HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months
Twelve Months
Ended
Ended
December 31,
December 31,
2005 2006 % Change 2005
2006 % Change
------ ------ --------- ------- ------- ---------
Revenue
Owned hotels
$490 $683 39 % $2,049
$2,521 23 %
Leased hotels
24 731 -
111 2,347 -
Management and
franchise fees
114 182 60
452 684 51
Timeshare and
other income
149 161 8
606 767 27
------ ------
------- -------
777 1,757 126 3,218
6,319 96
Other revenue from
managed and
franchised
properties
306 475 55
1,219 1,843 51
------ ------
------- -------
1,083 2,232 106 4,437
8,162 84
Expenses
Owned hotels
342 459 34
1,459 1,780 22
Leased hotels
22 605 -
99 1,985 -
Depreciation and
amortization
71 120 69
299 441 47
Impairment loss
and related costs
- -
- 7
- -
Other operating
expenses
131 191 46
497 736 48
Corporate expense 28
41 46
103 171 66
------ ------
------- -------
594 1,416 138 2,464
5,113 108
Other expenses
from managed and
franchised
properties
305 472 55
1,212 1,832 51
------ ------
------- -------
899 1,888 110 3,676
6,945 89
Operating income
from unconsolidated
affiliates
9 14 56
44 57
30
------ ------
------- -------
Operating income 193
358 85
805 1,274 58
Interest and
dividend income
18 5 (72)
32 27 (16)
Interest expense
(63) (127) 102 (259)
(498) 92
Net interest from
unconsolidated
affiliates and non-
controlled interests (7)
(11) 57 (26)
(45) 73
Net gain on foreign
currency
transactions
- 14
- -
24 -
Net gain on asset
dispositions and
other
27 36 33
103 72 (30)
Loss from non-
operating
affiliates
(4) (4) -
(17) (16) (6)
------ ------
------- -------
Income before taxes
and minority and
non-controlled
interests
164 271 65
638 838 31
Provision for income
taxes
(58) (61) 5
(166) (259) 56
Minority and non-
controlled
interests, net
(1) (3) -
(12) (7) (42)
------ ------
------- -------
Net income
$105 $207 97 %
$460 $572 24 %
====== ======
======= =======
Net income per share
(1)
--------------------
Basic
$.28 $.53 89 % $1.20
$1.49 24 %
====== ======
======= =======
Diluted
$.26 $.50 92 % $1.13
$1.39 23 %
====== ======
======= =======
Average shares -
basic
382 387 1 %
383 385
1 %
====== ======
======= =======
Average shares -
diluted
415 422 2 %
417 420
1 %
====== ======
======= =======
(1) EPS for the twelve 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
Comparable Owned Statistics (1)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
Worldwide -
57 Hotels
-------------
Hilton
-----------
Occupancy 73.6 %
74.3 % 0.7 pts 75.9 % 76.6 %
0.7 pts
Average
Rate $192.44
$210.58 9.4 % $177.22 $191.05
7.8 %
RevPAR $141.72
$156.48 10.4 % $134.57 $146.35
8.8 %
All Other
-----------
Occupancy 71.6 %
72.2 % 0.6 pts 74.3 % 75.3 %
1.0 pts
Average
Rate $107.91
$122.52 13.5 % $112.45 $121.68
8.2 %
RevPAR $77.31
$88.42 14.4 % $83.52 $91.63
9.7 %
Total
-----------
Occupancy 73.4 %
74.0 % 0.6 pts 75.7 % 76.4 %
0.7 pts
Average
Rate $182.42
$200.13 9.7 % $169.48 $182.73
7.8 %
RevPAR $133.90
$148.19 10.7 % $128.35 $139.68
8.8 %
North America
- 25 Hotels
-------------
Hilton
-----------
Occupancy 76.5 %
77.2 % 0.7 pts 79.3 % 79.3 %
- pts
Average
Rate $213.05
$232.41 9.1 % $191.40 $208.18
8.8 %
RevPAR $163.05
$179.32 10.0 % $151.85 $165.03
8.7 %
All Other
-----------
Occupancy 69.5 %
70.3 % 0.8 pts 73.2 % 74.6 %
1.4 pts
Average
Rate $120.58
$135.01 12.0 % $125.00 $135.54
8.4 %
RevPAR $83.85
$94.92 13.2 % $91.45 $101.06
10.5 %
Total
-----------
Occupancy 75.6 %
76.3 % 0.7 pts 78.5 % 78.7 %
0.2 pts
Average
Rate $202.08
$220.77 9.2 % $183.41 $199.24
8.6 %
RevPAR $152.83
$168.37 10.2 % $144.05 $156.73
8.8 %
International
- 32 Hotels
-------------
Hilton
-----------
Occupancy 67.1 %
67.9 % 0.8 pts 68.2 % 70.6 %
2.4 pts
Average
Rate $139.46
$154.94 11.1 % $139.58 $147.94
6.0 %
RevPAR $93.64
$105.24 12.4 % $95.15 $104.45
9.8 %
All Other
-----------
Occupancy 77.7 %
77.5 % (0.2)pts 77.5 % 77.4 % (0.1)pts
Average
Rate
$75.16 $89.78 19.5 % $78.20
$83.12 6.3 %
RevPAR $58.42
$69.60 19.1 % $60.59 $64.37
6.2 %
Total
-----------
Occupancy 68.2 %
68.9 % 0.7 pts 69.1 % 71.3 %
2.2 pts
Average
Rate $131.87
$147.34 11.7 % $132.38 $140.64
6.2 %
RevPAR $89.99
$101.55 12.8 % $91.53 $100.30
9.6 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January 1, 2005. Includes
hotels owned as
of December 31, 2006 which were owned by HHC or
HI since January 1,
2005. Excludes the Company's owned hotels in New
Orleans.
HILTON HOTELS CORPORATION
Comparable Leased Statistics (1)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
Worldwide -
196 Hotels
-------------
Hilton
-----------
Occupancy 70.8 %
71.8 % 1.0 pts 71.3 % 73.4 %
2.1 pts
Average
Rate $142.94
$165.33 15.7 % $145.74 $156.62
7.5 %
RevPAR $101.26
$118.64 17.2 % $103.92 $115.01
10.7 %
Scandic
-----------
Occupancy 62.2 %
63.3 % 1.1 pts 63.8 % 64.9 %
1.1 pts
Average
Rate $102.92
$119.41 16.0 % $105.22 $110.25
4.8 %
RevPAR $64.06
$75.55 17.9 % $67.16 $71.52
6.5 %
All Other
-----------
Occupancy 66.3 %
70.1 % 3.8 pts 74.4 % 76.4 %
2.0 pts
Average
Rate $115.88
$132.60 14.4 % $116.44 $129.16
10.9 %
RevPAR $76.87
$92.97 20.9 % $86.60 $98.65
13.9 %
Total
-----------
Occupancy 66.8 %
67.8 % 1.0 pts 68.0 % 69.7 %
1.7 pts
Average
Rate $125.09
$144.58 15.6 % $127.34 $135.87
6.7 %
RevPAR $83.54
$98.07 17.4 % $86.65 $94.63
9.2 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January 1, 2005. Includes
hotels leased as
of December 31, 2006 which were leased by HHC or
HI since January 1,
2005.
HILTON HOTELS CORPORATION
Comparable Systemwide Statistics (1)
Regional Summary
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
North America (US &
Canada)
---------------------
Occupancy 67.5 %
68.2 % 0.7 pts 71.8 % 72.8 %
1.0 pts
Average
Rate $113.96
$122.92 7.9 % $111.61 $120.56
8.0 %
RevPAR $76.92
$83.87 9.0 % $80.16
$87.77 9.5 %
United Kingdom &
Ireland
---------------------
Occupancy 74.2 %
75.1 % 0.9 pts 74.2 % 77.1 %
2.9 pts
Average
Rate $156.52
$182.72 16.7 % $158.63 $169.92
7.1 %
RevPAR $116.10
$137.21 18.2 % $117.70 $130.98
11.3 %
Continental
Europe
------------
Occupancy 66.8 %
68.2 % 1.4 pts 67.5 % 69.0 %
1.5 pts
Average
Rate $146.20
$166.46 13.9 % $150.00 $161.27
7.5 %
RevPAR $97.70
$113.47 16.1 % $101.27 $111.29
9.9 %
Africa
------------
Occupancy 67.5 %
74.2 % 6.7 pts 66.0 % 71.3 %
5.3 pts
Average
Rate $124.16
$142.95 15.1 % $122.87 $133.52
8.7 %
RevPAR $83.81
$106.02 26.5 % $81.13 $95.16
17.3 %
Middle East
------------
Occupancy 72.3 %
72.1 % (0.2)pts 75.7 % 72.7 % (3.0)pts
Average
Rate $118.38
$138.02 16.6 % $103.26 $115.84
12.2 %
RevPAR $85.54
$99.50 16.3 % $78.12 $84.24
7.8 %
Asia Pacific
------------
Occupancy 78.9 %
79.1 % 0.2 pts 77.4 % 77.3 %
(0.1)pts
Average
Rate $127.09
$142.99 12.5 % $125.16 $132.65
6.0 %
RevPAR $100.28
$113.09 12.8 % $96.93 $102.57
5.8 %
Latin America &
Caribbean
---------------------
Occupancy 66.3 %
68.9 % 2.6 pts 68.8 % 71.4 %
2.6 pts
Average
Rate $117.27
$130.53 11.3 % $116.60 $128.03
9.8 %
RevPAR $77.75
$89.98 15.7 % $80.25 $91.47
14.0 %
Nordic
------------
Occupancy 62.6 %
63.7 % 1.1 pts 64.1 % 65.3 %
1.2 pts
Average
Rate $106.19
$123.56 16.4 % $108.85 $114.17
4.9 %
RevPAR $66.42
$78.73 18.5 % $69.82 $74.57
6.8 %
Total
------------
Occupancy 67.9 %
68.7 % 0.8 pts 71.4 % 72.5 %
1.1 pts
Average
Rate $117.52
$128.80 9.6 % $115.43 $124.58
7.9 %
RevPAR $79.73
$88.48 11.0 % $82.46 $90.27
9.5 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January 1, 2005. Includes
hotels in the
system as of December 31, 2006 which were in the
system of HHC or HI
since January 1, 2005. Excludes the Company's owned
hotels in New
Orleans. Excludes data for HI franchise hotels.
HILTON HOTELS CORPORATION
Comparable Systemwide Statistics (1)
Brand Summary
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2005 2006 Change
2005 2006 Change
--------- --------- ------- --------- --------- --------
Hilton
------------
Occupancy 69.4 %
70.1 % 0.7 pts 71.8 % 72.8 %
1.0 pts
Average
Rate
$142.35 $158.10 11.1 % $138.55
$149.86 8.2 %
RevPAR $98.79
$110.83 12.2 % $99.50 $109.11
9.7 %
Hilton Garden
Inn
--------------
Occupancy 65.8 %
66.7 % 0.9 pts 70.0 % 71.4 %
1.4 pts
Average
Rate
$103.80 $110.74 6.7 % $103.89
$111.34 7.2 %
RevPAR $68.33
$73.85 8.1 % $72.70 $79.55
9.4 %
Doubletree
------------
Occupancy 66.1 %
66.4 % 0.3 pts 70.4 % 71.6 %
1.2 pts
Average
Rate
$116.65 $127.29 9.1 % $112.58
$122.32 8.7 %
RevPAR $77.12
$84.57 9.7 % $79.30 $87.60
10.5 %
Embassy
Suites
-------------
Occupancy 69.2 %
70.7 % 1.5 pts 73.8 % 74.9 %
1.1 pts
Average
Rate
$130.44 $140.30 7.6 % $129.93
$140.18 7.9 %
RevPAR $90.25
$99.19 9.9 % $95.85 $105.05
9.6 %
Homewood Suites by
Hilton
----------------------
Occupancy 71.4 %
71.5 % 0.1 pts 75.2 % 75.8 %
0.6 pts
Average
Rate
$101.60 $108.41 6.7 % $101.31
$108.31 6.9 %
RevPAR $72.50
$77.49 6.9 % $76.19 $82.14
7.8 %
Hampton
------------
Occupancy 66.9 %
67.8 % 0.9 pts 71.6 % 72.5 %
0.9 pts
Average
Rate
$88.05 $94.68 7.5 % $87.80
$94.69 7.8 %
RevPAR $58.91
$64.20 9.0 % $62.87 $68.66
9.2 %
Scandic
------------
Occupancy 62.4 %
63.5 % 1.1 pts 64.0 % 65.1 %
1.1 pts
Average
Rate
$102.50 $119.00 16.1 % $104.86
$109.92 4.8 %
RevPAR $64.00
$75.58 18.1 % $67.11 $71.58
6.7 %
Conrad
------------
Occupancy 67.6 %
69.7 % 2.1 pts 70.4 % 69.6 % (0.8)pts
Average
Rate
$161.37 $181.28 12.3 % $153.35
$173.75 13.3 %
RevPAR $109.10
$126.30 15.8 % $107.90 $120.94
12.1 %
Other
------------
Occupancy 73.9 %
77.6 % 3.7 pts 75.2 % 79.5 %
4.3 pts
Average
Rate
$139.60 $158.16 13.3 % $132.99
$145.13 9.1 %
RevPAR $103.22
$122.72 18.9 % $99.98 $115.36
15.4 %
Total
------------
Occupancy 67.9 %
68.7 % 0.8 pts 71.4 % 72.5 %
1.1 pts
Average
Rate
$117.52 $128.80 9.6 % $115.43
$124.58 7.9 %
RevPAR $79.73
$88.48 11.0 % $82.46 $90.27
9.5 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January 1, 2005. Includes
hotels in the
system as of December 31, 2006 which were in the
system of HHC or HI
since January 1, 2005. Excludes the Company's owned
hotels in New
Orleans. Excludes data for HI franchise hotels.
HILTON HOTELS CORPORATION
Supplementary Statistical Information (1)
December
Change to
--------------------------------------- ------------------
2005
2006 December
2005
Number of Number
of Number of
Properties Rooms Properties Rooms Properties
Rooms
------------------- ------------------- ------------------
Hilton
-----------
Owned
57 32,369 47
26,347 (10)(6,022)
Leased
79 23,460 80
23,798 1
338
Joint
Venture
16 6,844
14 6,156
(2) (688)
Managed
137 47,709 152
56,633 15 8,924
Franchised
193 54,784 205
59,671 12 4,887
------------------- ------------------- ------------------
482 165,166 498 172,605
16 7,439
Hilton
Garden Inn
-----------
Owned
1 162
1 162
- -
Joint
Venture
1 128
1 128
- -
Managed
7 886
7 886
- -
Franchised
250 34,347 293
40,493 43 6,146
------------------- ------------------- ------------------
259 35,523 302
41,669 43 6,146
Doubletree
-----------
Owned
3 1,349
3 1,349
- -
Leased
5 1,746
4 1,554
(1) (192)
Joint
Venture
14 4,306
12 3,761
(2) (545)
Managed
30 8,060
27 7,487
(3) (573)
Franchised
108 26,707 127
30,968 19 4,261
------------------- ------------------- ------------------
160 42,168 173
45,119 13 2,951
Embassy
Suites
-----------
Owned
3 663
3 664
- 1
Joint
Venture
25 6,586
23 5,788
(2) (798)
Managed
56 14,832 56
14,918 -
86
Franchised
98 22,348 103
23,802 5
1,454
------------------- ------------------- ------------------
182 44,429 185
45,172 3
743
Homewood
Suites by
Hilton
-----------
Owned
1 140
1 140
- -
Managed
41 4,706
41 4,706
- -
Franchised
122 13,287 150
16,295 28 3,008
------------------- ------------------- ------------------
164 18,133 192
21,141 28 3,008
Hampton
-----------
Owned
1 133
1 133
- -
Managed
34 4,453
34 4,447
- (6)
Franchised 1,301
129,535 1,357 133,907
56 4,372
------------------- ------------------- ------------------
1,336 134,121 1,392 138,487
56 4,366
Scandic
-----------
Owned
1 325
3 528
2 203
Leased
121 21,405 118
21,182 (3)
(223)
Managed
3 429
3 429
- -
Franchised
5 715
5 669
- (46)
------------------- ------------------- ------------------
130 22,874 129
22,808 (1)
(66)
Conrad
-----------
Joint
Venture
3 1,395
3 1,399
- 4
Managed
12 3,660
12 3,753
- 93
------------------- ------------------- ------------------
15 5,055
15 5,152
- 97
Other
-----------
Owned
2 630
1 324
(1) (306)
Leased
2 666
1 129
(1) (537)
Managed
6 1,311
11 4,277
5 2,966
Franchised
6 2,434
2 855
(4)(1,579)
------------------- ------------------- ------------------
16 5,041
15 5,585
(1) 544
Timeshare
40 4,272
34 3,740
(6) (532)
-----------
Total
-----------
Owned
69 35,771 60
29,647 (9)(6,124)
Leased
207 47,277 203
46,663 (4)
(614)
Joint
Venture
59 19,259 53
17,232 (6)(2,027)
Managed
326 86,046 343
97,536 17 11,490
Franchised 2,083
284,157 2,242 306,660
159 22,503
Timeshare
40 4,272
34 3,740
(6) (532)
------------------- ------------------- ------------------
TOTAL
PROPERTIES 2,784
476,782 2,935 501,478
151 24,696
======================================= ==================
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January 1, 2005.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months
Twelve Months
Ended
Ended
December 31,
December 31,
2005 2006 % Change 2005
2006 % Change
------ ----- --------- ------- ------- ---------
Adjusted EBITDA
$273 $485 78 % $1,140 $1,742
53 %
Proportionate share
of depreciation and
amortization of
unconsolidated
affiliates
(9) (8) (11)
(31) (31) -
Impairment loss and
related costs
- - -
(7) -
-
Operating interest
and dividend
income
(2) (2) -
(8) (7) (13)
Operating income of
non-controlled
interests
2 3 50
10 11
10
Net gain on foreign
currency
transactions
- 14 -
- 24
-
Net gain on asset
dispositions and
other
27 36 33
103 72 (30)
Loss from non-
operating
affiliates
(4) (4) -
(17) (16) (6)
Minority and non-
controlled
interests, net
(1) (3) -
(12) (7) (42)
------ -----
------- -------
EBITDA
286 521 82
1,178 1,788 52
Depreciation and
amortization
(71) (120) 69 (299)
(441) 47
Interest expense,
net
(52) (133) 156 (253)
(516) 104
Provision for
income taxes
(58) (61) 5
(166) (259) 56
------ -----
------- -------
Net income
$105 $207 97 % $460
$572 24 %
====== =====
======= =======
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2007 Outlook
($ in millions, except per share amounts)
Estimated Estimated
Full Year 2007 Full Year 2007
Low End High End
-------------- --------------
Adjusted EBITDA
$1,790 $1,850
Proportionate share of depreciation
and amortization of unconsolidated
affiliates
(31) (31)
Operating interest and dividend income
(4) (4)
Operating income of non-controlled
interests
11
11
Loss from non-operating affiliates
(16) (16)
Minority and non-controlled interests,
net
(6) (6)
-------------- --------------
EBITDA
1,744 1,804
Depreciation and amortization
(500) (500)
Interest expense, net
(502) (500)
Provision for income taxes
(242) (264)
-------------- --------------
Net income
$500 $540
============== ==============
Diluted EPS
$1.20 $1.30
============== ==============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Pro Forma Revenue and Expenses
($ in millions)
Owned Hotels
----------------------------------------------------------------------
Three Months % or Twelve Months
% or
Ended
Ended
December 31, basis December 31, basis
point
point
2005 2006 Change 2005
2006 Change
-------------------- -----------------------
Revenue
---------------------
Reported
$490 $683
$2,049 $2,521
Less sold hotels
and non-comparable
(71) (83)
(491) (397)
Less HI comparable,
as reported
- (136)
- (449)
------ ----- -------
-------
Pro Forma Comparable
Owned - North America 419
464 11% 1,558 1,675
8%
Plus HI
International, net
(1)
124 136 10%
475 511 8%
------ ----- -------
-------
Pro Forma Comparable
Owned - Worldwide
$543 $600 10% $2,033 $2,186
8%
====== ===== =======
=======
Expenses
---------------------
Reported
$342 $459
$1,459 $1,780
Less sold hotels
and non-comparable
(59) (50)
(361) (267)
Less HI comparable,
as reported
- (100)
- (333)
------ ----- -------
-------
Pro Forma Comparable
Owned - North America 283
309 9% 1,098
1,180 7%
Plus HI
International, net
(1)
92 100 9%
360 384 7%
------ ----- -------
-------
Pro Forma Comparable
Owned - Worldwide
$375 $409 9% $1,458
$1,564 7%
====== ===== =======
=======
Margins
---------------------
Pro Forma Comparable
Owned - North America 32.5% 33.4%
90 bps 29.5% 29.6% 10 bps
Pro Forma Comparable
Owned - International 25.8% 26.5%
70 bps 24.2% 24.9% 70 bps
Pro Forma Comparable
Owned - Worldwide
30.9% 31.8% 90 bps 28.3% 28.5% 20
bps
Leased Hotels
----------------------------------------------------------------------
Three Months % or Twelve Months
% or
Ended
Ended
December 31, basis December 31, basis
point
point
2005 2006 Change 2005
2006 Change
-------------------- -----------------------
Revenue
---------------------
Reported
$24 $731
$111 $2,347
Less sold hotels
and non-comparable
(2) (37)
(16) (121)
Less HI comparable,
as reported
- (669)
- (2,122)
Plus HI, net (1)
587 669 14% 2,276
2,423 6%
------ ----- -------
-------
Pro Forma Comparable
Leased - Worldwide
$609 $694 14% $2,371 $2,527
7%
====== ===== =======
=======
Expenses
---------------------
Reported
$22 $605
$99 $1,985
Less sold hotels
and non-comparable
(2) (29)
(16) (102)
Less HI comparable,
as reported
- (553)
- (1,794)
Plus HI, net (1)
496 553 11% 1,974
2,072 5%
------ ----- -------
-------
Pro Forma Comparable
Leased - Worldwide
$516 $576 12% $2,057 $2,161
5%
====== ===== =======
=======
Margins
---------------------
Pro Forma Comparable
Leased - Worldwide
15.3% 17.0%170 bps 13.2% 14.5%130
bps
Management and Franchise Fees
----------------------------------------------------------------------
Three Months Twelve
Months
Ended
Ended
December 31, % December
31, %
2005 2006 Change 2005
2006 Change
-------------------- -----------------------
Reported
$114 $182
$452 $684
Less HI reported
- (42)
- (109)
Plus HI
28 42 50%
94 123 31%
------ ----- -------
-------
Pro Forma - Worldwide $142 $182
28% $546 $698
28%
====== ===== =======
=======
(1) Pro forma for the entities acquired with Hilton International
as
if they had been acquired on January 1, 2005. Excludes
non-comparable
hotels.
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 we
have no ownership interest.
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. |