Hilton Reports Record First Quarter 2005 Results
BEVERLY HILLS, CA | Hilton Hotels Corporation (NYSE:HLT - News) today reported financial results for the first quarter ended March 31, 2005. First quarter highlights:
- Diluted EPS of $.16, up 60 percent from $.10 in Q1 2004, equals company record for a first quarter
- Total company Adjusted EBITDA up 15 percent to $252 million
- Comparable owned hotel RevPAR increases 9.1 percent, owing to strength in New York, Hawaii, Boston, New Orleans
- Fees up 15 percent from system-wide RevPAR growth, new units; record fees for a first quarter
- Record quarter for timeshare operating results; unit sales increase 23 percent
- Company repurchases 7.2 million shares of common stock in Q1
Hilton reported first quarter 2005 net income of $64 million, a 73 percent increase from $37 million in the 2004 period. Diluted net income per share was $.16 in the first quarter, compared with $.10 in the 2004 quarter. The $.16 of EPS equals the company's record for a first quarter since Hilton became a stand-alone lodging company in 1999.
Three non-comparable items combined to benefit first quarter 2005 EPS by $.01 per share: 1) a $2 million pre-tax impairment charge; 2) a $6 million net pre-tax gain on asset dispositions, primarily the sale of the Hilton Tarrytown; and 3) a $5 million pre-tax gain on a derivative contract related to the company's synthetic fuel investment.
Hilton reported first quarter 2005 total operating income of $163 million (a 24 percent increase from $131 million in the 2004 period), on total revenue of $1.076 billion (an 8 percent increase from $994 million in the 2004 quarter). Total company earnings before interest, taxes, depreciation, amortization and non-recurring items ("Adjusted EBITDA") were $252 million, compared with $219 million in the 2004 period, an increase of 15 percent.
Owned Hotel Results
Significant volume and rate increases from business transient customers – along with continued improved pricing power from the group and leisure markets – resulted in double-digit revenue-per-available-room (RevPAR) gains at many of the company's owned hotels. This came despite a difficult calendar comparison with the Easter holiday 2005 falling in the first quarter (versus the 2004 holiday falling in the second quarter). Company-owned hotels reporting particularly strong results in the quarter included those in New York City, Hawaii, Boston, New Orleans and Atlanta, all of which had double-digit RevPAR increases. Solid RevPAR gains were also reported at the company's owned hotels in the Washington, D.C. area.
Chicago, as anticipated, remained soft due to city-wide weakness in groups, though the market is expected to improve in the second quarter of 2005, with full-year results showing improvement over full-year 2004. San Francisco also had a relatively weak first quarter.
Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $495 million in the first quarter, a 3 percent increase from $482 million in the 2004 period. Total revenue from comparable owned hotels (excluding the impact of property sales) was up 6 percent. While RevPAR from comparable owned hotels increased a strong 9.1 percent in the quarter – resulting from solid growth in rooms revenue – other owned hotel revenues, primarily food-and-beverage, increased only 2.5 percent. Food-and-beverage revenue growth was impacted by a decline in convention and group room nights in Chicago and San Francisco. Comparable owned hotel occupancy increased 1.5 points to 70.3 percent, while average daily rate (ADR) increased 6.7 percent to $158.72. 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 1 percent in the first quarter to $376 million. Expenses at the comparable owned hotels increased 4 percent, primarily due to an increase in occupied rooms, along with increases in energy and marketing costs. Cost-per-occupied-room increased 3.5 percent in the quarter.
Comparable owned hotel margins in the 2005 first quarter improved 100 basis points to 24.3 percent.
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 first quarter 2005 RevPAR gains as follows: Hampton Inn, 12.8 percent; Hilton Garden Inn, 10.0 percent; Hilton, 8.9 percent; Homewood Suites by Hilton, 8.5 percent; Embassy Suites, 7.8 percent; Doubletree, 7.5 percent.
Management and franchise fees were the company's highest ever for a first quarter at $102 million, a 15 percent increase from the 2004 period, attributable to the aforementioned RevPAR gains and the addition of new units. Of the first quarter fee growth, approximately half came from RevPAR gains and half from unit growth.
Brand Development/Unit Growth
In the first quarter, the company added 35 properties and 5,810 rooms to its system as follows: Hampton Inn, 9 hotels and 947 rooms; Hilton, 7 hotels and 2,050 rooms; Hilton Garden Inn, 7 hotels and 994 rooms; Homewood Suites by Hilton, 7 hotels and 744 rooms; Doubletree, 3 hotels and 884 rooms; Embassy Suites, 1 hotel and 155 rooms; and Hilton Grand Vacations Company, 1 property and 36 rooms. Eight hotels and 1,139 rooms were removed from the system during the quarter.
While unit growth for full-year 2005 is expected to be driven primarily by Hampton Inn and Hilton Garden Inn (the latter the industry's fastest growing brand), the company is seeing excellent growth in its full-service Hilton and Doubletree brands as well.
In the first quarter, the company added full-service Hilton-branded properties in Virginia Beach, St. Louis, Houston, St. Augustine, Boca Raton, Hartford and Winnipeg (Canada), as well as a major beachfront resort in Daytona Beach. The Hilton brand expects to add 13 hotels in 2005. Doubletree opened hotels in Miami, greater Chicago and Grand Junction (Colorado.) Fifteen Doubletree hotels are expected to be added to that brand's system in 2005, with another 25 in various stages of planning and/or development.
Homewood Suites by Hilton had a milestone opening in the first quarter with the 150th Homewood Suites property opening outside Philadelphia.
Also during the quarter, the company, together with Hilton International, announced an initiative to aggressively expand the luxury Conrad Hotels brand on a global basis. Conrad properties are currently in development in Tokyo (scheduled summer 2005 opening), Phuket and Indianapolis (scheduled 2006 openings), Las Vegas (scheduled 2007 opening), and Dubai (scheduled 2008 opening), with several additional properties in various stages of discussion.
At March 31, 2005, the Hilton system consisted of 2,286 properties and 363,079 rooms. The company's development pipeline, the most active in the U.S., had more than 500 hotels and 60,000 rooms at March 31, 2005.
Hilton Grand Vacations
Record quarterly operating results were reported at Hilton Grand Vacations Company (HGVC), the company's vacation ownership business. HGVC profitability increased more than 50 percent in the first quarter 2005, owing to strong unit sales in Las Vegas, Orlando and Hawaii, along with unit sales price increases. HGVC had first quarter 2005 revenue of $146 million, a 34 percent increase from $109 million in the 2004 quarter. Expenses were $105 million in the first quarter, compared with $82 million in the 2004 period. First quarter unit sales were up 23 percent, while the average unit sales price increased 2 percent.
Phase II of HGVC's project on the Las Vegas Strip, which consists of 431 units, is on schedule for completion in summer 2006. In the first quarter, ground was broken on the 70-unit Phase V of the HGVC's Tuscany Village property in Orlando, with completion scheduled for spring 2006.
Distribution/Technology
Hilton reported a significant increase in gross reservations for the first quarter 2005. In the quarter, gross reservations through Hilton Reservations Worldwide, the Global Distribution System and all internet sources were up 13 percent over the same period in 2004.
First quarter 2005 online bookings through the company's proprietary branded websites increased 28 percent over the 2004 period.
Continuing its industry leadership position in expediting customer check-in through self-service kiosks, Hilton noted that – in addition to the kiosks currently in place at nearly 50 of the company's owned and/or managed hotels – its Embassy Suites hotels have begun installing the kiosks, with full deployment at all Embassy Suites properties expected by early 2006.
Corporate Finance
At March 31, 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 $429 million at March 31, 2005.
The company's average basic and diluted share counts for the first quarter were 387 million and 421 million, respectively.
Hilton's debt currently has an average life of 8.6 years, at an average cost of approximately 6.9 percent. During the quarter, the company amended its $1 billion revolving credit facility, allowing Hilton to lower its all-in cost of borrowing under this facility by 50 basis points (to LIBOR + 75 basis points). The facility was extended until March 2010.
The company's effective tax rate in the first quarter 2005 was 35 percent, and benefited from tax credits associated with the company's synthetic fuel investment.
During the first quarter, the company repurchased 7.2 million shares at a total cost of $158 million (an average price of $21.96 per share). The company's Board of Directors in March authorized the future repurchase of up to 50 million shares.
Total hotel capital expenditures in the first quarter were $27 million, with an additional $33 million expended for timeshare development.
Updated 2005 Outlook
Based on strong first quarter results, along with robust activity month-to-date April 2005 (due partly to a favorable holiday calendar) and expected continued strong demand in key markets, the company provided the following updated estimates for full-year 2005:
Total revenue: $4.510-$4.535 billion
Total Adjusted EBITDA: $1.130-$1.145 billion
Total operating income: $775-$790 million
Comparable owned hotel RevPAR: Increase of 8-9%
– approximately 70% of the expected RevPAR gains to come from
ADR increases
Comparable owned hotel margin growth: 175-200 basis points
Management and franchise fee growth: 10% range
Diluted earnings per share: $.78-$.80
– estimated range of full-year 2005 EPS would represent a new
company record for a fiscal year since Hilton became a
stand-alone lodging company in 1999
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Ended
March 31,
2004 2005 % Change
-------------- ------------- ---------
Revenue
Owned hotels $482 $495 3%
Leased hotels 26 28 8
Management and franchise fees 89 102 15
Timeshare and other income 120 154 28
-------------- -------------
717 779 9
Other revenue from managed and
franchised properties 277 297 7
-------------- -------------
994 1,076 8
Expenses
Owned hotels 371 376 1
Leased hotels 25 26 4
Depreciation and amortization 83 80 (4)
Impairment loss and related
costs - 2 -
Other operating expenses 101 122 21
Corporate expense 19 24 26
-------------- -------------
599 630 5
Other expenses from managed
and franchised properties 274 293 7
-------------- -------------
873 923 6
Operating income from
unconsolidated affiliates 10 10 -
-------------- -------------
Operating income 131 163 24
Interest and dividend income 10 4 (60)
Interest expense (70) (64) (9)
Net interest from
unconsolidated affiliates and
non-controlled interests (6) (6) -
Net (loss) gain on asset
dispositions and other (4) 11 -
Loss from non-operating
affiliates - (5) -
-------------- -------------
Income before taxes and
minority and non-controlled
interests 61 103 69
Provision for income taxes (21) (36) 71
Minority and non-controlled
interests, net (3) (3) -
-------------- -------------
Net income $37 $64 73%
============== =============
Net income per share
-------------------------------
Basic $.10 $.17 70%
============== =============
Diluted $.10 $.16 60%
============== =============
Average shares - basic 381 387 2%
============== =============
Average shares - diluted(1) 414 421 2%
============== =============
(1) 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 Ended
March 31,
2004 2005 %/pt Change
-------------- -------------- ------------
Hilton
---------------------------
Occupancy 68.8% 70.3% 1.5 pts
Average Rate $153.65 $164.54 7.1%
RevPAR $105.66 $115.73 9.5%
All Other
---------------------------
Occupancy 69.0% 70.4% 1.4 pts
Average Rate $111.98 $114.45 2.2%
RevPAR $77.31 $80.62 4.3%
Total
---------------------------
Occupancy 68.8% 70.3% 1.5 pts
Average Rate $148.80 $158.72 6.7%
RevPAR $102.37 $111.65 9.1%
(1) Statistics are for comparable hotels, and include only those
hotels in the system as of March 31, 2005, and owned by us since
January 1, 2004.
HILTON HOTELS CORPORATION
System-wide Statistics(1)
Three Months Ended
March 31,
2004 2005 %/pt Change
-------------- -------------- ------------
Hilton
---------------------------
Occupancy 66.8% 68.2% 1.4 pts
Average Rate $130.85 $139.62 6.7%
RevPAR $87.47 $95.26 8.9%
Hilton Garden Inn
---------------------------
Occupancy 65.7% 67.9% 2.2 pts
Average Rate $97.38 $103.62 6.4%
RevPAR $63.93 $70.32 10.0%
Doubletree
---------------------------
Occupancy 65.8% 66.6% 0.8 pts
Average Rate $101.60 $107.92 6.2%
RevPAR $66.83 $71.82 7.5%
Embassy Suites
---------------------------
Occupancy 68.7% 70.4% 1.7 pts
Average Rate $121.99 $128.37 5.2%
RevPAR $83.86 $90.37 7.8%
Homewood Suites by Hilton
---------------------------
Occupancy 70.6% 73.5% 2.9 pts
Average Rate $96.56 $100.71 4.3%
RevPAR $68.18 $73.99 8.5%
Hampton
---------------------------
Occupancy 63.1% 66.9% 3.8 pts
Average Rate $79.90 $85.09 6.5%
RevPAR $50.43 $56.91 12.8%
Other
---------------------------
Occupancy 66.1% 66.4% 0.3 pts
Average Rate $118.00 $136.94 16.1%
RevPAR $77.99 $90.92 16.6%
(1) Statistics are for comparable hotels, and include only those
hotels in the system as of March 31, 2005, and owned, operated or
franchised by us since January 1, 2004.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
March
2004 2005
Number of Number of
Properties Rooms Properties Rooms
----------- -------------------- --------
Hilton
----------------------------
Owned 36 27,492 35 27,198
Leased 1 499 1 499
Joint Venture 10 4,177 11 4,625
Managed 24 13,750 23 13,875
Franchised 158 42,361 165 45,162
----------- -------- ----------- --------
229 88,279 235 91,359
Hilton Garden Inn
----------------------------
Owned 1 162 1 162
Joint Venture 2 280 1 128
Managed 3 391 7 895
Franchised 185 25,383 217 29,633
----------- -------- ----------- --------
191 26,216 226 30,818
Doubletree
----------------------------
Owned 8 2,894 4 1,702
Leased 6 2,144 6 2,144
Joint Venture 25 7,427 16 4,982
Managed 38 10,035 38 10,069
Franchised 73 17,020 88 21,370
----------- -------- ----------- --------
150 39,520 152 40,267
Embassy Suites
----------------------------
Owned 4 881 4 881
Joint Venture 27 7,279 27 7,279
Managed 54 14,136 54 14,134
Franchised 89 20,257 91 20,575
----------- -------- ----------- --------
174 42,553 176 42,869
Homewood Suites by Hilton
----------------------------
Owned 3 398 3 398
Managed 36 4,304 38 4,483
Franchised 93 10,243 109 11,918
----------- -------- ----------- --------
132 14,945 150 16,799
Hampton
----------------------------
Owned 1 133 1 133
Managed 35 4,461 35 4,569
Franchised 1,225 123,409 1,259 126,191
----------- -------- ----------- --------
1,261 128,003 1,295 130,893
Timeshare 31 3,692 32 3,776
----------------------------
Other
----------------------------
Owned 1 300 1 300
Joint Venture 3 1,394 3 1,395
Managed 12 3,559 16 4,603
Franchised 1 408 - -
----------- -------- ----------- --------
17 5,661 20 6,298
Total
----------------------------
Owned 54 32,260 49 30,774
Leased 7 2,643 7 2,643
Joint Venture 67 20,557 58 18,409
Managed 202 50,636 211 52,628
Timeshare 31 3,692 32 3,776
Franchised 1,824 239,081 1,929 254,849
----------- -------------------- --------
TOTAL PROPERTIES 2,185 348,869 2,286 363,079
=========== ==================== ========
Change to
March 2004 December 2004
Number of Number of
Properties Rooms Properties Rooms
----------- -------- ----------- --------
Hilton
----------------------------
Owned (1) (294) (1) (294)
Leased - - - -
Joint Venture 1 448 1 448
Managed (1) 125 (1) 53
Franchised 7 2,801 6 1,896
----------- -------- ----------- --------
6 3,080 5 2,103
Hilton Garden Inn
----------------------------
Owned - - - -
Joint Venture (1) (152) - -
Managed 4 504 1 99
Franchised 32 4,250 6 878
----------- -------- ----------- --------
35 4,602 7 977
Doubletree
----------------------------
Owned (4) (1,192) - -
Leased - - - -
Joint Venture (9) (2,445) (8) (2,226)
Managed - 34 - (5)
Franchised 15 4,350 6 1,576
----------- -------- ----------- --------
2 747 (2) (655)
Embassy Suites
----------------------------
Owned - - - -
Joint Venture - - - -
Managed - (2) - -
Franchised 2 318 1 154
----------- -------- ----------- --------
2 316 1 154
Homewood Suites by Hilton
----------------------------
Owned - - - -
Managed 2 179 2 179
Franchised 16 1,675 5 566
----------- -------- ----------- --------
18 1,854 7 745
Hampton
----------------------------
Owned - - - -
Managed - 108 - 107
Franchised 34 2,782 5 388
----------- -------- ----------- --------
34 2,890 5 495
Timeshare 1 84 1 36
----------------------------
Other
----------------------------
Owned - - - -
Joint Venture - 1 - 1
Managed 4 1,044 3 815
Franchised (1) (408) - -
----------- -------- ----------- --------
3 637 3 816
Total
----------------------------
Owned (5) (1,486) (1) (294)
Leased - - - -
Joint Venture (9) (2,148) (7) (1,777)
Managed 9 1,992 5 1,248
Timeshare 1 84 1 36
Franchised 105 15,768 29 5,458
----------- -------- ----------- --------
TOTAL PROPERTIES 101 14,210 27 4,671
=========== ======== =========== ========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Ended
March 31,
2004 2005 % Change
----------- ----------- ---------
Adjusted EBITDA $219 $252 15%
Proportionate share of depreciation
and amortization of unconsolidated
affiliates (7) (7) -
Non-recurring items - (2) -
Operating interest and dividend
income (1) (3) -
Operating income of non-controlled
interests 3 3 -
Net (loss) gain on asset
dispositions and other (4) 11 -
Loss from non-operating affiliates - (5) -
Minority and non-controlled
interests, net (3) (3) -
----------- -----------
EBITDA 207 246 19
Depreciation and amortization (83) (80) (4)
Interest expense, net (66) (66) -
Provision for income taxes (21) (36) 71
----------- -----------
Net income $37 $64 73%
=========== ===========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Future Performance – Full Year 2005 Outlook
($ in millions, except per share amounts)
Estimated Estimated
Full Year 2005 Full Year 2005
Low End High End
--------------- ---------------
Adjusted EBITDA $1,130 $1,145
Proportionate share of depreciation
and amortization of unconsolidated
affiliates (29) (29)
Non-recurring items (2) (2)
Operating interest and dividend
income (7) (7)
Operating income of non-controlled
interests 10 10
Net gain on asset dispositions and
other 11 11
Loss from non-operating affiliates (17) (17)
Minority and non-controlled
interests, net (7) (7)
--------------- ---------------
EBITDA 1,089 1,104
Depreciation and amortization (329) (329)
Interest expense, net (268) (268)
Provision for income taxes (178) (184)
--------------- ---------------
Net income $314 $323
=============== ===============
Diluted EPS $.78 $.80
=============== ===============
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Owned Hotel Revenue and Expenses
Adjusted for Asset Sales
($ in millions)
Three Months Ended
March 31,
2004 2005 % Change
------------ ------------ ---------
Revenue – owned hotels $482 $495 3%
Less sold hotels (15) (1)
------------ ------------
Revenue – comparable owned hotels $467 $494 6%
============ ============
Expenses – owned hotels $371 $376 1%
Less sold hotels (13) (2)
------------ ------------
Expenses – comparable owned
hotels $358 $374 4%
============ ============
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 for 2004
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.
Marc Grossman
310-205-4030
Hilton
