BEVERLY HILLS, Calif. - Jan. 26, 2004 -- Hilton Hotels Corporation
(NYSE:HLT):
-
Quarter benefits from solid occupancies, moderately improved room
rates
-
Management/franchise fees, timeshare strong in quarter
-
Margins still impacted by increases in healthcare costs, property
taxes
Hilton Hotels Corporation today reported financial results for the
fourth quarter and fiscal year ended December 31, 2003.
The company reported fourth quarter 2003 net income of $67 million,
versus $40 million in the 2002 quarter. Diluted net income per share was
$.17 in the fourth quarter, compared with $.11 in the 2002 quarter. The
2003 quarter included a $27 million reduction in the provision for income
taxes ($.07 per share); and pre-tax losses totaling $8 million related
to an impairment charge and asset dispositions ($.01 per share.)
For full year 2003, Hilton reported net income of $164 million, versus
$198 million in 2002. Diluted net income per share was $.43 for the year
compared to $.53 in 2002.
Hilton reported 2003 fourth quarter total company operating income
of $139 million (compared with $136 million in the 2002 period), on total
revenue of $989 million (compared with $957 million in the corresponding
2002 period). Total company earnings before interest, taxes, depreciation,
amortization and non-recurring items ("Adjusted EBITDA") were $239 million
in the 2003 fourth quarter, compared with $232 million in the 2002 quarter.
For the full year 2003, total company operating income was $515 million
(compared with $603 million in 2002), on total revenue of $3.853 billion
(compared with $3.847 billion in 2002). Total company Adjusted EBITDA was
$906 million for full-year 2003, compared with $990 million in 2002.
Owned Hotel Results
The company's owned hotels maintained solid occupancy levels during
the fourth quarter, along with achieving moderately improved average daily
rate (ADR), resulting from generally improved business transient and international
travel, an increase in group room nights and strong leisure travel during
the holidays. Company-owned hotels in New York, Washington, D.C., Honolulu,
San Diego, Phoenix and Portland posted particularly strong results in the
quarter. The San Francisco/San Jose market continued to be sluggish, while
Boston and Chicago also were soft during the quarter.
Across all brands, revenues from the company's owned hotels (majority
owned and controlled hotels) totaled $530 million in the fourth quarter,
a 3 percent decline from the 2002 period due primarily to property sales.
Total revenues from comparable owned properties were approximately flat
in the quarter. Increased room revenues (as a result of the re-opening
of the Kalia Tower at the Hilton Hawaiian Village) were offset by lower
non-room revenues (cancellation fees, food and beverage, telephone and
retail) owing to lower group spending levels. Revenue per available room
(RevPAR) from comparable owned hotels was essentially flat in the quarter;
occupancy at these hotels showed a slight 0.2-point decline to 68.1 percent,
while ADR improved 0.3 percent to $153.09.
Total owned hotel expenses declined 1 percent in the fourth quarter
to $380 million, again as a result of property sales. Expenses at the comparable
owned hotels increased 2 percent in the quarter. Owned hotel profitability
continued to be constrained by the aforementioned lower non-room revenues,
as well as increased healthcare costs and property taxes.
For full-year 2003, revenues from the company's owned hotels totaled
$2.031 billion compared with $2.100 billion in 2002, a 3 percent decline.
Total revenues from comparable owned hotels showed a similar percentage
decline. RevPAR from comparable owned hotels declined 2.9 percent for the
full year; occupancy declined 0.6 points to 70.4 percent and ADR showed
a 2.1 percent decline to $145.52. Total owned hotel expenses increased
3 percent to $1.500 billion for full-year 2003; expenses at the comparable
owned hotels also increased 3 percent for the year.
System-wide RevPAR; Management/Franchise Fees
Improvement in business travel in the latter part of 2003, combined
with continued strong leisure travel, helped almost all of Hilton's brands
achieve positive year-over-year RevPAR growth in the fourth quarter. The
following of the company's brands (including franchise properties) reported
system-wide RevPAR gains in the quarter: Hilton Garden Inn, 3.1 percent;
Hampton Inn, 1.6 percent; Embassy Suites, 0.9 percent; Homewood Suites
by Hilton, 0.8 percent and Hilton, 0.6 percent. Doubletree posted a quarterly
RevPAR decline of 1.8 percent.
Management and franchise fees for the quarter totaled $82 million, a
5 percent increase from the 2002 period, as a result of these RevPAR increases
and the addition of new franchised units.
For the full year, system-wide RevPAR at the Hilton Garden Inn brand
improved 1.1 percent, with system-wide RevPAR at other company brands declining
as follows: Hampton Inn, 0.2 percent; Homewood Suites by Hilton, 0.9 percent;
Embassy Suites, 1.3 percent; Hilton, 2.6 percent, and Doubletree, 3.6 percent.
Management and franchise fees in 2003 increased 2 percent from 2002
to $337 million.
Brand Development/Unit Growth
Year-to-date November 2003 (the latest period for which data is available),
all but one of the company's brands continued to operate well above their
fair share of RevPAR versus their segment competitors. With 100 representing
a brand's fair share of the market, the Hilton brands, according to Smith
Travel Research, posted RevPAR index numbers as follows for the first 11
months of 2003: Embassy Suites, 125.5; Homewood Suites by Hilton, 118.7;
Hampton Inn, 118.0; Hilton Garden Inn, 114.4; Hilton 108.8, and Doubletree,
99.3.
In the fourth quarter, the company added 28 properties and 5,249 rooms
to its system as follows: Hampton Inn, 12 hotels and 1,260 rooms; Hilton
Garden Inn, 8 hotels and 1,047 rooms; Hilton, 2 hotels and 2,000 rooms;
Homewood Suites by Hilton, 2 hotels and 241 rooms; Embassy Suites, 1 hotel
and 246 rooms; Doubletree, 1 hotel and 100 rooms, and Hilton Grand Vacations,
2 properties and 355 units. Twelve hotels and 1,907 rooms were removed
from the system during the quarter.
During 2003, a total of 116 properties and 16,585 rooms were added to
the Hilton system, in line with the company's expectations and guidance,
while 27 properties and 5,218 rooms were removed from the system. At year-end
2003, the Hilton system consisted of 2,173 properties and 348,483 rooms.
The company had approximately 400 hotels and more than 53,000 rooms
in its development pipeline at year-end 2003. Hilton brands have more rooms
in the active U.S. development pipeline than any other company, according
to Lodging Econometrics.
Brand development activity in the fourth quarter included the openings
of two new Hilton-managed convention hotels in Texas: the 1,200-room Hilton
Americas in Houston and the 800-room Hilton Austin. Another Hilton-managed
convention property is scheduled to open in Omaha, Nebraska in April 2004.
Additionally, Hilton has been named as the operator of a proposed 750-room
convention hotel in Baltimore, Maryland. The luxury Conrad Hotels brand
continues to expand in major destinations around the world, with openings
scheduled in 2004 for Miami, Florida (the first freestanding Conrad Hotel
in the U.S.), Phuket, Thailand and in Bali, Indonesia.
Hilton Grand Vacations
The company's vacation ownership business, Hilton Grand Vacations Company
(HGVC) had a strong quarter, reporting fourth quarter revenue (included
in "other fees and income") of $96 million, compared to $64 million in
the 2002 quarter, an increase of 50 percent. Fourth quarter expenses were
$73 million, compared with $51 million in the 2002 quarter. Overall unit
sales in the quarter were comparable with the 2002 period, while the average
unit sales price increased 11 percent across the HGVC system during the
quarter.
HGVC reported strong results across its system, with strong sales at
its new properties on the Las Vegas Strip and in Orlando, Florida near
Universal Studios. The Las Vegas property has 283 units in its first phase
and opened for occupancy in the fourth quarter 2003. HGVC's new property
in Orlando is scheduled to open for occupancy in spring 2004; the 96 units
in the property's first phase are virtually sold out. Also during the quarter,
HGVC introduced 72 new vacation ownership units at the Kalia Tower at the
Hilton Hawaiian Village.
Full-year 2003 revenues at HGVC (included in "other fees and income")
were $345 million, compared with $296 million in 2002. Expenses in 2003
were $259 million, compared with $216 million in 2002.
Distribution/Technology
During the fourth quarter, Hilton introduced "Our Best Rates. Guaranteed."
The program is designed to encourage customers to book their reservations
through the company's branded websites, calling toll-free Hilton Reservations
Worldwide or by contacting the company's hotels directly. The company believes
that this program, along with enhancements to its branded websites, has
contributed to significantly increased numbers of transactions on the company's
proprietary brand websites.
Also during the quarter, the company essentially completed deployment
of its proprietary "OnQ" system to the 2,100-plus properties across its
system. This unique system -- which links all of the company's brands and
hotels on a single, consistent technology platform -- enhances customer
recognition and service, and has already resulted in increased customer
satisfaction scores across the company's system.
Building further on its industry leadership position in the use of
technology to better serve customers and maximize operational efficiencies,
Hilton began in early 2004 a test of self-service check-in kiosks at the
Hilton New York. Initial reaction from customers has been extremely positive,
and the tests will continue in New York and Chicago during the first quarter
2004.
CNL Transaction
In December, Hilton and CNL Hospitality Properties, Inc. completed the
formation of a partnership which acquired the 544-room Capital Hilton in
Washington, D.C. and the 394-room Hilton La Jolla Torrey Pines near San
Diego, California. Hilton contributed both properties to the partnership
and retains the management of both hotels. Hilton generated cash proceeds
of approximately $190 million, which were used to pay down debt. This marked
the third transaction that Hilton and CNL have completed over the last
two years.
Corporate Finance
At year-end 2003, Hilton had total debt of $3.8 billion (net of $325
million allocated to Caesars Entertainment, Inc., formerly Park Place Entertainment),
a reduction of $269 million during the fourth quarter. Approximately 17
percent of the company's debt is floating rate debt. Cash and equivalents
totaled approximately $82 million at December 31, 2003. The company's average
basic and diluted share counts for the fourth quarter were 380 million
and 388 million, respectively. For full-year 2003, the company's average
basic and diluted share counts were 378 million and 393 million, respectively.
Consolidated net interest expense (interest expense net of interest
and dividend income) declined $7 million in the fourth quarter due to lower
average debt balances.
Hilton's debt currently has an average life of 9.6 years, at an average
cost of approximately 6.5 percent.
At December 31, 2003, the company had approximately $670 million of
available capacity under its line of credit.
The company recorded a tax benefit of $2 million in the fourth quarter
due primarily to the utilization of capital loss tax carryforwards as a
result of the aforementioned transaction with CNL. Excluding the utilization
of capital loss tax carryforwards, the company's effective tax rate in
the quarter was 31.8 percent.
Total hotel capital expenditures in the quarter were $79 million, with
an additional $24 million expended for timeshare development. For full-year
2003, total hotel capital expenditures were $202 million, with an additional
$94 million expended for timeshare development.
2004 Outlook
With continuing improvement in the U.S. economy, and improving trends
in business travel and international visitation, the company's outlook
for 2004 is generally optimistic. Hilton noted that its owned hotels in
key U.S. cities, including New York, Washington, D.C., New Orleans, Honolulu
and Boston are expected to benefit both from these favorable trends as
well as the limited introduction of new full-service supply. The company
said that the San Francisco/San Jose and Chicago markets are expected to
be soft in 2004, the latter due to a reduced number of city-wide conventions
during the year.
Soft group business is expected to contribute to a comparatively challenging
first quarter of 2004. This segment is expected to improve as the year
progresses.
The company provided the following guidance for full-year 2004:
Full-Year 2004 Estimates
Total revenue - $4.07 billion range
Total Adjusted EBITDA - $945 million range
Total operating income - $575 million range
Comparable owned hotel RevPAR - Increase of 3 - 4%
Diluted earnings per share - Mid $.40 range
Total capital spending in 2004 is expected to be in the range of $275
million, with approximately $155 million for routine improvements and technology;
$55 million for timeshare projects, and $65 million for hotel special projects.
Hilton expects to add 115 - 130 hotels and 15,000 - 17,000 rooms to
its system in 2004.
"After what can only be described as three difficult years for the lodging
business, the fourth quarter of 2003 yielded signs that our business is
turning the corner, with positive implications for 2004 and beyond," said
Stephen F. Bollenbach, president and chief executive officer of Hilton
Hotels Corporation. "The pick-up we saw in business travel, particularly
in such important markets as New York and Washington, and a continuation
of strong leisure business, contributed not only to solid results in the
fourth quarter, but to a sense of momentum and optimism we have not enjoyed
since 2000.
"As we enter the early stages of a recovery in the hotel industry, we
are excited about the many opportunities for growth that we anticipate
in 2004. These include the ability to achieve pricing power through a more
desirable mix of business at our owned hotels, adding 15,000-plus hotel
rooms to our system and strengthening our competitive advantage through
technology. We cannot, of course, ignore the challenges that remain. Cost
increases in healthcare and insurance continue to put pressure on margins,
and one of our most important markets, Chicago, is expected to have a difficult
year. On balance, however, it is clear to us that the business is improving
significantly and that the road to recovery is getting smoother."
Mr. Bollenbach concluded: "The last three years have been the ultimate
test for our industry. By staying the course on our strategies, our company
grew stronger and solidified our industry leadership position. Through
the strength of our owned hotels, powerful brand names, investment in technology,
positive relationships with our hotel owners, prudent balance sheet management
and a dedicated team of employees, we are poised to take full advantage
of the brighter days that we feel confident lie ahead."
Note: This press release contains "forward-looking statements" within
the meaning of federal securities law, including statements concerning
business strategies and their intended results, and similar statements
concerning anticipated future events and expectations that are not historical
facts. 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.
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31
December 31
2002 2003 % Change 2002
2003 % Change
----- ----- --------- ------- ------- ---------
Revenue
Owned
hotels $545 $530 (3)% $2,100
$2,031 (3)%
Leased
hotels 25 24
(4) 111 103
(7)
Management
and
franchise
fees 78
82 5
329 337
2
Other
fees
and income 75 113
51 355 412
16
----- -----
------- -------
723 749 4
2,895 2,883 -
Other
revenue
from managed
and
franchised
properties 234 240
3 952 970
2
----- -----
------- -------
957 989 3
3,847 3,853 -
Expenses
Owned
hotels 382 380
(1) 1,462 1,500
3
Leased
hotels 24 24
- 101 96
(5)
Depreciation
and
amortization 90 85
(6) 348 334
(4)
Impairment
loss and
related
costs 1
5 -
21 22
5
Other
operating
expenses 71 92
30 294 335
14
Corporate
expense, net 19 24
26 66
81 23
----- -----
------- -------
587 610 4
2,292 2,368 3
Other
expenses
from managed
and
franchised
properties 234 240
3 952 970
2
----- -----
------- -------
821 850 4
3,244 3,338 3
Operating income
136 139 2
603 515 (15)
Interest and dividend
income
6 8 33
43 29 (33)
Interest expense
(76) (71) (7) (328)
(295) (10)
Net interest from
unconsolidated
affiliates
(4) (7) 75
(19) (20) 5
Net gain (loss) on
asset dispositions
2 (3) -
(14) (6) (57)
----- -----
------- -------
Income before taxes
and minority interest 64
66 3
285 223 (22)
Tax (provision)
benefit
(23) 2 -
(81) (53) (35)
Minority interest, net (1) (1)
- (6) (6)
-
----- -----
------- -------
Net income
$40 $67 68 %
$198 $164 (17)%
===== =====
======= =======
Net income per share
(1)
Basic
$.11 $.18 64 % $.53
$.43 (19)%
===== =====
======= =======
Diluted
$.11 $.17 55 % $.53
$.43 (19)%
===== =====
======= =======
Average shares - basic 376 380
1 % 374 378
1 %
===== =====
======= =======
Average shares -
diluted
403 388 (4)%
401 393 (2)%
===== =====
======= =======
(1) EPS for the twelve month period in 2003 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
December 31
2002 2003 %/pt Change
--------- --------- ------------
Hilton
Occupancy
69.5 % 69.2 % (0.3)pts
Average Rate
$161.12 $161.66 0.3
%
RevPAR
$112.01 $111.94 (0.1) %
All Other
Occupancy
62.1 % 62.1 % - pts
Average Rate
$104.30 $103.04 (1.2) %
RevPAR
$64.73 $63.95 (1.2)
%
Total
Occupancy
68.3 % 68.1 % (0.2)pts
Average Rate
$152.70 $153.09 0.3
%
RevPAR
$104.30 $104.23 (0.1) %
Twelve Months
Ended
December 31
2002 2003 %/pt Change
--------- --------- ------------
Hilton
Occupancy
72.0 % 71.1 % (0.9)pts
Average Rate
$155.79 $152.69 (2.0)
%
RevPAR
$112.13 $108.49 (3.2)
%
All Other
Occupancy
66.2 % 67.0 % 0.8 pts
Average Rate
$108.23 $106.18 (1.9)
%
RevPAR
$71.63 $71.17 (0.6)
%
Total
Occupancy
71.0 % 70.4 % (0.6)pts
Average Rate
$148.59 $145.52 (2.1)
%
RevPAR
$105.55 $102.45 (2.9)
%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2003 and owned by us since
January 1, 2002.
HILTON HOTELS CORPORATION
System-wide Statistics (1)
Three Months
Ended
December 31
2002 2003 %/pt Change
-------- --------- ------------
Hilton
Occupancy
64.2 % 64.4 % 0.2 pts
Average Rate $127.08
$127.30 0.2 %
RevPAR
$81.53 $82.01 0.6
%
Hilton Garden Inn
Occupancy
60.5 % 63.1 % 2.6 pts
Average Rate
$94.20 $93.14 (1.1) %
RevPAR
$57.01 $58.79 3.1
%
Doubletree
Occupancy
61.8 % 61.5 % (0.3)pts
Average Rate $101.44
$100.06 (1.4) %
RevPAR
$62.70 $61.55 (1.8) %
Embassy Suites
Occupancy
64.2 % 65.2 % 1.0 pts
Average Rate $117.85
$117.20 (0.6) %
RevPAR
$75.68 $76.36 0.9
%
Homewood Suites by Hilton
Occupancy
67.7 % 68.3 % 0.6 pts
Average Rate
$93.04 $92.94 (0.1) %
RevPAR
$63.03 $63.52 0.8
%
Hampton
Occupancy
61.3 % 61.4 % 0.1 pts
Average Rate
$75.77 $76.83 1.4
%
RevPAR
$46.46 $47.19 1.6
%
Other
Occupancy
61.9 % 67.3 % 5.4 pts
Average Rate $129.09
$132.26 2.5 %
RevPAR
$79.94 $88.98 11.3
%
Twelve Months
Ended
December 31
2002 2003 %/pt Change
------------------ ------------
Hilton
Occupancy
68.0 % 67.4 % (0.6)pts
Average Rate $127.42
$125.24 (1.7) %
RevPAR
$86.64 $84.36 (2.6)
%
Hilton Garden Inn
Occupancy
64.7 % 66.3 % 1.6 pts
Average Rate
$96.41 $95.03 (1.4)
%
RevPAR
$62.34 $63.02 1.1
%
Doubletree
Occupancy
66.1 % 65.0 % (1.1)pts
Average Rate $102.53
$100.47 (2.0) %
RevPAR
$67.73 $65.32 (3.6)
%
Embassy Suites
Occupancy
68.9 % 69.1 % 0.2 pts
Average Rate $120.86
$118.94 (1.6) %
RevPAR
$83.32 $82.24 (1.3)
%
Homewood Suites by Hilton
Occupancy
72.5 % 72.5 % - pts
Average Rate
$94.88 $93.95 (1.0)
%
RevPAR
$68.75 $68.14 (0.9)
%
Hampton
Occupancy
66.8 % 66.2 % (0.6)pts
Average Rate
$77.68 $78.22 0.7
%
RevPAR
$51.85 $51.75 (0.2)
%
Other
Occupancy
61.3 % 57.2 % (4.1)pts
Average Rate $124.87
$127.70 2.3 %
RevPAR
$76.49 $73.00 (4.6)
%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of December
31, 2003 and owned, operated
or franchised by us since January
1, 2002.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
December
2002
2003
Number of Number
of
Properties Rooms Properties Rooms
Hilton
Owned
39 28,985 36
27,496
Leased
1 499
1 499
Joint Venture
6 2,291
10 4,177
Managed
17 10,601 24
14,103
Franchised
168 45,334 159
42,737
------------------- -------------------
231 87,710 230
89,012
Hilton Garden Inn
Owned
1 162
1 162
Joint Venture
2 280
2 280
Managed
- -
3 391
Franchised
158 21,655 177
24,177
------------------- -------------------
161 22,097 183
25,010
Doubletree
Owned
9 3,156
9 3,156
Leased
6 2,151
6 2,144
Joint Venture
30 8,541
25 7,427
Managed
57 15,702 44
11,585
Franchised
52 11,792 71
16,302
------------------- -------------------
154 41,342 155
40,614
Embassy Suites
Owned
5 1,023
4 881
Joint Venture
24 6,581
27 7,279
Managed
61 15,589 54
14,136
Franchised
79 17,949 89
20,257
------------------- -------------------
169 41,142 174
42,553
Homewood Suites by Hilton
Owned
7 905
3 398
Managed
30 3,605
36 4,304
Franchised
84 9,218
91 10,058
------------------- -------------------
121 13,728 130
14,760
Hampton
Owned
1 133
1 133
Managed
25 3,268
34 4,323
Franchised
1,180 119,640 1,220 123,087
------------------- -------------------
1,206 123,041 1,255 127,543
Timeshare
27 3,117
30 3,644
Other
Owned
1 300
1 300
Joint Venture
3 1,400
3 1,393
Managed
11 3,239
11 3,246
Franchised
- -
1 408
------------------- -------------------
15 4,939
16 5,347
Total
Owned
63 34,664 55
32,526
Leased
7 2,650
7 2,643
Joint Venture
65 19,093 67
20,556
Managed
201 52,004 206
52,088
Timeshare
27 3,117
30 3,644
Franchised
1,721 225,588 1,808 237,026
TOTAL PROPERTIES
2,084 337,116 2,173 348,483
Change to
December 2002
Number of
Properties Rooms
Hilton
Owned
(3) (1,489)
Leased
-
-
Joint Venture
4 1,886
Managed
7 3,502
Franchised
(9) (2,597)
(1) 1,302
Hilton Garden Inn
Owned
-
-
Joint Venture
-
-
Managed
3 391
Franchised
19 2,522
22 2,913
Doubletree
Owned
-
-
Leased
-
(7)
Joint Venture
(5) (1,114)
Managed
(13) (4,117)
Franchised
19 4,510
1 (728)
Embassy Suites
Owned
(1) (142)
Joint Venture
3 698
Managed
(7) (1,453)
Franchised
10 2,308
5 1,411
Homewood Suites by Hilton
Owned
(4) (507)
Managed
6 699
Franchised
7 840
9 1,032
Hampton
Owned
-
-
Managed
9 1,055
Franchised
40 3,447
49 4,502
Timeshare
3 527
Other
Owned
-
-
Joint Venture
-
(7)
Managed
-
7
Franchised
1 408
1 408
Total
Owned
(8) (2,138)
Leased
-
(7)
Joint Venture
2 1,463
Managed
5
84
Timeshare
3 527
Franchised
87 11,438
TOTAL PROPERTIES
89 11,367
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
2002 2003 % Change 2002 2003 % Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA
$232 $239 3 % $990
$906 (8)%
Proportionate share of
depreciation and
amortization
of unconsolidated
affiliates
(7) (9) 29
(27) (30) 11
Non-recurring items
1 (5) -
(2) (22) -
Pre-opening expense
- - -
(1) - -
Operating interest and
dividend income
- (1) -
(9) (5) (44)
Net gain (loss) on
asset dispositions
2 (3) -
(14) (6) (57)
Minority interest, net
(1) (1) -
(6) (6) -
----- -----
----- -----
EBITDA
227 220 (3)
931 837 (10)
Depreciation and
amortization
(90) (85) (6) (348) (334)
(4)
Interest expense, net
(74) (70) (5) (304) (286)
(6)
Tax (provision) benefit (23)
2 - (81)
(53) (35)
----- -----
----- -----
Net income
$40 $67 68 % $198
$164 (17)%
===== =====
===== =====
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2004 Outlook
($ in millions, except per share amounts)
Estimated
Full Year
2004
Adjusted EBITDA
$945
Proportionate share of depreciation
and
amortization
of unconsolidated
affiliates
(30)
Operating interest and dividend income
(1)
Minority interest, net
(6)
EBITDA
908
Depreciation and amortization
(339)
Interest expense, net
(287)
Provision for income taxes
(109)
Net income
$173
Diluted EPS
$.44
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 2003
reflects EBITDA adjusted for the following items:
Gains and Losses on Asset Dispositions
and Non-Recurring Items
We exclude the effect of gains and
losses on asset dispositions
and non-recurring items, such as asset
write-downs and impairment
losses, from Adjusted EBITDA. 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.
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.
Prior to January 1, 2003, we also adjusted EBITDA for
pre-opening expense, which we no longer exclude, and adjusted only the
non-cash portion of non-recurring items.
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. |
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