HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months
Ended
March 31
---------------
2005 2006 % Change
------ ------ ---------
Revenue
Owned hotels
$ 495 $ 508
3%
Leased hotels
28 266
-
Management and franchise fees
102 152
49
Timeshare and other income
154 211
37
------ ------
779 1,137 46
Other revenue from managed and franchised
properties
297 382
29
------ ------
1,076 1,519 41
Expenses
Owned hotels
376 380
1
Leased hotels
26 230
-
Depreciation and amortization
80 86
8
Impairment loss and related costs
2 -
-
Other operating expenses
122 178
46
Corporate expense
24 44
83
------ ------
630 918
46
Other expenses from managed and franchised
properties
293 376
28
------ ------
923 1,294 40
Operating income from unconsolidated
affiliates
10 10
-
------ ------
Operating income
163 235
44
Interest and dividend income
4 11
-
Interest expense
(64) (96) 50
Net interest from unconsolidated affiliates
and non-controlled interests
(6) (9) 50
Net gain on foreign currency transactions
- 17
-
Net gain on asset dispositions and other
11 4
(64)
Loss from non-operating affiliates
(5) (4)
-
------ ------
Income before taxes and minority and non-
controlled interests
103 158
53
Provision for income taxes
(36) (52) 44
Minority and non-controlled interests, net
(3) (2) (33)
------ ------
Net income
$ 64 $ 104
63%
====== ======
Net income per share
--------------------------------------------
Basic
$ .17 $ .27
59%
====== ======
Diluted
$ .16 $ .26
63%
====== ======
Average shares - basic
387 383 (1)%
====== ======
Average shares - diluted
421 418 (1)%
====== ======
HILTON
HOTELS CORPORATION
Pro Forma Comparable Owned Statistics(1)
Three Months Ended March 31
Worldwide
64 Hotels
-------------------
2005 2006 Change
------- ------- ------
Hilton
---------------------------------------
Occupancy
69.1% 71.6% 2.5 pts
Average Rate
$165.92 $172.85 4.2%
RevPAR
$114.59 $123.82 8.1%
All Other
---------------------------------------
Occupancy
69.5% 72.3% 2.8 pts
Average Rate
$117.66 $121.91 3.6%
RevPAR
$ 81.73 $ 88.17 7.9%
Total
---------------------------------------
Occupancy
69.1% 71.7% 2.6 pts
Average Rate
$161.24 $167.88 4.1%
RevPAR
$111.41 $120.37 8.0%
North America
(US & Canada)
31 Hotels
-------------------
2005 2006 Change
------- ------- ------
Hilton
---------------------------------------
Occupancy
71.0% 73.0% 2.0 pts
Average Rate
$172.44 $184.36 6.9%
RevPAR
$122.36 $134.52 9.9%
All Other
---------------------------------------
Occupancy
73.2% 75.0% 1.8 pts
Average Rate
$122.53 $127.99 4.5%
RevPAR
$ 89.67 $ 96.01 7.1%
Total
---------------------------------------
Occupancy
71.2% 73.2% 2.0 pts
Average Rate
$166.72 $177.91 6.7%
RevPAR
$118.71 $130.22 9.7%
International
33 Hotels
-------------------
2005 2006 Change
------- ------- ------
Hilton
---------------------------------------
Occupancy
65.1% 68.8% 3.7 pts
Average Rate
$151.06 $147.39 (2.4)%
RevPAR
$ 98.35 $101.48 3.2%
All Other
---------------------------------------
Occupancy
55.0% 61.9% 6.9 pts
Average Rate
$ 92.52 $ 93.33 0.9%
RevPAR
$ 50.90 $ 57.75 13.5%
Total
---------------------------------------
Occupancy
64.5% 68.4% 3.9 pts
Average Rate
$147.90 $144.29 (2.4)%
RevPAR
$ 95.34 $ 98.71 3.5%
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels owned
as of March 31, 2006, which were owned
by HHC or HI since January
1, 2005. Excludes the Company's
owned hotels in New Orleans.
HILTON HOTELS CORPORATION
Pro Forma Comparable Leased Statistics(1)
Three Months Ended March 31
Worldwide
200 Hotels
-------------------
2005 2006 Change
------- ------- ------
Hilton
---------------------------------------
Occupancy
65.7% 69.6% 3.9 pts
Average Rate
$144.67 $142.25 (1.7)%
RevPAR
$ 95.05 $ 98.94 4.1%
Scandic
---------------------------------------
Occupancy
55.0% 59.1% 4.1 pts
Average Rate
$114.45 $107.23 (6.3)%
RevPAR
$ 62.94 $ 63.38 0.7%
All Other
---------------------------------------
Occupancy
66.0% 70.6% 4.6 pts
Average Rate
$121.60 $133.75 10.0%
RevPAR
$ 80.20 $ 94.41 17.7%
Total
---------------------------------------
Occupancy
60.9% 64.9% 4.0 pts
Average Rate
$131.15 $127.50 (2.8)%
RevPAR
$ 79.90 $ 82.79 3.6%
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels leased
as of March 31, 2006, which were leased
by HHC or HI since January
1, 2005.
HILTON HOTELS CORPORATION
Pro Forma Comparable Systemwide Statistics(1)
Regional Summary
Three Months Ended
March 31,
2005 2006 Change
------- ------- --------
North America (US & Canada)
------------------------------------------------
Occupancy
67.5% 70.1% 2.6 pts
Average Rate
$108.51 $117.00
7.8%
RevPAR
$ 73.27 $ 81.97 11.9%
United Kingdom & Ireland
-------------------------------------
Occupancy
66.9% 72.0% 5.1 pts
Average Rate
$167.97 $160.71 (4.3)%
RevPAR
$112.43 $115.72
2.9%
Continental Europe
-------------------------------------
Occupancy
58.0% 60.0% 2.0 pts
Average Rate
$153.10 $148.94 (2.7)%
RevPAR
$ 88.82 $ 89.31
0.6%
Africa
-------------------------------------
Occupancy
65.7% 67.3% 1.6 pts
Average Rate
$127.02 $133.45
5.1%
RevPAR
$ 83.49 $ 89.82
7.6%
Middle East
-------------------------------------
Occupancy
75.9% 73.9% (2.0) pts
Average Rate
$102.15 $104.78
2.6%
RevPAR
$ 77.55 $ 77.48 (0.1)%
Asia Pacific
-------------------------------------
Occupancy
73.8% 76.0% 2.2 pts
Average Rate
$126.24 $133.12
5.4%
RevPAR
$ 93.18 $101.19
8.6%
Latin America & Caribbean
-------------------------------------
Occupancy
68.6% 71.9% 3.3 pts
Average Rate
$118.75 $134.34 13.1%
RevPAR
$ 81.41 $ 96.64 18.7%
Nordic
-------------------------------------
Occupancy
55.2% 59.5% 4.3 pts
Average Rate
$117.48 $110.13 (6.3)%
RevPAR
$ 64.80 $ 65.49
1.1%
Total
-------------------------------------
Occupancy
66.8% 69.4% 2.6 pts
Average Rate
$113.18 $119.96
6.0%
RevPAR
$ 75.65 $ 83.25 10.0%
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels in the
system as of March 31, 2006, which
were in the system of HHC or HI
since January 1, 2005. Excludes the
Company's owned hotels in New
Orleans. Excludes data for HI franchise
hotels.
HILTON HOTELS CORPORATION
Pro Forma Comparable Systemwide Statistics(1)
Brand Summary
Three Months Ended
March 31,
2005 2006 Change
------- ------- ------
Hilton
---------------------------------------
Occupancy
67.4% 70.0% 2.6 pts
Average Rate
$136.99 $143.69 4.9%
RevPAR
$ 92.38 $100.53 8.8%
Hilton Garden Inn
---------------------------------------
Occupancy
65.7% 69.1% 3.4 pts
Average Rate
$102.35 $109.50 7.0%
RevPAR
$ 67.21 $ 75.69 12.6%
Doubletree
---------------------------------------
Occupancy
66.9% 69.1% 2.2 pts
Average Rate
$109.31 $118.17 8.1%
RevPAR
$ 73.15 $ 81.71 11.7%
Embassy Suites
---------------------------------------
Occupancy
70.4% 73.1% 2.7 pts
Average Rate
$127.20 $136.73 7.5%
RevPAR
$ 89.52 $ 99.91 11.6%
Homewood Suites by Hilton
---------------------------------------
Occupancy
72.3% 74.2% 1.9 pts
Average Rate
$100.72 $107.55 6.8%
RevPAR
$ 72.84 $ 79.82 9.6%
Hampton
---------------------------------------
Occupancy
66.7% 68.8% 2.1 pts
Average Rate
$ 85.29 $ 92.12 8.0%
RevPAR
$ 56.85 $ 63.41 11.5%
Scandic
---------------------------------------
Occupancy
54.9% 59.1% 4.2 pts
Average Rate
$114.02 $106.82 (6.3)%
RevPAR
$ 62.60 $ 63.09 0.8%
Conrad
---------------------------------------
Occupancy
66.7% 67.7% 1.0 pts
Average Rate
$145.21 $157.92 8.8%
RevPAR
$ 96.90 $106.99 10.4%
Other
---------------------------------------
Occupancy
63.4% 72.9% 9.5 pts
Average Rate
$114.95 $121.30 5.5%
RevPAR
$ 72.87 $ 88.42 21.3%
Total
---------------------------------------
Occupancy
66.8% 69.4% 2.6 pts
Average Rate
$113.18 $119.96 6.0%
RevPAR
$ 75.65 $ 83.25 10.0%
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels in the
system as of March 31, 2006, which
were in the system of HHC or HI
since January 1, 2005. Excludes the
Company's owned hotels in New
Orleans. Excludes data for HI franchise
hotels.
HILTON HOTELS CORPORATION
Supplementary Statistical Information(1)
March
-----------------------------------------
2005
2006
Number of
Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
----------------------------
Owned
95 42,783
55 31,009
Leased
78 22,908
79 23,437
Joint Venture
15 6,698
14 6,156
Managed
114 42,783
143 52,756
Franchised
181 50,233
197 56,170
----------- -------- ----------- --------
483 165,405 488
169,528
Hilton Garden Inn
----------------------------
Owned
1 162
1 162
Joint Venture
1 128
1 128
Managed
7 895
7 886
Franchised
217 29,633
257 35,275
----------- -------- ----------- --------
226 30,818
266 36,451
Doubletree
----------------------------
Owned
4 1,702
3 1,349
Leased
6 2,144
5 1,746
Joint Venture
16 4,982
14 4,306
Managed
38 10,069
28 7,742
Franchised
88 21,370 115
28,146
----------- -------- ----------- --------
152 40,267
165 43,289
Embassy Suites
----------------------------
Owned
4 881
3 663
Joint Venture
27 7,279
25 6,586
Managed
54 14,134
56 14,788
Franchised
91 20,575
97 22,145
----------- -------- ----------- --------
176 42,869
181 44,182
Homewood Suites by Hilton
-----------------------------
Owned
3 398
1 140
Managed
38 4,483
41 4,706
Franchised
109 11,918
127 13,795
----------- -------- ----------- --------
150 16,799
169 18,641
Hampton
----------------------------
Owned
1 133
1 133
Managed
35 4,569
35 4,607
Franchised
1,259 126,191 1,313 130,241
----------- -------- ----------- --------
1,295 130,893 1,349 134,981
Scandic
----------------------------
Owned
1 325
1 325
Leased
123 21,774
120 21,280
Managed
3 429
3 429
Franchised
5 575
6 962
----------- -------- ----------- --------
132 23,103
130 22,996
Conrad
----------------------------
Joint Venture
3 1,395
3 1,399
Managed
10 3,059
13 3,901
----------- -------- ----------- --------
13 4,454
16 5,300
Other
----------------------------
Owned
3 930
2 630
Leased
2 666
2 666
Managed
8 1,971
8 3,399
Franchised
5 2,215
6 2,432
----------- -------- ----------- --------
18 5,782
18 7,127
Timeshare
38 4,100
40 4,272
----------------------------
Total
----------------------------
Owned
112 47,314
67 34,411
Leased
209 47,492
206 47,129
Joint Venture
62 20,482
57 18,575
Managed
307 82,392
334 93,214
Franchised
1,955 262,710 2,118 289,166
Timeshare
38 4,100
40 4,272
----------- -------- ----------- --------
TOTAL PROPERTIES
2,683 464,490 2,822 486,767
=========== ==================== ========
Change to
----------------------------------------
March 2005 December 2005
Number of Number
of
Properties Rooms Properties Rooms
----------- -------- ----------- -------
Hilton
-----------------------------
Owned
(40) (11,774) (2) (1,360)
Leased
1 529
- (23)
Joint Venture
(1) (542)
(2) (688)
Managed
29 9,973
6 5,047
Franchised
16 5,937
4 1,386
----------- -------- ----------- -------
5 4,123
6 4,362
Hilton Garden Inn
-----------------------------
Owned
- -
- -
Joint Venture
- -
- -
Managed
- (9)
- -
Franchised
40 5,642
7 928
----------- -------- ----------- -------
40 5,633
7 928
Doubletree
-----------------------------
Owned
(1) (353)
- -
Leased
(1) (398)
- -
Joint Venture
(2) (676)
- -
Managed
(10) (2,327) (2)
(318)
Franchised
27 6,776
7 1,439
----------- -------- ----------- -------
13 3,022
5 1,121
Embassy Suites
-----------------------------
Owned
(1) (218)
- -
Joint Venture
(2) (693)
- -
Managed
2 654
- (44)
Franchised
6 1,570
(1) (203)
----------- -------- ----------- -------
5 1,313
(1) (247)
Homewood Suites by Hilton
------------------------------
Owned
(2) (258)
- -
Managed
3 223
- -
Franchised
18 1,877
5 508
----------- -------- ----------- -------
19 1,842
5 508
Hampton
-----------------------------
Owned
- -
- -
Managed
- 38
1 154
Franchised
54 4,050
12 706
----------- -------- ----------- -------
54 4,088
13 860
Scandic
-----------------------------
Owned
- -
- -
Leased
(3) (494)
(1) (125)
Managed
- -
- -
Franchised
1 387
1 247
----------- -------- ----------- -------
(2) (107)
- 122
Conrad
-----------------------------
Joint Venture
- 4
- 4
Managed
3 842
1 241
----------- -------- ----------- -------
3 846
1 245
Other
-----------------------------
Owned
(1) (300)
- -
Leased
- -
- -
Managed
- 1,428
2 2,088
Franchised
1 217
- (2)
----------- -------- ----------- -------
- 1,345
2 2,086
Timeshare
2 172
- -
-----------------------------
Total
-----------------------------
Owned
(45) (12,903) (2) (1,360)
Leased
(3) (363)
(1) (148)
Joint Venture
(5) (1,907) (2)
(684)
Managed
27 10,822
8 7,168
Franchised
163 26,456
35 5,009
Timeshare
2 172
- -
----------- -------- ----------- -------
TOTAL PROPERTIES
139 22,277
38 9,985
=========== ======== =========== =======
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months
Ended
March 31
---------------
2005 2006 % Change
----- ----- ---------
Adjusted EBITDA
$ 252 $ 328
30%
Proportionate share of depreciation and
amortization of unconsolidated
affiliates
(7) (8)
14
Impairment loss and related costs
(2) -
-
Operating interest and dividend income
(3) (2)
(33)
Operating income of non-controlled
interests
3 3
-
Net gain on foreign currency
transactions
- 17
-
Net gain on asset dispositions and other
11 4
(64)
Loss from non-operating affiliates
(5) (4)
(20)
Minority and non-controlled interests,
net
(3) (2)
(33)
----- -----
EBITDA
246 336
37
Depreciation and amortization
(80) (86)
8
Interest expense, net
(66) (94)
42
Provision for income taxes
(36) (52)
44
----- -----
Net income
$ 64 $ 104
63%
===== =====
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2006 Outlook(1)
($ in millions, except per share amounts)
Estimated Estimated
Full Year 2006 Full Year 2006
Low End High End
Adjusted EBITDA
$ 1,720 $
1,765
Proportionate share of depreciation
and amortization of unconsolidated
affiliates
(30)
(30)
Operating interest and dividend
income
(7)
(7)
Operating income of non-controlled
interests
11
11
Net gain on foreign currency
transactions
17
17
Net gain on asset dispositions and
other
4
4
Loss from non-operating affiliates
(17)
(17)
Minority and non-controlled
interests, net
(11)
(11)
--------------- --------------
EBITDA
1,687 1,732
Depreciation and amortization
(434) (434)
Interest expense, net
(513) (512)
Provision for income taxes
(282) (299)
--------------- --------------
Net income
$ 458
$ 487
=============== ==============
Diluted EPS
$ 1.12 $
1.19
=============== ==============
Recurring Diluted EPS
$ 1.06 $
1.13
=============== ==============
(1) Includes the impact of Hilton International from the
acquisition
date of February 23, 2006.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Pro Forma Revenue and Expenses - 1st Quarter
($ in millions)
Owned Hotels
---------------------------------------------------------------------
% or
basis
1st Quarter point
2005 2006 Change
------ ----- ------
Revenue
--------
Reported
$ 495 $ 508
Less sold hotels and New Orleans (142)
(48)
Less HI reported
- (81)
----- -----
Comparable Owned - United States
353 379
7%
Plus HI North America, net(1)
20 24
20%
----- -----
Pro Forma Comparable Owned - North America
373 403
8%
Plus HI International, net(1)
150 154
3%
----- -----
Pro Forma Comparable Owned - Worldwide
$ 523 $ 557
7%
===== =====
Expenses
--------
Reported
$ 376 $ 380
Less sold hotels and New Orleans (106)
(32)
Less HI reported
- (60)
----- -----
Comparable Owned - United States
270 288
7%
Plus HI North America, net(1)
19 22
16%
----- -----
Pro Forma Comparable Owned - North America
289 310
7%
Plus HI International, net(1)
115 114 (1%)
----- -----
Pro Forma Comparable Owned - Worldwide
$ 404 $ 424
5%
===== =====
Margins
--------
Comparable Owned - United States
23.5% 24.0% 50 bps
Pro Forma Comparable Owned - North America
22.5% 23.1% 60 bps
Pro Forma Comparable Owned - International
23.3% 26.0% 270 bps
Pro Forma Comparable Owned - Worldwide
22.8% 23.9% 110 bps
Leased Hotels
---------------------------------------------------------------------
% or
basis
1st Quarter point
2005 2006 Change
------ ----- ------
Revenue
--------
Reported
$ 28 $ 266
Less non-comparable
(4) -
Less HI reported
- (239)
Plus HI, net(1)
535 541
1%
----- -----
Pro Forma Comparable Leased - Worldwide
$ 559 $ 568
2%
===== =====
Expenses
--------
Reported
$ 26 $ 230
Less non-comparable
(4) -
Less HI reported
- (207)
Plus HI, net(1)
495 489 (1%)
----- -----
Pro Forma Comparable Leased - Worldwide
$ 517 $ 512 (1%)
===== =====
Margins
--------
Pro Forma Comparable Leased - Worldwide
7.5% 9.9% 240 bps
Management and Franchise Fees
---------------------------------------------------------------------
1st Quarter %
2005 2006 Change
------ ----- ------
Reported
$ 102 $ 152
Less HI reported
- (11)
Plus HI
19 24
26%
----- -----
Pro Forma - Worldwide
$ 121 $ 165 36%
===== =====
(1) Pro forma for the entities acquired with Hilton International
as
if they had been acquired on January
1, 2005. Excludes non-
comparable hotels.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Pro Forma Revenue and Expenses - 2005 Quarterly
($ in millions)
Owned Hotels
---------------------------------------------------------------------
2005
------------------------------------------
1st 2nd 3rd
4th Year
Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------
Revenue
------------------------
Reported
$ 495 $ 575 $ 489
$ 490 $2,049
Less sold hotels and
New Orleans
(142) (164) (95)
(64) (465)
Plus HI North America,
net(1)
20 26
26 27
99
------- ------- ------- ------- ------
Pro Forma Comparable
Owned - North America
373 437 420
453 1,683
Plus HI International,
net(1)
150 163 146
164 623
------- ------- ------- ------- ------
Pro Forma Comparable
Owned - Worldwide
$ 523 $ 600 $ 566
$ 617 $2,306
======= ======= ======= ======= ======
Expenses
------------------------
Reported
$ 376 $ 391 $ 350
$ 342 $1,459
Less sold hotels and
New Orleans
(106) (109) (69)
(53) (337)
Plus HI North America,
net(1)
19 20
20 21
80
------- ------- ------- ------- ------
Pro Forma Comparable
Owned - North America
289 302 301
310 1,202
Plus HI International,
net(1)
115 116 109
117 457
------- ------- ------- ------- ------
Pro Forma Comparable
Owned - Worldwide
$ 404 $ 418 $ 410
$ 427 $1,659
======= ======= ======= ======= ======
Margins
------------------------
Pro Forma Comparable
Owned - North America
22.5% 30.9% 28.3%
31.6% 28.6%
Pro Forma Comparable
Owned - International
23.3% 28.8% 25.3%
28.7% 26.6%
Pro Forma Comparable
Owned - Worldwide
22.8% 30.3% 27.6%
30.8% 28.1%
Leased Hotels
---------------------------------------------------------------------
2005
------------------------------------------
1st 2nd 3rd
4th Year
Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------
Revenue
------------------------
Reported
$ 28 $ 31 $
28 $ 24 $ 111
Less non-comparable
(4) (5)
- -
(9)
Plus HI, net(1)
535 620 571
602 2,328
------- ------- ------- ------- ------
Pro Forma Comparable
Leased - Worldwide
$ 559 $ 646 $ 599
$ 626 $2,430
======= ======= ======= ======= ======
Expenses
------------------------
Reported
$ 26 $ 27 $
24 $ 22 $ 99
Less non-comparable
(4) (5)
- -
(9)
Plus HI, net(1)
495 525 489
507 2,016
------- ------- ------- ------- ------
Pro Forma Comparable
Leased - Worldwide
$ 517 $ 547 $ 513
$ 529 $2,106
======= ======= ======= ======= ======
Margins
------------------------
Pro Forma Comparable
Leased - Worldwide
7.5% 15.3% 14.4%
15.5% 13.3%
Management and Franchise Fees
---------------------------------------------------------------------
2005
------------------------------------------
1st 2nd 3rd
4th Year
Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------
Revenue
------------------------
Reported
$ 102 $ 117 $ 119
$ 114 $ 452
Plus HI
19 26
24 32 101
------- ------- ------- ------- ------
Pro Forma - Worldwide $
121 $ 143 $ 143 $
146 $ 553
======= ======= ======= ======= ======
(1) Pro forma for the entities acquired with Hilton International
as
if they had been acquired on January
1, 2005. Excludes non-
comparable hotels.
NON-GAAP FINANCIAL MEASURES
----------------------------------------------------------------------
Regulation G, "Conditions for Use of Non-GAAP Financial
Measures,"
prescribes the conditions for use of non-GAAP financial
information in
public disclosures. We believe that our presentation
of EBITDA and
Adjusted EBITDA, which are non-GAAP financial measures,
are important
supplemental measures of operating performance to investors.
The
following discussion defines these terms and why we believe
they are
useful measures of our performance.
EBITDA and Adjusted EBITDA
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in
our industry
which we believe, when considered with measures calculated
in
accordance with United States Generally Accepted Accounting
Principles
(GAAP), gives investors a more complete understanding
of operating
results before the impact of investing and financing
transactions and
income taxes and facilitates comparisons between us and
our
competitors. Management has historically adjusted EBITDA
when
evaluating operating performance because we believe that
the inclusion
or exclusion of certain recurring and non- recurring
items described
below is necessary to provide the most accurate measure
of our core
operating results and as a means to evaluate period-to-period
results.
We have chosen to provide this information to investors
to enable them
to perform more meaningful comparisons of past, present
and future
operating results and as a means to evaluate the results
of core
on-going operations. We do not reflect such items when
calculating
EBITDA, however, we adjust for these items and refer
to this measure
as Adjusted EBITDA. We have historically reported this
measure to our
investors and believe that the continued inclusion of
Adjusted EBITDA
provides consistency in our financial reporting. We use
Adjusted
EBITDA in this press release because we believe it is
useful to
investors in allowing greater transparency related to
a significant
measure used by management in its financial and operational
decision-making. Adjusted EBITDA is among the more significant
factors
in management's internal evaluation of total company
and individual
property performance and in the evaluation of incentive
compensation
related to property management. Management also uses
Adjusted EBITDA
as a measure in determining the value of acquisitions
and
dispositions. Adjusted EBITDA is also widely used by
management in the
annual budget process. Externally, we believe these measures
continue
to be used by investors in their assessment of our operating
performance and the valuation of our company. Adjusted
EBITDA reflects
EBITDA adjusted for the following items:
Gains and Losses on Asset Dispositions and Non-Recurring
Items
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We exclude from Adjusted EBITDA the effect of gains
and losses on
asset dispositions and non-recurring items, such
as asset write-downs
and impairment losses. We believe the inclusion
of these items is not
consistent with reflecting the on-going performance
of our assets.
Management believes it is useful to exclude gains
and losses on asset
dispositions as these amounts are not reflective
of our operating
performance or the performance of our assets and
the amount of such
items can vary dramatically from period to period.
The timing and
selection of an asset for disposition is subject
to a number of
variables that are generally unrelated to our on-going
operations.
Proportionate Share of Depreciation and Amortization
of
Unconsolidated Affiliates
---------------------------------------------------------------------
Our consolidated results include the equity earnings
from our
unconsolidated affiliates after the deduction of
our proportionate
share of depreciation and amortization expense
from unconsolidated
affiliates. We exclude our proportionate share
of depreciation and
amortization expense from unconsolidated affiliates
from Adjusted
EBITDA to provide a more accurate measure of our
proportionate share
of core operating results before investing activities
and to provide
consistency with the performance measure we use
for our consolidated
properties.
Operating Interest and Dividend Income
---------------------------------------------------------------------
Interest and dividend income from investments related
to operating
activities is included in our calculation of Adjusted
EBITDA. We
consider this income, primarily interest on notes
receivable issued
to properties we manage or franchise and dividend
income from
investments related to the development of our core
businesses, to be
a part of our core operating results.
Non-Controlled Interest
---------------------------------------------------------------------
We exclude from Adjusted EBITDA the operating income,
net interest
expense, tax provision and non-controlled interest
reported on our
income statement to the extent we have no ownership
interest. These
exclusions are shown in their respective lines
on the Reconciliation
of Adjusted EBITDA to EBITDA and Net Income.
Minority Interest, Net
---------------------------------------------------------------------
We exclude the minority interest in the income or
loss of our
consolidated joint ventures because these amounts
effectively include
our minority partners' proportionate share of depreciation,
amortization, interest and taxes, which are excluded
from EBITDA.
Limitations on the Use of Non-GAAP Measures
----------------------------------------------------------------------
The use of EBITDA and Adjusted EBITDA has certain limitations.
Our
presentation of EBITDA and Adjusted EBITDA may be different
from the
presentation used by other companies and therefore comparability
may
be limited. Depreciation expense for various long-term
assets,
interest expense, income taxes and other items have been
and will be
incurred and are not reflected in the presentation of
EBITDA or
Adjusted EBITDA. Each of these items should also be considered
in the
overall evaluation of our results. Additionally, EBITDA
and Adjusted
EBITDA do not consider capital expenditures and other
investing
activities and should not be considered as a measure
of our liquidity.
We compensate for these limitations by providing the
relevant
disclosure of our depreciation, interest and income tax
expense,
capital expenditures and other items both in our reconciliations
to
the GAAP financial measures and in our consolidated financial
statements, all of which should be considered when evaluating
our
performance.
EBITDA and Adjusted EBITDA are used in addition to and
in
conjunction with results presented in accordance with
GAAP. EBITDA and
Adjusted EBITDA should not be considered as an alternative
to net
income, operating income, or any other operating performance
measure
prescribed by GAAP, nor should these measures be relied
upon to the
exclusion of GAAP financial measures. EBITDA and Adjusted
EBITDA
reflect additional ways of viewing our operations that
we believe,
when viewed with our GAAP results and the reconciliations
to the
corresponding GAAP financial measures, provide a more
complete
understanding of factors and trends affecting our business
than could
be obtained absent this disclosure. Management strongly
encourages
investors to review our financial information in its
entirety and not
to rely on a single financial measure. |