The Timeshare Beat Home | Today's Headlines | Back to Previous Page
|
The Timeshare Beat Home | Today's Headlines | Back to Previous Page |
|
|
|
Press Release: Hilton Hotels Corporation
July 28, 2005
BEVERLY HILLS, CA -- Hilton Hotels Corporation (NYSE:HLT) yesterday reported financial results for the second quarter
and six months ended June 30, 2005. Second quarter highlights:
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.
----------------------------------------------
Contact:
Hilton Hotels Corporation
Marc Grossman, 310-205-4030
marc_grossman@hilton.com
or
Atish Shah, 310-205-8664
atish_shah@hilton.com
http://www.hiltonworldwide.com
Source: Hilton Hotels Corporation