Hilton Worldwide Significantly Exceeds First Quarter 2014 EPS and Adjusted EBITDA Expectations; Raises Full Year Outlook

MCLEAN, Va. - May 09, 2014 - (BUSINESS WIRE) - Hilton Worldwide Holdings Inc. ("Hilton," "Hilton Worldwide" or the "Company") (NYSE: HLT) today reported its first quarter 2014 results and raised its full year 2014 outlook. Highlights include:

  • EPS, adjusted for special items, for the first quarter tripled from the same period in 2013 to $0.13; without adjustments, EPS was $0.12
  • Net income attributable to Hilton stockholders for the first quarter was $123 million, an increase of $89 million from the same period in 2013
  • Adjusted EBITDA for the first quarter increased 22 percent from the same period in 2013 to $544 million and Adjusted EBITDA margin increased 400 basis points
  • Management and franchise fees for the first quarter increased 17 percent from the same period in 2013 to $331 million
  • System-wide comparable RevPAR increased 6.6 percent for the first quarter on a currency neutral basis from the same period in 2013
  • Gross operating profit margins at owned and operated hotels increased 174 basis points for the first quarter compared to the same period in 2013
  • Opened more than 9,000 rooms in the first quarter
  • Approved 15,000 new rooms for development during the first quarter, growing its industry-leading development pipeline to 1,165 hotels, consisting of approximately 200,000 rooms as of March 31, 2014
  • Reduced long-term debt by $200 million through voluntary prepayments on its senior secured term loan facility
  • Increased outlook for full year 2014 Adjusted EBITDA to between $2,415 million and $2,465 million, up from $2,365 million to $2,435 million

Overview

For the three months ended March 31, 2014, earnings per share ("EPS") was $0.12 compared to $0.03 for the three months ended March 31, 2013 and EPS, adjusted for special items, was $0.13 for the three months ended March 31, 2014 compared to $0.03 for the three months ended March 31, 2013. Adjusted EBITDA increased 22 percent to $544 million for the three months ended March 31, 2014, compared to $447 million for the three months ended March 31, 2013 and net income attributable to Hilton stockholders was $123 million for the three months ended March 31, 2014 compared to $34 million for the three months ended March 31, 2013.

In the first quarter of 2014, there was one special item that resulted in a positive adjustment to net income attributable to Hilton stockholders of $13 million related to share-based compensation prior to and in connection with the initial public offering, which was included in general, administrative and other expenses.

Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had a strong first quarter that significantly exceeded our expectations. We are very optimistic about the remainder of 2014, and as a result we have increased our RevPAR, EPS and Adjusted EBITDA outlook for the year.

"We continue to increase the global presence of our industry-leading brands, with over 9,000 new rooms opening during the first quarter. We remain #1 in rooms under construction in every major region of the world, with over an 18 percent share of all rooms under construction globally. At the end of the first quarter, we had 510 hotels and 101,000 rooms under construction that will further grow our system.

"We also continue to mine value enhancement opportunities in our iconic real estate portfolio, most recently announcing our planned retail platform repositioning and the creation of additional timeshare inventory at our Hilton New York property. Our capital allocation strategy remains disciplined and simple and we remain committed to building equity value through debt repayments, which totaled $200 million in the first quarter.

"For 2014, we expect to see strong global RevPAR growth with system-wide comparable RevPAR increasing 5.5 percent to 7.0 percent and we have increased our full year outlook for EPS adjusted for special items to between $0.64 and $0.67 and Adjusted EBITDA to between $2,415 million and $2,465 million. As a result, the new midpoint of our outlook for full year 2014 Adjusted EBITDA is above the top end of our previous guidance."

Segment Highlights

Management and Franchise

Management and franchise fees were $331 million in the first quarter of 2014, an increase of 17 percent compared to the same period in 2013. Excluding $6 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements, management and franchise fees increased 15 percent. RevPAR at comparable managed and franchised hotels in the first quarter increased 6.8 percent on a currency neutral basis (a 6.3 percent increase in actual dollars) compared to the same period in 2013, including an increase in RevPAR from comparable managed and franchised hotels in the focused-service group of 6.7 percent.

Ownership

Revenues from the ownership segment were $952 million in the first quarter of 2014, an increase of 3 percent from the same period in 2013. Ownership segment Adjusted EBITDA for the first quarter of 2014 was $179 million. Ownership segment Adjusted EBITDA increased 13 percent(1) from the same period in 2013 and Adjusted EBITDA margin increased 172 basis points(1). RevPAR at comparable hotels in the ownership segment increased 5.1 percent on a currency neutral basis (a 5.7 percent increase in actual dollars) in the first quarter of 2014 compared to the same period in 2013, led by an increase in ADR of 3.7 percent at comparable ownership segment hotels in the United States. Outside of the United States, RevPAR at comparable ownership segment hotels increased by 5.4 percent on a currency neutral basis (a 6.7 percent increase in actual dollars).

____________

(1)

 

Excluding an $11 million benefit in the first quarter of 2013 related to the recognition of a lease termination payment and $6 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements. Ownership segment Adjusted EBITDA margin is calculated as ownership segment Adjusted EBITDA divided by ownership segment revenues.

     

Hilton Worldwide continues to make progress executing on value enhancement opportunities embedded in its owned portfolio. At the Hilton New York, a complete repositioning of the 6th Avenue frontage of the property is planned, which will create a retail platform with over 10,000 square feet of prime, street level space. Additional timeshare inventory is also planned, including two floors in addition to underutilized penthouse space.

Timeshare

Timeshare segment Adjusted EBITDA for the first quarter of 2014 was $85 million, a 44 percent increase compared to the same period in 2013. Timeshare revenues increased 13 percent to $279 million in the first quarter of 2014 compared to the same period in 2013, led by a $23 million increase in timeshare sales revenue, including a $5 million increase in revenue from sales of timeshare units developed by third parties. During the first quarter of 2014, 57 percent of intervals sold were developed by third parties, a 14 percentage point increase from the same period in the prior year. Revenue from resort operations also increased $11 million compared to the first quarter of 2013.

Development

Hilton Worldwide opened 51 hotels with over 9,000 rooms in the first quarter of 2014, all of which were within the management and franchise segment, and achieved net unit growth of over 8,000 rooms. Of the new rooms added, 14 percent were conversions from non-Hilton Worldwide brands.

As of March 31, 2014, Hilton Worldwide had the largest rooms pipeline in the lodging industry, according to Smith Travel Research, Inc. ("STR"), with approximately 200,000 rooms at 1,165 hotels throughout 76 countries and territories, of which 58 percent, or over 115,000 rooms, were located outside of the United States. Approximately half of the development pipeline, or over 101,000 rooms, were under construction. According to STR, Hilton Worldwide has the largest supply of rooms under construction in every major region of the world, as illustrated in the table below:


 
 
    Hilton Worldwide Rooms
    Under Construction
Market   % of Total   Industry Rank
Americas   20.9 %   #1
Europe   19.7 %   #1
Middle East and Africa   23.0 %   #1
Asia Pacific   14.9 %   #1
Global   18.1 %   #1
         
____________        

Source: STR Global New Development Pipeline (March 2014).

       
       

Balance Sheet and Liquidity

During the first quarter of 2014, Hilton made $200 million of voluntary prepayments on the senior secured term loan facility and reduced its interest rate spread on its $5.8 billion senior secured term loan facility by 25 basis points. The interest rate spread and the unused commitment fee percentage on the Company's senior secured revolving credit facility were also reduced by 25 basis points and 12.5 basis points, respectively. As of March 31, 2014, Hilton had $11.6 billion of outstanding indebtedness with a weighted average interest rate of 4.1 percent, excluding $959 million of non-recourse debt.

Total cash and cash equivalents were $722 million as of March 31, 2014, including $287 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of March 31, 2014.

Outlook

Full Year 2014

  • System-wide RevPAR is expected to increase between 5.5 percent and 7.0 percent on a comparable and currency neutral basis, with ownership segment RevPAR expected to increase between 4.5 percent and 6.5 percent on a comparable and currency neutral basis as compared to 2013.
  • Adjusted EBITDA is projected to be between $2,415 million and $2,465 million.
  • Management and franchise fees are projected to increase approximately 10 percent to 12 percent.
  • Timeshare segment Adjusted EBITDA is projected to be between $315 million and $330 million.
  • Corporate expense and other is projected to increase between 3 percent and 5 percent, including incremental public company costs.
  • Diluted EPS, adjusted for special items, is projected to be between $0.64 and $0.67.
  • Capital expenditures, excluding timeshare inventory, are expected to be approximately $350 million.
  • Net unit growth is expected to be approximately 35,000 rooms to 40,000 rooms.

Second Quarter 2014

  • System-wide RevPAR is expected to increase between 5.5 percent and 6.5 percent on a comparable and currency neutral basis compared to the second quarter of 2013.
  • Adjusted EBITDA is expected to be between $635 million and $655 million.
  • Management and franchise fees are expected to increase approximately 10 percent to 12 percent.
  • Diluted EPS, adjusted for special items, is projected to be between $0.18 and $0.20.

Conference Call

Hilton Worldwide will host a conference call to discuss first quarter 2014 results on May 9, 2014 at 10:00 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Hilton Worldwide Investor Relations website at http://ir.hilton.com/investors/events-and-presentations. A replay and transcript of the webcast will be available within 24 hours after the live event at http://ir.hilton.com/investors/financial-reporting/quarterly-results.

Alternatively, participants may listen to the live call by dialing 1-877-201-0168 in the United States or 1-647-788-4901 internationally. Please use the conference ID 25981567. Participants are encouraged to dial into the call or link to the webcast at least fifteen minutes prior to the scheduled start time. A telephone replay will be available for seven days following the call. To access the telephone replay, dial 1-855-859-2056 using the Conference ID 25981567.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to the expectations regarding the performance of Hilton's business, financial results, liquidity and capital resources and other non-historical statements, including the statements in the "Outlook" section of this press release. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Part I —Item 1A. Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission ("SEC"), as such factors may be updated from time to time in Hilton's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Hilton's filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Non-GAAP Financial Measures

The Company refers to certain non-GAAP financial measures in this press release, including net income and EPS, adjusted for special items, Adjusted EBITDA and Adjusted EBITDA margins and Net Debt. Please see the schedules to the press release for additional information and reconciliations of such non-GAAP financial measures.

About Hilton Worldwide

Hilton Worldwide is a leading global hospitality company, spanning the lodging sector from luxury and full-service hotels and resorts to extended-stay suites and focused-service hotels. For nearly 100 years, Hilton Worldwide has been dedicated to continuing its tradition of providing exceptional guest experiences. The Company’s portfolio of 10 world-class global brands is comprised of 4,155 managed, franchised, owned and leased hotels and timeshare properties, with 686,790 rooms in 92 countries and territories, including Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton, Embassy Suites Hotels, Hilton Garden Inn, Hampton Hotels, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. The Company also manages an award-winning customer loyalty program, Hilton HHonors®.

     
HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
     
    Three Months Ended March 31,
    2014   2013
Revenues            
Owned and leased hotels   $ 945     $ 914  
Management and franchise fees and other   312     262  
Timeshare   279     246  
    1,536     1,422  
Other revenues from managed and franchised properties   827     841  
Total revenues   2,363     2,263  
             
Expenses            
Owned and leased hotels   771     743  
Timeshare   177     170  
Depreciation and amortization   153     160  
General, administrative and other   97     97  
    1,198     1,170  
Other expenses from managed and franchised properties   827     841  
Total expenses   2,025     2,011  
             
Operating income   338     252  
             
Interest income   1     2  
Interest expense   (153 )   (143 )
Equity in earnings from unconsolidated affiliates   4     1  
Gain (loss) on foreign currency transactions   14     (43 )
Other gain, net   3     7  
             
Income before income taxes   207     76  
             
Income tax expense   (83 )   (38 )
             
Net income   124     38  
Net income attributable to noncontrolling interests   (1 )   (4 )
Net income attributable to Hilton stockholders   $ 123     $ 34  
             
Earnings per share            
Basic and diluted   $ 0.12     $ 0.03  

 

     
HILTON WORLDWIDE HOLDINGS INC.
SEGMENT ADJUSTED EBITDA
(unaudited, in millions)
     
    Three Months Ended March 31,
    2014   2013
Management and franchise(1)   $ 331     $ 282  
Ownership(1)(2)(3)(4)   179     174  
Timeshare(1)(2)   85     59  
Corporate and other(3)   (51 )   (68 )
Adjusted EBITDA(5)   $ 544     $ 447  
____________

(1)

  Includes management, royalty and intellectual property fees of $27 million and $21 million for the three months ended March 31, 2014 and 2013, respectively. These fees are charged to consolidated owned and leased properties and were eliminated in the condensed consolidated financial statements. Also includes a licensing fee of $11 million and $12 million for the three months ended March 31, 2014 and 2013, respectively, which is charged to the timeshare segment by the management and franchise segment and was eliminated in the condensed consolidated financial statements. While the net effect is zero, the measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the management and franchise segment and a cost to ownership Adjusted EBITDA and timeshare Adjusted EBITDA.

(2)

 

Includes charges to timeshare operations for rental fees and fees for other amenities, which were eliminated in the condensed consolidated financial statements. These charges totaled $6 million and $5 million for the three months ended March 31, 2014 and 2013, respectively. While the net effect is zero, the measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the ownership segment and a cost to timeshare Adjusted EBITDA.

(3)

  Includes charges to consolidated owned and leased properties for services provided by a wholly owned laundry business of $2 million for the three months ended March 31, 2014 and 2013. Also includes other intercompany charges of $1 million for the three months ended March 31, 2014 and 2013.

(4)

  Includes unconsolidated affiliate Adjusted EBITDA.

(5)

 

See “Non-GAAP Financial Measures Reconciliations – Adjusted EBITDA and Adjusted EBITDA Margin” for a reconciliation of net income attributable to Hilton stockholders to Adjusted EBITDA.

 

     
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY REGION
(unaudited)
     
    Three Months Ended March 31,
    Occupancy   ADR   RevPAR
    2014   vs. 2013   2014   vs. 2013   2014   vs. 2013
Americas   70.6 %   2.0 %

 pts.

  $ 134.97     3.7 %   $ 95.36     6.7 %
Europe   65.4     2.5       161.64     2.4     105.72     6.5  
Middle East & Africa   62.8     (1.8 )     171.21     2.3     107.51     (0.6 )
Asia Pacific   66.9     2.6       163.55     4.4     109.46     8.7  
System-wide   69.8     1.9       139.13     3.6     97.17     6.6  

 

     
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY SEGMENT
(unaudited)
     
    Three Months Ended March 31,
    Occupancy   ADR   RevPAR
    2014   vs. 2013   2014   vs. 2013   2014   vs. 2013
Ownership(1)   72.7 %   1.0 %

 pts.

  $ 188.20     3.6 %   $ 136.87     5.1 %
U.S.   76.6     0.9       191.51     3.7     146.68     4.9  
International (non-U.S.)   67.6     1.1       183.25     3.6     123.90     5.4  
                                       
Management and franchise   69.5     2.0       133.63     3.7     92.92     6.8  
U.S.   70.3     2.0       129.71     3.6     91.18     6.7  
International (non-U.S.)   66.0     2.2       152.91     3.8     100.94     7.4  
                                       
System-wide   69.8     1.9       139.13     3.6     97.17     6.6  
U.S.   70.7     1.9       134.34     3.5     95.01     6.5  
International (non-U.S.)   66.3     2.0       159.27     3.7     105.67     6.9  
____________
(1)   Includes owned and leased hotels, as well as hotels owned or leased by entities in which Hilton owns a noncontrolling interest.

 

             
HILTON WORLDWIDE HOLDINGS INC.
MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES
(unaudited, dollars in millions)
             
    Three Months Ended March 31,   Increase / (Decrease)
    2014   2013   $   %
Management fees:                            
Base fees(1)   $ 79     $ 67       12       17.9  
Incentive fees(1)   34     29       5       17.2  
Total base and incentive fees   113     96       17       17.7  
Other management fees(2)   7     6       1       16.7  
Total management fees   120     102       18       17.6  
Franchise fees(3)   211     180       31       17.2  
Total management and franchise fees   331     282       49       17.4  
Other revenues(4)   21     15       6       40.0  
Intersegment fees elimination(1)(3)(4)   (40 )   (35 )     (5 )     14.3  
Management and franchise fees and other revenues   $ 312     $ 262       50       19.1  
____________

(1)

  Includes management, royalty and intellectual property fees earned from consolidated owned and leased properties of $27 million and $21 million for the three months ended March 31, 2014 and 2013, respectively.

(2)

  Includes timeshare homeowners' association, early termination, product improvement plan and other fees.

(3)

  Includes a licensing fee earned from the timeshare segment of $11 million and $12 million for the three months ended March 31, 2014 and 2013, respectively.

(4)

  Includes charges to consolidated owned and leased properties for services provided by a wholly owned laundry business of $2 million for each of the three months ended March 31, 2014 and 2013.

 

             
HILTON WORLDWIDE HOLDINGS INC.
MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES
(unaudited, dollars in millions)
             
    Three Months Ended March 31,   Increase / (Decrease)
    2014   2013   $   %
Management fees:                            
Base fees(1)   $ 79     $ 67       12       17.9  
Incentive fees(1)   34     29       5       17.2  
Total base and incentive fees   113     96       17       17.7  
Other management fees(2)   7     6       1       16.7  
Total management fees   120     102       18       17.6  
Franchise fees(3)   211     180       31       17.2  
Total management and franchise fees   331     282       49       17.4  
Other revenues(4)   21     15       6       40.0  
Intersegment fees elimination(1)(3)(4)   (40 )   (35 )     (5 )     14.3  
Management and franchise fees and other revenues   $ 312     $ 262       50       19.1  
____________

(1)

  Includes management, royalty and intellectual property fees earned from consolidated owned and leased properties of $27 million and $21 million for the three months ended March 31, 2014 and 2013, respectively.

(2)

  Includes timeshare homeowners' association, early termination, product improvement plan and other fees.

(3)

  Includes a licensing fee earned from the timeshare segment of $11 million and $12 million for the three months ended March 31, 2014 and 2013, respectively.

(4)

  Includes charges to consolidated owned and leased properties for services provided by a wholly owned laundry business of $2 million for each of the three months ended March 31, 2014 and 2013.

 

           
HILTON WORLDWIDE HOLDINGS INC.
TIMESHARE REVENUES AND OPERATING EXPENSES
(unaudited, dollars in millions)
           
    Three Months Ended March 31,   Increase / (Decrease)
    2014   2013   $   %
Revenues                            
Timeshare sales   $ 199     $ 176       23       13.1  
Resort operations   49     38       11       28.9  
Financing and other   31     32       (1 )     (3.1 )
    $ 279     $ 246       33       13.4  
                             
Operating Expenses                            
Timeshare sales   $ 135     $ 128       7       5.5  
Resort operations   30     27       3       11.1  
Financing and other   12     15       (3 )     (20.0 )
    $ 177     $ 170       7       4.1  

 

                 
HILTON WORLDWIDE HOLDINGS INC.
HOTEL AND TIMESHARE PROPERTY SUMMARY
As of March 31, 2014
                 
    Owned / Leased(1)   Managed   Franchised   Total
    Hotels   Rooms   Hotels   Rooms   Hotels   Rooms   Hotels   Rooms
Waldorf Astoria Hotels & Resorts                                              
U.S.   2     1,601     12     5,798             14     7,399
Americas (excluding U.S.)           1     248     1     984     2     1,232
Europe   1     370     3     672             4     1,042
MEA           3     703             3     703
Asia Pacific           2     431             2     431
Conrad Hotels & Resorts                                              
U.S.           4     1,335             4     1,335
Americas (excluding U.S.)                   1     294     1     294
Europe   1     191     2     741             3     932
MEA   1     587     2     641             3     1,228
Asia Pacific           11     3,422     1     636     12     4,058
Hilton Hotels & Resorts                                              
U.S.   23     21,096     42     24,939     179     53,595     244     99,630
Americas (excluding U.S.)   3     1,836     22     7,599     18     5,489     43     14,924
Europe   74     19,046     58     16,988     21     5,309     153     41,343
MEA   6     2,279     44     13,992     1     410     51     16,681
Asia Pacific   8     3,954     51     19,337     8     2,974     67     26,265
DoubleTree by Hilton                                              
U.S.   12     4,456     28     8,205     242     59,200     282     71,861
Americas (excluding U.S.)           3     637     12     2,301     15     2,938
Europe           11     3,474     35     5,661     46     9,135
MEA           5     995     3     429     8     1,424
Asia Pacific           27     8,188     2     965     29     9,153
Embassy Suites Hotels                                              
U.S.   17     4,240     38     10,194     155     35,609     210     50,043
Americas (excluding U.S.)           2     473     5     1,270     7     1,743
Hilton Garden Inn                                              
U.S.   2     290     5     635     518     70,480     525     71,405
Americas (excluding U.S.)           5     685     24     3,683     29     4,368
Europe           18     3,225     12     1,751     30     4,976
MEA           1     180             1     180
Asia Pacific           5     748             5     748
Hampton Hotels                                              
U.S.   1     130     50     6,238     1,806     174,183     1,857     180,551
Americas (excluding U.S.)           6     729     53     6,536     59     7,265
Europe           4     532     23     3,530     27     4,062
Asia Pacific                   1     72     1     72
Homewood Suites by Hilton                                              
U.S.           37     4,267     288     31,641     325     35,908
Americas (excluding U.S.)           1     102     12     1,363     13     1,465
Home2 Suites by Hilton                                              
U.S.                   29     3,122     29     3,122
Americas (excluding U.S.)           1     97             1     97
Other   3     1,272     4     832             7     2,104
Lodging   154     61,348     508     147,282     3,450     471,487     4,112     680,117
Hilton Grand Vacations           43     6,673             43     6,673
Total   154     61,348     551     153,955     3,450     471,487     4,155     686,790
____________
(1)   Includes hotels owned or leased by entities in which Hilton owns a noncontrolling interest.

 

           
HILTON WORLDWIDE HOLDINGS INC.
CAPITAL EXPENDITURES
(unaudited, dollars in millions)
           
    Three Months Ended March 31,   Increase / (Decrease)
    2014   2013   $   %
Hotel property and equipment   $ 42     $ 53       (11 )     (20.8 )
Timeshare property and equipment       1       (1 )     NM(1)
Corporate & other property and equipment   1     3       (2 )     (66.7 )
Total capital expenditures for property and equipment   43     57       (14 )     (24.6 )
Software capitalization costs   15     11       4       36.4  
Contract acquisition costs   16     1       15       NM(1)
Expenditures for timeshare inventory net of costs of sales(2)       (13 )     13       NM(1)
Total capital expenditures   $ 74     $ 56       18       32.1  
____________

(1)

  Fluctuation in terms of percentage change is not meaningful.

(2)

  Timeshare capital expenditures for inventory additions were $36 million and $15 million for the three months ended March 31, 2014 and 2013, respectively, and timeshare cost of sales were $36 million and $28 million for the three months ended March 31, 2014 and 2013, respectively.

 

       
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET INCOME AND EPS, ADJUSTED FOR SPECIAL ITEMS
(unaudited, in millions, except per share data)
       
    Three Months Ended March 31,
    2014   2013
Net income attributable to Hilton stockholders, as reported   $ 123     $ 34  
             
Share-based compensation expense(1)   13      
Total special items before tax   13      
Income tax benefit (expense) on special items        
Net income, adjusted for special items   $ 136     $ 34  
             
Basic and diluted EPS, as reported   $ 0.12     $ 0.03  
             
Per share share-based compensation expense   0.01      
Total per share special items before tax   0.01      
Per share income tax benefit (expense) on special items        
Basic and diluted EPS, adjusted for special items   $ 0.13     $ 0.03  
____________
(1)   Expense of $13 million was recognized in general, administrative and other expenses during the three months ended March 31, 2014 related to the share-based compensation prior to and in connection with the initial public offering. Amount excludes share-based compensation expense related to awards issued under the 2013 Omnibus Incentive Plan.

 

     
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(unaudited, dollars in millions)
     
    Three Months Ended March 31,
    2014  

2013

Net income attributable to Hilton stockholders   $ 123     $ 34  
Interest expense   153     143  
Interest expense included in equity in earnings from unconsolidated affiliates   3     4  
Income tax expense   83     38  
Depreciation and amortization   153     160  
Depreciation and amortization included in equity in earnings from unconsolidated affiliates   8     8  
EBITDA   523     387  
Net income attributable to noncontrolling interests   1     4  
Loss (gain) on foreign currency transactions   (14 )   43  
FF&E replacement reserve   11     7  
Share-based compensation expense   13     2  
Other gain, net(1)   (3 )   (7 )
Other adjustment items(2)   13     11  
Adjusted EBITDA   $ 544     $ 447  
____________

(1)

  Represents gains and losses on the dispositions of property and equipment and investments in affiliates and lease restructuring transactions.

(2)

  Represents adjustments for reorganization costs, severance and other items.

 

     
    Three Months Ended March 31,
    2014   2013
Total revenues, as reported   $ 2,363     $ 2,263  
             
Less: other revenues from managed and franchised properties   (827 )   (841 )
Total revenues, excluding other revenues from managed and franchised properties   $ 1,536     $ 1,422  
             
Adjusted EBITDA   $ 544     $ 447  
             
Adjusted EBITDA margin   35.4 %   31.4 %

 

         
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET DEBT
(unaudited, in millions)
         
    March 31,   December 31,
    2014   2013
Long-term debt, including current maturities   $ 11,554     $ 11,755  
Non-recourse debt, including current maturities(1)   300     296  
Total long-term debt and non-recourse debt   11,854     12,051  
Add: Hilton's share of unconsolidated affiliate debt   273     302  
Less: cash and cash equivalents   (435 )   (594 )
Less: restricted cash and cash equivalents   (287 )   (266 )
Net debt   $ 11,405     $ 11,493  
____________
(1)   Excludes the non-recourse timeshare financing receivables credit facility and the 2.28 percent notes backed by timeshare financing receivables.

 

       
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK: ADJUSTED EBITDA
FORECASTED 2014
(in millions)
       
    Three Months Ended June 30, 2014
    Low Case   High Case
Net income attributable to Hilton stockholders   $ 168     $ 182  
Interest expense   152     152  
Interest expense included in equity in earnings (losses) from unconsolidated affiliates   3     3  
Income tax expense   114     120  
Depreciation and amortization   157     157  
Depreciation and amortization included in equity in earnings (losses) from unconsolidated affiliates   10     10  
EBITDA   604     624  
Net income attributable to noncontrolling interests   6     6  
FF&E replacement reserve   10     10  
Share-based compensation expense   6     6  
Other adjustment items(1)   9     9  
Adjusted EBITDA   $ 635     $ 655  
     
    Year Ended December 31, 2014
    Low Case   High Case
Net income attributable to Hilton stockholders   $ 597     $ 629  
Interest expense   606     606  
Interest expense included in equity in earnings (losses) from unconsolidated affiliates   11     11  
Income tax expense   408     426  
Depreciation and amortization   628     628  
Depreciation and amortization included in equity in earnings (losses) from unconsolidated affiliates   44     44  
EBITDA   2,294     2,344  
Net income attributable to noncontrolling interests   20     20  
Loss (gain) on foreign currency transactions   (14 )   (14 )
FF&E replacement reserve   50     50  
Share-based compensation expense   30     30  
Other gain, net(2)   (3 )   (3 )
Other adjustment items(1)   38     38  
Adjusted EBITDA   $ 2,415     $ 2,465  
____________

(1)

  Represents adjustments for reorganization costs, severance and other items.

(2)

  Represents gains and losses on the dispositions of property and equipment and investments in affiliates.

 

       
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK: NET INCOME AND EPS, ADJUSTED FOR SPECIAL ITEMS
FORECASTED 2014
(in millions, except per share data)
       
    Three Months Ended June 30, 2014
    Low Case   High Case
Net income attributable to Hilton stockholders, before special items   $ 168     $ 182  
             
Share-based compensation expense(1)   6     6  
Total special items before tax   6     6  
Income tax benefit (expense) on special items        
Net income, adjusted for special items   $ 174     $ 188  
             
Basic and diluted EPS, before special items   $ 0.17     $ 0.19  
             
Per share share-based compensation expense   0.01     0.01  
Total per share special items before tax   0.01     0.01  
Per share income tax benefit (expense) on special items        
Basic and diluted EPS, adjusted for special items   $ 0.18     $ 0.20  

 

       
    Year Ended December 31, 2014
    Low Case   High Case
Net income attributable to Hilton stockholders, before special items   $ 597     $ 629  
             
Share-based compensation expense(1)   30     30  
Total special items before tax   30     30  
Income tax benefit (expense) on special items        
Net income, adjusted for special items   $ 627     $ 659  
             
Basic and diluted EPS, before special items   $ 0.61     $ 0.64  
             
Per share share-based compensation expense   0.03     0.03  
Total per share special items before tax   0.03     0.03  
Per share income tax benefit (expense) on special items        
Basic and diluted EPS, adjusted for special items   $ 0.64     $ 0.67  
____________
(1)   Expense related to the share-based compensation prior to and in connection with the initial public offering. Amount excludes share-based compensation related to awards issued under the 2013 Omnibus Incentive Plan.
     
     
     
HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS
 

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and amortization ("EBITDA"), presented herein, is a financial measure not recognized under generally accepted accounting principles in the United States ("U.S. GAAP") that reflects net income attributable to Hilton stockholders, excluding interest expense, a provision for income taxes and depreciation and amortization. The Company considers EBITDA to be a useful measure of operating performance, due to the significance of the Company's long-lived assets and level of indebtedness.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses prior to and in connection with the Company's initial public offering; (viii) severance, relocation and other expenses; and (ix) other items.

Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of total revenues, excluding other revenues from managed and franchised properties.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly titled measures of other companies.

The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are among the measures used by the Company's management team to evaluate its operating performance and make day-to-day operating decisions; and (ii) EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in the industry.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing results as reported under U.S. GAAP.

Net Income and EPS, Adjusted for Special Items

Net income and EPS, adjusted for special items, are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definition of Net income and EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.

Net income and EPS, adjusted for special items, are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company's ongoing operations.

Net Debt

Net Debt, presented herein, is a non-GAAP financial measure that the Company uses to evaluate its financial leverage. Net Debt is calculated as (i) long-term debt, including current maturities; (ii) non-recourse debt, including current maturities and excluding amounts secured by timeshare financing receivables; (iii) the Company's share of investments in affiliate debt; reduced by (iv) cash and cash equivalents; and (v) restricted cash and cash equivalents.

The Company believes Net Debt provides useful information about its indebtedness to investors as it is frequently used by securities analysts, investors and other interested parties to compare the indebtedness of companies. Net Debt should not be considered as a substitute to debt presented in accordance with U.S. GAAP. Net debt may not be comparable to a similarly titled measure of other companies.

Comparable Hotels

The Company defines comparable hotels as those that: (i) were active and operating in the Company's system for at least one full calendar year as of the end of the current period, and open January 1st of the previous year; (ii) have not undergone a change in brand or ownership during the current or comparable periods reported; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results are not available.

Of the 4,112 hotels in the Company's system as of March 31, 2014, 3,626 were classified as comparable hotels. The 486 non-comparable hotels included 24 properties, or less than one percent of the total hotels in the system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were not available.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. Occupancy measures the utilization of the hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable Average Daily Rate ("ADR") levels as demand for hotel rooms increases or decreases.

Average Daily Rate ("ADR")

ADR represents hotel room revenue divided by total number of room nights sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the Company is able to generate by type of customer, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room ("RevPAR")

The Company calculates RevPAR by dividing hotel room revenue by room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company's performance as it provides a metric correlated to two primary and key drivers of operations at Hilton hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to RevPAR, ADR and occupancy throughout this press release are presented on a comparable basis and references to RevPAR and ADR are presented on a currency neutral basis (all periods use the same exchange rates), unless otherwise noted.

Contacts:

Hilton Worldwide

Christian Charnaux
Investor Relations
+1 703 883 5205

Aaron Radelet
Media Relations
+1 703 883 5804

 

###

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