Hilton reports strong first quarter

2nd May 2006

Hilton has reported first quarter 2006 total operating income of $235 million, marking a 44% increase from the 2005 period, on total revenue of $1.519 billion, which ia a 41% increase from $1.076 billion in the 2005 quarter. Other first quarter highlights, which include approximately five weeks of combined company results following the acquisition of the lodging assets of Hilton Group plc on February 23, are as follows:

—Reported diluted EPS of $.26 vs. $.16 in 2005, an increase of 63%.

—Recurring diluted EPS of $.20 vs. $.15 in 2005, an increase of 33%.

—Total company Adjusted EBITDA of $328 million up 30%.

—Comparable owned RevPAR (excluding sold hotels, the acquired HI owned hotels and New Orleans) increased 9.0%, driven by strong rate increases and high demand in most major markets.


—Fees up 49% to $152 million on strong RevPAR and unit growth, the HI acquisition and a one-time termination fee.

—Timeshare profitability up 20%, driven by increase in average unit sales price.

Hilton reported first quarter 2006 net income of $104 million, compared with $64 million in the 2005 quarter. Diluted net income per share was $.26 in the 2006 first quarter, versus $.16 in the 2005 period, an increase of 63%. Non-recurring items combined to benefit the quarter by $.06 per share as follows:

—$15 million pre tax benefit due to a contract termination fee;

—$17 million pre tax benefit from foreign currency gains;

—$4 million pre tax benefit due primarily to the combined impact of asset dispositions ($25 million book loss), a settlement recovery in Hawaii ($25 million benefit) and other items ($4 million benefit);

—$9 million benefit to the tax provision due primarily to the closure of IRS audits for the years 2002 and 2003, and the required tax treatment on foreign currency gains; and

—$12 million pre tax charge for costs related to the HI acquisition.

The 2005 first quarter benefited from non-recurring items totaling $.01 per share.

“Solid operating results both in the U.S. and internationally, combined with the closing of the Hilton International transaction and our new position as the global industry leader, made for a very successful and exciting first quarter,” said Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation.

“The integration of our domestic and international operating, financial and development teams is proceeding smoothly and seamlessly, with major projects—such as the worldwide introduction of our OnQ technology system and planting the seeds for international growth of our Family of Brands—already underway.”

Mr. Bollenbach continued: “Business fundamentals continue to be very strong, with high demand among both business and leisure travelers for our hotels in gateway cities. High occupancy levels are enabling us to achieve a more desirable mix of business. Renovations at a few of our bigger hotels took rooms out of service and impacted our margins in the quarter; we are working quickly to bring new and improved rooms to our customers at these properties. Rate increases continue to drive RevPAR growth in our most important U.S. markets. International RevPAR growth is still slightly more occupancy driven, but room rates in key international markets like London are steadily becoming a higher percentage of RevPAR gains.

“We continue to open more hotels in the U.S. than any other company, and we are finding that the appeal of our brands is extending to different corners of the world. We have had discussions with potential owners in a variety of countries regarding development of our mid-scale brands, and we look forward to making announcements as agreements are signed.”

Mr. Bollenbach concluded: “We see no let-up in our most important markets, and these strong business trends—coupled with our growing timeshare business and the new worldwide development opportunities at our fingertips—point to exciting things ahead for the remainder of 2006 and beyond.”



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