BETHESDA, Md., April 23 /PRNewswire-FirstCall/ -- Host Hotels &
Resorts, Inc. (NYSE:HST), the nation's largest lodging real estate
investment trust (REIT), today announced its results of operations
for the first quarter ended March 21, 2008. (Logo:
http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO ) -- Total
revenue increased $29 million, or 2.8%, to $1,058 million for the
first quarter of 2008. -- Net income decreased $126 million to $61
million for the first quarter of 2008; however, income from
continuing operations increased $19 million to $60 million compared
to the first quarter of 2007. The Company did not recognize any
gains on dispositions in the first quarter of 2008 compared to a
net gain of $136 million, or $.26 per diluted share, of such gains
in the first quarter of 2007. As a result, earnings per diluted
share decreased $.24 to $.11 for the first quarter of 2008. For
further detail, refer to the "Schedule of Significant Transactions
Affecting Earnings per Share" attached to this press release. --
Funds from Operations (FFO) per diluted share increased 10% from
$.30 to $.33 for the first quarter of 2008. The Company also
announced the following first quarter results for Host Hotels &
Resorts, L.P., through which it conducts all of its operations and
holds 96% of the partnership interests: -- Net income decreased
$130 million to $64 million for the first quarter of 2008. Net
income of Host LP was also affected by the recognition of
substantial gains on dispositions in the first quarter of 2007-See
"Schedule of Significant Transactions Affecting Earnings per
Share." -- Adjusted EBITDA, which is Earnings before Interest
Expense, Income Taxes, Depreciation, Amortization and other items,
increased $3 million to $262 million for the first quarter of 2008.
Adjusted EBITDA, FFO per diluted share and comparable hotel
adjusted operating profit margins (discussed below) are non-GAAP
(generally accepted accounting principles) financial measures
within the meaning of the rules of the Securities and Exchange
Commission (SEC). See the discussion included in this press release
for information regarding these non-GAAP financial measures.
Operating Results Comparable hotel RevPAR for the first quarter of
2008 increased 2.4%, driven by a 4.0% increase in average room
rate, while occupancy declined 1.1 percentage points. Comparable
hotel adjusted operating profit margins decreased 40 basis points
for the quarter. Comparable food and beverage sales increased 3.9%
for the first quarter. For further detail, see "Notes to the
Financial Information." Stock Repurchase Program The Company's
Board of Directors authorized a program to repurchase up to $500
million of common stock. The common stock may be purchased in the
open market or through private transactions, dependent upon market
conditions. The plan does not obligate the Company to repurchase
any specific number of shares and may be suspended at any time at
management's discretion. As of March 21, 2008, the Company has
repurchased 2.15 million shares valued at approximately $35
million. The Company has approximately 520.6 million shares
outstanding. Balance Sheet And Financing Transactions As of March
21, 2008, the Company had approximately $317 million of cash and
cash equivalents. Excluding amounts necessary for working capital,
the Company intends to use its available funds for dividend
payments, stock repurchases, investments in its portfolio, to
acquire new properties or to make debt repayments. On March 25,
2008, the Company borrowed $100 million under its Credit Facility.
Subsequently, on April 22, 2008, the Company entered into a $165
million term loan, which is an expansion of the existing $600
million Credit Facility. The term loan has a maturity date of
September 9, 2011 and is prepayable without penalty after 18 months
and may be repaid prior to that date for a fee. The term loan bears
interest at LIBOR plus 175 basis points, with a LIBOR floor of
2.25%. The proceeds from the term loan were used to repay the $100
million draw under the Credit Facility and for general corporate
purposes. As a result of this transaction, the Company has $600
million available under the Credit Facility. Dividend As previously
announced, the Company expects to declare a fixed $.20 per share
common dividend each quarter, as well as a special dividend in the
fourth quarter of each year, which based on the Company's current
outlook, will be similar to the 2007 level. 2008 Outlook The
Company expects comparable hotel RevPAR to increase approximately
2% to 4% for both the second quarter and the full year. For full
year 2008, the Company expects its operating profit margins under
GAAP to decrease approximately 150 basis points to 80 basis points
and its comparable hotel adjusted operating profit margins will
range from a decrease of 25 basis points to an increase of 25 basis
points. Based upon this guidance, the Company estimates that full
year 2008 guidance for Host Hotels & Resorts, Inc. and Host
Hotels & Resorts, L.P. would be as follows: Host Hotels &
Resorts, Inc. -- earnings per diluted share should be approximately
$.35 to $.37 for the second quarter and $1.00 to $1.10 for the full
year; -- net income should be approximately $190 million to $201
million for the second quarter and $544 million to $598 million for
the full year; and -- FFO per diluted share should be approximately
$.54 to $.56 for the second quarter and $1.88 to $1.98 for the full
year. Host Hotels & Resorts, L.P. -- net income for 2008 should
be approximately $568 million to $625 million; and -- Adjusted
EBITDA for 2008 should be approximately $1,450 million to $1,505
million. About Host Hotels & Resorts Host Hotels & Resorts,
Inc. is an S&P 500 and Fortune 500 company that is the largest
lodging real estate investment trust and one of the largest owners
of luxury and upper upscale hotels. The Company currently owns 119
properties with approximately 64,000 rooms, and also holds a
minority interest in a joint venture that owns ten hotels in Europe
with approximately 3,200 rooms. Guided by a disciplined approach to
capital allocation and aggressive asset management, the Company
partners with premium brands such as Marriott(R), Ritz-Carlton(R),
Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury
Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R)
and Swissotel(R)* in the operation of properties in over 50 major
markets worldwide. For additional information, please visit the
Company's website at http://www.hosthotels.com/. Note: This press
release contains forward-looking statements within the meaning of
federal securities regulations. These forward-looking statements
are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "plan," "predict," "project," "will," "continue" and other
similar terms and phrases, including references to assumption and
forecasts of future results. Forward-looking statements are not
guarantees of future performance and involve known and unknown
risks, uncertainties and other factors which may cause the actual
results to differ materially from those anticipated at the time the
forward- looking statements are made. These risks include, but are
not limited to: national and local economic and business
conditions, including the potential for terrorist attacks, that
will affect occupancy rates at our hotels and the demand for hotel
products and services; operating risks associated with the hotel
business; risks associated with the level of our indebtedness and
our ability to meet covenants in our debt agreements; relationships
with property managers; our ability to maintain our properties in a
first-class manner, including meeting capital expenditure
requirements; our ability to compete effectively in areas such as
access, location, quality of accommodations and room rate
structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices,
construction procedures and costs; our ability to complete pending
acquisitions and dispositions; and our ability to continue to
satisfy complex rules in order for us to qualify as a REIT for
federal income tax purposes and other risks and uncertainties
associated with our business described in the Company's filings
with the SEC. Although the Company believes the expectations
reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that the
expectations will be attained or that any deviation will not be
material. All information in this release is as of April 22, 2008,
and the Company undertakes no obligation to update any
forward-looking statement to conform the statement to actual
results or changes in the Company's expectations. * This press
release contains registered trademarks that are the exclusive
property of their respective owners. None of the owners of these
trademarks has any responsibility or liability for any information
contained in this press release. Host Hotels & Resorts, Inc.,
herein referred to as "we" or "Host," is a self-managed and
self-administered real estate investment trust (REIT) that owns
hotel properties. We conduct our operations as an umbrella
partnership REIT through an operating partnership, Host Hotels
& Resorts, L.P., or Host LP, of which we are the sole general
partner. For each share of our common stock, Host LP has issued to
us one unit of operating partnership interest, or OP Unit. When
distinguishing between Host and Host LP, the primary difference is
approximately 4% of the partnership interests in Host LP held by
outside partners as of April 22, 2008, which is reflected as
minority interest in our consolidated balance sheets and minority
interest expense in our consolidated statements of operations.
Readers are encouraged to find further detail regarding our
organizational structure in our annual report on Form 10-K. For
information on our reporting periods and non-GAAP financial
measures (including Adjusted EBITDA, FFO per diluted share and
comparable hotel adjusted operating profit margin) which we believe
is useful to investors, see the Notes to the Financial Information
included in this release. HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a) (in millions, except shares and per
share amounts) March 21, December 31, 2008 2007 (unaudited) ASSETS
Property and equipment, net $10,695 $10,588 Assets held for sale 13
- Due from managers 92 106 Investments in affiliates 202 194
Deferred financing costs, net 49 51 Furniture, fixtures and
equipment replacement fund 122 122 Other 205 198 Restricted cash 68
65 Cash and cash equivalents 317 488 Total assets $11,763 $11,812
LIABILITIES AND STOCKHOLDERS' EQUITY Debt Senior notes, including
$1,089 million and $1,088 million, respectively, net of discount,
of Exchangeable Senior Debentures $4,115 $4,114 Mortgage debt 1,416
1,423 Other 87 88 Total debt 5,618 5,625 Accounts payable and
accrued expenses 232 315 Other 222 215 Total liabilities 6,072
6,155 Interest of minority partners of Host Hotels & Resorts,
L.P. 245 188 Interest of minority partners of other consolidated
partnerships 32 28 Stockholders' equity Cumulative redeemable
preferred stock (liquidation preference $100 million) 50 million
shares authorized; 4.0 million shares issued and outstanding 97 97
Common stock, par value $.01, 750 million shares authorized; 520.6
million shares and 522.6 million shares issued and outstanding,
respectively 5 5 Additional paid-in capital 5,674 5,673 Accumulated
other comprehensive income 62 45 Deficit (424) (379) Total
stockholders' equity 5,414 5,441 Total liabilities and
stockholders' equity $11,763 $11,812 (a) Our consolidated balance
sheet as of March 21, 2008 has been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with GAAP have been omitted. The
consolidated balance sheets should be read in conjunction with the
consolidated financial statements and notes thereto included in our
most recent Annual Report on Form 10-K. HOST HOTELS & RESORTS,
INC. Consolidated Statements of Operations (a) (unaudited, in
millions, except per share amounts) Quarter ended March 21, March
23, 2008 2007 Revenues Rooms $624 $608 Food and beverage 334 321
Other 70 69 Total hotel sales 1,028 998 Rental income (b) 30 31
Total revenues 1,058 1,029 Expenses Rooms 157 150 Food and beverage
242 235 Hotel departmental expenses 258 249 Management fees 52 45
Other property-level expenses 82 81 Depreciation and amortization
124 116 Corporate and other expenses 17 22 Gain on insurance
settlement (b) (7) - Total operating costs and expenses 925 898
Operating profit 133 131 Interest income 4 6 Interest expense (76)
(94) Net gains on property transactions 1 1 Minority interest
expense (9) (11) Equity in earnings of affiliates - 2 Income before
income taxes 53 35 Benefit for income taxes 7 6 Income from
continuing operations 60 41 Income from discontinued operations ( c
) 1 146 Net income 61 187 Less: Dividends on preferred stock (2)
(2) Net income available to common stockholders $59 $185 Basic and
diluted earnings per common share: Continuing operations $.11 $.07
Discontinued operations - .28 Basic and diluted earnings per common
share $.11 $.35 (a) Our consolidated statements of operations
presented above have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with GAAP have been omitted. (b)
The gain on insurance settlement reflects business interruption
insurance proceeds from damages incurred from Hurricane Katrina in
2005 and excludes the $2 million of management fees paid to the
manager of the hotel related to proceeds. ( c ) Reflects the
results of operations and gains on sale, net of the related income
tax, for two properties classified as held-for-sale at March 21,
2008 and nine properties sold in 2007. HOST HOTELS & RESORTS,
INC. Earnings per Common Share (unaudited, in millions, except per
share amounts) Quarter ended Quarter ended March 21, 2008 March 23,
2007 Income Shares Per Income Shares Per (Nume- (Denom- Share
(Nume- (Denom- Share rator) inator) Amount rator) inator) Amount
Net income $61 522.6 $.12 $187 521.5 $.36 Dividends on preferred
stock (2) - (.01) (2) - (.01) Basic earnings available to common
stockholders (a)(b) 59 522.6 .11 185 521.5 .35 Assuming
distribution of common shares granted under the comprehensive stock
plan less shares assumed purchased at average market price - .2 - -
.8 - Assuming conversion of minority OP units issuable - - - - 1.2
- Diluted earnings available to common stockholders (a)(b) $59
522.8 $.11 $185 523.5 $.35 (a) Basic earnings per common share is
computed by dividing net income available to common stockholders by
the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is computed by dividing net
income available to common stockholders as adjusted for potentially
dilutive securities, by the weighted average number of shares of
common stock outstanding plus potentially dilutive securities.
Dilutive securities may include shares granted under comprehensive
stock plans, preferred OP Units held by minority partners,
exchangeable debt securities and other minority interests that have
the option to convert their limited partnership interests to common
OP Units. No effect is shown for any securities that are
anti-dilutive. (b) The results for first quarter 2007 were
significantly affected by certain transactions, which are detailed
in the table below (in millions): Schedule of Significant
Transactions Affecting Earnings per Share Quarter ended Quarter
ended March 21, 2008 March 23, 2007 Net Income Net Income Gain on
hotel dispositions, net of taxes $- $141 Minority interest expense
- (5) Total (a) $- $136 Per diluted share $- $.26 (a) Represents
the effect of these transactions on Host, net of the amount
attributable to minority partners in Host LP. The effect on the net
income of Host LP was approximately $141 million for the first
quarter of 2007. HOST HOTELS & RESORTS, INC. Comparable Hotel
Operating Data (unaudited) Comparable Hotels by Region (a) As of
Quarter ended March 21, 2008 March 21, 2008 Average Average No. of
No. of Daily Occupancy Properties Rooms Rate Percentages RevPAR
Pacific 27 15,934 $206.08 72.7% $149.74 Mid-Atlantic 11 8,681
236.96 73.7 174.58 North Central 14 6,175 134.19 54.0 72.43 Florida
10 5,935 244.92 81.1 198.74 New England 11 5,663 156.62 60.5 94.69
DC Metro 13 5,662 200.67 63.7 127.88 South Central 8 4,358 167.50
71.7 120.12 Mountain 8 3,372 206.56 64.5 133.14 Atlanta 7 2,589
194.74 69.2 134.83 International 7 2,471 162.16 69.4 112.49 All
Regions 116 60,840 200.32 69.1 138.50 Quarter ended March 23, 2007
Average Average Percent Daily Occupancy Change in Rate Percentages
RevPAR RevPAR Pacific $201.80 72.4% $146.05 2.5% Mid-Atlantic
222.77 75.3 167.68 4.1 North Central 132.20 61.7 81.53 (11.2)
Florida 244.02 76.2 186.00 6.8 New England 146.83 58.6 86.08 10.0
DC Metro 196.32 69.1 135.57 (5.7) South Central 161.07 75.8 122.09
(1.6) Mountain 193.95 68.1 132.06 0.8 Atlanta 190.20 69.3 131.89
2.2 International 141.68 64.3 91.15 23.4 All Regions 192.62 70.2
135.28 2.4 Comparable Hotels by Property Type (a) As of Quarter
ended March 21, 2008 March 21, 2008 Average Average No. of No. of
Daily Occupancy Properties Rooms Rate Percentages RevPAR Urban 55
32,980 $204.73 69.9% $143.19 Suburban 32 12,311 162.85 61.9 100.84
Airport 16 7,467 143.73 70.4 101.17 Resort/Convention 13 8,082
284.72 76.1 216.80 All Types 116 60,840 200.32 69.1 138.50 Quarter
ended March 23, 2007 Average Average Percent Daily Occupancy Change
in Rate Percentages RevPAR RevPAR Urban $195.84 71.8% $140.70 1.8%
Suburban 156.27 64.2 100.25 0.6 Airport 140.16 71.2 99.79 1.4
Resort/Convention 282.95 72.4 204.92 5.8 All Types 192.62 70.2
135.28 2.4 (a) See the notes to financial information for a
discussion of reporting periods and comparable hotel results. HOST
HOTELS & RESORTS, INC. Comparable Hotel Operating Data Schedule
of Comparable Hotel Results (a) (unaudited, in millions, except
hotel statistics) Quarter ended March 21, March 23, 2008 2007
Number of hotels 116 116 Number of rooms 60,480 60,480 Percent
change in Comparable Hotel RevPAR 2.4% - Operating profit margin
under GAAP (b) 12.6% 12.7% Comparable hotel adjusted operating
profit margin (b) 25.2% 25.6% Food and beverage profit margin under
GAAP (b) 27.5% 26.8% Comparable food and beverage profit margin (b)
27.7% 27.2% Comparable hotel sales Room $624 $606 Food and beverage
( c ) 336 323 Other 72 71 Comparable hotel sales (d) 1,032 1,000
Comparable hotel expenses Room 156 149 Food and beverage (e) 243
235 Other 38 38 Management fees, ground rent and other costs 335
322 Comparable hotel expenses (f) 772 744 Comparable hotel adjusted
operating profit 260 256 Non-comparable hotel results, net (g) 8 14
Depreciation and amortization (124) (116) Corporate and other
expenses (17) (22) Gain on insurance settlement 7 - Comparable
hotels classified as held for sale, net (1) (1) Operating profit
$133 $131 (a) See the notes to the financial information for
discussion of non-GAAP measures, reporting periods and comparable
hotel results. (b) Operating profit margin are calculated by
dividing the applicable operating profit by the related revenue
amount. GAAP margins are calculated using amounts presented in the
consolidated statement of operations. Comparable margins are
calculated using amounts presented in the above table. ( c ) The
reconciliation of total food and beverage sales per the
consolidated statements of operations to the comparable food and
beverage sales is as follows: Quarter ended March 21, March 23,
2008 2007 Food and beverage sales per the consolidated statements
of operations $334 $321 Non-comparable food and beverage sales (14)
(11) Food and beverage sales for the property for which we record
rental income 9 9 Adjustment for food and beverage sales for
comparable hotels to reflect Marriott's fiscal year for
Marriott-managed hotels 7 4 Comparable food and beverage sales $336
$323 (d) The reconciliation of total revenues per the consolidated
statements of operations to the comparable hotel sales is as
follows: Quarter ended March 21, March 23, 2008 2007 Revenues per
the consolidated statements of operations $1,058 $1,029
Non-comparable hotel sales (43) (40) Hotel sales for the property
for which we record rental income, net 13 13 Hotel sales for
comparable hotels classified as held-for-sale 2 2 Rental income for
office buildings and select service hotels (19) (18) Adjustment for
hotel sales for comparable hotels to reflect Marriott's fiscal year
for Marriott-managed hotels 21 14 Comparable hotel sales $1,032
$1,000 (e) The reconciliation of total food and beverage expenses
per the consolidated statements of operations to the comparable
food and beverage expenses is as follows: Quarter ended March 21,
March 23, 2008 2007 Food and beverage expenses per the consolidated
statements of operations $242 $235 Non-comparable food and beverage
expense (9) (8) Food and beverage expenses for the property for
which we record rental income 5 5 Adjustment for food and beverage
expenses for comparable hotels to reflect Marriott's fiscal year
for Marriott-managed hotels 5 3 Comparable food and beverage
expenses $243 $235 (f) The reconciliation of operating costs per
the consolidated statements of operations to the comparable hotel
expenses is as follows: Quarter ended March 21, March 23, 2008 2007
Operating costs and expenses per the consolidated statements of
operations $925 $898 Non-comparable hotel expenses (31) (25) Hotel
expenses for the property for which we record rental income 15 16
Hotel expenses for comparable hotels classified as held-for-sale 1
1 Rent expense for office buildings and select service hotels (19)
(18) Adjustment for hotel expenses for comparable hotels to reflect
Marriott's fiscal year for Marriott-managed hotels 15 10
Depreciation and amortization (124) (116) Corporate and other
expenses (17) (22) Gain on insurance settlements 7 - Comparable
hotel expenses $772 $744 (g) Non-comparable hotel results, net,
includes the following items: (i) the results of operations of our
non-comparable hotels whose operations are included in our
consolidated statement of operations as continuing operations and
(ii) the difference between the number of days of operations
reflected in the comparable hotel results and the number of days of
operations reflected in the consolidated statements of operations.
HOST HOTELS & RESORTS, INC. Other Financial and Operating Data
(unaudited, in millions, except per share amounts) March 21,
December 31, 2008 2007 Equity Common shares outstanding 520.6 522.6
Common shares and minority held common OP Units outstanding 544.5
540.9 Preferred OP Units outstanding .02 .02 Class E Preferred
shares outstanding 4.0 4.0 Security pricing Common (a) $16.21
$17.04 Class E Preferred (a) $25.10 $25.05 3-1/4% Exchangeable
Senior Debentures (b) $1,113.83 $1,153.19 2-5/8% Exchangeable
Senior Debentures (b) $828.50 $855.44 Dividends declared per share
for calendar year Common ( c ) $.20 $1.00 Class E Preferred ( c )
$.555 $2.22 Debt Series K senior notes, with a rate of 7-1/8% due
November 2013 $725 $725 Series M senior notes, with a rate of 7%
due August 2012 347 347 Series O senior notes, with a rate of
6-3/8% due March 2015 650 650 Series Q senior notes, with a rate of
6-3/4% due June 2016 800 800 Series S senior notes, with a rate of
6-7/8% due November 2014 497 497 $500 million Exchangeable Senior
Debentures, with a rate of 3-1/4% due April 2024 496 496 $600
million Exchangeable Senior Debentures, with a rate of 2-5/8% due
April 2027 593 592 Senior notes, with an average rate of 10.0%,
maturing through May 2012 7 7 Total senior notes 4,115 4,114
Mortgage debt (non-recourse) secured by $2.1 billion of real estate
assets, with an average interest rate of 6.6% at March 21, 2008 and
December 31, 2007, respectively, maturing through December 2023
1,416 1,423 Credit facility (d) - - Other 87 88 Total debt (e)
$5,618 $5,625 Percentage of fixed rate debt 100% 100% Weighted
average interest rate 6.0% 6.0% Weighted average debt maturity 5.5
years 5.7 years Quarter ended March 21, March 23, 2008 2007 Hotel
Operating Statistics for All Properties (f) Average daily rate
$198.00 $189.18 Average occupancy 69.3% 70.2% RevPAR $137.25
$132.77 (a) Share prices are the closing price as reported by the
New York Stock Exchange. (b) Amount reflects the market price of a
single $1,000 debenture as quoted by Bloomberg, L.P. ( c ) On March
17, 2008, the Company declared a first quarter common dividend of
$0.20 per share and a first quarter preferred dividend of
$0.5546875 per share for its Class E cumulative redeemable
preferred stock. (d) On March 25, 2008, the Company borrowed $100
million under its Credit Facility. Subsequently, on April 22, 2008,
the Company entered into a $165 million term loan, which is an
expansion of the existing $600 million Credit Facility. The term
loan has a maturity date of September 9, 2011 and is prepayable
without penalty after 18 months and may be repaid prior to that
date for a fee. The term loan bears interest at LIBOR plus 175
basis points, with a LIBOR floor of 2.25%. The proceeds from the
term loan were used to repay the $100 million draw under the Credit
Facility and for general corporate purposes. As a result of this
transaction, the Company has $600 million available under the
Credit Facility. (e) In accordance with GAAP, total debt includes
the debt of entities that we consolidate, but do not own 100% of
the interests, and excludes the debt of entities that we do not
consolidate, but have a minority ownership interest and record our
investment therein under the equity method of accounting. As of
March 21, 2008, our minority partners' share of consolidated debt
is $70 million and our share of debt in unconsolidated investments
is $370 million. (f) The operating statistics reflect all
consolidated properties as of March 21, 2008 and March 23, 2007,
respectively. The operating statistics include the results of
operations for nine properties sold as of March 21, 2008 prior to
their disposition and two hotels that been classified as
held-for-sale at March 21, 2008. HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share (unaudited, in millions,
except per share amounts) Quarter ended Quarter ended March 21,
2008 March 23, 2007 Per Per Share Share Income Shares Amount Income
Shares Amount Net income available to common stockholders $59 522.6
$.11 $185 521.5 $.35 Adjustments: Gains on dispositions, net of
taxes - - - (141) - (.27) Amortization of deferred gains and other
property transactions, net of taxes (1) - - (1) - - Depreciation
and amortization 124 - .23 117 - .23 Partnership adjustments 5 -
.01 7 - .01 FFO of minority partners of Host LP (a) (7) - (.01) (6)
- (.01) Adjustments for dilutive securities: Assuming distribution
of common shares granted under the comprehensive stock plan less
shares assumed purchased at average market price - .2 - - .8 -
Assuming conversion of 2004 Exchangeable Senior Debentures 5 30.5
(.01) 5 29.0 (.01) FFO per diluted share (b) $185 $553.3 $0.33 $166
551.3 $.30 (a) Represents FFO attributable to the minority
interests in Host LP. (b) FFO per diluted share in accordance with
NAREIT is adjusted for the effects of dilutive securities. Dilutive
securities may include shares granted under comprehensive stock
plans, preferred OP Units held by minority partners, exchangeable
debt securities and other minority interests that have the option
to convert their limited partnership interest to common OP Units.
No effect is shown for securities if they are anti-dilutive. HOST
HOTELS & RESORTS, L.P. Consolidated Statements of Operations
(a) (unaudited, in millions, except per unit amounts) Quarter ended
March 21, March 23, 2008 2007 Revenues Rooms $624 $608 Food and
beverage 334 321 Other 70 69 Total hotel sales 1,028 998 Rental
income 30 31 Total revenues 1,058 1,029 Expenses Rooms 157 150 Food
and beverage 242 235 Hotel departmental expenses 258 249 Management
fees 52 45 Other property-level expenses 82 81 Depreciation and
amortization 124 116 Corporate and other expenses 17 22 Gain on
insurance settlement (7) - Total operating costs and expenses 925
898 Operating profit 133 131 Interest income 4 6 Interest expense
(76) (94) Net gains on property transactions 1 1 Minority interest
expense (6) (4) Equity in earnings of affiliates - 2 Income before
income taxes 56 42 Benefit (provision) for income taxes 7 6 Income
from continuing operations 63 48 Income from discontinued
operations (b) 1 146 Net income 64 194 Less: Distributions on
preferred units (2) (2) Net income available to common unitholders
$62 $192 Basic earnings per common unit: Continuing operations $.11
$.09 Discontinued operations - .27 Basic earnings per common unit
$.11 $.36 Diluted earnings per common unit: Continuing operations
$.11 $.08 Discontinued operations - .27 Diluted earnings per common
unit $.11 $.35 (a) Our consolidated statements of operations
presented above have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with GAAP have been omitted.
When distinguishing between Host and Host LP, the primary
difference is the partnership interests in Host LP held by outside
partners, which is reflected as minority interest in Host's
consolidated balance sheets and minority interest expense in Host's
consolidated statements of operations. The consolidated statements
of operations should be read in conjunction with the consolidated
financial statements and notes thereto included in our most recent
Annual Report on Form 10-K. (b) Reflects the results of operations
and gain on sale, net of the related income tax, for two properties
classified as held-for-sale at March 21, 2008 and nine properties
sold in 2007. HOST HOTELS & RESORTS, L.P. Reconciliation of Net
Income to EBITDA and Adjusted EBITDA (unaudited, in millions)
Quarter ended March 21, March 23, 2008 2007 Net income $64 $194
Interest expense 76 94 Depreciation and amortization 124 116 Income
taxes (7) (6) Discontinued operations (a) 1 2 EBITDA 258 400 Gains
on dispositions - (141) Amortization of deferred gains (1) (1)
Equity investment adjustments: Equity in earnings of affiliates -
(2) Pro rata EBITDA of equity investments 6 6 Consolidated
partnership adjustments: Minority interest expense 6 4 Pro rata
EBITDA of minority partners (7) (7) Adjusted EBITDA of Host LP $262
$259 (a) Reflects the interest expense, depreciation and
amortization and income taxes included in discontinued operations.
HOST HOTELS & RESORTS, INC. Reconciliation of Net Income
Available to Common Stockholders to Funds From Operations per
Diluted Share for Second Quarter 2008 Forecasts (a) (unaudited, in
millions, except per share amounts) Low-end of Range Second Quarter
2008 Forecast Per Share Income Shares Amount Forecast net income
available to common stockholders $188 520.7 $.36 Adjustments:
Depreciation and amortization 120 - .23 Gain on dispositions, net
of taxes (11) - (.02) Partnership adjustments 11 - .02 FFO of
minority partners of Host LP (b) (13) - (.02) Adjustment for
dilutive securities: Assuming distribution of common shares granted
under the comprehensive stock plan less shares assumed purchased at
average market price - .5 (.01) Assuming conversion of 2004
Exchangeable Senior Debentures 4 30.8 (.02) FFO per diluted share
$299 552.0 $.54 High-end of Range Second Quarter 2008 Forecast Per
Share Income Shares Amount Forecast net income available to common
stockholders $199 520.7 $.38 Adjustments: Depreciation and
amortization 120 - .23 Gain on dispositions, net of taxes (11) -
(.02) Partnership adjustments 12 - .03 FFO of minority partners of
Host LP (b) (14) - (.03) Adjustment for dilutive securities:
Assuming distribution of common shares granted under the
comprehensive stock plan less shares assumed purchased at average
market price - .5 (.01) Assuming conversion of 2004 Exchangeable
Senior Debentures 4 30.8 (.02) FFO per diluted share $310 552.0
$.56 HOST HOTELS & RESORTS, INC. Reconciliation of Net Income
Available to Common Stockholders to Funds From Operations per
Diluted Share for Full Year 2008 Forecasts (a) (unaudited, in
millions, except per share amounts) Low-end of Range Full Year 2008
Forecast Per Share Income Shares Amount Forecast net income
available to common stockholders $535 519.3 $1.03 Adjustments:
Depreciation and amortization 524 - 1.01 Gain on dispositions, net
of taxes (28) - (.05) Partnership adjustments 34 - .07 FFO of
minority partners of Host LP (b) (45) - (.09) Adjustment for
dilutive securities: Assuming distribution of common shares granted
under the comprehensive stock plan less shares assumed purchased at
average market price - .5 (.01) Assuming conversion of 2004
Exchangeable Senior Debentures 19 32.2 (.08) FFO per diluted share
$1,039 552.0 $1.88 High-end of Range Full Year 2008 Forecast Per
Share Income Shares Amount Forecast net income available to common
stockholders $589 519.3 $1.13 Adjustments: Depreciation and
amortization 524 - 1.01 Gain on dispositions, net of taxes (28) -
(.05) Partnership adjustments 36 - .07 FFO of minority partners of
Host LP (b) (47) - (.09) Adjustment for dilutive securities:
Assuming distribution of common shares granted under the
comprehensive stock plan less shares assumed purchased at average
market price - .5 (.01) Assuming conversion of 2004 Exchangeable
Senior Debentures 19 32.2 (.08) FFO per diluted share $1,093 552.0
$1.98 (a) The second quarter and full year 2008 forecasts were
based on the following assumptions: -- Comparable hotel RevPAR will
increase 2% and 4% for both the second quarter and the full year
for the low and high ends of the forecasted range, respectively. --
Comparable hotel adjusted operating profit margins will range from
a decrease of 25 basis points to an increase of 25 basis points for
the full year for the low and high ends of the forecasted range,
respectively. -- We do not anticipate any acquisitions will be made
during 2008. -- We expect to have hotel dispositions of
approximately $150 million during 2008. -- We expect to spend
approximately $650 million on capital expenditures in 2008. --
Fully diluted weighted average shares for FFO per diluted share and
earnings per diluted share will be approximately 552.0 million for
both the second quarter and the full year, respectively. The
amounts shown in these forecasts are based on these and other
assumptions, as well as management's estimate of operations for
2008. These forecasts are forward-looking and are not guarantees of
future performance and involve known and unknown risks,
uncertainties and other factors which may cause actual
transactions, results and performance to differ materially from
those expressed or implied by these forecasts. Although we believe
the expectations reflected in the forecasts are based upon
reasonable assumptions, we can give no assurance that the
expectations will be attained or that the results will be
materially different. Risks that may affect these assumption and
forecasts include the following: -- the level of RevPAR and margin
growth may change significantly; -- the amount and timing of
acquisitions and dispositions of hotel properties is an estimate
that can substantially affect financial results, including such
items as net income, depreciation and gains on dispositions; -- the
level of capital expenditures may change significantly, which will
directly affect the level of depreciation expense and net income;
-- the amount and timing of debt payments may change significantly
based on market conditions, which will directly affect the level of
interest expense and net income; -- the number of shares of the
Company's common stock repurchased may change based on market
conditions; and -- other risks and uncertainties associated with
our business described herein and in the Company's filings with the
SEC. (b) Represents FFO attributable to the minority interests in
Host LP. HOST HOTELS & RESORTS, INC. Schedule of Comparable
Hotel Adjusted Operating Profit Margin for Full Year 2008 Forecasts
(a) (unaudited, in millions, except hotel statistics) Full Year
2008 Forecast Low-end High-end of range of range Operating profit
margin under GAAP (b) 16.1% 16.8% Comparable hotel adjusted
operating profit margin ( c ) 27.3% 27.8% Comparable hotel sales
Room $3,336 $3,398 Other 2,011 2,047 Comparable hotel sales (d)
5,347 5,445 Comparable hotel expenses Rooms and other departmental
costs 2,182 2,212 Management fees, ground rent and other costs
1,704 1,718 Comparable hotel expenses (e) 3,886 3,930 Comparable
hotel adjusted operating profit 1,461 1,515 Non-comparable hotel
results, net 8 8 Office buildings and select service properties,
net 10 10 Depreciation and amortization (526) (526) Corporate and
other expenses (77) (77) Operating profit $876 $930 (a) Forecasted
comparable hotel results include assumptions on the number of
hotels that will be included in our comparable hotel set in 2008.
We have assumed that 116 hotels will be classified as comparable as
of December 31, 2008. No assurances can be made as to the hotels
that will be in the comparable hotel set for 2008. Also, see the
notes following the table reconciling net income available to
common shareholders to Funds From Operations per Diluted Share for
assumptions relating to the full year 2008 forecasts. (b) Operating
profit margin under GAAP is calculated as the operating profit
divided by the forecast total revenues per the consolidated
statements of operations. See (d) below for forecasted revenues. (
c ) Comparable hotel adjusted operating profit margin is calculated
as the comparable hotel adjusted operating profit divided by the
comparable hotel sales per the table above. We forecasted a
decrease in margins of 25 basis points to an increase of 25 basis
points over the comparable adjusted operating profit margin of
27.55%. (d) The reconciliation of forecast total revenues to the
forecast comparable hotel sales is as follows (in millions): Full
Year 2008 Low-end High-end of range of range Revenues $5,435 $5,536
Non-comparable hotel sales (48) (51) Hotel sales for the property
for which we record rental income, net 53 53 Rental income for
office buildings and select service hotels (93) (93) Comparable
hotel sales $5,347 $5,445 (e) The reconciliation of forecast
operating costs and expenses to the comparable hotel expenses is as
follows (in millions): Full Year 2008 Low-end High-end of range of
range Operating costs and expenses $4,559 $4,606 Non-comparable
hotel expenses (40) (43) Hotel expenses for the property for which
we record rental income 53 53 Rent expense for office buildings and
select service hotels (83) (83) Depreciation and amortization (526)
(526) Corporate and other expenses (77) (77) Comparable hotel
expenses $3,886 $3,930 HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full
Year 2008 Forecasts (a) (unaudited, in millions) Full Year 2008
Low-end High-end of range of range Net income $568 $625 Interest
expense 355 355 Depreciation and amortization 526 526 Income taxes
2 - EBITDA 1,451 1,506 Gains on dispositions (28) (28) Equity
investment adjustments: Equity in earnings of affiliates (16) (16)
Pro rata Adjusted EBITDA of equity investments 52 52 Consolidated
partnership adjustments: Minority interest expense 10 10 Pro rata
Adjusted EBITDA of minority partners (19) (19) Adjusted EBITDA of
Host LP $1,450 $1,505 (a) See the notes following the table
reconciling net income available to common shareholders to Funds
From Operations per Diluted Share for assumptions relating to the
full year 2008. HOST HOTELS & RESORTS, INC. Notes to Financial
Information REPORTING PERIODS FOR STATEMENT OF OPERATIONS The
results we report in our consolidated statements of operations are
based on results of our hotels reported to us by our hotel
managers. Our hotel managers use different reporting periods.
Marriott International, Inc., or Marriott, the manager of the
majority of our properties, uses a fiscal year ending on the Friday
closest to December 31 and reports twelve weeks of operations for
the first three quarters and sixteen or seventeen weeks for the
fourth quarter of the year for its Marriott-managed hotels. In
contrast, other managers of our hotels, such as Starwood and Hyatt,
report results on a monthly basis. Additionally, Host, as a REIT,
is required by tax laws to report results on a calendar year. As a
result, we elected to adopt the reporting periods used by Marriott
except that our fiscal year always ends on December 31 to comply
with REIT rules. Our first three quarters of operations end on the
same day as Marriott but our fourth quarter ends on December 31 and
our full year results, as reported in our consolidated statement of
operations, always includes the same number of days as the calendar
year. Two consequences of the reporting cycle we have adopted are:
(1) quarterly start dates will usually differ between years, except
for the first quarter which always commences on January 1, and (2)
our first and fourth quarters of operations and year-to-date
operations may not include the same number of days as reflected in
prior years. For example, the first quarter of 2008 ended on March
21, and the first quarter of 2007 ended on March 23. Accordingly,
the first quarter of 2008 included 81 days of operations, while the
first quarter of 2007 included 82 days of operations. While the
reporting calendar we adopted is more closely aligned with the
reporting calendar used by the manager of a majority of our
properties, one final consequence of our calendar is we are unable
to report the month of operations that ends after our fiscal
quarter-end until the following quarter because our hotel managers
using a monthly reporting period do not make mid- month results
available to us. Hence, the month of operation that ends after our
fiscal quarter-end is included in our quarterly results of
operations in the following quarter for those hotel managers
(covering approximately 42% of our hotels). As a result, our
quarterly results of operations include results from hotel managers
reporting results on a monthly basis as follows: first quarter
(January, February), second quarter (March to May), third quarter
(June to August) and fourth quarter (September to December). While
this does not affect full-year results, it does affect the
reporting of quarterly results. REPORTING PERIODS FOR HOTEL
OPERATING STATISTICS AND COMPARABLE HOTEL RESULTS In contrast to
the reporting periods for our consolidated statement of operations,
our hotel operating statistics (i.e., RevPAR, average daily rate
and average occupancy) and our comparable hotel results are always
reported based on the reporting cycle used by Marriott for our
Marriott-managed hotels. This facilitates year-to-year comparisons,
as each reporting period will be comprised of the same number of
days of operations as in the prior year (except in the case of
fourth quarters comprised of seventeen weeks (such as fiscal year
2002) versus sixteen weeks). This means, however, that the
reporting periods we use for hotel operating statistics and our
comparable hotels results may differ slightly from the reporting
periods used for our statements of operations for the first and
fourth quarters and the full year. Results from hotel managers
reporting on a monthly basis are included in our operating
statistics and comparable hotels results consistent with their
reporting in our consolidated statement of operations herein: --
Hotel results for the first quarter of 2008 reflect 12 weeks of
operations for the period from December 29, 2007 to March 21, 2008
for our Marriott-managed hotels and results from January 1, 2008 to
February 29, 2008 for operations of all other hotels which report
results on a monthly basis. -- Hotel results for the first quarter
of 2007 reflect 12 weeks of operations for the period from December
30, 2006 to March 23, 2007 for our Marriott-managed hotels and
results from January 1, 2007 to February 28, 2007 for operations of
all other hotels which report results on a monthly basis.
COMPARABLE HOTEL OPERATING STATISTICS We present certain operating
statistics (i.e., RevPAR, average daily rate and average occupancy)
and operating results (revenues, expenses, adjusted operating
profit and adjusted operating profit margin) for the periods
included in this report on a comparable hotel basis. We define our
comparable hotels as properties (i) that are owned or leased by us
and the operations of which are included in our consolidated
results, whether as continuing operations or discontinued
operations, for the entirety of the reporting periods being
compared, and (ii) that have not sustained substantial property
damage or business interruption or undergone large-scale capital
projects during the reporting periods being compared. Of the 119
hotels that we owned as of March 21, 2008, 116 hotels have been
classified as comparable hotels. The operating results of the
following hotels that we owned as of March 21, 2008 are excluded
from comparable hotel results for these periods: -- The Sacramento
Host Airport Hotel (the Company executed an agreement with the
County of Sacramento related to the expansion of the Airport, which
will result in the closing of the hotel by August 2008); -- Atlanta
Marriott Marquis (major renovation started in August 2005); and --
New Orleans Marriott (property damage and business interruption
from Hurricane Katrina in August 2005). The operating results of
the nine hotels we disposed of in 2007 are also not included in
comparable hotel results for the periods presented herein.
Moreover, because these statistics and operating results are for
our hotel properties, they exclude results for our non-hotel
properties and other real estate investments. NON-GAAP FINANCIAL
MEASURES Included in this press release are certain "non-GAAP
financial measures," which are measures of our historical or future
financial performance that are not calculated and presented in
accordance with GAAP, within the meaning of applicable SEC rules.
They are as follows: (i) FFO per diluted share of Host, (ii) EBITDA
of Host LP, (iii) Adjusted EBITDA of Host LP and (iv) Comparable
Hotel Operating Results of Host. The following discussion defines
these terms and presents why we believe they are useful
supplemental measures of our performance. FFO per Diluted Share We
present FFO per diluted share as a non-GAAP measure of our
performance in addition to our earnings per share (calculated in
accordance with GAAP). We calculate FFO per diluted share for a
given operating period as our FFO (defined as set forth below) for
such period divided by the number of fully diluted shares
outstanding during such period. The National Association of Real
Estate Investment Trusts (NAREIT) defines FFO as net income
(calculated in accordance with GAAP) excluding gains (losses) from
sales of real estate, the cumulative effect of changes in
accounting principles, real estate-related depreciation and
amortization and adjustments for unconsolidated partnerships and
joint ventures. We present FFO on a per share basis after making
adjustments for the effects of dilutive securities and the payment
of preferred stock dividends, in accordance with NAREIT guidelines.
We believe that FFO per diluted share is a useful supplemental
measure of our operating performance and that the presentation of
FFO per diluted share, when combined with the primary GAAP
presentation of earnings per share, provides beneficial information
to investors. By excluding the effect of real estate depreciation,
amortization and gains and losses from sales of real estate, all of
which are based on historical cost accounting and which may be of
lesser significance in evaluating current performance, we believe
such measures can facilitate comparisons of operating performance
between periods and with other REITs, even though FFO per diluted
share does not represent an amount that accrues directly to holders
of our common stock. Historical cost accounting for real estate
assets implicitly assumes that the value of real estate assets
diminishes predictably over time. As noted by NAREIT in its April
2002 "White Paper on Funds From Operations," since real estate
values have historically risen or fallen with market conditions,
many industry investors have considered presentation of operating
results for real estate companies that use historical cost
accounting to be insufficient by themselves. For these reasons,
NAREIT adopted the definition of FFO in order to promote an
industry-wide measure of REIT operating performance. EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and
Amortization (EBITDA) is a commonly used measure of performance in
many industries. Management believes EBITDA provides useful
information to investors regarding our results of operations
because it helps us and our investors evaluate the ongoing
operating performance of our properties and facilitates comparisons
between us and other lodging REITs, hotel owners who are not REITs
and other capital-intensive companies. Management uses EBITDA to
evaluate property-level results and as one measure in determining
the value of acquisitions and dispositions and, like FFO per
diluted share, it is widely used by management in the annual budget
process. Adjusted EBITDA As of April 22, 2008, Host owns
approximately 96% of the partnership interest of Host LP and is its
sole general partner. We conduct all of our operations through Host
LP, and Host LP is the obligor on our senior notes and on our
credit facility. Historically, management has adjusted EBITDA when
evaluating our performance because we believe that the exclusion of
certain additional recurring and non-recurring items described
below provides useful supplemental information to investors
regarding our ongoing operating performance and that the
presentation of Adjusted EBITDA, when combined with the primary
GAAP presentation of net income, is beneficial to an investor's
complete understanding of our operating performance. In addition,
the Adjusted EBITDA of Host LP is presented because we believe it
is a relevant measure in calculating certain credit ratios, since
Host LP is the owner of all of our hotels and is the obligor on our
debt noted above. We adjust EBITDA for the following items, which
may occur in any period, and refer to this measure as Adjusted
EBITDA: -- Real Estate Transactions - We exclude the effect of
gains and losses, including the amortization of deferred gains,
recorded on the disposition of assets and property insurance gains
in our consolidated statement of operations because we believe that
including them in Adjusted EBITDA is not consistent with reflecting
the ongoing performance of our remaining assets. In addition,
material gains or losses from the depreciated value of the disposed
assets could be less important to investors given that the
depreciated asset often does not reflect the market value of real
estate assets (as noted above for FFO). -- Equity Investment
Adjustments - We exclude the equity in earnings (losses) of
unconsolidated investments in partnerships and joint ventures as
presented in our consolidated statement of operations because it
includes our pro-rata portion of depreciation, amortization and
interest expense. We include our pro rata share of the Adjusted
EBITDA of our equity investments as we believe this more accurately
reflects the performance of our investment. The pro rata Adjusted
EBITDA of equity investments is defined as the EBITDA of our equity
investments adjusted for any gains or losses on property
transactions multiplied by our percentage ownership in the
partnership or joint venture. -- Consolidated Partnership
Adjustments - We exclude the minority interest in the income or
loss of our consolidated partnerships as presented in our
consolidated statement of operations because it includes our
minority partners' pro-rata portion of depreciation, amortization
and interest expense. We exclude the minority partners' pro rata
share of the Adjusted EBITDA of our consolidated partnerships as we
believe this more accurately reflects the minority owners' interest
in our consolidated partnerships. The pro rata Adjusted EBITDA of
minority partners is defined as the EBITDA of our consolidated
partnerships adjusted for any gains or losses on property
transactions multiplied by the minority partners' positions in the
partnership or joint venture. -- Cumulative Effect of a Change in
Accounting Principle - Infrequently, the Financial Accounting
Standards Board (FASB) promulgates new accounting standards that
require the consolidated statement of operations to reflect the
cumulative effect of a change in accounting principle. We exclude
these one-time adjustments because they do not reflect our actual
performance for that period. -- Impairment Losses - We exclude the
effect of impairment losses recorded because we believe that
including them in Adjusted EBITDA is not consistent with reflecting
the ongoing performance of our remaining assets. In addition, we
believe that impairment charges are similar to gains (losses) on
dispositions and depreciation expense, both of which are also
excluded from EBITDA. Limitations on the Use of FFO per Diluted
Share, EBITDA and Adjusted EBITDA We calculate FFO per diluted
share in accordance with standards established by NAREIT, which may
not be comparable to measures calculated by other companies who do
not use the NAREIT definition of FFO or calculate FFO per diluted
share in accordance with NAREIT guidance. In addition, although FFO
per diluted share is a useful measure when comparing our results to
other REITs, it may not be helpful to investors when comparing us
to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also
not be comparable to measures calculated by other companies. This
information should not be considered as an alternative to net
income, operating profit, cash from operations or any other
operating performance measure calculated in accordance with GAAP.
Cash expenditures for various long-term assets (such as renewal and
replacement capital expenditures), interest expense (for EBITDA and
Adjusted EBITDA purposes only) and other items have been and will
be incurred and are not reflected in the EBITDA, Adjusted EBITDA
and FFO per diluted share presentations. Management compensates for
these limitations by separately considering the impact of these
excluded items to the extent they are material to operating
decisions or assessments of our operating performance. Our
consolidated statement of operations and cash flows include
interest expense, capital expenditures, and other excluded items,
all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures.
Additionally, FFO per diluted share, EBITDA and Adjusted EBITDA
should not be considered as a measure of our liquidity or
indicative of funds available to fund our cash needs, including our
ability to make cash distributions. In addition, FFO per diluted
share does not measure, and should not be used as a measure of,
amounts that accrue directly to stockholders' benefit. Comparable
Hotel Operating Results We present certain operating results for
our hotels, such as hotel revenues, expenses, adjusted operating
profit (and the related margin) and food and beverage adjusted
profit (and the related margin), on a comparable hotel, or "same
store," basis as supplemental information for investors. Our
comparable hotel results present operating results for hotels owned
during the entirety of the periods being compared without giving
effect to any acquisitions or dispositions, significant property
damage or large scale capital improvements incurred during these
periods. We present these comparable hotel operating results by
eliminating corporate-level costs and expenses related to our
capital structure, as well as depreciation and amortization. We
eliminate corporate-level costs and expenses to arrive at
property-level results because we believe property-level results
provide investors with supplemental information into the ongoing
operating performance of our hotels. We eliminate depreciation and
amortization because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based
on historical cost accounting for real estate assets, implicitly
assume that the value of real estate assets diminishes predictably
over time. As noted earlier, because real estate values have
historically risen or fallen with market conditions, many industry
investors have considered presentation of operating results for
real estate companies that use historical cost accounting to be
insufficient by themselves. As a result of the elimination of
corporate-level costs and expenses and depreciation and
amortization, the comparable hotel operating results we present do
not represent our total revenues, expenses, operating profit or
operating profit margin and should not be used to evaluate our
performance as a whole. Management compensates for these
limitations by separately considering the impact of these excluded
items to the extent they are material to operating decisions or
assessments of our operating performance. Our consolidated
statements of operations include such amounts, all of which should
be considered by investors when evaluating our performance. We
present these hotel operating results on a comparable hotel basis
because we believe that doing so provides investors and management
with useful information for evaluating the period-to-period
performance of our hotels and facilitates comparisons with other
hotel REITs and hotel owners. In particular, these measures assist
management and investors in distinguishing whether increases or
decreases in revenues and/or expenses are due to growth or decline
of operations at comparable hotels (which represent the vast
majority of our portfolio) or from other factors, such as the
effect of acquisitions or dispositions. While management believes
that presentation of comparable hotel results is a "same store"
supplemental measure that provides useful information in evaluating
our ongoing performance, this measure is not used to allocate
resources or to assess the operating performance of each of these
hotels, as these decisions are based on data for individual hotels
and are not based on comparable hotel results. For these reasons,
we believe that comparable hotel operating results, when combined
with the presentation of GAAP operating profit, revenues and
expenses, provide useful information to investors and management.
http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO
http://photoarchive.ap.org/ DATASOURCE: Host Hotels & Resorts,
Inc. CONTACT: Gregory J. Larson, Executive Vice President of Host
Hotels & Resorts, Inc., +1-240-744-5120 Web site:
http://www.hosthotels.com/
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