Hilton Reports Strong Third Quarter 2005 Results
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Hilton Reports Strong Third Quarter 2005 Results
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Category: Worldwide -
This is a press release selected by our editorial committee and published online for free on 2005-10-28
Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the third quarter and nine months ended September 30, 2005. Third quarter highlights:
-- Diluted EPS of $.22 versus $.15 in 2004 period, an increase of 47 percent.
-- 46 percent increase in net income; $89 million versus $61 million in 2004 period.
-- Total company Adjusted EBITDA up 9 percent to $279 million.
-- Comparable owned hotel RevPAR up 13.3 percent; strength in virtually all key markets led by New York and Hawaii; comparable owned hotel margins increase 220 basis points from Q3 2004 (New Orleans excluded from comparable numbers.)
-- Record fees of $119 million from RevPAR gains, new units; 17 percent increase from Q3 2004.
-- Timeshare profitability up 21 percent.
Hilton reported third quarter 2005 net income of $89 million, compared with $61 million in the 2004 quarter. Diluted net income per share was $.22 in the 2005 third quarter, versus $.15 in the 2004 period.
The company reported third quarter 2005 total operating income of $203 million (a 19 percent increase from $171 million in the 2004 period) on total revenue of $1.102 billion (a 7 percent increase from $1.033 billion in the 2004 quarter). Total company earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $279 million, an increase of 9 percent from $257 million in the 2004 quarter.
Owned Hotel Results
Strong increases in both room nights and rate across the business transient, group and leisure segments, resulted in many of the company's owned hotels showing double-digit revenue-per-available-room (RevPAR) gains in the quarter. These include company-owned hotels in New York City, Hawaii (which remain the two strongest U.S. lodging markets), Phoenix, Boston, Atlanta, and the steadily improving Chicago and San Francisco markets. Strong results were also reported at the company's owned hotels in San Diego and in the Washington, D.C., area.
Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $489 million, a 1 percent decline from $492 million in the 2004 period. Total revenue from comparable owned hotels (excluding the impact of 16 property sales dating back to July 1, 2004) was up 13 percent. RevPAR from comparable owned hotels increased a strong 13.3 percent. Comparable owned hotel occupancy increased 3.2 points to 82.4 percent, while average daily rate (ADR) increased 8.9 percent to $171.02. Approximately 70 percent of the quarterly RevPAR increase at the comparable owned hotels was attributable to the ADR gains.
Total owned hotel expenses were down 4 percent in the quarter to $350 million. Expenses at the comparable owned hotels increased 9 percent, primarily due to an increase in occupied rooms, along with increases in energy and marketing costs and $3 million in real estate tax credits received in the 2004 period. Cost-per-occupied-room increased 5.3 percent in the quarter.
Comparable owned hotel margins in the third quarter increased 220 basis points to 28.8 percent, owing to the aforementioned ADR gains and strong food-and-beverage revenues (up 12 percent from the 2004 period), particularly in New York and Hawaii.
The company's two owned hotels in New Orleans -- the Hilton New Orleans Riverside and the Hilton New Orleans Airport -- are excluded from the comparable numbers due to interruptions in operations caused by Hurricane Katrina. The hotels sustained relatively minor damage and both are now occupied, primarily with relief workers as well as Hilton employees.
System-wide RevPAR; Management/Franchise Fees
Each of the company's brands reported significant system-wide RevPAR increases, with particularly strong gains in ADR. On a system-wide basis (including managed and franchised properties), the company's brands showed third quarter RevPAR gains as follows: Hilton, 13.1 percent; Doubletree, 11.0 percent; Embassy Suites, 9.8 percent; Hampton Inn, 9.4 percent; Hilton Garden Inn, 8.9 percent; Homewood Suites by Hilton, 5.6 percent.
For the third consecutive quarter, management and franchise fees set a new quarterly record. Fees in the third quarter were $119 million, a 17 percent increase from the 2004 period. Approximately half of the fee increase was attributable to RevPAR gains and half from the addition of new units.
Brand Development/Unit Growth
In the third quarter, the company added 55 properties and 7,232 rooms to its system, including: Hampton Inn, 25 hotels and 2,334 rooms; Hilton Garden Inn, 13 hotels and 1,975 rooms; Homewood Suites by Hilton, 7 hotels and 645 rooms; Doubletree, 5 hotels and 1,314 rooms; and Embassy Suites, 3 hotels and 737 rooms. Nine hotels and 1,495 rooms were removed from the system during the quarter.
During the quarter, the Doubletree brand continued its strong growth with the opening of properties in Washington, D.C.; Memphis; Pittsburgh; and the greater Chicago and Los Angeles areas. The Washington, Memphis and Pittsburgh hotels are conversions from other brands. Also in the quarter, Conrad Hotels announced management contracts for a 320-room luxury property in Jakarta, Indonesia, (scheduled to open in 2008) and a 250-room luxury resort on the Caribbean island of Bimini (also scheduled to open in 2008). In addition, the first Hilton Garden Inn in Manhattan opened in the third quarter in Times Square.
At September 30, 2005, the Hilton system consisted of 2,357 properties and 370,111 rooms. The company's development pipeline had approximately 560 hotels and 75,000 rooms at September 30, 2005.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a strong quarter with profitability up 21 percent owing to strong unit sales in Las Vegas, Orlando and Hawaii; an increase in average unit sales price; and higher income from financing fees. HGVC had third quarter revenue of $142 million, a 30 percent increase from $109 million in the 2004 quarter. Expenses were $107 million in the third quarter, compared with $80 million in the 2004 period. Third quarter unit sales were up 3 percent, with the average unit sales price also up 3 percent.
During the quarter, HGVC celebrated the topping-off of its new 38-story, 423-unit Phase II tower on the Las Vegas Strip. Upon completion of the new tower (scheduled for summer 2006), HGVC will have 706 units on the Strip in two towers, out of a planned total of 1,582 units in four towers.
Additionally in the quarter, HGVC affiliated with Intrawest Corporation whereby Hilton Grand Vacations Club and Club Intrawest will offer reciprocal vacation packages to their respective members.
Asset Dispositions
As scheduled, the company in the third quarter completed the sale of the Palmer House Hilton in Chicago for $230 million. The new owner, an affiliate of Thor Equities, is expected to invest more than $100 million in capital improvements in the legendary property.
Hilton noted on October 24, 2005, the sale of the 385-room Hilton Boston Back Bay to Highland Hospitality Corp. for $110 million. The Boston property is one of eight hotels that Hilton had previously announced were being marketed for sale. The company continues to expect the majority of those hotel sales to close by year-end 2005.
Corporate Finance
At September 30, 2005, Hilton had total debt of $3.6 billion (net of $100 million of debt resulting from the consolidation of a managed hotel, which is non-recourse to Hilton). Approximately 13 percent of the company's debt is floating rate debt. Total cash and equivalents (including restricted cash) were approximately $958 million at September 30, 2005.
The company's average basic and diluted share counts for the third quarter were 381 million and 415 million, respectively.
Hilton's debt currently has an average life of 8.1 years, at an average cost of approximately 7.0 percent.
The company's effective tax rate in the third quarter was 34 percent. The tax provision benefited from certain state tax credits as well as credits associated with the company's synthetic fuel investment.
Total hotel capital expenditures in the third quarter were $67 million, with an additional $58 million expended for timeshare development.
The company did not repurchase any of its stock in the third quarter because it was engaged in discussions with Hilton Group PLC regarding a potential acquisition of Hilton Group's lodging business.
Nine-Month Results
For the nine-month period ended September 30, 2005, Hilton reported net income of $355 million, compared to $173 million in the 2004 period. Operating income for the nine months was $612 million (compared with $490 million in the 2004 period) on revenue of $3.354 billion (versus $3.092 billion in the 2004 period). For the 2005 nine-month period, when compared to the same period last year, total company Adjusted EBITDA increased 15 percent to $867 million.
Updated 2005 Outlook
The company provided the following updated estimates for full-year
2005:
Total revenue: $4.400 billion range
Total Adjusted EBITDA: $1.130 billion range
Total operating income: $790 million range
Comparable owned hotel RevPAR: Increase of approximately 11%
(excludes New Orleans)
Approximately 75% of expected RevPAR gains to come from ADR
increases
Comparable owned hotel margin growth: Approximately 180 basis points
(excludes New Orleans)
Management and franchise fee growth: Approximately 15%
Diluted earnings per share: $1.05 range
Recurring diluted EPS: low $.80 range
The company's revised guidance includes the impact of asset sales completed through October 2005, and excludes the impact of additional asset sales expected to close in the fourth quarter 2005.
The company estimates that the full-year impact of Hurricane Katrina from its previously issued guidance is $.02 per share. This impact is included in both the diluted and the recurring diluted earnings per share estimates noted above for full-year 2005.
Total capital spending in 2005 is expected to be approximately $600 million, broken out as follows: approximately $125 million for routine improvements; $190 million for timeshare projects; $105 million in hotel renovation, ROI or special projects; and $180 million related to previously completed land acquisitions on Hawaii's Big Island.
The company anticipates adding approximately 170 hotels and 24,000 rooms to its system in 2005.
Preliminary 2006 Outlook
While the company noted it was currently engaged in its 2006 budgeting process, based on its expectations of continuing strong demand trends, Hilton provided the following preliminary estimates for full-year 2006:
Comparable owned hotel RevPAR: Increase of 8-10%
Diluted earnings per share: $.97-$1.03
Total capital spending in 2006 is expected to be in the $485 million range, with approximately $115 million for routine improvements; $195 million for timeshare projects; and $175 million in hotel renovation, ROI or special projects.
The 2006 guidance includes the impact of asset sales completed through October 2005 and assumes seven additional asset sales expected to be completed by December 31, 2005, or shortly thereafter. The guidance also includes the estimated impact of the required accounting change related to expensing of unvested stock options. The 2006 guidance excludes the impact of share repurchases, additional asset sales and other potential transactions.
The company expects to add 175-200 hotels and 23,000-27,000 rooms to its system in 2006.
"We are very pleased with our results for the third quarter, which once again demonstrated the strength of our owned hotel, franchise/management and timeshare businesses," said Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation. "By providing first-rate products and service to our guests and offering the industry's best collection of brands, we continue to experience strong demand from both the traveling public and hotel owners.
"Our two biggest markets, New York and Hawaii, are also the two strongest U.S. hotel markets, and we are in the best locations in those areas with large hotels that are running in the 90 percent occupancy range, and at strong room rates. Other important markets also are performing well due to a business mix that is continuing to favor business transient and group customers. Importantly, we also continue to operate our owned hotels at industry-leading margins."
Bollenbach continued: "While our financial results were outstanding, the quarter, of course, was challenged by the terrible events surrounding Hurricane Katrina in New Orleans and along the Gulf Coast. Our big hotels fared comparatively well, but we are most proud of the courage, resourcefulness and spirit demonstrated by our team members as they helped ensure the comfort and safety of our customers and their fellow employees in a very difficult time. The city of New Orleans is gradually coming back, our hotels are operating and we are optimistic about New Orleans' recovery.
"Our hotel brands continue to be the favored brand names among hotel owners; we had another record quarter in our management/franchise business, our development pipeline has never been bigger, and we are maintaining our industry leadership position in U.S. hotel development. Hampton Inn and Hilton Garden Inn still lead the way, but we are also encouraged by strong growth at our full-service Doubletree brand, where owners are converting to Doubletree from other brands. In addition, we are looking forward to announcing a number of exciting product, service and marketing initiatives that are being developed and implemented to re-ignite the most famous brand in the business: Hilton.
"Timeshare had another great quarter, and we are anticipating future growth and success in our primary markets of Las Vegas, Orlando and Hawaii while we continue evaluating opportunities for a fourth market."
Bollenbach concluded: "Based on our strong results in the third quarter and our expectations for continued high levels of demand, we are looking forward to a strong finish to 2005 and are optimistic for our prospects as we head into 2006."
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 Nine Months
Ended Ended
September 30, September 30,
--------------- ---------------
2004 2005 % Change 2004 2005 % Change
------ ------ --------- ------ ------ ---------
Revenue
Owned hotels $ 492 $ 489 (1)% $1,520 $1,559 3%
Leased hotels 30 28 (7) 85 87 2
Management and
franchise fees 102 119 17 288 338 17
Timeshare and
other income 119 155 30 346 457 32
------ ------ ------ ------
743 791 6 2,239 2,441 9
Other revenue
from managed and
franchised
properties 290 311 7 853 913 7
------ ------ ------ ------
1,033 1,102 7 3,092 3,354 8
Expenses
Owned hotels 365 350 (4) 1,116 1,117 -
Leased hotels 26 24 (8) 76 77 1
Depreciation and
amortization 81 70 (14) 247 228 (8)
Impairment loss
and related
costs - - - - 7 -
Other operating
expenses 101 128 27 291 366 26
Corporate expense 19 25 32 63 75 19
------ ------ ------ ------
592 597 1 1,793 1,870 4
Other expenses
from managed and
franchised
properties 290 311 7 849 907 7
------ ------ ------ ------
882 908 3 2,642 2,777 5
Operating income
from
unconsolidated
affiliates 20 9 (55) 40 35 (13)
------ ------ ------ ------
Operating income 171 203 19 490 612 25
Interest and
dividend income 2 6 - 19 14 (26)
Interest expense (67) (66) (1) (209) (196) (6)
Net interest from
unconsolidated
affiliates and
non-controlled
interests (6) (6) - (20) (19) (5)
Net (loss) gain on
asset
dispositions and
other (1) 4 - (2) 76 -
Loss from non-
operating
affiliates (3) (4) 33 (3) (13) -
------ ------ ------ ------
Income before
taxes and
minority and non-
controlled
interests 96 137 43 275 474 72
Provision for
income taxes (35) (47) 34 (96) (108) 13
Minority and non-
controlled
interests, net - (1) - (6) (11) 83
------ ------ ------ ------
Net income $ 61 $ 89 46% $ 173 $ 355 105%
====== ====== ====== ======
Net income per
share(1)
------------------
Basic $ .16 $ .23 44% $ .45 $ .93 107%
====== ====== ====== ======
Diluted $ .15 $ .22 47% $ .44 $ .87 98%
====== ====== ====== ======
Average shares -
basic 385 381 (1)% 383 383 -%
====== ====== ====== ======
Average shares -
diluted(2) 419 415 (1)% 417 417 -%
====== ====== ====== ======
(1) EPS for the nine-month period differs from the sum of quarterly
EPS amounts due to the required method of computing EPS in the
respective periods.
(2) Average diluted shares for the prior periods reflect the required
retroactive application of EITF 04-8 "The Effect of Contingently
Convertible Debt on Diluted Earnings per Share".
HILTON HOTELS CORPORATION
U.S. Owned Statistics(1)
Three Months Nine Months
Ended Ended
September 30 September 30
----------------- -----------------
2004 2005 Change 2004 2005 Change
------- ------- ------ ------- ------- ------
Hilton
--------------------
Occupancy 80.0% 83.3% 3.3 pts 76.1% 78.1% 2.0 pts
Average Rate $160.28 $175.10 9.2% $160.68 $173.96 8.3%
RevPAR $128.24 $145.90 13.8% $122.27 $135.83 11.1%
All Other
--------------------
Occupancy 71.7% 74.3% 2.6 pts 71.8% 74.4% 2.6 pts
Average Rate $126.01 $131.06 4.0% $121.50 $126.39 4.0%
RevPAR $ 90.31 $ 97.39 7.8% $ 87.23 $ 94.01 7.8%
Total
--------------------
Occupancy 79.2% 82.4% 3.2 pts 75.7% 77.7% 2.0 pts
Average Rate $157.09 $171.02 8.9% $156.85 $169.28 7.9%
RevPAR $124.34 $140.91 13.3% $118.66 $131.53 10.8%
(1) Statistics are for comparable hotels, and include only those
hotels in the system as of September 30, 2005, and owned by us
since January 1, 2004. Comparable hotels exclude the Company's
owned hotels in New Orleans.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
2004 2005 Change 2004 2005 Change
------- ------- -------- ------- ------- --------
Hilton
----------------
Occupancy 72.5% 75.4% 2.9 pts 70.5% 73.0% 2.5 pts
Average Rate $126.62 $137.54 8.6% $128.36 $138.26 7.7%
RevPAR $ 91.75 $103.74 13.1% $ 90.46 $100.86 11.5%
Hilton Garden Inn
----------------
Occupancy 73.0% 75.2% 2.2 pts 70.3% 72.8% 2.5 pts
Average Rate $100.10 $105.77 5.7% $ 98.81 $104.79 6.1%
RevPAR $ 73.05 $ 79.52 8.9% $ 69.48 $ 76.25 9.7%
Doubletree
----------------
Occupancy 71.5% 74.1% 2.6 pts 69.8% 72.0% 2.2 pts
Average Rate $101.52 $108.68 7.1% $101.50 $108.48 6.9%
RevPAR $ 72.58 $ 80.54 11.0% $ 70.83 $ 78.07 10.2%
Embassy Suites
----------------
Occupancy 73.7% 76.6% 2.9 pts 72.1% 74.8% 2.7 pts
Average Rate $124.22 $131.19 5.6% $123.27 $129.86 5.3%
RevPAR $ 91.61 $100.55 9.8% $ 88.88 $ 97.07 9.2%
Homewood Suites by Hilton
-------------------------
Occupancy 77.2% 78.7% 1.5 pts 74.8% 77.0% 2.2 pts
Average Rate $ 96.54 $ 99.95 3.5% $ 96.49 $100.38 4.0%
RevPAR $ 74.55 $ 78.70 5.6% $ 72.17 $ 77.32 7.1%
Hampton
----------------
Occupancy 74.1% 76.2% 2.1 pts 69.7% 73.1% 3.4 pts
Average Rate $ 83.49 $ 88.81 6.4% $ 81.78 $ 87.01 6.4%
RevPAR $ 61.88 $ 67.67 9.4% $ 57.03 $ 63.60 11.5%
Other
----------------
Occupancy 76.9% 75.7% (1.2) pts 72.6% 72.2% (0.4) pts
Average Rate $132.35 $147.01 11.1% $129.00 $146.72 13.7%
RevPAR $101.73 $111.34 9.4% $ 93.63 $105.92 13.1%
(1) Statistics are for comparable hotels, and include only those
hotels in the system as of September 30, 2005, and owned,
operated or franchised by us since January 1, 2004. Comparable
hotels exclude the Company's owned hotels in New Orleans.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
September
-----------------------------------------------
2004 2005
Number of Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
----------------------
Owned 36 27,492 27 23,241
Leased 1 499 1 499
Joint Venture 10 4,177 11 4,625
Managed 24 13,904 27 15,370
Franchised 161 43,574 170 46,800
----------- -------- ----------- --------
232 89,646 236 90,535
Hilton Garden Inn
----------------------
Owned 1 162 1 162
Joint Venture 2 280 1 128
Managed 6 796 7 895
Franchised 204 27,761 236 32,429
----------- -------- ----------- --------
213 28,999 245 33,614
Doubletree
----------------------
Owned 6 2,374 3 1,349
Leased 6 2,144 5 1,746
Joint Venture 24 7,208 14 4,306
Managed 39 10,179 31 8,240
Franchised 79 18,694 102 24,936
----------- -------- ----------- --------
154 40,599 155 40,577
Embassy Suites
----------------------
Owned 4 881 3 663
Joint Venture 27 7,279 25 6,586
Managed 54 14,136 56 14,767
Franchised 90 20,422 97 22,118
----------- -------- ----------- --------
175 42,718 181 44,134
Homewood Suites by
Hilton
----------------------
Owned 3 398 1 140
Managed 36 4,304 41 4,706
Franchised 99 10,831 120 13,108
----------- -------- ----------- --------
138 15,533 162 17,954
Hampton
----------------------
Owned 1 133 1 133
Managed 35 4,461 34 4,453
Franchised 1,248 125,252 1,290 128,640
----------- -------- ----------- --------
1,284 129,846 1,325 133,226
Other
----------------------
Owned 1 300 - -
Joint Venture 3 1,394 3 1,395
Managed 13 3,749 17 4,750
----------- -------- ----------- --------
17 5,443 20 6,145
Timeshare 31 3,740 33 3,926
----------------------
Total
----------------------
Owned 52 31,740 36 25,688
Leased 7 2,643 6 2,245
Joint Venture 66 20,338 54 17,040
Managed 207 51,529 213 53,181
Franchised 1,881 246,534 2,015 268,031
Timeshare 31 3,740 33 3,926
----------- -------- ----------- --------
TOTAL PROPERTIES 2,244 356,524 2,357 370,111
=========== ======== = =========== ========
Change to
-----------------------------------------------
September 2004 December 2004
Number of Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
----------------------
Owned (9) (4,251) (9) (4,251)
Leased - - - -
Joint Venture 1 448 1 448
Managed 3 1,466 3 1,548
Franchised 9 3,226 11 3,534
----------- -------- ----------- --------
4 889 6 1,279
Hilton Garden Inn
----------------------
Owned - - - -
Joint Venture (1) (152) - -
Managed 1 99 1 99
Franchised 32 4,668 25 3,674
----------- -------- ----------- --------
32 4,615 26 3,773
Doubletree
----------------------
Owned (3) (1,025) (1) (353)
Leased (1) (398) (1) (398)
Joint Venture (10) (2,902) (10) (2,902)
Managed (8) (1,939) (7) (1,834)
Franchised 23 6,242 20 5,142
----------- -------- ----------- --------
1 (22) 1 (345)
Embassy Suites
----------------------
Owned (1) (218) (1) (218)
Joint Venture (2) (693) (2) (693)
Managed 2 631 2 633
Franchised 7 1,696 7 1,697
----------- -------- ----------- --------
6 1,416 6 1,419
Homewood Suites by
Hilton
----------------------
Owned (2) (258) (2) (258)
Managed 5 402 5 402
Franchised 21 2,277 16 1,756
----------- -------- ----------- --------
24 2,421 19 1,900
Hampton
----------------------
Owned - - - -
Managed (1) (8) (1) (9)
Franchised 42 3,388 36 2,837
----------- -------- ----------- --------
41 3,380 35 2,828
Other
----------------------
Owned (1) (300) (1) (300)
Joint Venture - 1 - 1
Managed 4 1,001 4 962
----------- -------- ----------- --------
3 702 3 663
Timeshare 2 186 2 186
----------------------
Total
----------------------
Owned (16) (6,052) (14) (5,380)
Leased (1) (398) (1) (398)
Joint Venture (12) (3,298) (11) (3,146)
Managed 6 1,652 7 1,801
Franchised 134 21,497 115 18,640
Timeshare 2 186 2 186
----------- -------- ----------- --------
TOTAL PROPERTIES 113 13,587 98 11,703
=========== ======== =========== ========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2004 2005 % Change 2004 2005 % Change
----- ----- --------- ----- ----- ---------
Adjusted EBITDA $ 257 $ 279 9% $ 754 $ 867 15%
Proportionate share
of depreciation and
amortization of
unconsolidated
affiliates (7) (8) 14 (20) (22) 10
Non-recurring items - - - - (7) -
Operating interest
and dividend income - (1) - (3) (6) 100
Operating income of
non-controlled
interests 2 3 50 6 8 33
Net (loss) gain on
asset dispositions
and other (1) 4 - (2) 76 -
Loss from non-
operating affiliates (3) (4) 33 (3) (13) -
Minority and non-
controlled
interests, net - (1) - (6) (11) 83
----- ----- ----- -----
EBITDA 248 272 10 726 892 23
Depreciation and
amortization (81) (70) (14) (247) (228) (8)
Interest expense, net (71) (66) (7) (210) (201) (4)
Provision for income
taxes (35) (47) 34 (96) (108) 13
----- ----- ----- -----
Net income $ 61 $ 89 46% $ 173 $ 355 105%
===== ===== ===== =====
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Future Performance - Full-Year 2005 Outlook
($ in millions, except per share amounts)
Estimated
Full-Year 2005
------------------------
Adjusted EBITDA $ 1,130
Proportionate share of depreciation and
amortization of unconsolidated affiliates (30)
Non-recurring items (7)
Operating interest and dividend income (7)
Operating income of non-controlled interests 10
Net gain on asset dispositions and other 76
Loss from non-operating affiliates (17)
Minority and non-controlled interests, net (12)
-------------
EBITDA 1,143
Depreciation and amortization (305)
Interest expense, net (261)
Provision for income taxes (149)
-------------
Net income $ 428
=============
Diluted EPS $ 1.05
=============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned-Hotel Revenue and Expenses
Adjusted for Asset Sales and New Orleans
($ in millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- ---------------
2004 2005 % Change 2004 2005 % Change
----- ----- --------- ------ ------ ---------
Revenue - owned
hotels $ 492 $ 489 (1)% $1,520 $1,559 3%
Less sold hotels and
New Orleans (86) (31) (299) (223)
----- ----- ------ ------
Revenue - comparable
owned hotels $ 406 $ 458 13% $1,221 $1,336 9%
===== ===== ====== ======
Expenses - owned
hotels $ 365 $ 350 (4)% $1,116 $1,117 -%
Less sold hotels and
New Orleans (67) (24) (216) (153)
----- ----- ------ ------
Expenses -
comparable owned
hotels $ 298 $ 326 9% $ 900 $ 964 7%
===== ===== ====== ======
NON-GAAP FINANCIAL MEASURES
----------------------------------------------------------------------
Regulation G, "Conditions for Use of Non-GAAP Financial Measures,"
prescribes the conditions for use of non-GAAP financial information in
public disclosures. We believe that our presentation of EBITDA and
Adjusted EBITDA, which are non-GAAP financial measures, are important
supplemental measures of operating performance to investors. The
following discussion defines these terms and why we believe they are
useful measures of our performance.
EBITDA and Adjusted EBITDA
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in our industry
which we believe, when considered with measures calculated in
accordance with United States Generally Accepted Accounting Principles
(GAAP), gives investors a more complete understanding of operating
results before the impact of investing and financing transactions and
income taxes, and facilitates comparisons between us and our
competitors. Management has historically adjusted EBITDA when
evaluating operating performance because we believe that the inclusion
or exclusion of certain recurring and non-recurring items described
below is necessary to provide the most accurate measure of our core
operating results and as a means to evaluate period-to-period results.
We have chosen to provide this information to investors to enable them
to perform more meaningful comparisons of past, present and future
operating results and as a means to evaluate the results of core
on-going operations. We do not reflect such items when calculating
EBITDA; however, we adjust for these items and refer to this measure
as Adjusted EBITDA. We have historically reported this measure to our
investors and believe that the continued inclusion of Adjusted EBITDA
provides consistency in our financial reporting. We use Adjusted
EBITDA in this press release because we believe it is useful to
investors in allowing greater transparency related to a significant
measure used by management in its financial and operational
decision making. Adjusted EBITDA is among the more significant factors
in management's internal evaluation of total company and individual
property performance and in the evaluation of incentive compensation
related to property management. Management also uses Adjusted EBITDA
as a measure in determining the value of acquisitions and
dispositions. Adjusted EBITDA is also widely used by management in the
annual budget process. Externally, we believe these measures continue
to be used by investors in their assessment of our operating
performance and the valuation of our company. Adjusted EBITDA reflects
EBITDA adjusted for the following items:
Gains and Losses on Asset Dispositions and Non-Recurring Items
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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
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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
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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
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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
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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
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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
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