Hilton Reports Fourth Quarter, Fiscal 2002 Results; Occupancy Gains Drive 13.2% RevPAR Increase at Comparable Owned Hotels; Cost Management Results in Solid Margins

Business Wire, Jan 27, 2003

Business Editors

BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Jan. 27, 2003

Strong Flow-Through at Comparable Owned Hotels;

All Brands Increase Market Share

Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the fourth quarter and fiscal year ended December 31, 2002.

Compared to the year-ago quarter, the following factors contributed to the company achieving solid quarterly earnings-per-share: significant revenue-per-available-room (RevPAR) growth at the company's comparable owned hotels, driven by strong occupancy levels at most of the company's owned city-center properties and easy comparisons with the 2001 period; market share increases for all brands in the Hilton family, and solid margins.

Factors adversely impacting the quarter included continued softness in independent business travel which suppressed average daily rate (ADR) growth, and increased insurance costs.

Hilton reported fourth quarter net income of $40 million, versus $4 million in the 2001 quarter. Diluted net income per share was $.11, compared with $.01 in the fourth quarter 2001. Pro forma diluted EPS in the fourth quarter 2001 (including $.03 per share from the new accounting rules pertaining to non-amortization of goodwill and certain intangible assets) was $.04.

For the full year 2002, Hilton reported net income of $198 million, versus $166 million in 2001. Diluted net income per share was $.53 for the year compared to $.45 in 2001. Pro forma diluted EPS for full year 2001 (including $.12 per share from the new accounting rules mentioned above) was $.57.

The company reported 2002 fourth quarter total revenue of $957 million, up 8 percent from $887 million in the 2001 period. Total company earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA(a)) was $232 million, compared with $194 million in the 2001 quarter, a 20 percent increase. Total operating income was $136 million compared to $79 million in the 2001 fourth quarter. Total company EBITDA margin for the quarter was 32.1 percent (EBITDA as a percentage of revenue before "other revenue from managed and franchised properties,") an increase of 280 basis points over the 2001 quarter.

For full year 2002, compared to fiscal 2001, total company revenue declined 4 percent to $3.847 billion; total company EBITDA of $990 million represented an 8 percent decrease, and total company EBITDA margin was 34.2 percent, a 90 basis point decline from 2001. Total company operating income was $603 million in 2002, compared with $632 million in 2001.

Owned Hotel Results

Across all brands, EBITDA and operating income from the company's owned hotels (majority owned and controlled hotels) totaled $163 million and $102 million, respectively, in the fourth quarter. Comparable EBITDA increased 29 percent from the 2001 period. RevPAR from comparable owned properties increased 13.2 percent in the quarter; occupancy at these hotels showed an increase of 7 points to 68.3 percent, and average daily rate increased 1.6 percent to $151.76. EBITDA margins at these hotels, while continuing to be impacted by increased insurance costs, remained solid for the quarter at 29.7 percent, a 390 basis point increase over the corresponding 2001 quarter.

Particularly strong results were posted by Hilton's owned properties in such key markets as New York, Chicago, Boston and Hawaii, with hotels in these markets showing both high occupancy levels (in the case of New York, more than 90 percent) and significant RevPAR growth. Strong occupancy gains were reported at the company's owned hotels in Washington, D.C., owing partially to favorable comparisons with the 2001 quarter. The New Orleans market was impacted by soft group business in the quarter. The San Francisco/San Jose and Phoenix markets continued to exhibit softness in the face of sluggish demand and new full-service hotel supply.

Fourth quarter comparisons to the first three quarters of 2002 confirmed the sequential quarterly improvement the company had anticipated for the year. Compared with the respective 2001 quarters, RevPAR at comparable owned hotels declined 15.3 percent and 6.1 percent, respectively, in the first and second quarters, and increased 1.2 percent and 13.2 percent, respectively, in the third and fourth quarters.

For full year 2002, EBITDA and operating income from the company's owned hotels totaled $638 million and $374 million, respectively. Comparable EBITDA declined 1 percent. RevPAR for the full year at comparable owned hotels declined 2.6 percent; occupancy improved 1.6 points to 71.1 percent, while average daily rate declined 4.8 percent to $148.41. Full year EBITDA margins at these hotels were roughly flat with 2001 at 30.2 percent.

Owned-or-Operated Hotel Results

Comparable RevPAR at the company's U.S. owned-or-operated hotels increased 9.4 percent in the fourth quarter, compared to the 2001 period, on an occupancy increase of 5.2 points to 65.4 percent, and an ADR increase of 0.6 percent to $126.45. Within the Hilton full service brand, comparable owned-or-operated RevPAR increased 15.1 percent in the quarter, with occupancy up 8.2 points to 68.3 percent, and an ADR increase of 1.3 percent to $152.20.