1
Exhibit 99.1
(PROMUS LOGO)
October 26, 1999
FOR IMMEDIATE RELEASE http://www.promus.com
Contact: Gregg Swearingen, Vice President, Investor Relations
(901) 374-5468
PROMUS REPORTS 3Q EPS OF $0.62 BEFORE UNUSUAL ITEMS
Memphis, Tenn. - OCTOBER 26, 1999-- Promus Hotel Corporation (NYSE:
PRH), a leading hotel franchising and management company, reported net income
of $63.1 million and diluted earnings per share of 80 cents for the third
quarter of 1999. Net income for the third quarter of 1998 was $51.8 million or
60 cents per share. Excluding unusual items, 1999 third quarter net income was
$48.9 million, compared to 1998 third quarter net income of $52.8 million.
Diluted earnings per share before unusual items was 62 cents compared to 61
cents for the same period last year.
During the third quarter of 1999, the company generated $26.7 million
of pre-tax net gains on asset dispositions, and expensed $0.7 million for
employee retention agreements related to the Promus/Doubletree merger and $3.2
million in charges related to the Hilton Hotels Corp./Promus business
combination. Combined, these items positively affected the 1999 third quarter
net income by $14.2 million or 18 cents per share. During the third quarter of
1998, the company realized an $8.5 million gain on the sale of securities and
took a $10.1 million charge for severance costs related to the resignation of
Promus' then Chairman/CEO and its President. These one time items reduced
1998's third quarter net income by $1.0 million, or one cent per share.
For the nine months ended September 30, 1999, the company reported net
income before unusual items of $133.8 million, compared with $138.8 million
before unusual items for the same 1998 period. Diluted earnings per share
before unusual items for the 1999 nine month period was $1.64 compared to $1.59
for the same period last year.
"Results for the third quarter were in line with our expectations",
said Norman P. Blake, Jr., Promus' Chairman, President and CEO. "Even though a
total of 86 hotels within the Promus system experienced some level of
disruption associated with hurricane Floyd, it was encouraging to note that the
third quarter rate of growth in revenue per available room (RevPAR) increased
over the second quarter level for all our core brands."
2
PRH 3Q Earnings Release - p.2
Unit Growth
During the third quarter of 1999, the company added 46 hotels (5,324
rooms) to its system, consisting of: three Doubletree hotels, two Embassy
Suites hotels, 33 Hampton Inn hotels, seven Hampton Inn & Suites hotels, and a
managed university hotel at the University of Pennsylvania. Also during the
quarter, Promus removed a 284 room Doubletree hotel from its system.
During the first nine months of 1999, Promus added 120 hotels (14,068
rooms) and the Promus relationship was terminated with 14 hotels (2,546 rooms).
Brand Performance
Hotels managed under the Doubletree brand generated a RevPAR increase
of 1.0% over third quarter 1998. Embassy Suites' RevPAR increased 1.9% for the
quarter. Hampton Inn achieved a 2.1% RevPAR increase over the same period last
year. Hampton Inn & Suites' RevPAR increased 1.7% over the third quarter 1998.
Homewood Suites' RevPAR gain was 3.2% in the third quarter.
Year-to-date, Doubletree RevPAR increased 1.5% over the same 1998
period. Embassy Suites' RevPAR increased 1.7%, Hampton Inn's and Hampton Inn
and Suites' RevPAR increased 1.6% and 2.6% respectively, while Homewood Suites'
year-to-date RevPAR decreased 0.9% over the first three quarters of 1998.
Average daily rate, occupancy and revenue per available room (RevPAR)
discussed in this release and in the attachments are reported for only those
comparable hotels in the system as of September 30 and managed and/or
franchised (does not include franchised Doubletree Hotels) since June 30, 1998
for the quarter comparison and January 1, 1998 for the year-to-date comparison.
Other Notable Events
On September 7, 1999, Promus and Hilton Hotels Corporation jointly announced an
agreement for Hilton's acquisition of Promus for a combination of cash and
Hilton stock. Both companies have prepared a joint Proxy statement that
provides further information regarding the transaction. Progress is being made
with respect to planning the integration of the two companies. It is
anticipated that, following shareholder approval, the transaction will be
closed on November 30, 1999.
Due to the discussions between Promus and Hilton, and the subsequent agreement
related to the business combination, Promus did not repurchase any of its
shares during the third quarter. Furthermore, due to the pending transaction,
Promus does not intend to repurchase any of its shares in the fourth quarter.
During the quarter the company successfully completed the sale of 10
Hampton Inn hotels for $99.8 million and four Homewood Suites hotels for $ 35.5
million. Sales of an additional nine Homewood Suites hotels are scheduled to
close in the fourth quarter.
3
PRH 3Q Earnings Release - p.3
Promus Hotel Corporation (NYSE:PRH) is the franchisor/operator of the
Doubletree Hotels, Doubletree Guest Suites, Embassy Suites, Hampton Inn,
Homewood Suites, Hampton Inn & Suites, Doubletree Club, Red Lion Hotels,
Embassy Vacation Resort and Hampton Vacation Resort brands. The company also
manages non-Promus branded hotels and facilities in its University Hotel &
Conference Center division. The company franchises, operates or owns hotels
throughout the United States and in Canada, Mexico and Latin America. Promus is
headquartered in Memphis, Tennessee and has approximately 40,000 employees.
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal securities laws.
Such statements are based on management's beliefs, assumptions and
expectations, which in turn are based on information currently available to
management. Actual performance and results could differ from those expressed
in, or contemplated by, the forward-looking statements due to a number of
risks, uncertainties and other factors, many of which are beyond Promus'
ability to predict or control, including changes in the general economy,
customer demand, interest rates and competition. For further information on
factors which could impact Promus and the statements contained herein, we refer
you to the filings made by Promus with the Securities and Exchange Commission,
including current reports on Form 8-K, quarterly reports on Form 10-Q and
annual reports on Form 10-K.
4
PRH 3Q Earnings Release - p.4
PROMUS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTERS ENDED SEPTEMBER 30,
----------------------------
1999 (1) 1998 (2)
--------- ----------
REVENUES:
Franchise and management fees $ 56,296 $ 59,341
Owned hotel revenues 110,671 107,355
Leased hotel revenues 102,086 110,823
Purchasing and service fees 6,781 7,091
Joint venture income & other revenues 9,316 11,617
--------- ---------
Total revenues 285,150 296,227
--------- ---------
OPERATING COSTS AND EXPENSES:
General and administrative 17,753 26,060
Owned hotel expenses 68,926 64,752
Leased hotel expenses 87,724 95,555
Depreciation and amortization 18,587 20,086
Business combination expenses 3,194 --
--------- ---------
Total operating costs and expenses 196,184 206,453
--------- ---------
Net gain on asset dispositions 26,719 8,541
--------- ---------
OPERATING INCOME: 115,685 98,315
Interest and dividend income 4,432 4,675
Interest expense (17,873) (16,290)
--------- ---------
Income before income taxes and minority interest 102,244 86,700
Minority interest share of net income (1,150) (1,313)
--------- ---------
Income before income taxes 101,094 85,387
Income tax expense (38,011) (33,557)
--------- ---------
NET INCOME: $ 63,083 $ 51,830
========= =========
Basic earnings per share $ 0.80 $ 0.60
========= =========
Diluted earnings per share $ 0.80 $ 0.60
========= =========
Basic weighted average shares outstanding 78,673 86,552
========= =========
Diluted weighted average shares outstanding 78,906 86,999
========= =========
(1) During the quarter ended September 30, 1999, Promus realized on a pre-tax
basis, (a) a $0.7 million charge for retention and employment-related
expenses associated with the management change following the
Promus/Doubletree merger, (b) $3.2 million of business combination expenses
related to the Hilton acquisition, (c) net gains of $44.0 million on asset
dispositions and (d) a $17.3 million reserve for the disposition of two
hotels held for sale. Excluding the net effect of these items, third
quarter 1999 net income and diluted earnings per share would have been
$48.9 million and $0.62, respectively.
(2) During the third quarter of 1998, Promus experienced the following unusual
items: (a) an $8.5 million gain on the sale of securities and (b) a $10.1
million charge for accrued severance and employment related expenses
associated with the resignations of the CEO and the President. Excluding
the net effect of these items, third quarter 1998 net income and diluted
earnings per share would have been $52.8 million and $0.61, respectively.
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PRH 3Q Earnings Release - p.5
PROMUS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 (1) 1998 (2)
----------- -------------
REVENUES:
Franchise and management fees $ 165,656 $ 167,773
Owned hotel revenues 322,788 300,946
Leased hotel revenues 293,341 318,489
Purchasing and service fees 16,786 18,379
Joint venture income & other revenues 33,831 35,910
--------- -----------
Total revenues 832,402 841,497
--------- -----------
OPERATING COSTS AND EXPENSES:
General and administrative 62,741 64,654
Owned hotel expenses 204,163 184,489
Leased hotel expense 259,075 279,624
Depreciation and amortization 61,317 58,623
Business combination expenses 3,194 --
--------- -----------
Total operating costs and expenses 590,490 587,390
--------- -----------
Net gain on asset dispositions 26,011 10,826
--------- -----------
OPERATING INCOME: 267,923 264,933
Interest and dividend income 14,206 15,300
Interest expense (50,704) (46,518)
--------- -----------
Income before income taxes and minority interest 231,425 233,715
Minority interest share of net income (2,566) (3,016)
--------- -----------
Income before income taxes 228,859 230,699
Income tax expense (86,051) (90,665)
--------- -----------
NET INCOME: $ 142,808 $ 140,034
========= ===========
Basic earnings per share $ 1.76 $ 1.62
========= ===========
Diluted earnings per share $ 1.75 $ 1.60
========= ===========
Basic weighted average shares outstanding 81,156 86,631
========= ===========
Diluted weighted average shares outstanding 81,428 87,352
========= ===========
(1) During the nine months ended September 30, 1999, Promus experienced certain
unusual items, including the following pre-tax items: (a) a $1.3 million
gain on the sale of a joint venture hotel, (b) $9.7 million in charges
relating to employee retention agreements, (c) net gains of $43.3 million
on asset dispositions, (d) $3.2 million in charges relating to the
Hilton/Promus merger, and (e) a $17.3 million reserve for the disposition
of two hotels held for sale. Excluding the effect of these unusual items,
net income for the first nine months of 1999 and diluted earnings per share
would have been $133.8 million and $1.64, respectively.
(2) During the nine months ended September 30, 1998, Promus experienced certain
unusual items, including the following pre-tax items: (a) a $1.3 million
gain on the sale of excess joint venture land, (b) gains of $10.2 million on
the sale of securities, (c) a $10.1 million charge for accrued severance and
employment related expenses associated with the resignations of the CEO and
President, and (d) other miscellaneous gains of $0.6 million. Excluding the
effect of these unusual items, net income for the first nine months of 1998
and diluted earnings per share would have been $138.8 million and $1.59,
respectively.
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PRH 3Q Earnings Release - p.6
PERFORMANCE STATISTICS
THIRD QUARTER YEAR-TO-DATE
----------------------------------------------------------------------------
Change vs. Change vs.
Quarter Ended Quarter Ended Nine Mos. Ended Nine Mos. Ended
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
----------------------------------------------------------------------------
Doubletree Hotels, Suites & Clubs
Occupancy 73.7% (0.5) pts. 71.5% (0.2) pts.
ADR* $103.70 1.7% $105.99 1.7%
RevPAR** $76.39 1.0% $75.83 1.5%
- -------------------------------------------------------------------------------------------------------------------
Embassy Suites
Occupancy 75.8% 1.3 pts. 75.3% 1.1 pts.
ADR* $119.01 0.2% $122.06 0.2%
RevPAR** $90.17 1.9% $91.92 1.7%
- -------------------------------------------------------------------------------------------------------------------
Hampton Inn
Occupancy 73.4% (1.5) pts. 70.2% 1.6 pts.
ADR* $72.39 4.1% $70.89 3.9%
RevPAR** $53.11 2.1% $49.77 1.6%
- -------------------------------------------------------------------------------------------------------------------
Hampton Inn & Suites
Occupancy 73.7% (0.4) pts. 71.5% 0.0 pts.
ADR* $90.48 2.1% $85.27 2.6%
RevPAR** $66.67 1.7% $60.93 2.6%
- -------------------------------------------------------------------------------------------------------------------
Homewood Suites
Occupancy 77.7% 3.8 pts. 75.8% (0.6) pts.
ADR* $93.22 (1.8)% $95.89 (1.7)%
RevPAR** $72.42 3.2% $72.70 (0.9)%
- -------------------------------------------------------------------------------------------------------------------
Other Hotels
Occupancy 71.2% (2.3) pts. 68.7% (1.9) pts.
ADR* $103.31 3.8% $103.12 4.2%
RevPAR** $73.58 0.5% $70.87 1.3%
- -------------------------------------------------------------------------------------------------------------------
* Average daily rate
** Revenue per available room
Revenue statistics are for comparable hotels, and include information
only for those hotels in the system as of September 30, 1999 and managed
or franchised by Promus or managed by Doubletree since April 1, 1998 for
the quarterly comparison and since January 1, 1998 for the year-to-date
comparison. Doubletree franchised hotels are not included in the
statistical information.
Includes results for 15 Red Lion hotels as well as the results for
hotels managed/leased under other franchisors' brands or as independent
hotels and conference centers.
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PRH 3Q Earnings Release - p.7
SYSTEM SIZE
NUMBER OF HOTELS NUMBER OF ROOMS/SUITES
As of Change Since As of Change Since
------------- ----------------------- ---------- ------------------------
9/30/99 6/30/99 12/31/98 9/30/99 6/30/99 12/31/98
----------------------------------------------------------------------------
Doubletree Hotels, Suites & Clubs
Company Owned 16 0 0 4,649 0 (97)
Leased 14 0 (4) 3,877 0 (935)
Joint Ventures 4 0 0 1,100 0 98
Management Contracts 91 0 4 24,962 (123) 633
Franchised 52 2 1 12,281 469 358
--- -- -- ------- ---- -----
Total Doubletree 177 2 1 46,869 346 57
Embassy Suites
Company Owned 6 0 0 1,299 0 0
Joint Ventures 19 0 0 5,098 0 154
Management Contracts 60 0 2 15,049 (1) 624
Franchised 65 2 3 14,710 483 805
--- -- -- ------- ---- -----
Total Embassy Suites 150 2 5 36,156 482 1,583
Hampton Inn
Company Owned 0 (10) (11) 0 (1,378) (1,504)
Leased 18 0 0 2,250 0 0
Management Contracts 7 0 0 929 0 0
Franchised 878 43 88 90,203 4,562 8,805
---- --- --- ------- ------ ------
Total Hampton Inn 903 33 77 93,382 3,184 7,301
Hampton Inn & Suites
Company Owned 1 1 1 133 133 133
Management Contracts 3 0 0 408 0 0
Franchised 59 6 14 6,792 657 1,609
--- -- --- ------ ---- ------
Total Hampton Inn & Suites 63 7 15 7,333 790 1,742
Homewood Suites
Company Owned 18 (4) (1) 2,127 (478) (105)
Management Contracts 8 4 3 949 478 395
Franchised 58 0 8 6,112 (2) 1,031
--- -- -- ------ --- ------
Total Homewood Suites 84 0 10 9,188 (2) 1,321
Other Hotels
Company Owned 10 0 0 1,622 2 2
Leased 41 0 0 6,433 0 0
Management Contracts 15 1 (2) 2,583 238 (484)
--- -- --- ------ ---- ------
Total Other Hotels 66 1 (2) 10,638 240 (482)
Total Promus System
Company Owned 51 (13) (11) 9,830 (1,721) (1,571)
Leased 73 0 (4) 12,560 0 (935)
Joint Ventures 23 0 0 6,198 0 252
Management Contracts 184 5 7 44,880 592 1,168
Franchised 1,112 53 114 130,098 6,169 12,608
------ --- ---- -------- ------ ------
Total Promus System 1,443 45 106 203,566 5,040 11,522
For statistical purposes only, Promus classified unconsolidated joint
ventures in which it holds less than a 20% interest as "Management
Contracts" and consolidated joint ventures in which it owns more than a
50% interest as "Company Owned" hotels.
Includes 15 Red Lion hotels as well as hotels managed/leased under
other franchisors' brands or as independent hotels and conference
centers.