PROMUS REPORTS 2Q EPS OF $0.58 BEFORE UNUSUAL ITEMS
Source: Promus Hotel Corporation
July 28, 1999
MEMPHIS, Tenn., -- Promus Hotel Corporation (NYSE:PRH), a leading hotel franchising and management company, reported
net income of $45.7 million and diluted earnings per share of 56 cents for the second quarter of 1999. Before unusual
items, net income was $46.8 million, compared to 1998 second quarter net income of $50.0 million before unusual
items. Diluted earnings per share before unusual items was 58 cents compared to 57 cents in the year ago comparable
period.
During the second quarter of 1999, the company expensed $1.3 million for retention and employment-related costs
associated with the management change following the Promus/Doubletree merger. The company also realized a pre-tax
loss of $0.4 million on the sale of real estate. Combined, these items negatively effected the 1999 second quarter
net income by $1.1 million or 2 cents per share. During the second quarter of 1998, the company realized three
unusual pre-tax items: (1) a $1.3 million gain on the sale of excess joint venture land, (2) $1.3 million of previously
deferred gains on the sale of hotels and (3) a $1.0 million gain on the sale of securities. These items positively
impacted 1998's second quarter net income by $2.2 million or 2 cents per share.
For the first six months of 1999, the company reported net income before unusual items of $84.9 million, compared
with $86.0 million before unusual items for the same 1998 period. Diluted earnings per share before unusual items
for the 1999 six month period was $1.03 compared to $0.98 in the year ago comparable period, an increase of five
percent.
"Consistent with the pre-announcement of earnings expectations we made on May 25, 1999, our second quarter
earnings per share were about flat with the exceptionally strong financial results the company experienced last
year", said Norman P. Blake, Jr., Promus' Chairman, President and CEO. Our efforts to solidify the Doubletree
brand's 4-star positioning have affected Doubletree's short term unit growth, which has slowed the growth of our
management fee income and the related purchasing and service fee income. In addition, we experienced less in change
of ownership and termination fees this year as significantly fewer real estate transactions have occurred this
year compared to the last few years. Also, as we announced on May 25th, industry lodging demand has slowed somewhat,
which obviously has a limiting effect on companies ability to grow hotel-related income.
Unit Growth
During the second quarter of 1999, the company added 41 hotels (5,138 rooms) to its system, consisting of: two
Doubletree hotels, three Embassy Suites hotels, 28 Hampton Inn hotels, three Hampton Inn & Suites hotels, four
hotels in the Homewood Suites brand, and a 303-room Red Lion hotel. During the quarter a 305-suite Doubletree Guest
Suites was converted to an Embassy Suites hotel and a 154-room Promus managed, non-Promus branded hotel, was converted
to a Doubletree hotel. Also during the quarter, Promus initiated the termination of one Doubletree hotel, one Embassy
Suites hotel, two Hampton Inn hotels and one non-Promus branded hotel. These five hotels included 843 rooms.
During the first six months of 1999, Promus added 74 hotels (8,538 rooms) and the Promus relationship was terminated
with 13 hotels (2,055 rooms).
Brand Performance
Hotels managed under the Doubletree brand generated a RevPAR increase of 0.3% over second quarter 1998. Embassy
Suites' RevPAR increased 1.1% for the quarter. Hampton Inn achieved a 1.7% RevPAR increase over the same period
last year. Hampton Inn & Suites' RevPAR increased 4.1% over the second quarter 1998. Homewood Suites' RevPAR
gain was 2.3% in the second quarter.
Year-to-date, Doubletree RevPAR increased 1.8% over the same 1998 period. Embassy Suites' and Hampton Inn's RevPAR
both increased 1.7%, while Homewood Suites' RevPAR decreased 0.5% over the first half of 1998.
Average daily rate, occupancy and revenue per available room (RevPAR) discussed in this release and in the attachments
are reported for only those comparable hotels in the system as of June 30, 1999 and managed and franchised by Promus
or managed by Doubletree since April 1, 1998 for the quarter comparison and January 1, 1998 for the year-to-date
comparison.
Other Notable Events
During the second quarter of 1999, Promus repurchased 4.3 million shares of its stock for approximately $109.6
million. Since August of 1998, the company has repurchased approximately 9.3 million shares of its stock for a
total cost of $276.0 million.
The Company has signed a sales contract to sell 10 Hampton Inn hotels. This is in addition to the letter of intent
disclosed earlier in the year regarding the sale of 13 Homewood Suites hotels. Combined, these transactions would
result in asset sales of $224 million.
Promus Hotel Corporation (NYSE:PRH) is the franchisor/operator of the Doubletree Hotels, Doubletree Guest Suites,
Embassy Suites, Hampton Inn, Homewood Suites, Hampton Inn & Suites, Club Hotel by Doubletree, Red Lion Hotels,
Embassy Vacation Resort and Hampton Vacation Resort brands. The company also manages non-Promus branded hotels
and facilities in its University Hotel & Conference Center division. The company franchises, operates or owns
hotels throughout the United States and in Canada, Mexico and Latin America. Promus is headquartered in Memphis,
Tennessee and has approximately 40,000 employees.
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of
the federal securities laws. Such statements are based on management's beliefs, assumptions and expectations, which
in turn are based on information currently available to management. Actual performance and results could differ
from those expressed in, or contemplated by, the forward-looking statements due to a number of risks, uncertainties
and other factors, many of which are beyond Promus' ability to predict or control, including changes in the general
economy, customer demand, interest rates and competition. For further information on factors which could impact
Promus and the statements contained herein, we refer you to the filings made by Promus with the Securities and
Exchange Commission, including current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on
Form 10-K.
|
Quarters Ended June 30, |
||
|
1999(A) |
1998(B) |
|
| Revenues: | ||
| Franchise and management fees |
$57,270 |
$59,088 |
| Owned hotel revenues |
110,627 |
102,010 |
| Leased hotel revenues |
100,599 |
109,187 |
| Purchasing and service fees |
5,146 |
6,198 |
| Joint venture income & other revenue |
13,469 |
14,244 |
| Total revenues |
287,111 |
290,727 |
| Operating costs and expenses: | ||
| General and administrative |
21,202 |
20,059 |
| Owned hotel expenses |
69,522 |
62,071 |
| Leased hotel expenses |
88,741 |
94,810 |
| Depreciation and amortization |
21,688 |
19,357 |
| Total operating costs and expenses |
201,153 |
196,297 |
| Operating income |
85,958 |
94,430 |
| Interest and dividend income |
4,940 |
5,007 |
| Interest expense |
(16,380) |
(14,923) |
| Gain on sale of real estate and securities |
(440) |
2,289 |
| Income before income taxes and minority interest |
74,078 |
86,803 |
| Minority interest share of net income |
(868) |
(824) |
| Income before income taxes |
73,210 |
85,979 |
| Income tax expense |
(27,527) |
(33,790) |
| Net income |
$45,683 |
$52,189 |
| Basic earnings per share |
$0.56 |
$0.60 |
| Diluted earnings per share |
$0.56 |
$0.59 |
| Basic weighted average shares outstanding |
80,995 |
87,202 |
| Diluted weighted average shares outstanding |
81,266 |
88,137 |
|
Six Months Ended June 30, |
||
|
1999(A) |
1998(B) |
|
| Revenues: | ||
| Franchise and management fees |
$109,360 |
$108,432 |
| Owned hotel revenues |
212,117 |
193,591 |
| Leased hotel revenues |
191,255 |
207,666 |
| Purchasing and service fees |
10,005 |
11,288 |
| Joint venture income & other revenue |
24,515 |
24,293 |
| Total revenues |
547,252 |
545,270 |
| Operating costs and expenses: | ||
| General and administrative |
44,988 |
38,594 |
| Owned hotel expenses |
135,237 |
119,737 |
| Leased hotel expenses |
171,351 |
184,069 |
| Depreciation and amortization |
42,730 |
38,537 |
| Total operating costs and expenses |
394,306 |
380,937 |
| Operating income |
152,946 |
164,333 |
| Interest and dividend income |
9,774 |
10,625 |
| Interest expense |
(32,831) |
(30,228) |
| Gain on sale of real estate and securities |
(708) |
2,285 |
| Income before income taxes and minority interest |
129,181 |
147,015 |
| Minority interest share of net income |
(1,416) |
(1,703) |
| Income before income taxes |
127,765 |
145,312 |
| Income tax expense |
(48,040) |
(57,107) |
| Net income |
$79,725 |
$88,205 |
| Basic earnings per share |
$0.97 |
$1.02 |
| Diluted earnings per share |
$0.97 |
$1.00 |
| Basic weighted average shares outstanding |
82,219 |
86,773 |
| Diluted weighted average shares outstanding |
82,553 |
87,830 |
|
Second Quarter Change vs |
Six Months Change vs. |
|||
|
Quarter Ended |
Quarter Ended |
Six Mos. Ended |
Six Mos. Ended |
|
| Doubletree Hotels: | ||||
| Occupancy |
73.2% |
(0.9) pts. |
70.4% |
(0.1) pts. |
| ADR* |
$ 106.14 |
1.5 % |
$ 106.89 |
1.9 % |
| RevPAR** |
$ 77.67 |
0.3 % |
$ 75.23 |
1.8 % |
| Embassy Suites: | ||||
| Occupancy |
76.4% |
0.8 pts. |
74.6% |
0.9 pts. |
| ADR* |
$ 122.06 |
0.0% |
$ 123.19 |
0.4 % |
| RevPAR** |
$ 93.27 |
1.1 % |
$ 91.94 |
1.7 % |
| Hampton Inn: | ||||
| Occupancy |
72.6% |
(1.8) pts. |
68.6% |
(1.4) pts. |
| ADR* |
$ 70.98 |
4.2 % |
$ 70.02 |
3.8 % |
| RevPAR** |
$ 51.56 |
1.7 % |
$ 48.00 |
1.7 % |
| Hampton Inn & Suites: | ||||
| Occupancy |
74.3% |
0.6 pts. |
71.4% |
1.3 pts. |
| ADR* |
$ 90.73 |
3.2 % |
$ 85.53 |
2.3 % |
| RevPAR** |
$ 67.43 |
4.1 % |
$ 61.03 |
4.3 % |
| Homewood Suites: | ||||
| Occupancy |
76.8% |
1.9 pts. |
74.5% |
(0.4) pts. |
| ADR* |
$ 96.87 |
(0.2) % |
$ 97.04 |
0.0 % |
| RevPAR** |
$ 74.43 |
2.3 % |
$ 72.29 |
(0.5) % |
| Other Hotels (b) | ||||
| Occupancy |
71.6% |
(1.0) pts. |
67.9% |
(1.3) pts. |
| ADR* |
$ 103.78 |
3.5 % |
$ 101.84 |
3.2 % |
| RevPAR** |
$ 74.26 |
2.1 % |
$ 69.11 |
1.2 % |
|
Number of Hotels |
Number of Rooms/Suites |
|||||
|
Change Since |
Change Since |
|||||
| Jun 30,1999 | Mar 31,1999 | Dec 31,1998 | Jun 30,1999 | Mar 31,1999 | Dec 31,1998 | |
| Doubletree Hotels: | ||||||
| Company owned |
16 |
-- |
-- |
4,649 |
(98) |
(97) |
| Leased |
14 |
-- |
(4) |
3,877 |
-- |
(935) |
| Joint ventures (a) |
4 |
-- |
-- |
1,100 |
98 |
98 |
| Management contracts |
91 |
1 |
4 |
25,085 |
34 |
761 |
| Franchised |
50 |
-- |
(1) |
11,812 |
23 |
(115) |
|
175 |
1 |
(1) |
46,523 |
57 |
(288) |
|
| Embassy Suites: | ||||||
| Company owned |
6 |
-- |
-- |
1,299 |
-- |
-- |
| Joint ventures(a) |
19 |
1 |
-- |
5,098 |
321 |
154 |
| Management contracts |
60 |
-- |
2 |
15,050 |
230 |
625 |
| Franchised |
63 |
2 |
1 |
14,227 |
450 |
322 |
|
148 |
3 |
3 |
35,674 |
1,001 |
1,101 |
|
| Hampton Inn: | ||||||
| Company owned |
10 |
(1) |
(1) |
1,378 |
(126) |
(126) |
| Leased |
18 |
-- |
-- |
2,250 |
-- |
-- |
| Management contracts |
7 |
-- |
-- |
929 |
-- |
-- |
| Franchised |
835 |
27 |
45 |
85,641 |
2,431 |
4,243 |
|
870 |
26 |
44 |
90,198 |
2,305 |
4,117 |
|
| Hampton Inn & Suites: | ||||||
| Management contracts |
3 |
-- |
-- |
408 |
-- |
-- |
| Franchised |
53 |
3 |
8 |
6,135 |
399 |
952 |
|
56 |
3 |
8 |
6,543 |
399 |
952 |
|
| Homewood Suites: | ||||||
| Company owned |
22 |
1 |
3 |
2,605 |
137 |
373 |
| Management contracts |
4 |
(1) |
(1) |
471 |
(83) |
(83) |
| Franchised |
58 |
4 |
8 |
6,114 |
655 |
1,033 |
|
84 |
4 |
10 |
9,190 |
709 |
1,323 |
|
| Other Hotels (b) | ||||||
| Company owned |
10 |
-- |
-- |
1,620 |
-- |
-- |
| Leased |
41 |
-- |
-- |
6,433 |
-- |
-- |
| Management contracts |
14 |
(1) |
(3) |
2,345 |
(176) |
(722) |
|
65 |
(1) |
(3) |
10,398 |
(176) |
(722) |
|
| Total System: | ||||||
| Company owned |
64 |
-- |
2 |
11,551 |
(87) |
150 |
| Leased |
73 |
-- |
(4) |
12,560 |
-- |
(935) |
| Joint ventures (a) |
23 |
1 |
-- |
6,198 |
419 |
252 |
| Management contracts |
179 |
(1) |
2 |
44,288 |
5 |
581 |
| Franchised |
1,059 |
36 |
61 |
123,929 |
3,958 |
6,435 |
|
1,398 |
36 |
61 |
198,526 |
4,295 |
6,483 |
|