million,
with an additional $54 million expended for timeshare development. For
full-year 2005, total capital expenditures were $602 million, including
$179 million expended for timeshare development and $180 million related
to land acquisition on Hawaii's Big Island.
Updated 2006 Outlook
The company provided the following estimates for full-year 2006, noting
that the estimates are for Hilton Hotels Corporation as a stand-alone company
and do not include any impact from the pending Hilton International transaction.
More detailed guidance will be provided in the company's first quarter
2006 earnings report if, as expected, the Hilton International acquisition
is completed in the first quarter.
-
Comparable U.S. owned hotel RevPAR -
Increase of 8 - 10%
-
Comparable U.S. owned hotel margin growth - 100
- 200 basis points
-
North America management/franchise fee growth - Approximately 15%
-
Timeshare profitability growth -
Approximately 10%
Total domestic capital spending in 2006 is expected to be approximately
$495 million, broken out as follows: approximately $125 million for routine
improvements, $195 million for timeshare projects, and $175 million in
hotel renovation, ROI or special projects.
The company anticipates adding approximately 200 hotels and 28,000
rooms to its system in 2006, not including potential international development.
"While 2005 will be remembered for our historic agreement to acquire
Hilton International, we are also very pleased that in the fourth quarter
and full-year 2005 we achieved exceptional financial results, experienced
strong performance across our owned hotels, opened more hotels in the U.S.
than anyone in the industry, saw record results in our timeshare and fee
businesses, and introduced a number of exciting product, service and marketing
initiatives," said Stephen F. Bollenbach, co-chairman and chief executive
officer of Hilton Hotels Corporation.
"Demand for hotel rooms, particularly among business travelers, continued
to accelerate in 2005. Occupancy levels of 90 percent were the norm at
some of our large hotels in New York and Hawaii, and the increase in business
travel -- coupled with little new full-service supply -- enabled us to
once again significantly increase room rates.
"Unit growth continues to be strong across all of our brands. We were
pleased in 2005 to mark the opening of the 1,300th Hampton Inn and the
250th Hilton Garden Inn, while also seeing outstanding growth in our full-service
Hilton and Doubletree brands. Our development pipeline has never been bigger,
which speaks to the appeal of our brands to hotel owners."
Mr. Bollenbach continued: "Our decision to increase our investment in
timeshare has paid off as our selective approach to development, along
with high quality product, has generated strong returns, the best in the
industry.
"In 2006, we look forward to a continuation of the strong business trends
we experienced in 2005, along with the new worldwide growth opportunities
presented by our acquisition of Hilton International. We had an exciting
and productive year in 2005, and anticipate a great future in 2006 and
beyond for our customers, team members, owners and shareholders."
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31
December 31
------------------------ --------------------------
2004 2005 % Change 2004
2005 % Change
------ ------ ---------- ------- ------- ----------
Revenue
Owned hotels $542
$490 (10)% $2,062 $2,049
(1)%
Leased hotels
26 24 (8)
111 111 -
Management and
franchise fees 96
114 19
384 452 18
Timeshare and
other income
117 149 27
463 606 31
------ ------
------- -------
781 777 (1)
3,020 3,218 7
Other revenue
from managed and
franchised
properties
273 306 12
1,126 1,219 8
------ ------
------- -------
1,054 1,083 3
4,146 4,437 7
Expenses
Owned hotels
385 342 (11)
1,501 1,459 (3)
Leased hotels
25 22 (12)
101 99 (2)
Depreciation and
amortization
83 71 (14)
330 299 (9)
Impairment loss
and related costs 5
- -
5 7 40
Other operating
expenses
104 131 26
395 497 26
Corporate expense 22
28 27
85 103 21
------ ------
------- -------
624 594 (5)
2,417 2,464 2
Other expenses
from managed and
franchised
properties
271 305 13
1,120 1,212 8
------ ------
------- -------
895 899 -
3,537 3,676 4
Operating income
from unconsolidated
affiliates
9 9 -
49 44 (10)
------ ------
------- -------
Operating income 168
193 15
658 805 22
Interest and
dividend income
7 18 -
26 32 23
Interest expense (65)
(63) (3) (274)
(259) (5)
Net interest from
unconsolidated
affiliates and
non-controlled
interests
(6) (7) 17
(26) (26) -
Net (loss) gain on
asset dispositions
and other
(3) 27 -
(5) 103 -
Loss from non-
operating
affiliates
(3) (4) 33
(6) (17) -
------ ------
------- -------
Income before
taxes and minority
and non-controlled
interests
98 164 67
373 638 71
Provision for
income taxes
(31) (58) 87
(127) (166) 31
Minority and non-
controlled
interests, net
(2) (1) (50)
(8) (12) 50
------ ------
------- -------
Net income
$65 $105 62%
$238 $460 93%
====== ======
======= =======
Net income per share(1)
--------------------
Basic
$.17 $.28 65%
$.62 $1.20 94%
====== ======
======= =======
Diluted
$.16 $.26 63%
$.60 $1.13 88%
====== ======
======= =======
Average shares -
basic
388 382 (2)%
384 383 -%
====== ======
======= =======
Average shares -
diluted
422 415 (2)%
418 417 -%
====== ======
======= =======
(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.
HILTON
HOTELS CORPORATION
U.S. Owned Statistics(1)
Three Months Ended
Twelve Months Ended
December 31
December 31
-------------------
-------------------
2004 2005 Change
2004 2005 Change
--------- --------- -------- --------- --------- ---------
Hilton
-----------
Occupancy 72.5 %
74.8 % 2.3 pts 75.7 % 77.9 %
2.2 pts
Average
Rate $185.62
$204.68 10.3 % $169.45 $184.94
9.1 %
RevPAR $134.56 $153.13
13.8 % $128.32 $144.00 12.2
%
All Other
-----------
Occupancy 65.8 %
69.5 % 3.7 pts 70.3 % 73.2 %
2.9 pts
Average
Rate $116.55
$120.58 3.5 % $120.33 $125.00
3.9 %
RevPAR $76.69
$83.85 9.3 % $84.58
$91.45 8.1 %
Total
-----------
Occupancy 71.7 %
74.2 % 2.5 pts 75.1 % 77.3 %
2.2 pts
Average
Rate $178.26
$195.53 9.7 % $164.11 $178.35
8.7 %
RevPAR $127.83 $145.08
13.5 % $123.24 $137.90 11.9
%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2005 and owned by us since
January 1, 2004. Comparable hotels
exclude the Company's owned
hotels in New Orleans.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months Ended
Twelve Months Ended
December 31
December 31
-------------------
-------------------
2004 2005 Change
2004 2005 Change
--------- --------- -------- --------- --------- --------
Hilton
------------
Occupancy 65.2 %
67.9 % 2.7 pts 69.6 % 71.7 %
2.1 pts
Average
Rate $135.80
$146.85 8.1 % $129.38 $140.42
8.5 %
RevPAR $88.61
$99.72 12.5 % $90.06 $100.68
11.8 %
Hilton Garden Inn
-----------------
Occupancy 65.4 %
66.3 % 0.9 pts 69.1 % 71.1 %
2.0 pts
Average
Rate
$98.17 $104.69 6.6 % $98.65
$104.74 6.2 %
RevPAR $64.23
$69.37 8.0 % $68.14
$74.47 9.3 %
Doubletree
------------
Occupancy 63.7 %
65.5 % 1.8 pts 68.2 % 70.3 %
2.1 pts
Average
Rate $104.06
$112.14 7.8 % $102.29 $109.60
7.1 %
RevPAR $66.28
$73.40 10.7 % $69.78 $77.01
10.4 %
Embassy Suites
--------------
Occupancy 65.8 %
68.1 % 2.3 pts 70.6 % 73.2 %
2.6 pts
Average
Rate $122.84
$129.89 5.7 % $123.30 $129.98
5.4 %
RevPAR $80.84
$88.47 9.4 % $87.01
$95.09 9.3 %
Homewood Suites by Hilton
-------------------------
Occupancy 69.9 %
71.6 % 1.7 pts 73.5 % 75.6 %
2.1 pts
Average
Rate
$96.09 $100.87 5.0 % $96.51
$100.57 4.2 %
RevPAR $67.13
$72.19 7.5 % $70.93
$76.05 7.2 %
Hampton
-------
Occupancy 65.3 %
66.7 % 1.4 pts 68.7 % 71.5 %
2.8 pts
Average
Rate
$81.07 $87.16 7.5 % $81.57
$86.98 6.6 %
RevPAR $52.97
$58.16 9.8 % $56.00
$62.22 11.1 %
Other
-----
Occupancy 68.9 %
69.3 % 0.4 pts 71.7 % 71.5 %
(0.2)pts
Average
Rate $145.68
$155.25 6.6 % $133.03 $148.80
11.9 %
RevPAR $100.38
$107.55 7.1 % $95.33 $106.33
11.5 %
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2005 and owned, operated
or franchised by us since January
1, 2004. Comparable hotels
exclude the Company's owned hotels
in New Orleans.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
December
Change to
--------------------------------------- ------------------
2004
2005
December 2004
Number of Number
of Number of
Properties Rooms Properties Rooms Properties
Rooms
------------------- ------------------- ------------------
Hilton
------
Owned
36 27,492 21
20,524 (15)(6,968)
Leased
1 499
1 499
- -
Joint
Venture
10 4,177
11 4,625
1 448
Managed
24 13,822 27
15,923 3
2,101
Franchised
159 43,266 174
48,907 15 5,641
------------------- ------------------- ------------------
230 89,256 234
90,478 4
1,222
Hilton Garden Inn
-----------------
Owned
1 162
1 162
- -
Joint
Venture
1 128
1 128
- -
Managed
6 796
7 886
1 90
Franchised
211 28,755 250
34,347 39 5,592
------------------- ------------------- ------------------
219 29,841 259
35,523 40 5,682
Doubletree
-----------
Owned
4 1,702
3 1,349
(1) (353)
Leased
6 2,144
5 1,746
(1) (398)
Joint
Venture
24 7,208
14 4,306 (10)(2,902)
Managed
38 10,074 30
8,060 (8)(2,014)
Franchised
82 19,794 108
26,707 26 6,913
------------------- ------------------- ------------------
154 40,922 160
42,168 6
1,246
Embassy Suites
--------------
Owned
4 881
3 663
(1) (218)
Joint
Venture
27 7,279
25 6,586
(2) (693)
Managed
54 14,134 56
14,832 2
698
Franchised
90 20,421 98
22,348 8
1,927
------------------- ------------------- ------------------
175 42,715 182
44,429 7
1,714
Homewood Suites by Hilton
-------------------------
Owned
3 398
1 140
(2) (258)
Managed
36 4,304
41 4,706
5 402
Franchised
104 11,352 122
13,287 18 1,935
------------------- ------------------- ------------------
143 16,054 164
18,133 21 2,079
Hampton
-------
Owned
1 133
1 133
- -
Managed
35 4,462
34 4,453
(1) (9)
Franchised 1,254
125,803 1,301 129,535
47 3,732
------------------- ------------------- ------------------
1,290 130,398 1,336 134,121
46 3,723
Other
-----
Owned
1 300
- -
(1) (300)
Joint
Venture
3 1,394
3 1,395
- 1
Managed
13 3,788
15 4,255
2 467
Franchised
- -
1 219
1 219
------------------- ------------------- ------------------
17 5,482
19 5,869
2 387
Timeshare
31 3,740
34 3,948
3 208
---------
Total
-----
Owned
50 31,068 30
22,971 (20)(8,097)
Leased
7 2,643
6 2,245
(1) (398)
Joint
Venture
65 20,186 54
17,040 (11)(3,146)
Managed
206 51,380 210
53,115 4
1,735
Franchised 1,900
249,391 2,054 275,350
154 25,959
Timeshare
31 3,740
34 3,948
3 208
------------------- ------------------- ------------------
TOTAL
PROPERTIES 2,259
358,408 2,388 374,669
129 16,261
======================================= ==================
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
--------------------- -------------------------
2004 2005 % Change 2004 2005
% Change
----- ----- --------- ------- ------- ---------
Adjusted EBITDA
$267 $273 2% $1,021
$1,140 12%
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(8) (9) 13
(28) (31) 11
Non-recurring items (5)
- -
(5) (7) 40
Operating interest and
dividend income
(5) (2) (60)
(8) (8) -
Operating income of
non-controlled
interests
2 2 -
8 10 25
Net (loss) gain on
asset dispositions
and other
(3) 27 -
(5) 103 -
Loss from non-
operating affiliates (3)
(4) 33
(6) (17) -
Minority and non-
controlled interests,
net
(2) (1) (50)
(8) (12) 50
----- -----
------- -------
EBITDA
243 286 18
969 1,178 22
Depreciation and
amortization
(83) (71) (14) (330)
(299) (9)
Interest expense, net (64) (52)
(19) (274) (253)
(8)
Provision for income
taxes
(31) (58) 87
(127) (166) 31
----- -----
------- -------
Net income
$65 $105 62%
$238 $460 93%
===== =====
======= =======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales and New Orleans
($ in millions)
Three Months Ended Twelve Months Ended
December 31
December 31
--------------------- -------------------------
2004 2005 % Change 2004 2005
% Change
----- ----- --------- ------- ------- ---------
Revenue - owned hotels $542 $490
(10)% $2,062 $2,049 (1)%
Less sold hotels and
New Orleans
(136) (44)
(543) (379)
----- -----
------- -------
Revenue - comparable
owned hotels
$406 $446 10 % $1,519 $1,670
10 %
===== =====
======= =======
Expenses - owned
hotels
$385 $342 (11)% $1,501 $1,459
(3)%
Less sold hotels and
New Orleans
(97) (36)
(392) (269)
----- -----
------- -------
Expenses - comparable
owned hotels
$288 $306 6 % $1,109
$1,190 7 %
===== =====
======= =======
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 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
-----------------------
We exclude from Adjusted EBITDA the
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. |