Hilton Reports Second Quarter, Six-Month Results

Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the second quarter and six months ended June 30, 2002.
The second quarter was highlighted by strong operating margins, strength in the company`s timeshare business; high occupancy levels at most of Hilton`s owned city center properties; market share increases for all brands in the Hilton family, and a decline in interest expense. These factors contributed to the company achieving solid earnings-per-share in a challenging environment.
Adversely impacting the quarter was a general decline in average daily room rates due to sluggish demand from independent business travelers, and a charge related to the Kalia Tower in Hawaii.
Hilton reported second quarter net income of $76 million, versus $86 million in the 2001 quarter. Diluted net income per share was $.20, compared with $.23 in the second quarter 2001. Pro forma diluted EPS in the second quarter 2001 (including $.03 per share from the new accounting rules pertaining to non-amortization of goodwill and certain intangible assets) was $.26.
The following three items combined to adversely impact the company`s second quarter pre-tax income by approximately $4 million, or approximately $.01 per share:
Results for the 2002 second quarter include a charge of $10
      million for estimated remediation efforts relating to mold
      found at the newly constructed Kalia Tower at the Hilton
      Hawaiian Village. This charge includes an estimated impairment
      loss for certain fixed assets as well as estimates of
      investigatory and remediation costs. Actual costs incurred in
      future periods may vary from the estimates, given the inherent
      uncertainties in evaluating these types of situations. It is
      expected that the guestroom closure at the Kalia Tower will
      have no significant impact on 2002 EBITDA at the Hilton
      Hawaiian Village for the balance of the year.
In June 2002, Hilton Grand Vacations, the company`s timeshare
      business, completed the sale of approximately $52 million of
      timeshare notes receivable (out of a total portfolio of
      approximately $190 million) to a subsidiary of GE Capital. The
      transaction resulted in a gain of approximately $2 million in
      the second quarter.

In April 2002, Hilton collected on a note receivable that had
      been partially reserved in the fourth quarter of 2001 due to
      the borrower`s failure to make certain required payments.
      Corporate expense in the second quarter includes a benefit of
      approximately $4 million related to the reversal of this bad
      debt reserve.

The company reported second quarter total revenue of $1.035 billion, down 5 percent from the 2001 period. Total company earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA) were $303 million, compared with $345 million in the 2001 quarter. Revenue and EBITDA declined 3 percent and 9 percent, respectively, in the second quarter when excluding the impact of the following items: asset sales completed in 2001 (primarily the CNL and Red Lion transactions); the purchase of the Hilton Waikoloa Village in 2002, and the cash portion of the remediation costs at the Kalia Tower.
Total company EBITDA margin for the quarter was 38.7 percent (EBITDA as a percentage of revenue before “other revenue from managed and franchised properties.”)