BEVERLY HILLS, Calif. - July 27, 2005 -- Hilton Hotels Corporation
(NYSE:HLT) today reported financial results for the second quarter and
six months ended June 30, 2005. Second quarter highlights:
-
Diluted EPS of $.49 versus $.19 in 2004 period; recurring EPS $.27, up
50 percent from $.18 in Q2 2004.
-
Recurring net income of $110 million, a company quarterly record.
-
Non-recurring items benefited Q2 2005 by $.22 per share, versus $.01 per
share benefit in Q2 2004.
-
Total company Adjusted EBITDA up 21 percent to $336 million.
-
Comparable owned hotel RevPAR up 9.4 percent; strength in New York, Hawaii,
Boston, plus significant improvement in Chicago; comparable owned hotel
margins increase 160 basis points from Q2 2004.
-
Record fees of $117 million from RevPAR gains, new units; 21 percent increase
from Q2 2004; unit growth targets raised for 2005.
-
Timeshare profitability up 44 percent.
-
Company repurchases 5.1 million shares of common stock in Q2.
Hilton reported second quarter 2005 net income of $202 million, compared
with $75 million in the 2004 quarter. Diluted net income per share was
$.49 in the second quarter, versus $.19 in the 2004 period. The 2005 quarter
benefited from two non-recurring items totaling $.22 per share:
1) $.15 per share ($64 million after tax) related primarily to asset
sales as follows:
-- $61 million gain on asset dispositions and other ($37
million after tax)
-- $34 million tax benefit from the utilization of tax
loss
carryforwards
-- $5 million impairment loss on asset sales that closed
in July ($3 million after tax)
-- $4 million after-tax cost related to a minority interest
in a
sold hotel
2) $.07 per share of tax benefit ($28 million) related primarily to
the closure of IRS audits for the years 1997-2001.
The 2004 second quarter benefited from non-recurring items totaling
$.01 per share.
The company reported recurring net income of $110 million in the second
quarter, the highest quarterly net income in the company's history. On
a recurring basis, diluted net income per share was $.27 in the second
quarter, compared with $.18 in the 2004 period, a 50 percent increase.
Hilton reported second quarter 2005 total operating income of $246 million
(a 31 percent increase from $188 million in the 2004 period), on total
revenue of $1.176 billion (a 10 percent increase from $1.065 billion in
the 2004 quarter). Total company earnings before interest, taxes, depreciation,
amortization and non-recurring items ("Adjusted EBITDA") were $336 million,
an increase of 21 percent from $278 million in the 2004 quarter.
Owned Hotel Results
Strong increases in room nights, along with continuing pricing power,
resulted in many of the company's owned hotels showing double-digit revenue-per-available-room
(RevPAR) gains in the quarter, including those in New York City, Honolulu,
Phoenix, Atlanta, Seattle and Portland. Solid RevPAR gains were also reported
at the company's owned hotels in Boston. Anticipated improvement in the
Chicago market was realized as each of the company's owned hotels in Chicago
posted double-digit RevPAR gains in the quarter, driven by increases in
business transient room nights and rates. San Francisco remained a difficult
market during the quarter.
Across all brands, revenue from the company's owned hotels (majority-owned
and -controlled hotels) was $575 million in the second quarter, a 5 percent
increase from $546 million in the 2004 period. Total revenue from comparable
owned hotels (excluding the impact of property sales) was up 9 percent.
RevPAR from comparable owned hotels increased a strong 9.4 percent. Comparable
owned hotel occupancy increased 2.2 points to 80.1 percent, while average
daily rate (ADR) increased 6.4 percent to $168.99. Approximately 70 percent
of the quarterly RevPAR increase at the comparable owned hotels was attributable
to the ADR gains.
Total owned hotel expenses were up 3 percent in the quarter to $391
million. Expenses at the comparable owned hotels increased 7 percent, primarily
due to an increase in occupied rooms, along with increases in energy and
marketing costs. Cost-per-occupied-room increased 4.3 percent in the quarter.
Comparable owned hotel margins in the second quarter increased 160 basis
points to 32.1 percent, owing to the aforementioned ADR gains and strong
food-and-beverage revenues, particularly in New York, Chicago and Hawaii.
Weakness in San Francisco adversely impacted margin growth by 80 basis
points.
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
second quarter 2005 RevPAR gains as follows: Hampton Inn, 12.4 percent;
Hilton, 11.9 percent; Doubletree, 11.4 percent; Hilton Garden Inn, 10.8
percent; Embassy Suites, 9.8 percent; Homewood Suites by Hilton, 7.3 percent.
Management and franchise fees set a new quarterly record at $117 million,
a 21 percent increase from the 2004 period, and 15 percent above the previous
record level attained in the first quarter 2005. Reflecting strength in
demand and increased pricing power, approximately 60 percent of the fee
growth in the second quarter was attributable to system-wide RevPAR gains,
with 40 percent coming from the addition of new units.
Brand Development/Unit Growth
In the second quarter, the company added 37 properties and 4,689 rooms
to its system as follows: Hampton Inn, 16 hotels and 1,281 rooms; Hilton
Garden Inn, 6 hotels and 824 rooms; Homewood Suites by Hilton, 6 hotels
and 665 rooms; Hilton, 4 hotels and 925 rooms; Doubletree, 3 hotels and
403 rooms; and Embassy Suites, 2 hotels and 591 rooms. Twelve hotels and
3,394 rooms were removed from the system during the quarter, including
the 1,338-room Fontainebleau in Miami.
Brand development highlights included the opening of new full-service
Hilton hotels in Vancouver, Wash., and Villahermosa, Mexico; the opening
of a Homewood Suites by Hilton property in the Toronto area, the brand's
first new-build hotel in Canada; new Embassy Suites openings in Albuquerque,
Dallas and St. Louis-St. Charles, Mo.; and the opening of a luxury Conrad
Hotel in Tokyo. Strong development activity continues with the company's
Doubletree brand, with new Doubletrees scheduled for opening in the second
half of 2005 in Memphis; Washington, D.C.; Pittsburgh; Chicago; Key Largo;
and Anaheim.
At June 30, 2005, the Hilton system consisted of 2,311 properties and
364,374 rooms. The company's development pipeline is the largest it has
ever been with approximately 520 hotels and 64,000 rooms at June 30, 2005.
The Hilton Family of Hotels dominated the recently announced J.D. Power
and Associates 2005 North America Hotel Guest Satisfaction Index Study,
with Hampton, Hilton Garden Inn (for the fourth straight year) and Homewood
Suites by Hilton (for the third straight year) each earning first place
rankings in their respective categories. Hilton was the only hotel company
with three top rankings. In addition, the Hilton, Doubletree and Embassy
Suites brands all improved their respective customer satisfaction scores
in the 2005 J.D. Power study.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, reported a strong quarter with profitability up 44 percent owing
to strong unit sales in Las Vegas, Orlando and Hawaii, and higher income
from resort operations and financing fees. HGVC had second quarter 2005
revenue of $136 million, a 39 percent increase from $98 million in the
2004 quarter. Expenses were $97 million in the second quarter, compared
with $71 million in the 2004 period. Second quarter unit sales were up
13 percent, while the average unit sales price was flat.
During the quarter, Hilton completed a transaction whereby it will
acquire 112 acres of undeveloped land on Hawaii's Big Island for $65 million.
The company is likely to utilize the land for future timeshare development,
but specific plans are still being determined.
Asset Dispositions
The company noted that from May through July 2005 it had sold 11 hotel
properties for a combined $416 million. Net proceeds after property level
debt repayment, minority partner distributions, selling costs and income
taxes totaled approximately $335 million. All properties are remaining
in the Hilton system either through long-term franchise or management agreements.
The sale of the Palmer House Hilton in Chicago is expected to be completed
in the third quarter of 2005, with Hilton continuing to manage the hotel.
Hilton also announced plans to sell an additional eight properties, with
the intention of closing the majority of the transactions by year-end 2005.
Corporate Finance
At June 30, 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 $691 million at June 30, 2005.
The company's average basic and diluted share counts for the second
quarter were 381 million and 416 million, respectively.
Hilton's debt currently has an average life of 8.4 years, at an average
cost of approximately 7.0 percent.
The company's effective tax rate in the second quarter was 11 percent,
and benefited from the aforementioned closure of IRS audits and the utilization
of tax loss carryforwards associated with asset sales. The tax provision
also benefited from tax credits associated with the company's synthetic
fuel investment.
During the second quarter, the company repurchased 5.1 million shares
of its common stock at a total cost of $113 million (an average price of
$22.17 per share). On July 21, the company's Board of Directors voted to
increase the company's quarterly dividend on its common stock from $.02
per share to $.04 per share (an increase of approximately $7.6 million
per quarter).
Total capital expenditures in the second quarter were $228 million,
with an additional $34 million expended for timeshare development. Total
capital expenditures include $115 million to acquire the land on which
the Hilton Waikoloa Village is located, and $65 million to acquire the
aforementioned undeveloped land on Hawaii's Big Island.
Six-Month Results
For the six-month period ended June 30, 2005, Hilton reported net income
of $266 million, compared to $112 million in the 2004 period. Diluted net
income per share was $.65 versus $.28 in the 2004 period. Non-recurring
items benefited the 2005 six-month period by $.23 per share, versus $.02
per share benefit in the 2004 six-month period. Operating income for the
six months was $409 million (compared with $319 million in the 2004 period)
on revenue of $2.252 billion (versus $2.059 billion in the 2004 period).
For the 2005 six-month period, when compared to the same period last year,
total company Adjusted EBITDA increased 18 percent to $588 million.
Updated 2005 Outlook
Noting continued strong demand trends in most key markets and an acceleration
in new unit openings, the company provided the following updated estimates
for full-year 2005:
-
Total revenue: $4.435 - $4.460 billion
-
Total Adjusted EBITDA: $1.135 - $1.150 billion
-
Total operating income: $790 - $805 million
-
Comparable owned hotel RevPAR: Increase of 9.5% - 10.5% --
Approximately 70% of the expected RevPAR gains to come from ADR increases
-
Comparable owned hotel margin growth: 180 - 220 basis points
-
Management and franchise fee growth: Approximately 12%
-
Diluted earnings per share: $1.05 - $1.07 -- Recurring diluted earnings
per share of $.82 - $.84
The company's revised guidance includes the impact of asset sales completed
through July 2005, and assumes completion of the sale of the Palmer House
Hilton before the end of the third quarter. The revised guidance excludes
the impact of other potential future asset sales and additional share repurchases.
Total capital spending in 2005 is expected to be approximately $615
million broken out as follows: approximately $125 million for routine improvements;
$210 million for timeshare projects; $100 million in hotel renovation,
ROI and special projects; and $180 million related to previously completed
land acquisitions on Hawaii's Big Island.
Based on strong demand for its brands by owners and accelerated construction
activity, the company raised its guidance for unit additions for 2005.
The company now anticipates adding 160 - 170 hotels and 21,000 - 24,000
rooms to its system in 2005.
Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton
Hotels Corporation, said: "All three facets of our business -- owned hotels,
management and franchising, and timeshare -- are performing very well,
taking full advantage of the robust business trends that continue to mark
our industry's recovery, and this has translated into another quarter of
strong results.
"Many of the hotels in our most important markets are running essentially
full, with occupancies well into the 80s and, in the case of New York City,
in the 90s, bringing the pricing power that comes with increased travel
demand and limited new supply. We are particularly encouraged by strong
results in Chicago which, as we anticipated, improved significantly in
the second quarter. Our strong margin growth at our owned hotels is reflective
of this favorable room rate environment and our ability to effectively
manage costs while still delivering first-class customer service."
He continued: "On the management and franchise side of our business,
our brands are showing outstanding RevPAR gains and therefore continue
to be the favored brands among hotel owners. With our expectation of unit
openings increased for 2005, we look forward to enhancing our leadership
position in branded hotel development in the U.S. The brand initiatives
we have underway, including the new bedding and TVs at the Hilton brand,
new beds at Doubletree and our `Make It Hampton' program, are being received
enthusiastically by travelers and owners alike.
"Our timeshare business had another outstanding quarter, bringing high
quality products to our customers in Las Vegas, Orlando and Hawaii, and
industry-leading margins to our shareholders."
Mr. Bollenbach concluded: "On top of strength in operations, we are
successfully carrying out corporate financial strategies, including our
efforts to sell hotel assets with an eye toward achieving even greater
balance in our company between income derived from owned hotels and income
from management and franchise fees. We sold 11 hotels in the May through
July period at strong prices, and we are pleased that the buyers have elected
to retain the Hilton Family flags on these properties. Additionally, we
have continued our efforts to return capital to our shareholders by repurchasing
our shares, along with doubling our quarterly dividend.
"With each of our businesses performing well and the evidence pointing
to continued strong trends in our industry, we remain confident and optimistic
as to our prospects."
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
Six Months
Ended
Ended
June 30,
June 30,
-------------
---------------
2004 2005 % Change 2004
2005 % Change
------ ------ --------- ------- ------- ---------
Revenue
Owned hotels
$546 $575 5%
$1,028 $1,070 4%
Leased hotels
29 31
7 55 59
7
Management and
franchise fees
97 117 21
186 219
18
Timeshare and other
income
107 148 38
227 302
33
------ ------
------- -------
779 871 12
1,496 1,650 10
Other revenue from
managed and
franchised
properties
286 305
7 563 602
7
------ ------
------- -------
1,065 1,176 10
2,059 2,252
9
Expenses
Owned hotels
380 391
3 751 767
2
Leased hotels
25 27
8 50 53
6
Depreciation and
amortization
83 78
(6) 166 158
(5)
Impairment loss and
related costs
- 5
- -
7 -
Other operating
expenses
89 116 30
190 238
25
Corporate expense
25 26
4 44 50
14
------ ------
------- -------
602 643
7 1,201 1,273
6
Other expenses from
managed and
franchised
properties
285 303
6 559 596
7
------ ------
------- -------
887 946
7 1,760 1,869
6
Operating income
from unconsolidated
affiliates
10 16
60 20 26
30
------ ------
------- -------
Operating income 188
246 31
319 409
28
Interest and
dividend income
7 4 (43)
17 8
(53)
Interest expense
(72) (66) (8)
(142) (130) (8)
Net interest from
unconsolidated
affiliates and
non-controlled
interests
(8) (7) (13)
(14) (13) (7)
Net gain (loss) on
asset dispositions
and other
3 61
- (1) 72
-
Loss from non-
operating
affiliates
- (4)
- - (9)
-
------ ------
------- -------
Income before taxes
and minority and
non-controlled
interests
118 234 98
179 337
88
Provision for income
taxes
(40) (25) (38)
(61) (61) -
Minority and non-
controlled
interests, net
(3) (7) 133
(6) (10) 67
------ ------
------- -------
Net income
$75 $202 169%
$112 $266 138%
====== ======
======= =======
Net income per
share(1)
Basic
$.20 $.53 165%
$.29 $.69 138%
====== ======
======= =======
Diluted
$.19 $.49 158%
$.28 $.65 132%
====== ======
======= =======
Average shares --
basic
383 381 (1)%
382 384
1%
====== ======
======= =======
Average shares --
diluted(2)
417 416
-% 416 418
-%
====== ======
======= =======
(1) EPS for the full year differs from the sum of quarterly
EPS
amounts due to the required method
of computing EPS in the
respective periods.
(2) Average diluted shares for the prior period reflect
the required
retroactive application of EITF 04-8
"The Effect of Contingently
Convertible Debt on Diluted Earnings
per Share".
HILTON HOTELS CORPORATION
U.S. Owned Statistics(1)
Three Months
Six Months
Ended
Ended
June 30,
June 30,
-----------------
-----------------
2004 2005 Change
2004 2005 Change
-------- -------- -------- -------- -------- --------
Hilton
Occupancy
78.6% 80.5% 1.9 pts 73.7%
75.5% 1.8 pts
Average Rate $162.06 $172.94
6.7% $159.42 $170.41 6.9%
RevPAR
$127.39 $139.30 9.3% $117.43
$128.58 9.5%
All Other
Occupancy
70.7% 75.6% 4.9 pts 71.9%
74.4% 2.5 pts
Average Rate $121.09 $125.46
3.6% $119.23 $124.02 4.0%
RevPAR
$85.62 $94.89 10.8% $85.67
$92.29 7.7%
Total
Occupancy
77.9% 80.1% 2.2 pts 73.5%
75.4% 1.9 pts
Average Rate $158.78 $168.99
6.4% $155.95 $166.37 6.7%
RevPAR
$123.71 $135.38 9.4% $114.63
$125.38 9.4%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of June 30,
2005, and owned by us
since January 1, 2004.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months
Six Months
Ended
Ended
June 30,
June 30,
-----------------
-----------------
2004 2005 Change
2004 2005 Change
-------- -------- -------- -------- -------- --------
Hilton
Occupancy
72.7% 75.7% 3.0 pts 69.7%
71.9% 2.2 pts
Average Rate $130.79 $140.51
7.4% $130.29 $139.47 7.0%
RevPAR
$95.08 $106.38 11.9% $90.83 $100.33
10.5%
Hilton Garden
Inn
Occupancy
71.9% 75.2% 3.3 pts 68.8%
71.6% 2.8 pts
Average Rate $99.50
$105.38 5.9% $98.49 $104.56
6.2%
RevPAR
$71.55 $79.25 10.8% $67.74
$74.82 10.5%
Doubletree
Occupancy
71.6% 74.5% 2.9 pts 68.8%
70.7% 1.9 pts
Average Rate $101.45 $108.57
7.0% $101.35 $108.12 6.7%
RevPAR
$72.66 $80.92 11.4% $69.76
$76.42 9.5%
Embassy Suites
Occupancy
73.6% 77.1% 3.5 pts 71.2%
73.8% 2.6 pts
Average Rate $124.04 $130.08
4.9% $123.05 $129.27 5.1%
RevPAR
$91.32 $100.30 9.8% $87.59
$95.35 8.9%
Homewood Suites
by Hilton
Occupancy
76.6% 78.8% 2.2 pts 73.6%
76.2% 2.6 pts
Average Rate $96.99
$101.22 4.4% $96.97 $101.12
4.3%
RevPAR
$74.31 $79.75 7.3% $71.34
$77.01 7.9%
Hampton
Occupancy
71.8% 76.1% 4.3 pts 67.4%
71.5% 4.1 pts
Average Rate $82.06
$87.00 6.0% $81.07 $86.14
6.3%
RevPAR
$58.90 $66.18 12.4% $54.68
$61.60 12.7%
Other
Occupancy
73.6% 73.9% 0.3 pts 70.4%
70.4% - pts
Average Rate $132.97 $150.80
13.4% $127.15 $146.56 15.3%
RevPAR
$97.91 $111.51 13.9% $89.55 $103.17
15.2%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of June 30,
2005, and owned, operated or
franchised by us since January 1,
2004.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
June
2004
2005
Number of
Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
Owned
36 27,492
29 25,285
Leased
1 499
1 499
Joint Venture
10 4,177
11 4,625
Managed
24 13,904
26 13,560
Franchised
159 42,973
170 46,699
----------- -------- ----------- --------
230 89,045
237 90,668
Hilton Garden Inn
Owned
1 162
1 162
Joint Venture
2 280
1 128
Managed
6 796
7 895
Franchised
191 26,161
223 30,454
----------- -------- ----------- --------
200 27,399
232 31,639
Doubletree
Owned
6 2,374
3 1,349
Leased
6 2,144
5 1,746
Joint Venture
25 7,427
16 4,982
Managed
40 10,553
33 8,611
Franchised
75 17,762
96 23,307
----------- -------- ----------- --------
152 40,260
153 39,995
Embassy Suites
Owned
4 881
3 664
Joint Venture
27 7,279
26 6,923
Managed
54 14,136
55 14,433
Franchised
89 20,264
94 21,382
----------- -------- ----------- --------
174 42,560
178 43,402
Homewood Suites by Hilton
Owned
3 398
1 140
Managed
36 4,304
41 4,802
Franchised
97 10,617 113
12,367
----------- -------- ----------- --------
136 15,319
155 17,309
Hampton
Owned
1 133
1 133
Managed
35 4,461
35 4,569
Franchised
1,241 124,809 1,269 126,815
----------- -------- ----------- --------
1,277 129,403 1,305 131,517
Other
Owned
1 300
- -
Leased
- -
- -
Joint Venture
3 1,394
6 2,202
Managed
12 3,465
13 3,796
Franchised
- -
- -
----------- -------- ----------- --------
16 5,159
19 5,998
Timeshare
31 3,740
32 3,846
Total
Owned
52 31,740
38 27,733
Leased
7 2,643
6 2,245
Joint Venture
67 20,557
60 18,860
Managed
207 51,619
210 50,666
Franchised
1,852 242,586 1,965 261,024
Timeshare
31 3,740
32 3,846
----------- -------- ----------- --------
TOTAL PROPERTIES
2,216 352,885 2,311 364,374
=========== ==================== ========
Change to
June 2004 December
2004
Number of
Number of
Properties Rooms Properties Rooms
----------- --------- ----------- -------
Hilton
Owned
(7) (2,207)
(7) (2,207)
Leased
- -
- -
Joint Venture
1 448
1 448
Managed
2 (344)
2 (262)
Franchised
11 3,726
11 3,433
----------- --------- ----------- -------
7 1,623
7 1,412
Hilton Garden Inn
Owned
- -
- -
Joint Venture
(1) (152)
- -
Managed
1 99
1 99
Franchised
32 4,293
12 1,699
----------- --------- ----------- -------
32 4,240
13 1,798
Doubletree
Owned
(3) (1,025)
(1) (353)
Leased
(1) (398)
(1) (398)
Joint Venture
(9) (2,445)
(8) (2,226)
Managed
(7) (1,942)
(5) (1,463)
Franchised
21 5,545
14 3,513
----------- --------- ----------- -------
1 (265)
(1) (927)
Embassy Suites
Owned
(1) (217)
(1) (217)
Joint Venture
(1) (356)
(1) (356)
Managed
1 297
1 299
Franchised
5 1,118
4 961
----------- --------- ----------- -------
4 842
3 687
Homewood Suites by Hilton
Owned
(2) (258)
(2) (258)
Managed
5 498
5 498
Franchised
16 1,750
9 1,015
----------- --------- ----------- -------
19 1,990
12 1,255
Hampton
Owned
- -
- -
Managed
- 108
- 107
Franchised
28 2,006
15 1,012
----------- --------- ----------- -------
28 2,114
15 1,119
Other
Owned
(1) (300)
(1) (300)
Leased
- -
- -
Joint Venture
3 808
3 808
Managed
1 331
- 8
Franchised
- -
- -
----------- --------- ----------- -------
3 839
2 516
Timeshare
1 106
1 106
Total
Owned
(14) (4,007) (12)
(3,335)
Leased
(1) (398)
(1) (398)
Joint Venture
(7) (1,697)
(5) (1,326)
Managed
3 (953)
4 (714)
Franchised
113 18,438
65 11,633
Timeshare
1 106
1 106
----------- --------- ----------- -------
TOTAL PROPERTIES
95 11,489
52 5,966
=========== ========= =========== =======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months
Six Months
Ended
Ended
June 30,
June 30,
--------------
------------
2004 2005 % Change 2004 2005
% Change
------- ------ --------- ------ ----- ---------
Adjusted EBITDA
$278 $336 21%
$497 $588 18%
Proportionate share
of depreciation and
amortization of
unconsolidated
affiliates
(6) (7) 17
(13) (14) 8
Non-recurring items
- (5)
- - (7)
-
Operating interest
and dividend income
(2) (2) -
(3) (5) 67
Operating income of
non-controlled
interests
1 2 100
4 5 25
Net gain (loss) on
asset dispositions
and other
3 61
- (1) 72
-
Loss from non-
operating affiliates
- (4)
- - (9)
-
Minority and non-
controlled
interests, net
(3) (7) 133
(6) (10) 67
------- ------
------ -----
EBITDA
271 374 38
478 620 30
Depreciation and
amortization
(83) (78) (6) (166)
(158) (5)
Interest expense, net (73)
(69) (5) (139) (135)
(3)
Provision for income
taxes
(40) (25) (38) (61)
(61) -
------- ------
------ -----
Net income
$75 $202 169% $112
$266 138%
======= ======
====== =====
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance -- Full Year 2005 Outlook
($ in millions, except per share amounts)
Estimated Estimated
Full Year 2005 Full Year 2005
Low End High End
-------------- --------------
Adjusted EBITDA
$1,135 $1,150
Proportionate share of depreciation and
amortization of unconsolidated
affiliates
(29) (29)
Non-recurring items
(7) (7)
Operating interest and dividend income
(6) (6)
Operating income of non-controlled
interests
10
10
Net gain on asset dispositions and
other
72
72
Loss from non-operating affiliates
(18) (18)
Minority and non-controlled interests,
net
(12) (12)
-------------- --------------
EBITDA
1,145 1,160
Depreciation and amortization
(312) (312)
Interest expense, net
(259) (259)
Provision for income taxes
(150) (156)
-------------- --------------
Net income
$424 $433
============== ==============
Diluted EPS
$1.05 $1.07
============== ==============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales
($ in millions)
Three Months
Six Months
Ended
Ended
June 30,
June 30,
-----------
---------------
2004 2005 % Change 2004
2005 % Change
----- ----- --------- ------- ------- ---------
Revenue -- owned
hotels
$546 $575 5% $1,028
$1,070 4%
Less sold hotels
(47) (29)
(91) (60)
----- -----
------- -------
Revenue -- comparable
owned hotels
$499 $546 9%
$937 $1,010 8%
===== =====
======= =======
Expenses -- owned
hotels
$380 $391 3%
$751 $767
2%
Less sold hotels
(33) (20)
(67) (43)
----- -----
------- -------
Expenses -- comparable
owned hotels
$347 $371 7%
$684 $724
6%
===== =====
======= =======
Owned Hotel Revenue and Expenses -- 2004
Adjusted for Asset Sales(1)
($ in millions)
Twelve Months Ended
December 31, 2004
Revenue -- owned hotels
$2,062
Less sold hotels
(280)
Revenue -- comparable owned hotels
$1,782
Expenses -- owned hotels
$1,501
Less sold hotels
(212)
Expenses -- comparable owned hotels
$1,289
(1) Adjusted for asset sales in 2004, asset sales completed
through
July 2005 and assuming completion
of the sale of the Palmer House
Hilton in the third quarter of 2005.
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.
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