Hilton Reports Q1 2014 Net Income of $123M, Up $89M Over Last Year; RevPAR Increased 6.6%
May 12, 2014 12:56pm
For the three months ended March 31, 2014, earnings per share ("EPS") was $0.12 compared to $0.03 for the three months ended March 31, 2013 and EPS, adjusted for special items, was $0.13 for the three months ended March 31, 2014 compared to $0.03 for the three months ended March 31, 2013. Adjusted EBITDA increased 22 percent to $544 million for the three months ended March 31, 2014, compared to $447 million for the three months ended March 31, 2013 and net income attributable to Hilton stockholders was $123 million for the three months ended March 31, 2014 compared to $34 million for the three months ended March 31, 2013.
In the first quarter of 2014, there was one special item that resulted in a positive adjustment to net income attributable to Hilton stockholders of $13 million related to share-based compensation prior to and in connection with the initial public offering, which was included in general, administrative and other expenses.
Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had a strong first quarter that significantly exceeded our expectations. We are very optimistic about the remainder of 2014, and as a result we have increased our RevPAR, EPS and Adjusted EBITDA outlook for the year.
"We continue to increase the global presence of our industry-leading brands, with over 9,000 new rooms opening during the first quarter. We remain #1 in rooms under construction in every major region of the world, with over an 18 percent share of all rooms under construction globally. At the end of the first quarter, we had 510 hotels and 101,000 rooms under construction that will further grow our system.
"We also continue to mine value enhancement opportunities in our iconic real estate portfolio, most recently announcing our planned retail platform repositioning and the creation of additional timeshare inventory at our Hilton New York property. Our capital allocation strategy remains disciplined and simple and we remain committed to building equity value through debt repayments, which totaled $200 million in the first quarter.
"For 2014, we expect to see strong global RevPAR growth with system-wide comparable RevPAR increasing 5.5 percent to 7.0 percent and we have increased our full year outlook for EPS adjusted for special items to between $0.64 and $0.67 and Adjusted EBITDA to between $2,415 million and $2,465 million. As a result, the new midpoint of our outlook for full year 2014 Adjusted EBITDA is above the top end of our previous guidance."
Management and Franchise
Management and franchise fees were $331 million in the first quarter of 2014, an increase of 17 percent compared to the same period in 2013. Excluding $6 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements, management and franchise fees increased 15 percent. RevPAR at comparable managed and franchised hotels in the first quarter increased 6.8 percent on a currency neutral basis (a 6.3 percent increase in actual dollars) compared to the same period in 2013, including an increase in RevPAR from comparable managed and franchised hotels in the focused-service group of 6.7 percent.
Revenues from the ownership segment were $952 million in the first quarter of 2014, an increase of 3 percent from the same period in 2013. Ownership segment Adjusted EBITDA for the first quarter of 2014 was $179 million. Ownership segment Adjusted EBITDA increased 13 percent(1) from the same period in 2013 and Adjusted EBITDA margin increased 172 basis points(1). RevPAR at comparable hotels in the ownership segment increased 5.1 percent on a currency neutral basis (a 5.7 percent increase in actual dollars) in the first quarter of 2014 compared to the same period in 2013, led by an increase in ADR of 3.7 percent at comparable ownership segment hotels in the United States. Outside of the United States, RevPAR at comparable ownership segment hotels increased by 5.4 percent on a currency neutral basis (a 6.7 percent increase in actual dollars).
1) Excluding an $11 million benefit in the first quarter of 2013 related to the recognition of a lease termination payment and $6 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements. Ownership segment Adjusted EBITDA margin is calculated as ownership segment Adjusted EBITDA divided by ownership segment revenues.
Hilton Worldwide continues to make progress executing on value enhancement opportunities embedded in its owned portfolio. At the Hilton New York, a complete repositioning of the 6th Avenue frontage of the property is planned, which will create a retail platform with over 10,000 square feet of prime, street level space. Additional timeshare inventory is also planned, including two floors in addition to underutilized penthouse space.
Timeshare segment Adjusted EBITDA for the first quarter of 2014 was $85 million, a 44 percent increase compared to the same period in 2013. Timeshare revenues increased 13 percent to $279 million in the first quarter of 2014 compared to the same period in 2013, led by a $23 million increase in timeshare sales revenue, including a $5 million increase in revenue from sales of timeshare units developed by third parties. During the first quarter of 2014, 57 percent of intervals sold were developed by third parties, a 14 percentage point increase from the same period in the prior year. Revenue from resort operations also increased $11 million compared to the first quarter of 2013.
Hilton Worldwide opened 51 hotels with over 9,000 rooms in the first quarter of 2014, all of which were within the management and franchise segment, and achieved net unit growth of over 8,000 rooms. Of the new rooms added, 14 percent were conversions from non-Hilton Worldwide brands.
As of March 31, 2014, Hilton Worldwide had the largest rooms pipeline in the lodging industry, according to Smith Travel Research, Inc. ("STR"), with approximately 200,000 rooms at 1,165 hotels throughout 76 countries and territories, of which 58 percent, or over 115,000 rooms, were located outside of the United States. Approximately half of the development pipeline, or over 101,000 rooms, were under construction. According to STR, Hilton Worldwide has the largest supply of rooms under construction in every major region of the world, as illustrated in the table below:
Balance Sheet and Liquidity
During the first quarter of 2014, Hilton made $200 million of voluntary prepayments on the senior secured term loan facility and reduced its interest rate spread on its $5.8 billion senior secured term loan facility by 25 basis points. The interest rate spread and the unused commitment fee percentage on the Company's senior secured revolving credit facility were also reduced by 25 basis points and 12.5 basis points, respectively. As of March 31, 2014, Hilton had $11.6 billion of outstanding indebtedness with a weighted average interest rate of 4.1 percent, excluding $959 million of non-recourse debt.
Total cash and cash equivalents were $722 million as of March 31, 2014, including $287 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of March 31, 2014.
Full Year 2014
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