BEVERLY HILLS, Calif. - Oct. 27, 2005 -- Hilton Hotels Corporation
(NYSE:HLT) today reported financial results for the third quarter and nine
months ended September 30, 2005. Third quarter highlights:
-
Diluted EPS of $.22 versus $.15 in 2004 period, an increase of 47 percent.
-
46 percent increase in net income; $89 million versus $61 million in 2004
period.
-
Total company Adjusted EBITDA up 9 percent to $279 million.
-
Comparable owned hotel RevPAR up 13.3 percent; strength in virtually all
key markets led by New York and Hawaii; comparable owned hotel margins
increase 220 basis points from Q3 2004 (New Orleans excluded from comparable
numbers.)
-
Record fees of $119 million from RevPAR gains, new units; 17 percent increase
from Q3 2004.
-
Timeshare profitability up 21 percent.
Hilton reported third quarter 2005 net income of $89 million, compared
with $61 million in the 2004 quarter. Diluted net income per share was
$.22 in the 2005 third quarter, versus $.15 in the 2004 period.
The company reported third quarter 2005 total operating income of $203
million (a 19 percent increase from $171 million in the 2004 period) on
total revenue of $1.102 billion (a 7 percent increase from $1.033 billion
in the 2004 quarter). Total company earnings before interest, taxes, depreciation
and amortization ("Adjusted EBITDA") were $279 million, an increase of
9 percent from $257 million in the 2004 quarter.
Owned Hotel Results
Strong increases in both room nights and rate across the business transient,
group and leisure segments, resulted in many of the company's owned hotels
showing double-digit revenue-per-available-room (RevPAR) gains in the quarter.
These include company-owned hotels in New York City, Hawaii (which remain
the two strongest U.S. lodging markets), Phoenix, Boston, Atlanta, and
the steadily improving Chicago and San Francisco markets. Strong results
were also reported at the company's owned hotels in San Diego and in the
Washington, D.C., area.
Across all brands, revenue from the company's owned hotels (majority
owned and controlled hotels) was $489 million, a 1 percent decline from
$492 million in the 2004 period. Total revenue from comparable owned hotels
(excluding the impact of 16 property sales dating back to July 1, 2004)
was up 13 percent. RevPAR from comparable owned hotels increased a strong
13.3 percent. Comparable owned hotel occupancy increased 3.2 points to
82.4 percent, while average daily rate (ADR) increased 8.9 percent to $171.02.
Approximately 70 percent of the quarterly RevPAR increase at the comparable
owned hotels was attributable to the ADR gains.
Total owned hotel expenses were down 4 percent in the quarter to $350
million. Expenses at the comparable owned hotels increased 9 percent, primarily
due to an increase in occupied rooms, along with increases in energy and
marketing costs and $3 million in real estate tax credits received in the
2004 period. Cost-per-occupied-room increased 5.3 percent in the quarter.
Comparable owned hotel margins in the third quarter increased 220 basis
points to 28.8 percent, owing to the aforementioned ADR gains and strong
food-and-beverage revenues (up 12 percent from the 2004 period), particularly
in New York and Hawaii.
The company's two owned hotels in New Orleans -- the Hilton New Orleans
Riverside and the Hilton New Orleans Airport -- are excluded from the comparable
numbers due to interruptions in operations caused by Hurricane Katrina.
The hotels sustained relatively minor damage and both are now occupied,
primarily with relief workers as well as Hilton employees.
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
third quarter RevPAR gains as follows: Hilton, 13.1 percent; Doubletree,
11.0 percent; Embassy Suites, 9.8 percent; Hampton Inn, 9.4 percent; Hilton
Garden Inn, 8.9 percent; Homewood Suites by Hilton, 5.6 percent.
For the third consecutive quarter, management and franchise fees set
a new quarterly record. Fees in the third quarter were $119 million, a
17 percent increase from the 2004 period. Approximately half of the fee
increase was attributable to RevPAR gains and half from the addition of
new units.
Brand Development/Unit Growth
In the third quarter, the company added 55 properties and 7,232 rooms
to its system, including: Hampton Inn, 25 hotels and 2,334 rooms; Hilton
Garden Inn, 13 hotels and 1,975 rooms; Homewood Suites by Hilton, 7 hotels
and 645 rooms; Doubletree, 5 hotels and 1,314 rooms; and Embassy Suites,
3 hotels and 737 rooms. Nine hotels and 1,495 rooms were removed from the
system during the quarter.
During the quarter, the Doubletree brand continued its strong growth
with the opening of properties in Washington, D.C.; Memphis; Pittsburgh;
and the greater Chicago and Los Angeles areas. The Washington, Memphis
and Pittsburgh hotels are conversions from other brands. Also in the quarter,
Conrad Hotels announced management contracts for a 320-room luxury property
in Jakarta, Indonesia, (scheduled to open in 2008) and a 250-room luxury
resort on the Caribbean island of Bimini (also scheduled to open in 2008).
In addition, the first Hilton Garden Inn in Manhattan opened in the third
quarter in Times Square.
At September 30, 2005, the Hilton system consisted of 2,357 properties
and 370,111 rooms. The company's development pipeline had approximately
560 hotels and 75,000 rooms at September 30, 2005.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership
business, reported a strong quarter with profitability up 21 percent owing
to strong unit sales in Las Vegas, Orlando and Hawaii; an increase in average
unit sales price; and higher income from financing fees. HGVC had third
quarter revenue of $142 million, a 30 percent increase from $109 million
in the 2004 quarter. Expenses were $107 million in the third quarter, compared
with $80 million in the 2004 period. Third quarter unit sales were up 3
percent, with the average unit sales price also up 3 percent.
During the quarter, HGVC celebrated the topping-off of its new 38-story,
423-unit Phase II tower on the Las Vegas Strip. Upon completion of the
new tower (scheduled for summer 2006), HGVC will have 706 units on the
Strip in two towers, out of a planned total of 1,582 units in four towers.
Additionally in the quarter, HGVC affiliated with Intrawest Corporation
whereby Hilton Grand Vacations Club and Club Intrawest will offer reciprocal
vacation packages to their respective members.
Asset Dispositions
As scheduled, the company in the third quarter completed the sale of
the Palmer House Hilton in Chicago for $230 million. The new owner, an
affiliate of Thor Equities, is expected to invest more than $100 million
in capital improvements in the legendary property.
Hilton noted on October 24, 2005, the sale of the 385-room Hilton Boston
Back Bay to Highland Hospitality Corp. for $110 million. The Boston property
is one of eight hotels that Hilton had previously announced were being
marketed for sale. The company continues to expect the majority of those
hotel sales to close by year-end 2005.
Corporate Finance
At September 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 $958 million at September 30, 2005.
The company's average basic and diluted share counts for the third quarter
were 381 million and 415 million, respectively.
Hilton's debt currently has an average life of 8.1 years, at an average
cost of approximately 7.0 percent.
The company's effective tax rate in the third quarter was 34 percent.
The tax provision benefited from certain state tax credits as well as credits
associated with the company's synthetic fuel investment.
Total hotel capital expenditures in the third quarter were $67 million,
with an additional $58 million expended for timeshare development.
The company did not repurchase any of its stock in the third quarter
because it was engaged in discussions with Hilton Group PLC regarding a
potential acquisition of Hilton Group's lodging business.
Nine-Month Results
For the nine-month period ended September 30, 2005, Hilton reported
net income of $355 million, compared to $173 million in the 2004 period.
Operating income for the nine months was $612 million (compared with $490
million in the 2004 period) on revenue of $3.354 billion (versus $3.092
billion in the 2004 period). For the 2005 nine-month period, when compared
to the same period last year, total company Adjusted EBITDA increased 15
percent to $867 million.
Updated 2005 Outlook
The company provided the following updated estimates for full-year 2005:
-
Total revenue:
$4.400 billion range
-
Total Adjusted EBITDA:
$1.130 billion range
-
Total operating income:
$790 million range
-
Comparable owned hotel RevPAR: Increase of approximately
11% (excludes New Orleans) Approximately 75% of expected RevPAR gains to
come from ADR increases
-
Comparable owned hotel margin growth: Approximately 180 basis points (excludes
New Orleans)
-
Management and franchise fee growth: Approximately 15%
-
Diluted earnings per share:
$1.05 range
-
Recurring diluted EPS:
low $.80 range
|
The company's revised guidance includes the impact of asset sales completed
through October 2005, and excludes the impact of additional asset sales
expected to close in the fourth quarter 2005.
The company estimates that the full-year impact of Hurricane Katrina
from its previously issued guidance is $.02 per share. This impact is included
in both the diluted and the recurring diluted earnings per share estimates
noted above for full-year 2005.
Total capital spending in 2005 is expected to be approximately $600
million, broken out as follows: approximately $125 million for routine
improvements; $190 million for timeshare projects; $105 million in hotel
renovation, ROI or special projects; and $180 million related to previously
completed land acquisitions on Hawaii's Big Island.
The company anticipates adding approximately 170 hotels and 24,000 rooms
to its system in 2005.
Preliminary 2006 Outlook
While the company noted it was currently engaged in its 2006 budgeting
process, based on its expectations of continuing strong demand trends,
Hilton provided the following preliminary estimates for full-year 2006:
Comparable owned hotel RevPAR:
Increase of 8-10%
Diluted earnings per share:
$.97-$1.03
Total capital spending in 2006 is expected to be in the $485 million
range, with approximately $115 million for routine improvements; $195 million
for timeshare projects; and $175 million in hotel renovation, ROI or special
projects.
The 2006 guidance includes the impact of asset sales completed through
October 2005 and assumes seven additional asset sales expected to be completed
by December 31, 2005, or shortly thereafter. The guidance also includes
the estimated impact of the required accounting change related to expensing
of unvested stock options. The 2006 guidance excludes the impact of share
repurchases, additional asset sales and other potential transactions.
The company expects to add 175-200 hotels and 23,000-27,000 rooms to
its system in 2006.
"We are very pleased with our results for the third quarter, which once
again demonstrated the strength of our owned hotel, franchise/management
and timeshare businesses," said Stephen F. Bollenbach, co-chairman and
chief executive officer of Hilton Hotels Corporation. "By providing first-rate
products and service to our guests and offering the industry's best collection
of brands, we continue to experience strong demand from both the traveling
public and hotel owners.
"Our two biggest markets, New York and Hawaii, are also the two strongest
U.S. hotel markets, and we are in the best locations in those areas with
large hotels that are running in the 90 percent occupancy range, and at
strong room rates. Other important markets also are performing well due
to a business mix that is continuing to favor business transient and group
customers. Importantly, we also continue to operate our owned hotels at
industry-leading margins."
Bollenbach continued: "While our financial results were outstanding,
the quarter, of course, was challenged by the terrible events surrounding
Hurricane Katrina in New Orleans and along the Gulf Coast. Our big hotels
fared comparatively well, but we are most proud of the courage, resourcefulness
and spirit demonstrated by our team members as they helped ensure the comfort
and safety of our customers and their fellow employees in a very difficult
time. The city of New Orleans is gradually coming back, our hotels are
operating and we are optimistic about New Orleans' recovery.
"Our hotel brands continue to be the favored brand names among hotel
owners; we had another record quarter in our management/franchise business,
our development pipeline has never been bigger, and we are maintaining
our industry leadership position in U.S. hotel development. Hampton Inn
and Hilton Garden Inn still lead the way, but we are also encouraged by
strong growth at our full-service Doubletree brand, where owners are converting
to Doubletree from other brands. In addition, we are looking forward to
announcing a number of exciting product, service and marketing initiatives
that are being developed and implemented to re-ignite the most famous brand
in the business: Hilton.
"Timeshare had another great quarter, and we are anticipating future
growth and success in our primary markets of Las Vegas, Orlando and Hawaii
while we continue evaluating opportunities for a fourth market."
Bollenbach concluded: "Based on our strong results in the third quarter
and our expectations for continued high levels of demand, we are looking
forward to a strong finish to 2005 and are optimistic for our prospects
as we head into 2006."
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
---------------
---------------
2004 2005 % Change 2004
2005 % Change
------ ------ --------- ------ ------ ---------
Revenue
Owned hotels $
492 $ 489 (1)% $1,520
$1,559 3%
Leased hotels
30 28
(7) 85 87
2
Management and
franchise fees 102
119 17
288 338
17
Timeshare and
other income
119 155
30 346 457
32
------ ------
------ ------
743 791
6 2,239 2,441
9
Other revenue
from managed and
franchised
properties
290 311
7 853 913
7
------ ------
------ ------
1,033 1,102
7 3,092 3,354
8
Expenses
Owned hotels
365 350
(4) 1,116 1,117
-
Leased hotels
26 24
(8) 76 77
1
Depreciation and
amortization
81 70
(14) 247 228
(8)
Impairment loss
and related
costs
- -
- -
7 -
Other operating
expenses
101 128
27 291 366
26
Corporate expense 19
25 32
63 75
19
------ ------
------ ------
592 597
1 1,793 1,870
4
Other expenses
from managed and
franchised
properties
290 311
7 849 907
7
------ ------
------ ------
882 908
3 2,642 2,777
5
Operating income
from
unconsolidated
affiliates
20 9
(55) 40 35
(13)
------ ------
------ ------
Operating income 171
203 19
490 612
25
Interest and
dividend income
2 6
- 19 14
(26)
Interest expense (67)
(66) (1) (209)
(196) (6)
Net interest from
unconsolidated
affiliates and
non-controlled
interests
(6) (6)
- (20) (19)
(5)
Net (loss) gain on
asset
dispositions and
other
(1) 4
- (2) 76
-
Loss from non-
operating
affiliates
(3) (4) 33
(3) (13) -
------ ------
------ ------
Income before
taxes and
minority and non-
controlled
interests
96 137
43 275 474
72
Provision for
income taxes
(35) (47) 34
(96) (108) 13
Minority and non-
controlled
interests, net
- (1)
- (6) (11)
83
------ ------
------ ------
Net income
$ 61 $ 89
46% $ 173 $ 355 105%
====== ======
====== ======
Net income per
share(1)
------------------
Basic
$ .16 $ .23
44% $ .45 $ .93 107%
====== ======
====== ======
Diluted
$ .15 $ .22
47% $ .44 $ .87
98%
====== ======
====== ======
Average shares -
basic
385 381 (1)%
383 383
-%
====== ======
====== ======
Average shares -
diluted(2)
419 415 (1)%
417 417
-%
====== ======
====== ======
(1) EPS for the nine-month period 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 periods 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
Nine Months
Ended
Ended
September 30
September 30
----------------- -----------------
2004 2005 Change 2004
2005 Change
------- ------- ------ ------- ------- ------
Hilton
--------------------
Occupancy
80.0% 83.3% 3.3 pts 76.1%
78.1% 2.0 pts
Average Rate
$160.28 $175.10 9.2% $160.68 $173.96
8.3%
RevPAR
$128.24 $145.90 13.8% $122.27 $135.83
11.1%
All Other
--------------------
Occupancy
71.7% 74.3% 2.6 pts 71.8%
74.4% 2.6 pts
Average Rate
$126.01 $131.06 4.0% $121.50 $126.39
4.0%
RevPAR
$ 90.31 $ 97.39 7.8% $ 87.23 $ 94.01
7.8%
Total
--------------------
Occupancy
79.2% 82.4% 3.2 pts 75.7%
77.7% 2.0 pts
Average Rate
$157.09 $171.02 8.9% $156.85 $169.28
7.9%
RevPAR
$124.34 $140.91 13.3% $118.66 $131.53
10.8%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September
30, 2005, and owned by us
since January 1, 2004. Comparable
hotels exclude the Company's
owned hotels in New Orleans.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
-----------------
-----------------
2004 2005 Change
2004 2005 Change
------- ------- -------- ------- ------- --------
Hilton
----------------
Occupancy
72.5% 75.4% 2.9 pts 70.5%
73.0% 2.5 pts
Average Rate $126.62 $137.54
8.6% $128.36 $138.26 7.7%
RevPAR
$ 91.75 $103.74 13.1% $ 90.46 $100.86
11.5%
Hilton Garden Inn
----------------
Occupancy
73.0% 75.2% 2.2 pts 70.3%
72.8% 2.5 pts
Average Rate $100.10 $105.77
5.7% $ 98.81 $104.79 6.1%
RevPAR
$ 73.05 $ 79.52 8.9% $ 69.48
$ 76.25 9.7%
Doubletree
----------------
Occupancy
71.5% 74.1% 2.6 pts 69.8%
72.0% 2.2 pts
Average Rate $101.52 $108.68
7.1% $101.50 $108.48 6.9%
RevPAR
$ 72.58 $ 80.54 11.0% $ 70.83 $ 78.07
10.2%
Embassy Suites
----------------
Occupancy
73.7% 76.6% 2.9 pts 72.1%
74.8% 2.7 pts
Average Rate $124.22 $131.19
5.6% $123.27 $129.86 5.3%
RevPAR
$ 91.61 $100.55 9.8% $ 88.88
$ 97.07 9.2%
Homewood Suites by Hilton
-------------------------
Occupancy
77.2% 78.7% 1.5 pts 74.8%
77.0% 2.2 pts
Average Rate $ 96.54 $
99.95 3.5% $ 96.49 $100.38
4.0%
RevPAR
$ 74.55 $ 78.70 5.6% $ 72.17
$ 77.32 7.1%
Hampton
----------------
Occupancy
74.1% 76.2% 2.1 pts 69.7%
73.1% 3.4 pts
Average Rate $ 83.49 $
88.81 6.4% $ 81.78 $ 87.01
6.4%
RevPAR
$ 61.88 $ 67.67 9.4% $ 57.03
$ 63.60 11.5%
Other
----------------
Occupancy
76.9% 75.7% (1.2) pts 72.6%
72.2% (0.4) pts
Average Rate $132.35 $147.01
11.1% $129.00 $146.72 13.7%
RevPAR
$101.73 $111.34 9.4% $ 93.63
$105.92 13.1%
(1) Statistics are for comparable hotels, and include
only those
hotels in the system as of September
30, 2005, and owned,
operated or franchised by us since
January 1, 2004. Comparable
hotels exclude the Company's owned
hotels in New Orleans.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
September
-----------------------------------------------
2004
2005
Number of
Number of
Properties Rooms Properties
Rooms
----------- -------- ----------- --------
Hilton
----------------------
Owned
36 27,492
27 23,241
Leased
1 499
1 499
Joint Venture
10 4,177
11 4,625
Managed
24 13,904
27 15,370
Franchised
161 43,574
170 46,800
----------- -------- ----------- --------
232 89,646
236 90,535
Hilton Garden Inn
----------------------
Owned
1 162
1 162
Joint Venture
2 280
1 128
Managed
6 796
7 895
Franchised
204 27,761
236 32,429
----------- -------- ----------- --------
213 28,999
245 33,614
Doubletree
----------------------
Owned
6 2,374
3 1,349
Leased
6 2,144
5 1,746
Joint Venture
24 7,208
14 4,306
Managed
39 10,179
31 8,240
Franchised
79 18,694
102 24,936
----------- -------- ----------- --------
154 40,599
155 40,577
Embassy Suites
----------------------
Owned
4 881
3 663
Joint Venture
27 7,279
25 6,586
Managed
54 14,136
56 14,767
Franchised
90 20,422
97 22,118
----------- -------- ----------- --------
175 42,718
181 44,134
Homewood Suites by
Hilton
----------------------
Owned
3 398
1 140
Managed
36 4,304
41 4,706
Franchised
99 10,831
120 13,108
----------- -------- ----------- --------
138 15,533
162 17,954
Hampton
----------------------
Owned
1 133
1 133
Managed
35 4,461
34 4,453
Franchised
1,248 125,252
1,290 128,640
----------- -------- ----------- --------
1,284 129,846
1,325 133,226
Other
----------------------
Owned
1 300
- -
Joint Venture
3 1,394
3 1,395
Managed
13 3,749
17 4,750
----------- -------- ----------- --------
17 5,443
20 6,145
Timeshare
31 3,740
33 3,926
----------------------
Total
----------------------
Owned
52 31,740
36 25,688
Leased
7 2,643
6 2,245
Joint Venture
66 20,338
54 17,040
Managed
207 51,529
213 53,181
Franchised
1,881 246,534
2,015 268,031
Timeshare
31 3,740
33 3,926
----------- -------- ----------- --------
TOTAL PROPERTIES
2,244 356,524
2,357 370,111
=========== ======== = =========== ========
Change to
-----------------------------------------------
September 2004
December 2004
Number of
Number of
Properties Rooms Properties
Rooms
----------- -------- ----------- --------
Hilton
----------------------
Owned
(9) (4,251)
(9) (4,251)
Leased
- -
- -
Joint Venture
1 448
1 448
Managed
3 1,466
3 1,548
Franchised
9 3,226
11 3,534
----------- -------- ----------- --------
4 889
6 1,279
Hilton Garden Inn
----------------------
Owned
- -
- -
Joint Venture
(1) (152)
- -
Managed
1 99
1 99
Franchised
32 4,668
25 3,674
----------- -------- ----------- --------
32 4,615
26 3,773
Doubletree
----------------------
Owned
(3) (1,025)
(1) (353)
Leased
(1) (398)
(1) (398)
Joint Venture
(10) (2,902)
(10) (2,902)
Managed
(8) (1,939)
(7) (1,834)
Franchised
23 6,242
20 5,142
----------- -------- ----------- --------
1 (22)
1 (345)
Embassy Suites
----------------------
Owned
(1) (218)
(1) (218)
Joint Venture
(2) (693)
(2) (693)
Managed
2 631
2 633
Franchised
7 1,696
7 1,697
----------- -------- ----------- --------
6 1,416
6 1,419
Homewood Suites by
Hilton
----------------------
Owned
(2) (258)
(2) (258)
Managed
5 402
5 402
Franchised
21 2,277
16 1,756
----------- -------- ----------- --------
24 2,421
19 1,900
Hampton
----------------------
Owned
- -
- -
Managed
(1) (8)
(1) (9)
Franchised
42 3,388
36 2,837
----------- -------- ----------- --------
41 3,380
35 2,828
Other
----------------------
Owned
(1) (300)
(1) (300)
Joint Venture
- 1
- 1
Managed
4 1,001
4 962
----------- -------- ----------- --------
3 702
3 663
Timeshare
2 186
2 186
----------------------
Total
----------------------
Owned
(16) (6,052)
(14) (5,380)
Leased
(1) (398)
(1) (398)
Joint Venture
(12) (3,298)
(11) (3,146)
Managed
6 1,652
7 1,801
Franchised
134 21,497
115 18,640
Timeshare
2 186
2 186
----------- -------- ----------- --------
TOTAL PROPERTIES
113 13,587
98 11,703
=========== ======== =========== ========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
-------------
-------------
2004 2005 % Change 2004 2005
% Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA
$ 257 $ 279 9% $
754 $ 867 15%
Proportionate share
of depreciation and
amortization of
unconsolidated
affiliates
(7) (8) 14
(20) (22) 10
Non-recurring items
- -
- - (7)
-
Operating interest
and dividend income
- (1)
- (3) (6)
100
Operating income of
non-controlled
interests
2 3
50 6 8
33
Net (loss) gain on
asset dispositions
and other
(1) 4
- (2) 76
-
Loss from non-
operating affiliates (3)
(4) 33 (3)
(13) -
Minority and non-
controlled
interests, net
- (1)
- (6) (11)
83
----- -----
----- -----
EBITDA
248 272 10
726 892 23
Depreciation and
amortization
(81) (70) (14) (247)
(228) (8)
Interest expense, net (71)
(66) (7) (210) (201)
(4)
Provision for income
taxes
(35) (47) 34
(96) (108) 13
----- -----
----- -----
Net income
$ 61 $ 89 46%
$ 173 $ 355 105%
===== =====
===== =====
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full-Year 2005 Outlook
($ in millions, except per share amounts)
Estimated
Full-Year 2005
------------------------
Adjusted EBITDA
$ 1,130
Proportionate share of depreciation and
amortization of unconsolidated affiliates
(30)
Non-recurring items
(7)
Operating interest and dividend income
(7)
Operating income of non-controlled interests
10
Net gain on asset dispositions and other
76
Loss from non-operating affiliates
(17)
Minority and non-controlled interests, net
(12)
-------------
EBITDA
1,143
Depreciation and amortization
(305)
Interest expense, net
(261)
Provision for income taxes
(149)
-------------
Net income
$ 428
=============
Diluted EPS
$ 1.05
=============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned-Hotel Revenue and Expenses
Adjusted for Asset Sales and New Orleans
($ in millions)
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
-------------
---------------
2004 2005 % Change 2004
2005 % Change
----- ----- --------- ------ ------ ---------
Revenue - owned
hotels
$ 492 $ 489 (1)% $1,520
$1,559 3%
Less sold hotels and
New Orleans
(86) (31)
(299) (223)
----- -----
------ ------
Revenue - comparable
owned hotels
$ 406 $ 458 13% $1,221
$1,336 9%
===== =====
====== ======
Expenses - owned
hotels
$ 365 $ 350 (4)% $1,116
$1,117 -%
Less sold hotels and
New Orleans
(67) (24)
(216) (153)
----- -----
------ ------
Expenses -
comparable owned
hotels
$ 298 $ 326 9% $
900 $ 964 7%
===== =====
====== ======
NON-GAAP FINANCIAL MEASURES
----------------------------------------------------------------------
Regulation G, "Conditions for Use of Non-GAAP Financial
Measures,"
prescribes the conditions for use of non-GAAP financial
information in
public disclosures. We believe that our presentation
of EBITDA and
Adjusted EBITDA, which are non-GAAP financial measures,
are important
supplemental measures of operating performance to investors.
The
following discussion defines these terms and why we believe
they are
useful measures of our performance.
EBITDA and Adjusted EBITDA
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in
our industry
which we believe, when considered with measures calculated
in
accordance with United States Generally Accepted Accounting
Principles
(GAAP), gives investors a more complete understanding
of operating
results before the impact of investing and financing
transactions and
income taxes, and facilitates comparisons between us
and our
competitors. Management has historically adjusted EBITDA
when
evaluating operating performance because we believe that
the inclusion
or exclusion of certain recurring and non-recurring items
described
below is necessary to provide the most accurate measure
of our core
operating results and as a means to evaluate period-to-period
results.
We have chosen to provide this information to investors
to enable them
to perform more meaningful comparisons of past, present
and future
operating results and as a means to evaluate the results
of core
on-going operations. We do not reflect such items when
calculating
EBITDA; however, we adjust for these items and refer
to this measure
as Adjusted EBITDA. We have historically reported this
measure to our
investors and believe that the continued inclusion of
Adjusted EBITDA
provides consistency in our financial reporting. We use
Adjusted
EBITDA in this press release because we believe it is
useful to
investors in allowing greater transparency related to
a significant
measure used by management in its financial and operational
decision making. Adjusted EBITDA is among the more significant
factors
in management's internal evaluation of total company
and individual
property performance and in the evaluation of incentive
compensation
related to property management. Management also uses
Adjusted EBITDA
as a measure in determining the value of acquisitions
and
dispositions. Adjusted EBITDA is also widely used by
management in the
annual budget process. Externally, we believe these measures
continue
to be used by investors in their assessment of our operating
performance and the valuation of our company. Adjusted
EBITDA reflects
EBITDA adjusted for the following items:
Gains and Losses on Asset Dispositions and
Non-Recurring Items
-------------------------------------------------------------------
We exclude from Adjusted EBITDA the
effect of gains and losses on
asset dispositions and non-recurring
items, such as asset
write-downs and impairment losses.
We believe the inclusion of
these items is not consistent with
reflecting the on-going
performance of our assets. Management
believes it is useful to
exclude gains and losses on asset
dispositions as these amounts
are not reflective of our operating
performance or the performance
of our assets, and the amount of such
items can vary dramatically
from period to period. The timing
and selection of an asset for
disposition is subject to a number
of variables that are generally
unrelated to our on-going operations.
Proportionate Share of Depreciation and Amortization
of
Unconsolidated Affiliates
-------------------------------------------------------------------
Our consolidated results include the
equity earnings from our
unconsolidated affiliates after the
deduction of our proportionate
share of depreciation and amortization
expense from unconsolidated
affiliates. We exclude our proportionate
share of depreciation and
amortization expense from unconsolidated
affiliates from Adjusted
EBITDA to provide a more accurate
measure of our proportionate
share of core operating results before
investing activities and to
provide consistency with the performance
measure we use for our
consolidated properties.
Operating Interest and Dividend Income
-------------------------------------------------------------------
Interest and dividend income from investments
related to operating
activities is included in our calculation
of Adjusted EBITDA. We
consider this income, primarily interest
on notes receivable
issued to properties we manage or
franchise and dividend income
from investments related to the development
of our core
businesses, to be a part of our core
operating results.
Non-Controlled Interest
-------------------------------------------------------------------
We exclude from Adjusted EBITDA the
operating income, net interest
expense, tax provision and non-controlled
interest reported on our
income statement to the extent these
amounts belong to other
ownership interests. These exclusions
are shown in their
respective lines on the Reconciliation
of Adjusted EBITDA to
EBITDA and Net Income.
Minority Interest, Net
-------------------------------------------------------------------
We exclude the minority interest in
the income or loss of our
consolidated joint ventures because
these amounts effectively
include our minority partners' proportionate
share of
depreciation, amortization, interest
and taxes, which are excluded
from EBITDA.
Limitations on the Use of Non-GAAP Measures
----------------------------------------------------------------------
The use of EBITDA and Adjusted EBITDA has certain limitations.
Our
presentation of EBITDA and Adjusted EBITDA may be different
from the
presentation used by other companies and therefore comparability
may
be limited. Depreciation expense for various long-term
assets,
interest expense, income taxes and other items have been
and will be
incurred and are not reflected in the presentation of
EBITDA or
Adjusted EBITDA. Each of these items should also be considered
in the
overall evaluation of our results. Additionally, EBITDA
and Adjusted
EBITDA do not consider capital expenditures and other
investing
activities and should not be considered as a measure
of our liquidity.
We compensate for these limitations by providing the
relevant
disclosure of our depreciation, interest and income tax
expense,
capital expenditures and other items both in our reconciliations
to
the GAAP financial measures and in our consolidated financial
statements, all of which should be considered when evaluating
our
performance.
EBITDA and Adjusted EBITDA are used in addition to and
in
conjunction with results presented in accordance with
GAAP. EBITDA and
Adjusted EBITDA should not be considered as an alternative
to net
income, operating income, or any other operating performance
measure
prescribed by GAAP, nor should these measures be relied
upon to the
exclusion of GAAP financial measures. EBITDA and Adjusted
EBITDA
reflect additional ways of viewing our operations that
we believe,
when viewed with our GAAP results and the reconciliations
to the
corresponding GAAP financial measures, provide a more
complete
understanding of factors and trends affecting our business
than could
be obtained absent this disclosure. Management strongly
encourages
investors to review our financial information in its
entirety and not
to rely on a single financial measure. |
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.
|