BETHESDA, Md., Oct. 10 /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 third quarter ended September 5, 2008. -- Total revenue
decreased $29 million, or 2.4%, to $1,168 million for the third
quarter and increased $34 million, or 0.9%, to $3,641 million for
year-to-date 2008. -- Net income decreased $43 million to $54
million and income from continuing operations decreased $52 million
to $41 million for the third quarter of 2008. For year-to-date
2008, net income decreased $128 million to $305 million and income
from continuing operations increased $1 million to $280 million
compared to year-to-date 2007. Earnings per diluted share decreased
$.08 to $.10 for the third quarter and decreased $.23 to $.56 for
year-to-date 2008. Net income in 2008 included a net gain of
approximately $12 million, or $.02 per diluted share, for the third
quarter and $22 million, or $.04 per diluted share, for
year-to-date associated with hotel dispositions. By comparison, net
income in 2007 included a net gain of approximately $90 million, or
$.16 per diluted share, for year-to-date 2007 associated with gains
from hotel dispositions, partially offset by debt refinancing
costs. There were no dispositions in the third quarter of 2007. --
Funds from Operations (FFO) per diluted share decreased 18.4% to
$.31 for the third quarter and increased 4.3% to $1.21 for
year-to-date 2008. For year-to-date 2007, FFO was reduced by $.08
per diluted share for costs associated with debt refinancings.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO ) The
Company also announced the following third quarter results for Host
Hotels & Resorts, L.P., (Host LP) through which it conducts all
of its operations and, as of September 5, 2008, holds approximately
96% of the partnership interests: -- Net income decreased $44
million to $57 million for the third quarter and decreased $130
million to $319 million for year-to-date 2008. -- Adjusted EBITDA,
which is Earnings before Interest Expense, Income Taxes,
Depreciation, Amortization and other items, decreased $27 million,
for both third quarter and year-to-date 2008, to $270 million for
the third quarter and to $951 million for year-to-date 2008. For
further detail of certain transactions affecting net income of the
Company and Host LP, earnings per diluted share and FFO per diluted
share, refer to the "Schedule of Significant Transactions Affecting
Earnings per Share and Funds From Operations per Diluted Share"
attached to this press release. 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 third quarter of 2008 decreased 2.1% when compared
to the third quarter of 2007. RevPAR for the third quarter was
significantly affected by the performance of the Company's two
properties in Hawaii, which experienced a significant decline as a
result of a decrease in leisure transient and group demand in this
market. Excluding the two Hawaiian hotels from our comparable
portfolio, the Company's RevPAR decline is reduced by 170 basis
points to a decline of .4%. Year-to-date 2008 comparable hotel
RevPAR increased .6% when compared to year-to-date 2007. Comparable
hotel adjusted operating profit margins decreased 140 basis points
and 60 basis points for the third quarter and year-to-date 2008,
respectively. For further detail, see "Notes to the Financial
Information." Balance Sheet As of September 5, 2008, the Company
had approximately $494 million of cash and cash equivalents.
Subsequent to the end of the third quarter, the Company increased
its available cash by $200 million through a draw under the
revolver portion of its credit facility. Currently the Company has
access to an additional $400 million of available capacity under
the credit facility. The Company intends to maintain higher than
historical cash levels for working capital because of the
uncertainty in the financial markets. In addition to 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. Stock
Repurchase Program Under its previously announced stock repurchase
program, the Company repurchased 2.1 million shares of its common
stock valued at approximately $27.7 million during the third
quarter. Year-to-date, the Company has repurchased approximately
6.5 million shares for approximately $100 million. Capital
Expenditures The Company continued its capital expenditure program
which totaled approximately $153 million and $463 million for the
third quarter and year-to-date 2008, respectively. These
expenditures included return on investment (ROI) and repositioning
projects of approximately $78 million and $218 million for the
third quarter and year-to-date 2008, respectively. 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, the amount of which
will be based on the Company's estimated taxable income. Based on
the Company's current guidance for 2008, which assumes that no
hotel sales will be completed in the fourth quarter, the Company
expects that the fourth quarter special dividend will be in the
range of zero to $.05. 2008 Outlook The Company expects comparable
hotel RevPAR to decline approximately 3% to 5% for the fourth
quarter and to range from flat to a decrease of 1% for the full
year. For full year 2008, the Company expects its operating profit
margins under GAAP to decrease approximately 280 basis points to
320 basis points and its comparable hotel adjusted operating profit
margins to decrease approximately 100 basis points to 125 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. is as follows: Host Hotels &
Resorts, Inc. -- earnings per diluted share should be approximately
$.81 to $.86 for the full year; -- net income should be
approximately $437 million to $465 million for the full year; and
-- FFO per diluted share should be approximately $1.75 to $1.80 for
the full year. Host Hotels & Resorts, L.P. -- net income for
2008 should be approximately $456 million to $485 million; and --
Adjusted EBITDA for 2008 should be approximately $1,375 million to
$1,400 million. About Host Hotels & Resorts Host Hotels &
Resorts, Inc. is an S&P 500 and Fortune 500 company and is the
largest lodging real estate investment trust and one of the largest
owners of luxury and upper upscale hotels. The Company currently
owns 117 properties with approximately 64,000 rooms, and also holds
a minority interest in a joint venture that owns 11 hotels in
Europe with approximately 3,500 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
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 October 9, 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. *** Tables to Follow *** 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 September 5, 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) September 5, December 31, 2008 2007 (unaudited)
ASSETS Property and equipment, net $10,731 $10,588 Due from
managers 99 106 Investments in affiliates 210 194 Deferred
financing costs, net 51 51 Furniture, fixtures and equipment
replacement fund 121 122 Other 228 198 Restricted cash 55 65 Cash
and cash equivalents 494 488 Total assets $11,989 $11,812
LIABILITIES AND STOCKHOLDERS' EQUITY Debt Senior notes, including
$1,091 million and $1,088 million, respectively, net of discount,
of Exchangeable Senior Debentures $4,117 $4,114 Mortgage debt 1,492
1,423 Credit facility, including the $210 million term loan 210 -
Other 87 88 Total debt 5,906 5,625 Accounts payable and accrued
expenses (b) 132 315 Other 206 215 Total liabilities 6,244 6,155
Interest of minority partners of Host Hotels & Resorts, L.P.
223 188 Interest of minority partners of other consolidated
partnerships 26 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; 518.9
million shares and 522.6 million shares issued and outstanding,
respectively 5 5 Additional paid-in capital 5,638 5,673 Accumulated
other comprehensive income 44 45 Deficit (288) (379) Total
stockholders' equity 5,496 5,441 Total liabilities and
stockholders' equity $11,989 $11,812 (a) Our consolidated balance
sheet as of September 5, 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. (b)
Amount includes $209 million at year end 2007 for the accrual of
the year end 2007 dividend of $.40 per common share. The third
quarter 2008 dividend of $.20 per common share was declared
subsequent to the end of the third quarter on September 18, 2008.
HOST HOTELS & RESORTS, INC. Consolidated Statements of
Operations (a) (unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended September September September
September 5, 2008 7, 2007 5, 2008 7, 2007 Revenues Rooms $757 $769
$2,236 $2,216 Food and beverage 311 323 1,085 1,071 Other 78 83 241
242 Total hotel sales 1,146 1,175 3,562 3,529 Rental income 22 22
79 78 Total revenues 1,168 1,197 3,641 3,607 Expenses Rooms 191 190
547 533 Food and beverage 254 260 798 791 Hotel departmental
expenses 313 307 897 870 Management fees 49 55 173 171 Other
property-level expenses 91 93 268 268 Depreciation and amortization
133 119 388 352 Corporate and other expenses 14 14 45 51 Gain on
insurance settlement (b) - (5) (7) (5) Total operating costs and
expenses 1,045 1,033 3,109 3,031 Operating profit 123 164 532 576
Interest income 4 9 13 27 Interest expense (83) (82) (240) (312)
Net gains on property transactions and other - 3 2 5 Minority
interest expense - (5) (19) (21) Equity in earnings of affiliates 1
- 3 5 Income before income taxes 45 89 291 280 Benefit (provision)
for income taxes (4) 4 (11) (1) Income from continuing operations
41 93 280 279 Income from discontinued operations ( c ) 13 4 25 154
Net income 54 97 305 433 Less: Dividends on preferred stock (2) (2)
(6) (6) Net income available to common stockholders $52 $95 $299
$427 Basic earnings per common share: Continuing operations $.07
$.17 $.52 $.52 Discontinued operations .03 .01 .05 .30 Basic
earnings per common share $.10 $.18 $.57 $.82 Diluted earnings per
common share Continuing operations $.07 $.17 $.52 $.51 Discontinued
operations .03 .01 .04 .28 Diluted earnings per common share $.10
$.18 $.56 $.79 (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 due to the
manager of the hotel for the first quarter of 2008 related to the
proceeds. ( c ) Reflects the results of operations and gains on
sale, net of the related income tax, for two properties sold in
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 September 5, 2008
September 7, 2007 Per Per Share Share Income Shares Amount Income
Shares Amount Net income $54 519.3 $.10 $97 522.3 $.19 Dividends on
preferred stock (2) - - (2) - (.01) Basic earnings available to
common stockholders (a)(b) 52 519.3 .10 95 522.3 .18 Assuming
distribution of common shares granted under the comprehensive stock
plan less shares assumed purchased at average market price - .3 - -
.8 - Assuming conversion of minority OP units issuable - - - - 1.2
- Assuming conversion of 2004 Exchangeable Senior Debentures - - -
4 29.5 - Diluted earnings available to common stockholders (a)(b)
$52 519.6 $.10 $99 553.8 $.18 Year-to-date ended Year-to-date ended
September 5, 2008 September 7, 2007 Per Per Share Share Income
Shares Amount Income Shares Amount Net income $305 520.8 $.58 $433
522.0 $.83 Dividends on preferred stock (6) - (.01) (6) - (.01)
Basic earnings available to common stockholders (a)(b) 299 520.8
.57 427 522.0 .82 Assuming distribution of common shares granted
under the comprehensive stock plan less shares assumed purchased at
average market price - .4 - - .9 - Assuming conversion of minority
OP units issuable - - - - 1.2 - Assuming conversion of 2004
Exchangeable Senior Debentures 13 31.2 (.01) 13 29.5 (.03) Diluted
earnings available to common stockholders (a)(b) $312 552.4 $.56
$440 553.6 $.79 (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) Our results for both periods presented were
significantly affected by certain transactions. For further detail
see "Schedule of Significant Transactions Affecting Earnings per
Share and Funds From Operations per Diluted Share." HOST HOTELS
& RESORTS, INC. Comparable Hotel Operating Data (unaudited)
Comparable Hotels by Region (a) Quarter ended As of September 5,
2008 September 5, 2008 Average Average No. of No. of Daily
Occupancy Properties Rooms Rate Percentages RevPAR Pacific 27
15,936 $193.33 80.9% $156.43 Mid-Atlantic 11 8,684 258.56 81.6
210.89 North Central 14 6,175 153.73 72.8 111.91 Florida 9 5,676
165.06 67.8 111.95 DC Metro 13 5,666 175.31 80.0 140.29 New England
11 5,663 175.51 77.4 135.76 South Central 8 4,358 149.97 62.7 94.09
Mountain 8 3,372 136.63 65.6 89.70 Atlanta 7 2,589 179.13 62.1
111.24 International 7 2,471 171.67 64.7 111.05 All Regions 115
60,590 187.00 74.9 140.13 Quarter ended September 7, 2007 Average
Average Percent Daily Occupancy Change in Rate Percentages RevPAR
RevPAR Pacific $198.97 82.6% $164.36 (4.8)% Mid-Atlantic 240.98
85.8 206.70 2.0 North Central 157.40 75.6 119.06 (6.0) Florida
161.15 68.5 110.46 1.3 DC Metro 175.09 77.5 135.63 3.4 New England
171.34 84.7 145.14 (6.5) South Central 146.60 65.8 96.53 (2.5)
Mountain 130.13 71.0 92.45 (3.0) Atlanta 184.37 66.1 121.91 (8.8)
International 155.41 66.6 103.50 7.3 All Regions 184.54 77.5 143.15
(2.1) Year-to-date ended As of September 5, 2008 September 5, 2008
Average Average No. of No. of Daily Occupancy Properties Rooms Rate
Percentages RevPAR Pacific 27 15,936 $201.37 76.9% $154.86
Mid-Atlantic 11 8,684 255.14 79.3 202.32 North Central 14 6,175
150.95 66.6 100.48 Florida 9 5,676 218.67 75.6 165.31 DC Metro 13
5,666 196.54 76.4 150.13 New England 11 5,663 174.84 72.7 127.13
South Central 8 4,358 163.73 68.7 112.56 Mountain 8 3,372 173.01
66.8 115.57 Atlanta 7 2,589 190.25 67.1 127.74 International 7
2,471 172.50 69.3 119.60 All Regions 115 60,590 198.30 73.8 146.27
Year-to-date ended September 7, 2007 Average Average Percent Daily
Occupancy Change in Rate Percentages RevPAR RevPAR Pacific $201.57
77.6% $156.33 (0.9)% Mid-Atlantic 241.03 82.4 198.69 1.8 North
Central 150.04 70.3 105.53 (4.8) Florida 214.38 73.7 158.03 4.6 DC
Metro 193.00 77.6 149.72 0.3 New England 168.33 74.4 125.30 1.5
South Central 158.83 72.0 114.30 (1.5) Mountain 166.73 69.9 116.49
(0.8) Atlanta 193.47 69.1 133.70 (4.5) International 151.35 67.5
102.11 17.1 All Regions 193.26 75.3 145.46 0.6 HOST HOTELS &
RESORTS, INC. Comparable Hotel Operating Data (unaudited)
Comparable Hotels by Property Type (a) Quarter ended As of
September 5, 2008 September 5, 2008 Average Average No. of No. of
Daily Occupancy Properties Rooms Rate Percentages RevPAR Urban 55
32,989 $204.22 78.2% $159.70 Suburban 32 12,311 154.84 70.3 108.84
Resort/Conference 13 8,082 209.98 67.3 141.32 Airport 15 7,208
132.26 76.4 101.10 All Types 115 60,590 187.00 74.9 140.13 Quarter
ended September 7, 2007 Average Average Percent Daily Occupancy
Change in Rate Percentages RevPAR RevPAR Urban $197.08 81.0%
$159.73 -% Suburban 153.75 71.2 109.48 (0.6) Resort/Conference
221.06 72.9 161.26 (12.4) Airport 132.42 77.6 102.70 (1.6) All
Types 184.54 77.5 143.15 (2.1) Year-to-date ended As of September
5, 2008 September 5, 2008 Average Average No. of No. of Daily
Occupancy Properties Rooms Rate Percentages RevPAR Urban 55 32,989
$210.29 75.8% $159.44 Suburban 32 12,311 159.58 67.3 107.43
Resort/Conference 13 8,082 256.76 73.8 189.58 Airport 15 7,208
138.69 75.3 104.42 All Types 115 60,590 198.30 73.8 146.27
Year-to-date ended September 7, 2007 Average Average Percent Daily
Occupancy Change in Rate Percentages RevPAR RevPAR Urban $202.31
78.0% $157.73 1.1% Suburban 156.11 68.6 107.04 0.4
Resort/Conference 258.75 74.1 191.67 (1.1) Airport 137.20 75.7
103.91 0.5 All Types 193.26 75.3 145.46 0.6 (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 Year-to-date ended September September September
September 5, 2008 7, 2007 5, 2008 7, 2007 Number of hotels 115 115
115 115 Number of rooms 60,590 60,590 60,590 60,590 Percent change
in comparable hotel RevPAR (2.1%) - .6% - Operating profit margin
under GAAP (b) 10.5% 13.7% 14.6% 16.0% Comparable hotel adjusted
operating profit margin (b) 23.45% 24.85% 26.6% 27.2% Food and
beverage profit margin under GAAP (b) 18.3% 19.5% 26.5% 26.1%
Comparable food and beverage adjusted profit margin (b) 18.5% 20.1%
26.7% 26.5% Comparable hotel sales Room $741 $757 $2,204 $2,188
Food and beverage ( c ) 308 323 1,079 1,071 Other 79 84 245 247
Comparable hotel sales (d) 1,128 1,164 3,528 3,506 Comparable hotel
expenses Room 187 186 538 524 Food and beverage (e) 251 258 791 787
Other 45 49 132 135 Management fees, ground rent and other costs
380 382 1,130 1,108 Comparable hotel expenses (f) 863 875 2,591
2,554 Comparable hotel adjusted operating profit 265 289 937 952
Non-comparable hotel results, net (g) 5 3 22 23 Office buildings
and select service properties, net (h) - - (1) (1) Depreciation and
amortization (133) (119) (388) (352) Corporate and other expenses
(14) (14) (45) (51) Gain on insurance settlement - 5 7 5 Operating
profit $123 $164 $532 $576 (a) See the notes to the financial
information for discussion of non- GAAP measures, reporting periods
and comparable hotel results. (b) Operating profit margins 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 Year-to-date ended
September September September September 5, 2008 7, 2007 5, 2008 7,
2007 Food and beverage sales per the consolidated statements of
operations $311 $323 $1,085 $1,071 Non-comparable food and beverage
sales (8) (4) (34) (24) Food and beverage sales for the property
for which we record rental income 5 4 21 20 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 $308 $323 $1,079 $1,071 (d) The reconciliation of
total revenues per the consolidated statements of operations to the
comparable hotel sales is as follows: Quarter ended Year-to-date
ended September September September September 5, 2008 7, 2007 5,
2008 7, 2007 Revenues per the consolidated statements of operations
$1,168 $1,197 $3,641 $3,607 Non-comparable hotel sales (31) (24)
(114) (96) Hotel sales for the property for which we record rental
income, net 11 10 38 37 Rental income for office buildings and
select service hotels (20) (19) (58) (56) Adjustment for hotel
sales for comparable hotels to reflect Marriott's fiscal year for
Marriott-managed hotels - - 21 14 Comparable hotel sales $1,128
$1,164 $3,528 $3,506 (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 Year-to-date ended September September September September 5,
2008 7, 2007 5, 2008 7, 2007 Food and beverage expenses per the
consolidated statements of operations $254 $260 $798 $791
Non-comparable food and beverage expense (6) (5) (25) (19) Food and
beverage expenses for the property for which we record rental
income 3 3 13 12 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 $251 $258 $791 $787 (f) The reconciliation of operating
costs per the consolidated statements of operations to the
comparable hotel expenses is as follows: Quarter ended Year-to-date
ended September September September September 5, 2008 7, 2007 5,
2008 7, 2007 Operating costs and expenses per the consolidated
statements of operations $1,045 $1,033 $3,109 $3,031 Non-comparable
hotel expenses (26) (20) (87) (70) Hotel expenses for the property
for which we record rental income 11 9 39 38 Rent expense for
office buildings and select service hotels (20) (19) (59) (57)
Adjustment for hotel expenses for comparable hotels to reflect
Marriott's fiscal year for Marriott-managed hotels - - 15 10
Depreciation and amortization (133) (119) (388) (352) Corporate and
other expenses (14) (14) (45) (51) Gain on insurance settlement - 5
7 5 Comparable hotel expenses $863 $875 $2,591 $2,554 (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. (h) Represents rental income less rental
expense for select service properties and office buildings. HOST
HOTELS & RESORTS, INC. Other Financial and Operating Data
(unaudited, in millions, except per share amounts) September 5,
December 31, 2008 2007 Equity Common shares outstanding 518.9 522.6
Common shares and minority held common OP Units outstanding 540.2
540.9 Preferred OP Units outstanding .02 .02 Class E Preferred
shares outstanding 4.0 4.0 Security pricing Common (a) $14.32
$17.04 Class E Preferred (a) $24.03 $25.05 3 1/4% Exchangeable
Senior Debentures (b) $1,032.50 $1,153.19 2 5/8% Exchangeable
Senior Debentures (b) $810.00 $855.44 Dividends declared per share
for calendar year Common ( c ) $.60 $1.00 Class E Preferred ( c )
$1.67 $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 348 347 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 497 496 $600
million Exchangeable Senior Debentures, with a rate of 2 5/8% due
April 2027 593 592 Senior notes, with a rate of 10.0% due May 2012
7 7 Total senior notes 4,117 4,114 Mortgage debt (non-recourse)
secured by $2.2 billion of real estate assets, with an average
interest rate of 6.4% and 6.6% at September 5, 2008 and December
31, 2007, respectively, maturing through December 2023 1,492 1,423
Credit facility, including the $210 million term loan (d) 210 -
Other 87 88 Total debt (e)(f) $5,906 $5,625 Percentage of fixed
rate debt 91.4% 100% Weighted average interest rate 5.9% 6.0%
Weighted average debt maturity 5.0 years 5.7 years Quarter ended
Year-to-date ended September September September September 5, 2008
7, 2007 5, 2008 7, 2007 Hotel Operating Statistics for All
Properties (g) Average daily rate $184.53 $181.71 $195.80 $190.20
Average occupancy 74.7% 76.5% 73.6% 74.6% RevPAR $137.75 $138.97
$144.07 $141.81 (a) Share prices are the closing price as reported
by the New York Stock Exchange. (b) Amount reflects market price of
a single $1,000 debenture as quoted by Bloomberg L.P. ( c ) On
September 18, 2008, the Company declared a third quarter common
dividend of $0.20 per share and a third quarter preferred dividend
of $.5546875 per share for its Class E cumulative redeemable
preferred stock. (d) Subsequent to the end of the third quarter,
the Company drew $200 million under the revolver portion of its
credit facility. The Company currently has $400 million of
remaining available capacity under the revolver portion of 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
September 5, 2008, our minority partners' share of consolidated
debt is $68 million and our share of debt in unconsolidated
investments is $365 million. (f) Total debt as of September 5, 2008
and December 31, 2007 includes net discounts of $11 million and $13
million, respectively. (g) The operating statistics reflect all
consolidated properties as of September 5, 2008 and September 7,
2007, respectively. The operating statistics include the results of
operations for eleven properties sold as of September 5, 2008 prior
to their disposition. HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Common Share (unaudited, in millions,
except per share amounts) Quarter ended Quarter ended September 5,
2008 September 7, 2007 Per Per Share Share Income Shares Amount
Income Shares Amount Net income available to common stockholders
$52 519.3 $.10 $95 522.3 $.18 Adjustments: Gains on dispositions,
net of taxes (13) - (.03) - - - Gains on insurance settlement (a) -
- - (6) - (.01) Amortization of deferred gains and other property
transactions, net of taxes (1) - - (3) - (.01) Depreciation and
amortization 133 - .25 120 - .23 Partnership adjustments 5 - .01 7
- .01 FFO of minority partners of Host LP (b) (7) - (.01) (7) -
(.01) Adjustments for dilutive securities: Assuming distribution of
common shares granted under the comprehensive stock plan less
shares assumed purchased at average market price - .3 - - 0.8 -
Assuming conversion of 2004 Exchangeable Senior Debentures 4 31.2
(.01) 4 29.5 (.01) FFO per diluted share ( c )(d) $173 550.8 $.31
$210 552.6 $.38 Year-to-date ended Year-to-date ended September 5,
2008 September 7, 2007 Per Per Share Share Income Shares Amount
Income Shares Amount Net income available to common stockholders
$299 520.8 $.57 $427 522.0 $.82 Adjustments: Gains on dispositions,
net of taxes (23) - (.04) (139) - (.27) Gains on insurance
settlement (a) - - - (6) - (.01) Amortization of deferred gains and
other property transactions, net of taxes (3) - (.01) (5) - (.01)
Depreciation and amortization 387 - .74 354 - .68 Partnership
adjustments 22 - .04 20 - .04 FFO of minority partners of Host LP
(b) (28) - (.05) (22) - (.04) Adjustments for dilutive securities:
Assuming distribution of common shares granted under the
comprehensive stock plan less shares assumed purchased at average
market price - .4 - - 0.9 - Assuming conversion of 2004
Exchangeable Senior Debentures 13 31.2 (.04) 13 29.5 (.05) FFO per
diluted share ( c )(d) $667 552.4 $1.21 $642 552.4 $1.16 (a)
Represents the gain during the period for the settlement of
property insurance claims, including the gains that are included in
discontinued operations related to hotels that we have sold. (b)
Represents FFO attributalbe to the minority interests in Host LP. (
c ) 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. (d) FFO per diluted share was
significantly affected by certain transactions. For further detail
see "Schedule of Significant Transactions Affecting Earnings per
Diluted Share and Funds From Operations per Diluted Share." HOST
HOTELS & RESORTS, INC. Schedule of Significant Transactions
Affecting Earnings per Share and Funds From Operations per Diluted
Share (unaudited, in millions, except per share amounts) Quarter
ended Quarter ended September 5, 2008 September 7,2007 Net Income
Net Income (Loss) FFO (Loss) FFO Gain on hotel dispositions, net of
taxes $13 $- $- $- Minority interest expense (a) (1) - - - Total
(b) $12 $- $- $- Diluted shares 519.6 - - - Per diluted share $.02
$- $- $- Year-to-date ended Year-to-date ended September 5, 2008
September 7, 2007 Net Income Net Income (Loss) FFO (Loss) FFO
Senior notes redemptions and debt prepayments ( c ) $- $- $(46)
$(46) Gain on hotel dispositions, net of taxes 23 - 139 - Minority
interest income (expense) (a) (1) - (3) 2 Total (b) $22 $- $90
$(44) Diluted shares 552.4 - 553.6 552.4 Per diluted share $.04 $-
$.16 $(.08) (a) Represents the portion of the significant
transactions attributable to minority partners in Host LP. (b) Net
income of Host LP was also affected by the transactions discussed
above, with the exception of the minority interest income (expense)
item discussed in footnote (a). Accordingly, the total adjustments
to the net income of Host LP were approximately $13 million and $23
million for the third quarter and year-to-date 2008 and $93 million
for the year-to-date 2007. ( c ) Represents call premiums and the
acceleration of original issue discounts and deferred financing
costs, as well as incremental interest during the call or
prepayment notice period, included in interest expense in the
consolidated statements of operations. We recognized these costs in
conjunction with the prepayment or refinancing of senior notes and
mortgages during the periods presented. HOST HOTELS & RESORTS,
L.P. Consolidated Statements of Operations (a) (unaudited, in
millions, except per unit amounts) Quarter ended Year-to-date ended
September September September September 5, 2008 7, 2007 5, 2008 7,
2007 Revenues Rooms $757 $769 $2,236 $2,216 Food and beverage 311
323 1,085 1,071 Other 78 83 241 242 Total hotel sales 1,146 1,175
3,562 3,529 Rental income 22 22 79 78 Total revenues 1,168 1,197
3,641 3,607 Expenses Rooms 191 190 547 533 Food and beverage 254
260 798 791 Hotel departmental expenses 313 307 897 870 Management
fees 49 55 173 171 Other property-level expenses 91 93 268 268
Depreciation and amortization 133 119 388 352 Corporate and other
expenses 14 14 45 51 Gain on insurance settlement - (5) (7) (5)
Total operating costs and expenses 1,045 1,033 3,109 3,031
Operating profit 123 164 532 576 Interest income 4 9 13 27 Interest
expense (83) (82) (240) (312) Net gains on property transactions
and other - 3 2 5 Minority interest income/(expense) 3 (1) (5) (5)
Equity in earnings of affiliates 1 - 3 5 Income before income taxes
48 93 305 296 Provision for income taxes (4) 4 (11) (1) Income from
continuing operations 44 97 294 295 Income from discontinued
operations (b) 13 4 25 154 Net income 57 101 319 449 Less:
Distributions on preferred units (2) (2) (6) (6) Net income
available to common unitholders $55 $99 $313 $443 Basic earnings
per common unit: Continuing operations $.08 $.17 $.53 $.54
Discontinued operations .02 .01 .05 .28 Basic earnings per common
unit $.10 $.18 $.58 $.82 Diluted earnings per common unit:
Continuing operations $.08 $.17 $.52 $.53 Discontinued operations
.02 .01 .05 .27 Diluted earnings per common unit $.10 $.18 $.57
$.80 (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 sold in 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 Year-to-date ended September
September September September 5, 2008 7, 2007 5, 2008 7, 2007 Net
income $57 $101 $319 $449 Interest expense 83 82 240 312
Depreciation and amortization 133 119 388 352 Income taxes 4 (4) 11
1 Discontinued operations (a) 1 1 1 4 EBITDA 278 299 959 1,118
Gains on dispositions (13) - (23) (139) Amortization of deferred
gains (1) (3) (3) (5) Property insurance gains - (6) - (6) Equity
investment adjustments: Equity in earnings of affiliates (1) - (3)
(5) Pro rata EBITDA of equity investments 12 9 29 24 Consolidated
partnership adjustments: Minority interest expense (3) 1 5 5 Pro
rata EBITDA of minority partners (2) (3) (13) (14) Adjusted EBITDA
of Host LP $270 $297 $951 $978 (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 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 $428
521.2 $.82 Adjustments: Depreciation and amortization 559 - 1.07
Gain on dispositions, net of taxes (27) - (.05) Partnership
adjustments 30 - .05 FFO of minority partners of Host LP (b) (38) -
(.07) Adjustment for dilutive securities: Assuming distribution of
common shares granted under the comprehensive stock plan less
shares assumed purchased at average market price - .3 - Assuming
conversion of 2004 Exchangeable Senior Debentures 19 32.3 (.07) FFO
per diluted share $971 553.8 $1.75 High-end of Range Full Year 2008
Forecast Per Share Income Shares Amount Forecast net income
available to common stockholders $456 521.2 $.87 Adjustments:
Depreciation and amortization 559 - 1.07 Gain on dispositions, net
of taxes (27) - (.05) Partnership adjustments 30 - .05 FFO of
minority partners of Host LP (b) (39) - (.07) Adjustment for
dilutive securities: Assuming distribution of common shares granted
under the comprehensive stock plan less shares assumed purchased at
average market price - .3 - Assuming conversion of 2004
Exchangeable Senior Debentures 19 32.3 (.07) FFO per diluted share
$998 553.8 $1.80 (a) The full year 2008 forecasts were based on the
following assumptions: -- Comparable hotel RevPAR will range from
flat to a decrease of 1% for 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 100
basis points to 125 basis points for the full year for the low and
high ends of the forecasted range, respectively. -- We do not
anticipate that any acquisitions will be made during 2008. -- We do
not anticipate that any hotel dispositions will be made during the
fourth quarter of 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 553.8 million for the full year. 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 assumptions and
forecasts include the following: -- the level of RevPAR and margin
growth or decline 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)(b) (unaudited, in millions, except
hotel statistics) Full Year 2008 Low-end High-end of range of range
Operating profit margin under GAAP ( c ) 14.4% 14.7% Comparable
hotel adjusted operating profit margin (d) 26.2% 26.5% Comparable
hotel sales Room $3,203 $3,236 Other 1,939 1,950 Comparable hotel
sales (e) 5,142 5,186 Comparable hotel expenses Rooms and other
departmental costs 2,135 2,148 Management fees, ground rent and
other costs 1,659 1,666 Comparable hotel expenses (f) 3,794 3,814
Comparable hotel adjusted operating profit 1,348 1,372
Non-comparable hotel results, net 39 39 Office buildings and select
service properties, net 8 8 Depreciation and amortization (559)
(559) Corporate and other expenses (70) (70) Operating profit $766
$790 (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 115 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) Our
comparable hotel results are recorded based on the reporting cycle
used by Marriott International, Inc., or Marriott, for our
Marriott-managed hotels. Marriott uses a fiscal year ending on the
Friday closest to December 31 and will generally report 52 weeks of
operations in a given year. However, Marriott will report its
results of operations based on a 53-week year for 2008 based on a
fourth quarter of 17 weeks. For comparative purposes, we include
the standard 52 weeks and exclude the extra week of operations in
our forecast comparable hotel operating data for the full year
2008. For further information, see "Reporting Periods for Statement
of Operations" and "Reporting Periods for Hotel Operating
Statistics and Comparable Hotel Results" in the Notes to Financial
Information. ( c ) 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. (d) 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 100 basis points to 125
basis points under the 2007 comparable hotel adjusted operating
profit margin of 27.5%. (e) 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 $5,332 $5,377 Non-comparable hotel sales (152) (153) Hotel
sales for the property for which we record rental income, net 54 54
Rental income for office buildings and select service hotels (92)
(92) Comparable hotel sales $5,142 $5,186 (f) 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 $4,566
$4,587 Non-comparable hotel expenses (113) (114) Hotel expenses for
the property for which we record rental income 54 54 Rent expense
for office buildings and select service hotels (84) (84)
Depreciation and amortization (559) (559) Corporate and other
expenses (70) (70) Comparable hotel expenses $3,794 $3,814 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 $456 $485 Interest expense 359 359 Depreciation and
amortization 559 559 Income taxes 1 (3) EBITDA 1,375 1,400 Gains on
dispositions (27) (27) Equity investment adjustments: (8) (8)
Equity in earnings of affiliates Pro rata Adjusted EBITDA of equity
investments 48 48 Consolidated partnership adjustments: Minority
interest expense 5 5 Pro rata Adjusted EBITDA of minority partners
(18) (18) Adjusted EBITDA of Host LP $1,375 $1,400 (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 third quarter of 2008 ended on September 5,
and the third quarter of 2007 ended on September 7, though both
quarters reflect twelve weeks of operations. In contrast, the
September 5, 2008 year-to-date operations included 249 days of
operations, while the September 7, 2007 year-to-date operations
included 250 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 41% 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 2008) 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 third quarter of 2008 reflect 12 weeks of
operations for the period from June 14, 2008 to September 5, 2008
for our Marriott-managed hotels and results from June 1, 2008 to
August 31, 2008 for operations of all other hotels which report
results on a monthly basis. -- Hotel results for the third quarter
of 2007 reflect 12 weeks of operations for the period from June 16,
2007 to September 7, 2007 for our Marriott-managed hotels and
results from June 1, 2007 to August 31, 2007 for operations of all
other hotels which report results on a monthly basis. -- Hotel
results for year-to-date 2008 reflect 36 weeks for the period from
December 29, 2007 to September 5, 2008 for our Marriott-managed
hotels and results from January 1, 2008 to August 31, 2008 for
operations of all other hotels which report results on a monthly
basis. -- Hotel results for year-to-date 2007 reflect 36 weeks for
the period from December 30, 2006 to September 7, 2007 for our
Marriott-managed hotels and results from January 1, 2007 to August
31, 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 117 hotels that we owned as of September 5, 2008, 115 hotels
have been classified as comparable hotels. The operating results of
the following hotels that we owned as of September 5, 2008 are
excluded from comparable hotel results for these periods: --
Atlanta Marriott Marquis (a two-year major renovation that was
completed in June 2008); and -- New Orleans Marriott (property
damage and business interruption from Hurricane Katrina in August
2005). The operating results of the two hotels we disposed of in
2008 and 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 September 5, 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 deduct 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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