Hilton Reports Strong Second Quarter 2007 Results
BEVERLY HILLS, Calif. -- Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the second quarter and six months ended June 30, 2007. Second quarter highlights compared to the second quarter of 2006 are as follows:
- Fees up 16% to $201 million on strong RevPAR and unit growth.
- Comparable system-wide RevPAR increased 8.9%, driven by strong rate increases and high demand in most major markets. North America comparable owned RevPAR increased 9.8%.
Non-recurring items combined to benefit the 2007 quarter by $.02 per share as follows:
- $47 million pre-tax gain related to the Scandic sale (included in discontinued operations, net of tax);
- $24 million pre-tax other loss; primarily related to currency contracts used to protect the U.S. dollar value of the Scandic sale proceeds;
- $6 million pre-tax loss on foreign currency transactions;
- $4 million pre-tax loss related to impairment of a joint venture investment.
The 2006 second quarter benefited from non-recurring items totaling $.03 per share.
Net income from the Scandic hotel system, the sale of which was announced on March 2, 2007 and completed on April 26, 2007, is reflected as discontinued operations.
The company reported second quarter 2007 total operating income of $345 million (a 1 percent decrease from the 2006 quarter), on total revenue of $2.085 billion (a 4 percent increase from $2.005 billion in the 2006 quarter). Total company earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) were $468 million, a decrease of 4 percent from $489 million in the 2006 quarter. Revenue, operating income and Adjusted EBITDA growth in the quarter were impacted by asset sales completed within the last twelve months.
System-wide RevPAR; Management/Franchise Fees
All of the company's brands reported significant system-wide revenue-per-available-room (RevPAR) increases, with particularly strong gains in average daily rate (ADR). On a system-wide basis (including owned, leased, managed and franchised properties) second quarter comparable RevPAR increased 8.9 percent compared to the 2006 period. The company's brands showed second quarter RevPAR gains as follows: Conrad, 15.7 percent; Hilton, 10.4 percent; Doubletree, 8.6 percent; Hilton Garden Inn, 8.0 percent; Hampton Inn, 7.6 percent; Homewood Suites by Hilton, 7.4 percent; and Embassy Suites, 6.3 percent.
Management and franchise fees increased 16 percent in the second quarter to $201 million, benefiting from RevPAR gains and the addition of new units.
Owned Hotel Results
Continued strong demand trends resulted in high single digit or double digit ADR increases at many of the company's gateway hotels around the world. Business transient, group and leisure segments all showed solid ADR gains.
Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $636 million in the second quarter 2007, a 6 percent decrease from $678 million in the 2006 quarter. Total owned hotel expenses declined 8 percent in the quarter to $435 million. The decreases reflect the sale of owned assets over the last year.
Comparable North America (N.A.) owned revenue and expenses increased 8.5 percent and 4.3 percent, respectively.
RevPAR from comparable N.A. owned hotels increased 9.8 percent. Comparable owned N.A. hotel occupancy increased 2.0 points to 82.0 percent, while ADR increased 7.1 percent to $211.29. Particularly strong RevPAR growth was reported at the company's owned hotels in New York and San Francisco, while the Hawaii market was soft during the quarter. Comparable N.A. owned hotel margins in the second quarter increased 270 basis points to 32.9 percent.
Comparatively lower renovation disruption activity at the Hilton New York, the Waldorf=Astoria, and the Hilton Hawaiian Village in the 2007 second quarter benefited comparable N.A. owned hotel RevPAR and margin growth.
Comparable international owned revenue and expenses increased 9.3 percent and 7.7 percent, respectively. RevPAR from international comparable owned hotels increased 9.4 percent. Occupancy decreased 1.3 points to 73.0 percent, while ADR increased 11.3 percent to $162.35. Particularly strong results were reported in Barcelona, Zurich, Sydney and Sao Paulo. Adjusting for the impact of foreign exchange, RevPAR from international comparable owned hotels increased 3.2 percent. Comparable international owned margins improved 110 basis points to 26.8 percent.
On a worldwide basis, comparable owned RevPAR increased 9.7 percent, with margins improving 230 basis points to 31.3 percent. Excluding the impact of foreign exchange, worldwide comparable owned RevPAR increased 8.2 percent.
Leased Hotels
Revenue from leased hotels was $530 million in the second quarter 2007 compared to $476 million in the 2006 quarter, while leased expenses (including rents) were $459 million in the current quarter versus $415 million last year. The EBITDAR-to-rent coverage ratio was 1.6 times in the quarter. Leased results exclude hotels that have been classified as discontinued operations in connection with the Scandic sale.
Comparable leased revenue increased 12.0 percent, leased expenses increased 10.7 percent and margins increased 100 basis points to 13.6 percent. RevPAR from comparable leased properties increased 14.6 percent. Adjusting for the impact of foreign exchange, RevPAR from comparable leased hotels increased 9.3 percent, reflective of business strength in the U.K. (primarily London) and continental Europe.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a 21 percent decline in profitability in the second quarter, due to percentage-of-completion accounting associated with new projects. Revenue and expenses associated with projects in development are deferred to correspond with the pace of construction. Unit sales declined 9 percent, however average unit sales prices increased 35 percent over last year, with the increase driven by new projects in Hawaii.
HGVC had second quarter revenue of $159 million, an 8 percent decrease from $173 million in the 2006 quarter. Expenses were $121 million in the second quarter, compared with $125 million in the 2006 period.
Brand Development/Unit Growth
In the second quarter, the company added 71 properties and 9,436 rooms to its system as follows: Hampton Inn, 32 hotels and 2,919 rooms; Hilton Garden Inn, 18 hotels and 2,359 rooms; Hilton, 8 hotels and 1,918 rooms; Doubletree, 7 hotels and 1,591 rooms; Homewood Suites by Hilton, 5 hotels and 493 rooms; Embassy Suites, 1 hotel and 156 rooms.
13 hotels and 2,088 rooms were removed from the system during the quarter.
During the second quarter, the company added new Hilton hotels in Dallas; New Orleans; Limerick, Ireland; Venice, Italy and Valencia, Spain. The company added new Doubletree hotels in Milwaukee, Columbus, Boston, and Richmond. Additionally, during the quarter, the company signed over 15 management agreements, including the Conrad Buenos Aires, Argentina scheduled to open in 2010, the Hilton Forbidden City, Beijing, China scheduled to open in 2008, and the Hilton Mina Al Arab, U.A.E., scheduled to open in 2010.
During the second quarter, the company announced four new agreements as follows:
- A strategic alliance with the Caribbean Property Development Group to develop approximately 15 franchised hotels in Central America and the Caribbean under the Hilton Garden Inn, Hampton by Hilton and Homewood Suites by Hilton brands over the next five years.
- A strategic development alliance with London and Regional Properties to develop approximately 25 franchised or managed hotels in Russia under the Conrad, Hilton, Doubletree by Hilton, Hilton Garden Inn and Hampton by Hilton brands over the next five years.
- A strategic development alliance with Shiva Hotels Limited to develop approximately 15 franchised or managed hotels in the U.K. and Ireland under the Hilton, Doubletree by Hilton, Hilton Garden Inn and Hampton by Hilton brands over the next five years.
- A letter of understanding for a development alliance with Somerston Hotels U.K. Limited to develop approximately 25 franchised hotels in the U.K. under the Hampton by Hilton brand over the next five years.
At June 30, 2007, the Hilton worldwide system consisted of 2,896 properties and 490,438 rooms.
In July, the company received three highest-ranking awards in the J.D. Power and Associates 2007 North American Hotel Guest Satisfaction Index Study, outperforming all other hospitality companies within their respective segments. Hilton Garden Inn received the highest ranking (for the sixth consecutive year) in the mid-scale full service segment. Embassy Suites received the highest ranking (for the sixth time) in the upscale segment. Homewood Suites by Hilton received the highest ranking (for the fifth time) in the extended-stay segment.
Matthew J. Hart, Hilton President & COO, said: "Our operations continue to be very strong across the board. Our brand management and development businesses are experiencing strong RevPAR gains and unit growth both domestically and internationally. We are seeing significant RevPAR increases and improvement in margins across owned hotels, and our timeshare business continues to perform in-line with our expectations. Our development pipeline is larger than it has ever been and our four new strategic agreements add further momentum to our growth."
Asset Dispositions
During the second quarter, the company completed the sale of the Scandic chain for EUR 833 million or approximately $1.1 billion as of the transaction date. Additionally, during the second quarter the company sold the Hilton Washington for approximately $290 million.
The company also announced that it entered into an agreement to sell up to 10 hotels in Continental Europe for EUR 566 million or approximately $770 million. Early in the third quarter, the company announced that it has completed the sale of eight of the ten hotels and expects to complete the sale of the remaining two by the end of the third quarter 2007. The company will retain management agreements on nine of the ten hotels.
Corporate Finance
At June 30, 2007, Hilton had total debt of approximately $5.68 billion (net of approximately $499 million of debt and capital lease obligations resulting from the consolidation of certain joint venture entities and a managed hotel, which are non-recourse to Hilton), a reduction of nearly $1.4 billion during the quarter. Of the $5.68 billion, approximately 42 percent is floating rate debt. Total cash and equivalents (including restricted cash of approximately $376 million) were approximately $546 million at June 30, 2007.
The company's average basic and diluted share counts for the second quarter were 390 million and 424 million, respectively.
Hilton's effective tax rate for continuing operations in the second quarter 2007 was approximately 35 percent.
Total capital expenditures in the second quarter were approximately $194 million, including approximately $76 million expended for timeshare development.
Six-month Results
For the six-month period ended June 30, 2007, Hilton reported net income of $260 million, compared to $248 million in the 2006 period. Excluding non-recurring items in both periods, and assuming the Hilton International acquisition had occurred on January 1, 2006, diluted EPS totaled $.58 versus $.47 in the 2006 period. Non-recurring items benefited the 2007 six-month period by $.05 per share. The 2006 six-month period benefited from non-recurring items of $.09 per share. Additionally, had the HI acquisition been completed on January 1, 2006 (actual acquisition date was February 23, 2006), 2006 six-month results would have been reduced by approximately $.05 per share due to the seasonally weak business environment in the first two months of the year. Operating income for the six months was $573 million (consistent with the 2006 period) on revenue of $3.949 billion (compared with $3.446 billion in the 2006 period). For the 2007 six-month period, when compared to the same period last year, total company Adjusted EBITDA increased 3 percent to $839 million.
2007 Outlook
The company's prior guidance regarding the outlook for 2007 has been withdrawn and no new guidance is being issued due to the pending transaction.
Update on Blackstone Transaction
It is anticipated that the proposed acquisition of the company by BH Hotels LLC, an entity controlled by investment funds affiliated with the Blackstone Group L.P., will close during the fourth quarter 2007; completion is subject to the approval of Hilton's shareholders, as well as other customary closing conditions. Further details regarding the transaction can be found in the preliminary proxy statement that was filed with the Securities and Exchange Commission last week. It is available via the SEC filings link in the investor relations section of
Stephen F. Bollenbach, Hilton co-chairman and chief executive officer, said: "The proposed sale of our company is proceeding on track with an anticipated closing in the fourth quarter of this year. As we stated when we announced the deal, this transaction brings tremendous value to our shareholders and we look forward to bringing it to completion in the next several months."
Note: This press release contains "forward-looking statements" within the meaning of federal securities law, including statements concerning business strategies and their intended results, the proposed transaction with Blackstone and similar statements concerning anticipated future events and expectations that are not historical facts. Discussion of risks and uncertainties that could cause actual results to differ materially from management's current projections, forecasts, estimates and expectations is contained in Hilton's filings with the Securities and Exchange Commission (SEC). Specifically, Hilton makes reference to the section entitled "Risk Factors" in its annual and quarterly reports. In addition to the risks and uncertainties set forth in the Hilton SEC reports or periodic reports, the proposed transaction with Blackstone described in this release could be affected by, among other things, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that may be instituted against Hilton and others related to the merger agreement; failure to obtain stockholder approval or any other failure to satisfy other conditions required to complete the merger, including required regulatory approvals; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; the failure to obtain the necessary debt financing arrangements set forth in a commitment letter received in connection with the merger; the amount of the costs, fees, expenses and charges related to the merger and the actual terms of certain financings that will be obtained for the merger; and the impact of the substantial indebtedness incurred to finance the consummation of the merger. Many of the factors that will determine the outcome of the subject matter of this press release are beyond Hilton's ability to control or predict. Hilton undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, the Company intends to file a definitive proxy statement with the Securities and Exchange Commission (the "SEC"). Stockholders are urged to read the definitive proxy statement (and all amendments and supplements to it) and other materials that the Company may file with the SEC when they become available in their entirety, because they contain important information about the proposed transaction. The final definitive proxy statement will be mailed to the Company's stockholders. Stockholders will be able to obtain free copies of the final definitive proxy statement, as well as the Company's other filings, without charge, at the SEC's Web site (www.sec.gov) when they become available. Copies of the filings may also be obtained without charge from the Company by directing a request to: Hilton Hotels Corporation, 9336 Civic Center Drive, Beverly Hills, CA, 90210, Attention: Atish Shah, Investor Relations (Tel: 1 310 205 8664, Email:
Participants in the Solicitation
The Company's directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from stockholders in respect of the proposed transaction. Information regarding the Company's directors and executive officers is available in the Company's 2006 Annual Report on Form 10-K, filed with the SEC on February 28, 2007 and the Company's proxy statement for its 2007 annual meeting of stockholders, filed with the SEC on April 12, 2007. Additional information regarding the interests of such potential participants will be included in the definitive proxy statement and the other relevant documents filed with the SEC when they become available.
HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2007 % Change 2006 2007 % Change
------- ------- -------- ------- ------- --------
Revenue
Owned hotels $ 678 $ 636 (6)% $1,185 $1,207 2 %
Leased hotels 476 530 11 665 985 48
Management and
franchise fees 174 201 16 326 377 16
Timeshare and
other income 217 181 (17) 428 345 (19)
------- ------- ------- -------
1,545 1,548 - 2,604 2,914 12
Other revenue from
managed and
franchised
properties 460 537 17 842 1,035 23
------- ------- ------- -------
2,005 2,085 4 3,446 3,949 15
Expenses
Owned hotels 475 435 (8) 855 864 1
Leased hotels 415 459 11 584 872 49
Depreciation and
amortization 113 106 (6) 198 219 11
Impairment loss
and related costs - 4 - - 4 -
Other operating
expenses 173 168 (3) 344 325 (6)
Corporate expense 43 51 19 87 97 11
------- ------- ------- -------
1,219 1,223 - 2,068 2,381 15
Other expenses from
managed and
franchised
properties 457 534 17 833 1,026 23
------- ------- ------- -------
1,676 1,757 5 2,901 3,407 17
Operating income
from unconsolidated
affiliates 18 17 (6) 28 31 11
------- ------- ------- -------
Operating income 347 345 (1) 573 573 -
Interest and
dividend income 4 8 100 15 13 (13)
Interest expense (139) (102) (27) (235) (218) (7)
Net interest from
unconsolidated
affiliates and
non-controlled
interests (13) (13) - (22) (25) 14
Net gain (loss) on
foreign currency
transactions 8 (6) - 26 (14) -
Net other gain
(loss) 19 (24) - 23 6 (74)
Loss from non-
operating
affiliates (4) (4) - (8) (8) -
------- ------- ------- -------
Income before taxes
and minority and
non-controlled
interests 222 204 (8) 372 327 (12)
Provision for
income taxes (90) (71) (21) (140) (114) (19)
Minority and non-
controlled
interests, net - (2) - (2) (4) 100
------- ------- ------- -------
Income from
continuing
operations 132 131 (1) 230 209 (9)
Discontinued
operations, net
of tax 12 34 - 18 51 -
------- ------- ------- -------
Net Income $ 144 $ 165 15 % $ 248 $ 260 5 %
======= ======= ======= =======
Net income per
share(1)
--------------------
Basic Earnings Per
Share
Continuing
operations $ .34 $ .34 - % $ .60 $ .54 (10)%
Discontinued
operations .03 .09 - .05 .13 -
------- ------- ------- -------
$ .37 $ .42 14 % $ .65 $ .67 3 %
======= ======= ======= =======
Diluted Earnings Per
Share
Continuing
operations $ .32 $ .32 - % $ .56 $ .51 (9)%
Discontinued
operations .03 .08 - .04 .12 -
------- ------- ------- -------
$ .35 $ .40 14 % $ .61 $ .63 3 %
======= ======= ======= =======
Average shares -
basic 385 390 1 % 384 389 1 %
======= ======= ======= =======
Average shares -
diluted 419 424 1 % 418 424 1 %
======= ======= ======= =======
(1) EPS from the six month periods differs from the sum of quarterly
EPS and the total reported EPS differs from the sum of EPS from
continuing and discontinued operations due to the required methods of
computing EPS.
HILTON HOTELS CORPORATION
Comparable Systemwide Statistics(1)
Brand Summary
Three Months Ended Six Months Ended
June 30, June 30,
2006 2007 Change 2006 2007 Change
--------- -------- -------- -------- -------- --------
Hilton
---------------
Occupancy 75.2% 75.7% 0.5 pts 72.3% 72.6% 0.3 pts
Average Rate $149.46 $164.08 9.8 % $146.73 $161.19 9.9 %
RevPAR $112.39 $124.13 10.4 % $106.05 $117.03 10.4 %
Hilton Garden
Inn
---------------
Occupancy 74.5% 75.9% 1.4 pts 71.2% 72.5% 1.3 pts
Average Rate $114.45 $121.29 6.0 % $112.75 $119.45 5.9 %
RevPAR $ 85.26 $ 92.07 8.0 % $ 80.24 $ 86.61 7.9 %
Doubletree
---------------
Occupancy 75.1% 75.8% 0.7 pts 71.7% 72.4% 0.7 pts
Average Rate $119.86 $129.01 7.6 % $118.64 $127.89 7.8 %
RevPAR $ 90.00 $ 97.75 8.6 % $ 85.06 $ 92.53 8.8 %
Embassy Suites
---------------
Occupancy 77.9% 77.8% (0.1)pts 75.7% 75.4% (0.3)pts
Average Rate $141.21 $150.30 6.4 % $140.12 $149.63 6.8 %
RevPAR $110.07 $116.97 6.3 % $106.14 $112.84 6.3 %
Homewood Suites
---------------
Occupancy 79.1% 79.7% 0.6 pts 76.1% 76.8% 0.7 pts
Average Rate $110.39 $117.68 6.6 % $109.37 $116.75 6.7 %
RevPAR $ 87.28 $ 93.77 7.4 % $ 83.25 $ 89.67 7.7 %
Hampton
---------------
Occupancy 76.6% 76.8% 0.2 pts 72.7% 73.0% 0.3 pts
Average Rate $ 96.22 $103.24 7.3 % $ 95.18 $102.18 7.4 %
RevPAR $ 73.74 $ 79.32 7.6 % $ 69.23 $ 74.55 7.7 %
Conrad
---------------
Occupancy 70.7% 72.5% 1.8 pts 68.4% 69.4% 1.0 pts
Average Rate $176.21 $198.66 12.7 % $173.43 $196.23 13.1 %
RevPAR $124.50 $144.07 15.7 % $118.59 $136.12 14.8 %
Other
---------------
Occupancy 80.8% 76.9% (3.9)pts 76.6% 73.8% (2.8)pts
Average Rate $144.73 $169.82 17.3 % $133.44 $153.67 15.2 %
RevPAR $116.97 $130.57 11.6 % $102.27 $113.48 11.0 %
Total
---------------
Occupancy 76.0% 76.4% 0.4 pts 72.8% 73.1% 0.3 pts
Average Rate $125.52 $135.98 8.3 % $123.82 $134.24 8.4 %
RevPAR $ 95.38 $103.89 8.9 % $ 90.10 $ 98.14 8.9 %
(1) Statistics are presented pro forma as if the acquisition of Hilton
International had occurred January 1, 2006. Includes hotels in the
system as of June 30, 2007 which were in the system of HHC or HI
since January 1, 2006. Excludes data for HI franchise hotels and an
owned hotel in New Orleans.
HILTON HOTELS CORPORATION
Comparable Systemwide Statistics(1)
Regional Summary
Three Months Ended Six Months Ended
June 30, June 30,
2006 2007 Change 2006 2007 Change
--------- -------- -------- -------- -------- --------
North America
(US & Canada)
---------------
Occupancy 76.3% 77.0% 0.7 pts 73.0% 73.4% 0.4 pts
Average Rate $121.16 $129.54 6.9 % $119.78 $128.07 6.9 %
RevPAR $ 92.47 $ 99.69 7.8 % $ 87.41 $ 94.06 7.6 %
United Kingdom
& Ireland
---------------
Occupancy 79.1% 77.1% (2.0)pts 75.9% 73.8% (2.1)pts
Average Rate $164.24 $190.20 15.8 % $158.89 $187.39 17.9 %
RevPAR $129.98 $146.73 12.9 % $120.60 $138.27 14.7 %
Continental
Europe
---------------
Occupancy 74.1% 73.0% (1.1)pts 67.1% 66.8% (0.3)pts
Average Rate $173.05 $201.45 16.4 % $161.39 $187.57 16.2 %
RevPAR $128.21 $147.05 14.7 % $108.36 $125.24 15.6 %
Africa
---------------
Occupancy 70.5% 71.1% 0.6 pts 68.4% 71.5% 3.1 pts
Average Rate $139.16 $168.71 21.2 % $136.05 $159.11 16.9 %
RevPAR $ 98.14 $120.00 22.3 % $ 93.12 $113.79 22.2 %
Middle East
---------------
Occupancy 71.9% 73.4% 1.5 pts 72.6% 73.1% 0.5 pts
Average Rate $ 90.97 $ 99.67 9.6 % $100.11 $108.61 8.5 %
RevPAR $ 65.44 $ 73.20 11.9 % $ 72.69 $ 79.43 9.3 %
Asia Pacific
---------------
Occupancy 75.0% 74.4% (0.6)pts 75.2% 75.8% 0.6 pts
Average Rate $134.24 $149.56 11.4 % $135.73 $151.27 11.4 %
RevPAR $100.69 $111.21 10.4 % $102.05 $114.70 12.4 %
Latin America &
Caribbean
---------------
Occupancy 71.3% 71.5% 0.2 pts 72.1% 71.9% (0.2)pts
Average Rate $126.13 $144.02 14.2 % $132.60 $150.80 13.7 %
RevPAR $ 89.91 $103.03 14.6 % $ 95.63 $108.45 13.4 %
Total
---------------
Occupancy 76.0% 76.4% 0.4 pts 72.8% 73.1% 0.3 pts
Average Rate $125.52 $135.98 8.3 % $123.82 $134.24 8.4 %
RevPAR $ 95.38 $103.89 8.9 % $ 90.10 $ 98.14 8.9 %
(1) Statistics are presented pro forma as if the acquisition of Hilton
International had occurred January 1, 2006. Includes hotels in the
system as of June 30, 2007 which were in the system of HHC or HI
since January 1, 2006. Excludes data for HI franchise hotels and an
owned hotel in New Orleans.
HILTON HOTELS CORPORATION
Comparable Owned Statistics(1)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2007 Change 2006 2007 Change
-------- -------- --------- -------- -------- ---------
Worldwide - 53
Hotels
--------------
Hilton
-------------
Occupancy 78.3% 79.8% 1.5 pts 75.5% 75.9% 0.4 pts
Average Rate $187.91 $202.69 7.9 % $183.95 $198.38 7.8 %
RevPAR $147.15 $161.73 9.9 % $138.94 $150.52 8.3 %
All Other
-------------
Occupancy 77.0% 73.1% (3.9)pts 76.8% 75.6% (1.2)pts
Average Rate $121.35 $136.49 12.5 % $118.74 $133.70 12.6 %
RevPAR $ 93.42 $ 99.78 6.8 % $ 91.17 $101.10 10.9 %
Total
-------------
Occupancy 78.2% 79.2% 1.0 pts 75.6% 75.8% 0.2 pts
Average Rate $181.84 $197.02 8.3 % $177.82 $192.40 8.2 %
RevPAR $142.17 $155.99 9.7 % $134.51 $145.93 8.5 %
North America -
23 Hotels
---------------
Hilton
-------------
Occupancy 80.5% 82.9% 2.4 pts 78.1% 78.7% 0.6 pts
Average Rate $205.03 $218.97 6.8 % $199.81 $213.34 6.8 %
RevPAR $165.09 $181.45 9.9 % $156.13 $167.86 7.5 %
All Other
-------------
Occupancy 76.0% 75.6% (0.4)pts 75.6% 75.9% 0.3 pts
Average Rate $135.12 $147.93 9.5 % $132.27 $147.46 11.5 %
RevPAR $102.71 $111.77 8.8 % $100.03 $111.93 11.9 %
Total
-------------
Occupancy 80.0% 82.0% 2.0 pts 77.8% 78.4% 0.6 pts
Average Rate $197.24 $211.29 7.1 % $192.11 $205.86 7.2 %
RevPAR $157.77 $173.28 9.8 % $149.55 $161.30 7.9 %
International
- 30 Hotels
--------------
Hilton
-------------
Occupancy 73.9% 73.7% (0.2)pts 70.3% 70.3% - pts
Average Rate $150.81 $166.27 10.3 % $148.91 $165.06 10.8 %
RevPAR $111.46 $122.51 9.9 % $104.75 $116.01 10.7 %
All Other
-------------
Occupancy 83.2% 57.3% (25.9)pts 84.2% 73.8% (10.4)pts
Average Rate $ 40.33 $ 39.28 (2.6)% $ 40.45 $ 42.47 5.0 %
RevPAR $ 33.57 $ 22.51 (32.9)% $ 34.06 $ 31.33 (8.0)%
Total
-------------
Occupancy 74.3% 73.0% (1.3)pts 70.9% 70.4% (0.5)pts
Average Rate $145.93 $162.35 11.3 % $143.84 $160.00 11.2 %
RevPAR $108.39 $118.57 9.4 % $101.97 $112.68 10.5 %
(1) Statistics are presented pro forma as if the acquisition of Hilton
International had occurred January 1, 2006. Includes hotels owned as
of June 30, 2007 which were owned by HHC or HI since January 1, 2006.
Excludes an owned hotel in New Orleans.
HILTON HOTELS CORPORATION
Comparable Leased Statistics (1)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2007 Change 2006 2007 Change
--------- -------- -------- -------- -------- --------
Worldwide - 82
Hotels
---------------
Hilton
--------------
Occupancy 75.9% 75.0% (0.9)pts 72.6% 71.7% (0.9)pts
Average Rate $160.82 $186.71 16.1 % $152.46 $178.48 17.1 %
RevPAR $122.11 $140.00 14.7 % $110.74 $127.95 15.5 %
All Other
--------------
Occupancy 79.8% 79.1% (0.7)pts 75.6% 74.5% (1.1)pts
Average Rate $129.37 $148.23 14.6 % $125.71 $145.03 15.4 %
RevPAR $103.22 $117.24 13.6 % $ 95.03 $108.00 13.6 %
Total
--------------
Occupancy 76.3% 75.3% (1.0)pts 72.9% 71.9% (1.0)pts
Average Rate $158.05 $183.32 16.0 % $150.12 $175.57 17.0 %
RevPAR $120.52 $138.09 14.6 % $109.41 $126.27 15.4 %
(1) Statistics are presented pro forma as if the acquisition of Hilton
International had occurred January 1, 2006. Includes hotels leased as
of June 30, 2007 which were leased by HHC or HI since January 1,
2006.
HILTON HOTELS CORPORATION
Supplementary Statistical Information
June
----------------------------------------------
2006 2007
Number of Number of
Properties Rooms Properties Rooms
----------- ---------- ----------- -----------
Hilton
-----------------------
Owned 54 30,339 46 25,226
Leased 77 23,122 78 23,264
Joint Venture 14 6,156 13 5,708
Managed 143 52,783 158 59,890
Franchised 203 58,442 214 61,928
----------- ---------- ----------- -----------
491 170,842 509 176,016
Hilton Garden Inn
-----------------------
Owned 1 162 1 162
Joint Venture 1 128 1 128
Managed 7 886 8 1,168
Franchised 270 37,198 317 43,625
----------- ---------- ----------- -----------
279 38,374 327 45,083
Doubletree
-----------------------
Owned 3 1,349 3 1,351
Leased 5 1,746 4 1,554
Joint Venture 14 4,306 7 1,958
Managed 26 7,146 30 8,633
Franchised 119 29,102 135 32,884
----------- ---------- ----------- -----------
167 43,649 179 46,380
Embassy Suites
-----------------------
Owned 3 664 2 444
Joint Venture 24 6,251 20 5,074
Managed 56 14,830 52 13,992
Franchised 98 22,247 111 25,634
----------- ---------- ----------- -----------
181 43,992 185 45,144
Homewood Suites
-----------------------
Owned 1 140 - -
Managed 41 4,706 41 4,689
Franchised 132 14,434 160 17,406
----------- ---------- ----------- -----------
174 19,280 201 22,095
Hampton
-----------------------
Owned 1 133 1 133
Managed 35 4,607 23 2,927
Franchised 1,329 131,421 1,409 138,739
----------- ---------- ----------- -----------
1,365 136,161 1,433 141,799
Conrad
-----------------------
Joint Venture 3 1,399 3 1,399
Managed 13 3,903 11 3,592
----------- ---------- ----------- -----------
16 5,302 14 4,991
Other
-----------------------
Owned 2 630 1 324
Leased 3 1,069 2 532
Managed 8 3,288 10 4,130
Franchised 7 2,435 2 170
----------- ---------- ----------- -----------
20 7,422 15 5,156
Timeshare 40 4,878 33 3,774
-----------------------
Total
-----------------------
Owned 65 33,417 54 27,640
Leased 85 25,937 84 25,350
Joint Venture 56 18,240 44 14,267
Managed 329 92,149 333 99,021
Franchised 2,158 295,279 2,348 320,386
Timeshare 40 4,878 33 3,774
----------- ---------- ----------- -----------
TOTAL PROPERTIES 2,733 469,900 2,896 490,438
=========== ====================== ===========
Change to
----------------------------------------------
June 2006 December 2006
Number of Number of
Properties Rooms Properties Rooms
----------- ---------- ----------- -----------
Hilton
-----------------------
Owned (8) (5,113) (1) (1,121)
Leased 1 142 - (104)
Joint Venture (1) (448) (1) (448)
Managed 15 7,107 6 3,257
Franchised 11 3,486 7 1,827
----------- ---------- ----------- -----------
18 5,174 11 3,411
Hilton Garden Inn
-----------------------
Owned - - - -
Joint Venture - - - -
Managed 1 282 1 282
Franchised 47 6,427 24 3,132
----------- ---------- ----------- -----------
48 6,709 25 3,414
Doubletree
-----------------------
Owned - 2 - 2
Leased (1) (192) - -
Joint Venture (7) (2,348) (5) (1,803)
Managed 4 1,487 3 1,146
Franchised 16 3,782 8 1,916
----------- ---------- ----------- -----------
12 2,731 6 1,261
Embassy Suites
-----------------------
Owned (1) (220) (1) (220)
Joint Venture (4) (1,177) (3) (714)
Managed (4) (838) (4) (926)
Franchised 13 3,387 8 1,832
----------- ---------- ----------- -----------
4 1,152 - (28)
Homewood Suites
-----------------------
Owned (1) (140) (1) (140)
Managed - (17) - (17)
Franchised 28 2,972 10 1,111
----------- ---------- ----------- -----------
27 2,815 9 954
Hampton
-----------------------
Owned - - - -
Managed (12) (1,680) (11) (1,520)
Franchised 80 7,318 52 4,832
----------- ---------- ----------- -----------
68 5,638 41 3,312
Conrad
-----------------------
Joint Venture - - - -
Managed (2) (311) (1) (161)
----------- ---------- ----------- -----------
(2) (311) (1) (161)
Other
-----------------------
Owned (1) (306) - -
Leased (1) (537) - -
Managed 2 842 - (1)
Franchised (5) (2,265) (2) (855)
----------- ---------- ----------- -----------
(5) (2,266) (2) (856)
Timeshare (7) (1,104) (1) 34
-----------------------
Total
-----------------------
Owned (11) (5,777) (3) (1,479)
Leased (1) (587) - (104)
Joint Venture (12) (3,973) (9) (2,965)
Managed 4 6,872 (6) 2,060
Franchised 190 25,107 107 13,795
Timeshare (7) (1,104) (1) 34
----------- ---------- ----------- -----------
TOTAL PROPERTIES 163 20,538 88 11,341
=========== ========== =========== ===========
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to EBITDA and Net Income
Historical Data
($ in millions)
Three Months Ended
June 30,
2006
-----------------------------------------
Continuing Discontinued
Operations Operations Total
-------------- -------------- -----------
Adjusted EBITDA $ 466 $ 23 $ 489
Proportionate share of
depreciation and
amortization of
unconsolidated affiliates
(7) - (7)
Impairment loss and related
costs - - -
Operating interest and
dividend income (1) - (1)
Operating income of non-
controlled interests 2 - 2
Net gain (loss) on foreign
currency transactions 8 (5) 3
Net other gain (loss) 19 - 19
Loss from non-operating
affiliates (4) - (4)
Minority and non-controlled
interests, net - - -
-------------- -------------- -----------
EBITDA 483 18 501
Depreciation and
amortization (113) (4) (117)
Interest expense, net (148) - (148)
Provision for income taxes (90) (2) (92)
-------------- -------------- -----------
Net income $ 132 $ 12 $ 144
============== ============== ===========
Three Months Ended
June 30,
2007
-------------------------------
Continuing Discontinued
Operations Operations Total % Change
----------- ------------ ------ --------
Adjusted EBITDA $ 463 $ 5 $ 468 (4)%
Proportionate share of
depreciation and
amortization of
unconsolidated affiliates
(7) - (7) -
Impairment loss and related
costs (4) - (4) -
Operating interest and
dividend income (4) - (4) -
Operating income of non-
controlled interests 3 - 3 50
Net gain (loss) on foreign
currency transactions (6) 1 (5) -
Net other gain (loss) (24) 47 23 21
Loss from non-operating
affiliates (4) - (4) -
Minority and non-controlled
interests, net (2) - (2) -
----------- ------------ ------
EBITDA 415 53 468 (7)
Depreciation and
amortization (106) - (106) (9)
Interest expense, net (107) - (107) (28)
Provision for income taxes (71) (19) (90) (2)
----------- ------------ ------
Net income $ 131 $ 34 $ 165 15 %
=========== ============ ======
Six Months Ended
June 30,
2006
----------------------------------------
Continuing Discontinued
Operations Operations Total
------------- -------------- -----------
Adjusted EBITDA $ 784 $ 33 $ 817
Proportionate share of
depreciation and
amortization of
unconsolidated affiliates
(15) - (15)
Impairment loss and related
costs - - -
Operating interest and
dividend income (3) - (3)
Operating income of non-
controlled interests 5 - 5
Net gain (loss) on foreign
currency transactions 26 (6) 20
Net other gain (loss) 23 - 23
Loss from non-operating
affiliates (8) - (8)
Minority and non-controlled
interests, net (2) - (2)
------------- -------------- -----------
EBITDA 810 27 837
Depreciation and
amortization (198) (5) (203)
Interest expense, net (242) - (242)
Provision for income taxes (140) (4) (144)
------------- -------------- -----------
Net income $ 230 $ 18 $ 248
============= ============== ===========
Six Months Ended
June 30,
2007
------------------------------
Continuing Discontinued
Operations Operations Total % Change
---------- ------------ ------ --------
Adjusted EBITDA $ 809 $ 30 $ 839 3 %
Proportionate share of
depreciation and
amortization of
unconsolidated affiliates
(14) - (14) (7)
Impairment loss and related
costs (4) - (4) -
Operating interest and
dividend income (5) - (5) 67
Operating income of non-
controlled interests 6 - 6 20
Net gain (loss) on foreign
currency transactions (14) 2 (12) -
Net other gain (loss) 6 47 53 -
Loss from non-operating
affiliates (8) - (8) -
Minority and non-controlled
interests, net (4) - (4) 100
---------- ------------ ------
EBITDA 772 79 851 2
Depreciation and amortization (219) (5) (224) 10
Interest expense, net (230) - (230) (5)
Provision for income taxes (114) (23) (137) (5)
---------- ------------ ------
Net income $ 209 $ 51 $ 260 5 %
========== ============ ======
HILTON HOTELS CORPORATION
Supplemental Financial Information (Unaudited)
Pro Forma Revenue and Expenses
($ in millions)
Owned Hotels
----------------------------------------------------------------------
% or % or
Three Months basis Six Months basis
Ended June 30, point Ended June 30, point
2006 2007 Change 2006 2007 Change
-------------- ------- --------------- -------
Revenue
---------------------
Total Owned Hotel
Revenue $ 681 $ 638 $1,189 $1,215
Discontinued
operations (3) (2) (4) (8)
------- ------ ------- -------
Continuing
Operations 678 636 1,185 1,207
Less sold hotels
and non-
comparable (137) (48) (235) (108)
Less HI
comparable, as
reported (140) (153) (193) (288)
------- ------ ------- -------
Pro Forma
Comparable Owned -
North America 401 435 8% 757 811 7%
Plus HI
International
comparable,
net(1) 140 153 9% 262 288 10%
------- ------ ------- -------
Pro Forma
Comparable Owned -
Worldwide $ 541 $ 588 9% $1,019 $1,099 8%
======= ====== ======= =======
Expenses
---------------------
Total Owned Hotel
Expenses $ 477 $ 437 $ 857 $ 870
Discontinued
operations (2) (2) (2) (6)
------- ------ ------- -------
Continuing
Operations 475 435 855 864
Less sold hotels
and non-
comparable (91) (31) (162) (68)
Less HI
comparable, as
reported (104) (112) (144) (216)
------- ------ ------- -------
Pro Forma
Comparable Owned -
North America 280 292 4% 549 580 6%
Plus HI
International
comparable,
net(1) 104 112 8% 200 216 8%
------- ------ ------- -------
Pro Forma
Comparable Owned -
Worldwide $ 384 $ 404 5% $ 749 $ 796 6%
======= ====== ======= =======
Margins
---------------------
Pro Forma
Comparable Owned -
North America 30.2% 32.9% 270 bps 27.5% 28.5% 100 bps
Pro Forma
Comparable Owned -
International 25.7% 26.8% 110 bps 23.7% 25.0% 130 bps
Pro Forma
Comparable Owned -
Worldwide 29.0% 31.3% 230 bps 26.5% 27.6% 110 bps
Leased Hotels
----------------------------------------------------------------------
% or % or
Three Months basis Six Months basis
Ended June 30, point Ended June 30, point
2006 2007 Change 2006 2007 Change
-------------- ------- --------------- -------
Revenue
---------------------
Total Leased Hotel
Revenue $ 671 $ 584 $ 937 $1,254
Discontinued
operations (195) (54) (272) (269)
------- ------ ---------------
Continuing
Operations 476 530 665 985
Less sold hotels
and non-
comparable (17) (16) (25) (30)
Less HI
comparable, as
reported (434) (487) (590) (903)
Plus HI
International
comparable,
net(1) 434 487 12% 799 903 13%
------- ------ ------- -------
Pro Forma
Comparable Leased
- Worldwide $ 459 $ 514 12% $ 849 $ 955 12%
======= ====== ======= =======
Expenses
---------------------
Total Leased Hotel
Expenses $ 572 $ 506 $ 802 $1,092
Discontinued
operations (157) (47) (218) (220)
------- ------ ------- -------
Continuing
Operations 415 459 584 872
Less sold hotels
and non-
comparable (14) (15) (20) (28)
Less HI
comparable, as
reported (379) (421) (521) (799)
Plus HI
International
comparable,
net(1) 379 421 11% 721 799 11%
------- ------ ------- -------
Pro Forma
Comparable Leased
- Worldwide $ 401 $ 444 11% $ 764 $ 844 10%
======= ====== ======= =======
Margins
---------------------
Pro Forma
Comparable Leased
- Worldwide 12.6% 13.6% 100 bps 10.0% 11.6% 160 bps
Management and Franchise Fees
----------------------------------------------------------------------
Three Months Six Months
Ended June 30, % Ended June 30, %
2006 2007 Change 2006 2007 Change
-------------- ------- --------------- -------
Total Management
and Franchise Fees $ 175 $ 202 $ 327 $ 378
Discontinued
operations (1) (1) (1) (1)
------- ------ ------- -------
Continuing
Operations 174 201 326 377
Less HI reported (27) (47) (37) (85)
Plus HI, net(1) 27 47 74% 51 85 67%
------- ------ ------- -------
Pro Forma -
Worldwide $ 174 $ 201 16% $ 340 $ 377 11%
======= ====== ======= =======
(1) Pro forma for the entities acquired with Hilton International as
if they had been acquired on January 1, 2006. Excludes non-comparable
hotels.
NON-GAAP FINANCIAL MEASURES
----------------------------------------------------------------------
Regulation G, "Conditions for Use of Non-GAAP Financial Measures,"
prescribes the conditions for use of non-GAAP financial information
in public disclosures. We believe that our presentation of EBITDA and
Adjusted EBITDA, which are non-GAAP financial measures, are important
supplemental measures of operating performance to investors. The
following discussion defines these terms and why we believe they are
useful measures of our performance.
EBITDA and Adjusted EBITDA
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in our industry
which we believe, when considered with measures calculated in
accordance with United States Generally Accepted Accounting
Principles (GAAP), gives investors a more complete understanding of
operating results before the impact of investing and financing
transactions and income taxes and facilitates comparisons between us
and our competitors. Management has historically adjusted EBITDA when
evaluating operating performance because we believe that the
inclusion or exclusion of certain recurring and non- recurring items
described below is necessary to provide the most accurate measure of
our core operating results and as a means to evaluate period-to-
period results. We have chosen to provide this information to
investors to enable them to perform more meaningful comparisons of
past, present and future operating results and as a means to evaluate
the results of core on-going operations. We do not reflect such items
when calculating EBITDA, however, we adjust for these items and refer
to this measure as Adjusted EBITDA. We have historically reported
this measure to our investors and believe that the continued
inclusion of Adjusted EBITDA provides consistency in our financial
reporting. We use Adjusted EBITDA in this press release because we
believe it is useful to investors in allowing greater transparency
related to a significant measure used by management in its financial
and operational decision-making. Adjusted EBITDA is among the more
significant factors in management's internal evaluation of total
company and individual property performance and in the evaluation of
incentive compensation related to property management. Management
also uses Adjusted EBITDA as a measure in determining the value of
acquisitions and dispositions. Adjusted EBITDA is also widely used by
management in the annual budget process. Externally, we believe these
measures continue to be used by investors in their assessment of our
operating performance and the valuation of our company. Adjusted
EBITDA reflects EBITDA adjusted for the following items:
Gains and Losses on Asset Dispositions and Non-Recurring Items
----------------------------------------------------------------------
We exclude from Adjusted EBITDA the effect of gains and losses on
asset dispositions and non-recurring items, such as asset write-
downs and impairment losses. We believe the inclusion of these
items is not consistent with reflecting the on-going performance of
our assets. Management believes it is useful to exclude gains and
losses on asset dispositions as these amounts are not reflective of
our operating performance or the performance of our assets and the
amount of such items can vary dramatically from period to period.
The timing and selection of an asset for disposition is subject to
a number of variables that are generally unrelated to our on-going
operations.
Proportionate Share of Depreciation and Amortization of
Unconsolidated Affiliates
----------------------------------------------------------------------
Our consolidated results include the equity earnings from our
unconsolidated affiliates after the deduction of our proportionate
share of depreciation and amortization expense from unconsolidated
affiliates. We exclude our proportionate share of depreciation and
amortization expense from unconsolidated affiliates from Adjusted
EBITDA to provide a more accurate measure of our proportionate
share of core operating results before investing activities and to
provide consistency with the performance measure we use for our
consolidated properties.
Operating Interest and Dividend Income
----------------------------------------------------------------------
Interest and dividend income from investments related to operating
activities is included in our calculation of Adjusted EBITDA. We
consider this income, primarily interest on notes receivable issued
to properties we manage or franchise and dividend income from
investments related to the development of our core businesses, to
be a part of our core operating results.
Non-Controlled Interest
----------------------------------------------------------------------
We exclude from Adjusted EBITDA the operating income, net interest
expense, tax provision and non-controlled interest reported on our
income statement to the extent we have no ownership interest. These
exclusions are shown in their respective lines on the
Reconciliation of Adjusted EBITDA to EBITDA and Net Income.
Minority Interest, Net
----------------------------------------------------------------------
We exclude the minority interest in the income or loss of our
consolidated joint ventures because these amounts effectively
include our minority partners' proportionate share of depreciation,
amortization, interest and taxes, which are excluded from EBITDA.
Limitations on the Use of Non-GAAP Measures
----------------------------------------------------------------------
The use of EBITDA and Adjusted EBITDA has certain limitations. Our
presentation of EBITDA and Adjusted EBITDA may be different from the
presentation used by other companies and therefore comparability may
be limited. Depreciation expense for various long-term assets,
interest expense, income taxes and other items have been and will be
incurred and are not reflected in the presentation of EBITDA or
Adjusted EBITDA. Each of these items should also be considered in the
overall evaluation of our results. Additionally, EBITDA and Adjusted
EBITDA do not consider capital expenditures and other investing
activities and should not be considered as a measure of our
liquidity. We compensate for these limitations by providing the
relevant disclosure of our depreciation, interest and income tax
expense, capital expenditures and other items both in our
reconciliations to the GAAP financial measures and in our
consolidated financial statements, all of which should be considered
when evaluating our performance.
EBITDA and Adjusted EBITDA are used in addition to and in conjunction
with results presented in accordance with GAAP. EBITDA and Adjusted
EBITDA should not be considered as an alternative to net income,
operating income, or any other operating performance measure
prescribed by GAAP, nor should these measures be relied upon to the
exclusion of GAAP financial measures. EBITDA and Adjusted EBITDA
reflect additional ways of viewing our operations that we believe,
when viewed with our GAAP results and the reconciliations to the
corresponding GAAP financial measures, provide a more complete
understanding of factors and trends affecting our business than could
be obtained absent this disclosure. Management strongly encourages
investors to review our financial information in its entirety and not
to rely on a single financial measure.