HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months
Six Months
Ended
Ended
June 30
June 30
-------------
---------------
2005 2006 % Change 2005
2006 % Change
------ ------ ---------- ------- ------- ----------
Revenue
Owned hotels $575
$681 18 % $1,070 $1,189
11 %
Leased hotels
31 671
- 59 937
-
Management and
franchise fees 117
175 50
219 327
49
Timeshare and
other income
148 217 47
302 428
42
------ ------
------- -------
871 1,744 100
1,650 2,881 75
Other revenue
from managed
and franchised
properties
305 460 51
602 842
40
------ ------
------- -------
1,176 2,204 87
2,252 3,723 65
Expenses
Owned hotels
391 477 22
767 857
12
Leased hotels
27 572
- 53 802
-
Depreciation and
amortization
78 117 50
158 203
28
Impairment loss
and related
costs
5 -
- 7
- -
Other operating
expenses
116 190 64
238 368
55
Corporate
expense
26 43
65 50
87 74
------ ------
------- -------
643 1,399 118
1,273 2,317 82
Other expenses
from managed
and franchised
properties
303 457 51
596 833
40
------ ------
------- -------
946 1,856 96
1,869 3,150 69
Operating income
from
unconsolidated
affiliates
16 18
13 26
28 8
------ ------
------- -------
Operating income 246
366 49
409 601
47
Interest and
dividend income
4 4
- 8
15 88
Interest expense (66) (139)
111 (130) (235)
81
Net interest from
unconsolidated
affiliates and
non-controlled
interests
(7) (13) 86
(13) (22) 69
Net gain on
foreign currency
transactions
- 3
- -
20 -
Net gain on asset
dispositions and
other
61 19 (69)
72 23
(68)
Loss from non-
operating
affiliates
(4) (4) -
(9) (8) (11)
------ ------
------- -------
Income before
taxes and
minority and non-
controlled
interests
234 236
1 337 394
17
Provision for
income taxes
(25) (92) -
(61) (144) 136
Minority and non-
controlled
interests, net
(7) -
- (10) (2)
(80)
------ ------
------- -------
Net income
$202 $144 (29)%
$266 $248 (7)%
====== ======
======= =======
Net income per
share (1)
--------------
Basic
$.53 $.37 (30)%
$.69 $.65 (6)%
====== ======
======= =======
Diluted
$.49 $.35 (29)%
$.65 $.61 (6)%
====== ======
======= =======
Average shares -
basic
381 385
1 % 384 384
- %
====== ======
======= =======
Average shares -
diluted
416 419
1 % 418 418
- %
====== ======
======= =======
(1) EPS for the six month periods differs from the sum
of quarterly
EPS amounts due to the required method
of computing EPS in the
respective periods.
HILTON
HOTELS CORPORATION
Comparable Owned Statistics (1)
Three Months Ended
Six Months Ended
June 30,
June 30,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
Worldwide -
63 Hotels
-----------
Hilton
------
Occupancy 78.1 %
79.0 % 0.9 pts 73.8 % 75.5 %
1.7 pts
Average Rate $170.54 $184.66
8.3 % $169.64 $180.50 6.4 %
RevPAR $133.20
$145.85 9.5 % $125.24 $136.34
8.9 %
All Other
---------
Occupancy 76.5 %
76.1 % (0.4)pts 73.9 % 74.8 %
0.9 pts
Average Rate $109.02 $117.41
7.7 % $109.13 $115.22 5.6 %
RevPAR $83.44
$89.30 7.0 % $80.62
$86.20 6.9 %
Total
-----
Occupancy 77.9 %
78.7 % 0.8 pts 73.8 % 75.5 %
1.7 pts
Average Rate $163.95 $177.58
8.3 % $163.03 $173.46 6.4 %
RevPAR $127.77
$139.69 9.3 % $120.37 $130.88
8.7 %
North America
(US & Canada)
- 30 Hotels
-------------
Hilton
------
Occupancy 81.0 %
80.9 % (0.1)pts 76.5 % 77.4 %
0.9 pts
Average Rate $179.18 $196.88
9.9 % $176.71 $191.76 8.5 %
RevPAR $145.05
$159.22 9.8 % $135.19 $148.50
9.8 %
All Other
---------
Occupancy 75.6 %
76.5 % 0.9 pts 74.4 % 75.7 %
1.3 pts
Average Rate $125.46 $133.38
6.3 % $124.02 $130.72 5.4 %
RevPAR $94.89
$101.98 7.5 % $92.29
$99.01 7.3 %
Total
-----
Occupancy 80.3 %
80.4 % 0.1 pts 76.3 % 77.2 %
0.9 pts
Average Rate $173.35 $189.87
9.5 % $170.78 $184.84 8.2 %
RevPAR $139.27
$152.58 9.6 % $130.24 $142.77
9.6 %
International
- 33 Hotels
-------------
Hilton
------
Occupancy 72.2 %
75.1 % 2.9 pts 68.2 % 71.7 %
3.5 pts
Average Rate $150.35 $157.91
5.0 % $153.09 $155.66 1.7 %
RevPAR $108.48
$118.64 9.4 % $104.49 $111.54
6.7 %
All Other
---------
Occupancy 78.8 %
75.0 % (3.8)pts 72.5 % 72.4 % (0.1)pts
Average Rate $68.58 $75.70
10.4 % $69.93 $73.67
5.3 %
RevPAR $54.08
$56.79 5.0 % $50.68
$53.35 5.3 %
Total
-----
Occupancy 72.8 %
75.1 % 2.3 pts 68.7 % 71.7 %
3.0 pts
Average Rate $141.86 $150.17
5.9 % $144.68 $147.86 2.2 %
RevPAR $103.27
$112.80 9.2 % $99.33 $106.05
6.8 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels owned
as of June 30, 2006 which were owned
by HHC or HI since January 1,
2005. Excludes the Company's owned
hotels in New Orleans.
HILTON HOTELS CORPORATION
Comparable Leased Statistics (1)
Three Months Ended
Six Months Ended
June 30,
June 30,
2005 2006 Change
2005 2006 Change
--------- --------- ------- --------- -------- ---------
Worldwide -
200 Hotels
-----------
Hilton
------
Occupancy 74.2
% 76.0 % 1.8 pts 70.0 %
72.8 % 2.8 pts
Average Rate $152.58 $159.48
4.5 % $148.89 $151.29 1.6 %
RevPAR $113.20
$121.20 7.1 % $104.18 $110.13
5.7 %
Scandic
-------
Occupancy 65.9
% 64.5 % (1.4)pts 60.5 %
61.8 % 1.3 pts
Average Rate $110.43 $111.97
1.4 % $112.25 $109.72 (2.3)%
RevPAR
$72.82 $72.18 (0.9)% $67.91
$67.82 (0.1)%
All Other
---------
Occupancy 80.7
% 78.2 % (2.5)pts 73.4 %
74.4 % 1.0 pts
Average Rate $139.36 $151.49
8.7 % $131.42 $143.12 8.9 %
RevPAR $112.45
$118.53 5.4 % $96.41 $106.54
10.5 %
Total
-----
Occupancy 70.8
% 70.9 % 0.1 pts 65.9 %
68.0 % 2.1 pts
Average Rate $134.23 $139.61
4.0 % $132.82 $133.86 0.8 %
RevPAR
$95.09 $99.02 4.1 % $87.54
$90.96 3.9 %
(1) Statistics are presented pro forma as if the acquisition
of Hilton
International had occurred January
1, 2005. Includes hotels leased
as of June 30, 2006 which were leased
by HHC or HI since January
1, 2005.
HILTON HOTELS CORPORATION
Comparable Systemwide Statistics (1)
Regional Summary
Three Months Ended
Six Months Ended
June 30,
June 30,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
North America
(US & Canada)
-------------
Occupancy 73.3 %
76.3 % 3.0 pts 69.6 % 72.6 %
3.0 pts
Average Rate $106.70 $113.93
6.8 % $105.83 $113.00 6.8 %
RevPAR $78.20
$86.93 11.2 % $73.66 $81.99
11.3 %
United Kingdom
& Ireland
--------------
Occupancy 75.5 %
78.1 % 2.6 pts 71.3 % 75.1 %
3.8 pts
Average Rate $169.16 $172.85
2.2 % $168.60 $167.06 (0.9)%
RevPAR $127.78
$135.08 5.7 % $120.15 $125.45
4.4 %
Continental
Europe
-----------
Occupancy 71.8 %
73.6 % 1.8 pts 65.0 % 66.9 %
1.9 pts
Average Rate $164.33 $173.02
5.3 % $159.40 $162.36 1.9 %
RevPAR $118.04
$127.35 7.9 % $103.66 $108.60
4.8 %
Africa
------
Occupancy 64.1 %
71.7 % 7.6 pts 64.9 % 69.5 %
4.6 pts
Average Rate $128.46 $135.62
5.6 % $127.74 $134.59 5.4 %
RevPAR $82.40
$97.23 18.0 % $82.94 $93.55
12.8 %
Middle East
-----------
Occupancy 76.6 %
71.4 % (5.2)pts 76.3 % 72.7 % (3.6)pts
Average Rate $80.39 $89.21
11.0 % $91.10 $97.13
6.6 %
RevPAR $61.61
$63.71 3.4 % $69.50
$70.59 1.6 %
Asia Pacific
------------
Occupancy 75.4 %
75.9 % 0.5 pts 74.9 % 76.0 %
1.1 pts
Average Rate $126.30 $131.80
4.4 % $126.69 $132.45 4.5 %
RevPAR $95.19
$100.06 5.1 % $94.89 $100.62
6.0 %
Latin America
& Caribbean
-------------
Occupancy 69.4 %
72.2 % 2.8 pts 69.0 % 72.6 %
3.6 pts
Average Rate $112.91 $124.35
10.1 % $118.49 $129.74 9.5 %
RevPAR $78.40
$89.74 14.5 % $81.78 $94.15
15.1 %
Nordic
------
Occupancy 66.1 %
64.8 % (1.3)pts 60.7 % 62.1 %
1.4 pts
Average Rate $114.56 $116.16
1.4 % $115.88 $113.29 (2.2)%
RevPAR $75.78
$75.23 (0.7)% $70.32 $70.40
0.1 %
Total
-----
Occupancy 72.9 %
75.3 % 2.4 pts 69.3 % 71.9 %
2.6 pts
Average Rate $111.91 $118.96
6.3 % $111.31 $117.63 5.7 %
RevPAR $81.60
$89.62 9.8 % $77.09
$84.57 9.7 %
(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 June 30, 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
Comparable Systemwide Statistics (1)
Brand Summary
Three Months Ended
Six Months Ended
June 30,
June 30,
2005 2006 Change
2005 2006 Change
--------- --------- -------- --------- --------- --------
Hilton
------
Occupancy 73.9 %
75.3 % 1.4 pts 70.8 % 72.4 %
1.6 pts
Average Rate $136.67 $146.42
7.1 % $136.02 $144.06 5.9 %
RevPAR $101.03
$110.30 9.2 % $96.29 $104.27
8.3 %
Hilton Garden
Inn
-------------
Occupancy 72.0 %
75.1 % 3.1 pts 68.9 % 71.5 %
2.6 pts
Average Rate $99.64 $105.51
5.9 % $98.60 $104.71 6.2
%
RevPAR $71.76
$79.28 10.5 % $67.93 $74.84
10.2 %
Doubletree
----------
Occupancy 71.8 %
75.9 % 4.1 pts 68.4 % 72.3 %
3.9 pts
Average Rate $105.36 $113.67
7.9 % $104.90 $112.89 7.6 %
RevPAR $75.59
$86.28 14.1 % $71.73 $81.56
13.7 %
Embassy
Suites
-------
Occupancy 75.7 %
77.1 % 1.4 pts 72.5 % 74.5 %
2.0 pts
Average Rate $126.33 $135.75
7.5 % $125.50 $134.35 7.1 %
RevPAR $95.62
$104.70 9.5 % $90.99 $100.13
10.0 %
Homewood
Suites by
Hilton
---------
Occupancy 76.9 %
79.3 % 2.4 pts 74.1 % 76.8 %
2.7 pts
Average Rate $98.55 $103.43
5.0 % $98.35 $103.20 4.9
%
RevPAR $75.76
$81.99 8.2 % $72.85
$79.21 8.7 %
Hampton
-------
Occupancy 72.0 %
76.1 % 4.1 pts 67.6 % 71.6 %
4.0 pts
Average Rate $82.21 $87.29
6.2 % $81.22 $86.42
6.4 %
RevPAR $59.16
$66.45 12.3 % $54.94 $61.89
12.7 %
Scandic
-------
Occupancy 65.9 %
64.5 % (1.4)pts 60.4 % 61.8 %
1.4 pts
Average Rate $109.95 $111.55
1.5 % $111.79 $109.30 (2.2)%
RevPAR $72.48
$71.97 (0.7)% $67.57 $67.57
- %
Conrad
------
Occupancy 72.5 %
69.4 % (3.1)pts 69.6 % 68.6 % (1.0)pts
Average Rate $145.36 $162.52
11.8 % $145.29 $160.27 10.3 %
RevPAR $105.38
$112.81 7.1 % $101.17 $109.93
8.7 %
Other
-----
Occupancy 80.0 %
82.0 % 2.0 pts 71.8 % 77.5 %
5.7 pts
Average Rate $139.71 $149.01
6.7 % $128.83 $136.05 5.6 %
RevPAR $111.81
$122.22 9.3 % $92.45 $105.41
14.0 %
Total
-----
Occupancy 72.9 %
75.3 % 2.4 pts 69.3 % 71.9 %
2.6 pts
Average Rate $111.91 $118.96
6.3 % $111.31 $117.63 5.7 %
RevPAR $81.60
$89.62 9.8 % $77.09
$84.57 9.7 %
(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 June 30, 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)
June
---------------------------------------
2005
2006
Number of Number
of
Properties Rooms Properties Rooms
------------------- -------------------
Hilton
------
Owned
81 39,770 54
30,339
Leased
78 22,908 79
23,552
Joint Venture
16 6,844
14 6,156
Managed
118 42,797 143
52,783
Franchised
188 52,364 201
58,012
------------------- -------------------
481 164,683 491
170,842
Hilton Garden Inn
-----------------
Owned
1 162
1 162
Joint Venture
1 128
1 128
Managed
7 895
7 886
Franchised
223 30,454 270
37,198
------------------- -------------------
232 31,639 279
38,374
Doubletree
----------
Owned
3 1,349
3 1,349
Leased
5 1,746
5 1,746
Joint Venture
16 4,982
14 4,306
Managed
33 8,611
26 7,146
Franchised
96 23,307 119
29,102
------------------- -------------------
153 39,995 167
43,649
Embassy Suites
--------------
Owned
3 664
3 664
Joint Venture
26 6,923
24 6,251
Managed
55 14,433 56
14,830
Franchised
94 21,382 98
22,247
------------------- -------------------
178 43,402 181
43,992
Homewood Suites by Hilton
-------------------------
Owned
1 140
1 140
Managed
41 4,802
41 4,706
Franchised
113 12,367 132
14,434
------------------- -------------------
155 17,309 174
19,280
Hampton
-------
Owned
1 133
1 133
Managed
35 4,569
35 4,607
Franchised
1,269 126,815 1,329
131,421
------------------- -------------------
1,305 131,517 1,365
136,161
Scandic
-------
Owned
1 325
1 325
Leased
123 21,774 120
21,431
Managed
3 429
3 429
Franchised
5 575
6 962
------------------- -------------------
132 23,103 130
23,147
Conrad
------
Joint Venture
3 1,395
3 1,399
Managed
10 3,059
13 3,903
------------------- -------------------
13 4,454
16 5,302
Other
-----
Owned
2 630
2 630
Leased
2 666
2 666
Joint Venture
3 807
- -
Managed
5 1,164
9 3,434
Franchised
5 2,215
5 2,265
------------------- -------------------
17 5,482
18 6,995
Timeshare
38 4,170
40 4,878
---------
Total
-----
Owned
93 43,173 66
33,742
Leased
208 47,094 206
47,395
Joint Venture
65 21,079 56
18,240
Managed
307 80,759 333
92,724
Franchised
1,993 269,479 2,160
295,641
Timeshare
38 4,170
40 4,878
------------------- -------------------
TOTAL PROPERTIES
2,704 465,754 2,861
492,620
=======================================
Change to
-------------------------------------
June 2005 December 2005
Number of Number
of
Properties Rooms Properties Rooms
------------------ ------------------
Hilton
------
Owned
(27) (9,431) (3)
(2,030)
Leased
1 644
- 92
Joint Venture
(2) (688) (2)
(688)
Managed
25 9,986
6 5,074
Franchised
13 5,648
8 3,228
------------------ ------------------
10 6,159
9 5,676
Hilton Garden Inn
-----------------
Owned
- -
- -
Joint Venture
- -
- -
Managed
- (9)
- -
Franchised
47 6,744 20
2,851
------------------ ------------------
47 6,735 20
2,851
Doubletree
----------
Owned
- -
- -
Leased
- -
- -
Joint Venture
(2) (676) -
-
Managed
(7) (1,465) (4)
(914)
Franchised
23 5,795 11
2,395
------------------ ------------------
14 3,654
7 1,481
Embassy Suites
--------------
Owned
- -
- 1
Joint Venture
(2) (672) (1)
(335)
Managed
1 397
- (2)
Franchised
4 865
- (101)
------------------ ------------------
3 590
(1) (437)
Homewood Suites by Hilton
-------------------------
Owned
- -
- -
Managed
- (96)
- -
Franchised
19 2,067 10
1,147
------------------ ------------------
19 1,971 10
1,147
Hampton
-------
Owned
- -
- -
Managed
- 38
1 154
Franchised
60 4,606 28
1,886
------------------ ------------------
60 4,644 29
2,040
Scandic
-------
Owned
- -
- -
Leased
(3) (343) (1)
26
Managed
- -
- -
Franchised
1 387
1 247
------------------ ------------------
(2) 44
- 273
Conrad
------
Joint Venture
- 4
- 4
Managed
3 844
1 243
------------------ ------------------
3 848
1 247
Other
-----
Owned
- -
- -
Leased
- -
- -
Joint Venture
(3) (807) -
-
Managed
4 2,270
3 2,123
Franchised
- 50
(1) (169)
------------------ ------------------
1 1,513
2 1,954
Timeshare
2 708
- 606
---------
Total
-----
Owned
(27) (9,431) (3)
(2,029)
Leased
(2) 301
(1) 118
Joint Venture
(9) (2,839) (3) (1,019)
Managed
26 11,965 7
6,678
Franchised
167 26,162 77
11,484
Timeshare
2 708
- 606
------------------ ------------------
TOTAL PROPERTIES
157 26,866 77
15,838
================== ==================
(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
Six Months
Ended
Ended
June 30
June 30
-----------
-----------
2005 2006 % Change 2005 2006 % Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA
$336 $489 46 % $588 $817
39 %
Proportionate share of
depreciation and
amortization of
unconsolidated
affiliates
(7) (7) -
(14) (15) 7
Impairment loss and
related costs
(5) - -
(7) - -
Operating interest and
dividend income
(2) (1) (50) (5)
(3) (40)
Operating income of non-
controlled interests
2 2 -
5 5 -
Net gain on foreign
currency transactions
- 3 -
- 20 -
Net gain on asset
dispositions and other
61 19 (69)
72 23 (68)
Loss from non-operating
affiliates
(4) (4) -
(9) (8) (11)
Minority and non-
controlled interests,
net
(7) - -
(10) (2) (80)
----- -----
----- -----
EBITDA
374 501 34
620 837 35
Depreciation and
amortization
(78) (117) 50 (158) (203)
28
Interest expense, net
(69) (148) 114 (135) (242)
79
Provision for income
taxes
(25) (92) -
(61) (144) 136
----- -----
----- -----
Net income
$202 $144 (29)% $266 $248
(7)%
===== =====
===== =====
Reconciliation of Adjusted
EBITDA to EBITDA and Net Income
Future Performance - Full Year 2006 Outlook (1)
($ in millions, except per share amounts)
Estimated Estimated
Full Year Full Year
2006 2006
Low End High End
--------- ---------
Adjusted EBITDA
$1,740 $1,765
Proportionate share of depreciation and
amortization of unconsolidated affiliates
(31) (31)
Operating interest and dividend income
(7) (7)
Operating income of non-controlled interests
11 11
Net gain on foreign currency transactions
20 20
Net gain on asset dispositions and other
23 23
Loss from non-operating affiliates
(16) (16)
Minority and non-controlled interests, net
(6) (6)
--------- ---------
EBITDA
1,734 1,759
Depreciation and amortization
(436) (436)
Interest expense, net
(526) (525)
Provision for income taxes
(292) (302)
--------- ---------
Net income
$480 $496
========= =========
Diluted EPS
$1.17 $1.21
========= =========
Recurring Diluted EPS
$1.08 $1.12
========= =========
(1) Includes the impact of Hilton International from the
acquisition
date of February 23, 2006.
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Pro Forma Revenue and Expenses
($ in millions)
Owned Hotels
---------------------------------------------------------------------
Three Months % or Six Months
% or
Ended basis
Ended basis
June 30, point June
30, point
2005 2006 Change 2005
2006 Change
------------------- -----------------------
Revenue
-------
Reported
$575 $681
$1,070 $1,189
Less sold hotels
and New Orleans
(172) (33)
(319) (87)
Less HI reported
- (222)
- (302)
Plus HI North
America, net (1)
26 31 19%
46 56 22%
----- ----- -------
-------
Pro Forma Comparable
Owned - North America 429
457 7% 797
856 7%
Plus HI
International, net
(1)
163 176 8%
313 331 6%
----- ----- -------
-------
Pro Forma Comparable
Owned - Worldwide
$592 $633 7% $1,110
$1,187 7%
===== ===== =======
=======
Expenses
--------
Reported
$391 $477
$767 $857
Less sold hotels
and New Orleans
(115) (24)
(228) (62)
Less HI reported
- (158)
- (217)
Plus HI North
America, net (1)
20 24 20%
39 45 15%
----- ----- -------
-------
Pro Forma Comparable
Owned - North America 296
319 8% 578
623 8%
Plus HI
International, net
(1)
116 123 6%
231 239 3%
----- ----- -------
-------
Pro Forma Comparable
Owned - Worldwide
$412 $442 7%
$809 $862 7%
===== ===== =======
=======
Margins
-------
Pro Forma Comparable
Owned - North America 31.0% 30.2%(80)
bps 27.5% 27.2%(30) bps
Pro Forma Comparable
Owned - International 28.8% 30.1%130
bps 26.2% 27.8%160 bps
Pro Forma Comparable
Owned - Worldwide
30.4% 30.2%(20) bps 27.1% 27.4% 30
bps
Leased Hotels
---------------------------------------------------------------------
Three Months % or Six Months
% or
Ended basis
Ended basis
June 30, point June
30, point
2005 2006 Change 2005
2006 Change
------------------- -----------------------
Revenue
-------
Reported
$31 $671
$59 $937
Less non-comparable
(4) -
(8) -
Less HI reported
- (643)
- (882)
Plus HI, net (1)
624 634 2%
1,163 1,174 1%
----- ----- -------
-------
Pro Forma Comparable
Leased - Worldwide
$651 $662 2% $1,214
$1,229 1%
===== ===== =======
=======
Expenses
--------
Reported
$27 $572
$53 $802
Less non-comparable
(4) -
(7) -
Less HI reported
- (549)
- (756)
Plus HI, net (1)
529 539 2%
1,027 1,028 -%
----- ----- -------
-------
Pro Forma Comparable
Leased - Worldwide
$552 $562 2% $1,073
$1,074 -%
===== ===== =======
=======
Margins
-------
Pro Forma Comparable
Leased - Worldwide
15.2% 15.1%(10) bps 11.6% 12.6%100
bps
Management and Franchise
Fees
---------------------------------------------------------------------
Three Months
Six Months
Ended
Ended
June 30, %
June 30, %
2005 2006 Change 2005
2006 Change
------------------- -----------------------
Reported
$117 $175
$219 $327
Less HI reported
- (28)
- (38)
Plus HI
26 28 8%
45 52 16%
----- ----- -------
-------
Pro Forma - Worldwide $143 $175
22% $264 $341
29%
===== ===== =======
=======
(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
--------------------------------------------------------------
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. |