BETHESDA, Md., April 28 /PRNewswire-FirstCall/ -- Host Hotels
& Resorts, Inc. (NYSE: HST), the nation's largest lodging real
estate investment trust (REIT), today announced results of
operations for the first quarter ended March 26, 2010. The
results for the quarter exceeded the Company's expectations for
several metrics, including RevPAR, earnings and FFO per diluted
share and Adjusted EBITDA, that were incorporated into the
Company's full year 2010 guidance issued on February 17, 2010.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO
)
-- Total revenue was $823 million for the first quarter 2010, which
was a decrease of 5% compared to 2009.
-- Net loss was $84 million for the first quarter of 2010 compared to
net loss of $60 million for the first quarter of 2009. Loss per
diluted share was $.13 for the first quarter of 2010 compared to
loss per diluted share of $.12 in 2009.
Operating results for the first quarter of 2010 were affected by
costs associated with the repayment of debt and an additional
accrual for the potential litigation loss related to the San
Antonio Marriott Rivercenter. Operating results for the first
quarter 2009 were affected by a gain on the disposition of one
hotel, as well as non-cash impairment charges. The net effect of
these items on loss per diluted share was a decrease in earnings
of $11 million, or $.01 per diluted share, for the first quarter
of 2010 and a decrease in earnings of $21 million, or $.04 per
diluted share, for the first quarter of 2009.
-- Funds from Operations (FFO) per diluted share was $.08 for the
first quarter of 2010 compared to $.10 per diluted share for the
first quarter of 2009. The net effect of the above transactions
affecting operating results also decreased FFO per share by $.01
and $.08 for the first quarter of 2010 and 2009, respectively.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items was $126 million
for the first quarter 2010, which was a decrease of $48 million
compared to 2009.
For further detail of the transactions affecting net income,
earnings per diluted share and FFO per diluted share, refer to the
notes to the "Reconciliation of Net Income to EBITDA, Adjusted
EBITDA and FFO per Diluted Share."
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 2010 decreased
2.3% when compared to 2009. Comparable hotel adjusted operating
profit margins decreased 275 basis points for the first
quarter. This includes the effect of approximately $12 million
of revenues from incremental attrition and cancellation fees
recorded in the first quarter of 2009 compared to the first quarter
of 2010, which accounted for 110 basis points of the overall
reduction in our comparable hotel adjusted operating margin for the
first quarter of 2010. For further detail, see "Notes to the
Financial Information."
BALANCE SHEET
As of March 26, 2010, the Company had over $1.2 billion of cash and cash equivalents
and $600 million of available capacity under its credit
facility. During the first quarter, the Company redeemed
$346 million of 7% Series M senior notes and repaid the
$124 million mortgage on the Atlanta Marriott Marquis.
The Company issued approximately 4 million shares of common
stock at an average price of $12.65
per share under its continuous equity offering program for net
proceeds of approximately $55 million in the first quarter.
Currently, there is approximately $54 million of availability
remaining under the program.
INVESTMENTS
On April 13, 2010, the Company
acquired, at a discount, the most junior tranches of a euro 427 million mortgage loan that is secured by
six hotels located in Europe. The
two junior tranches purchased by the Company have a face value of
euro 64 million and are subordinate
to euro 363 million of senior debt.
The Company will earn interest on the face amount based on the
90-day EURIBOR plus 303 basis points, or currently approximately
3.8%.
DISPOSITIONS
During the first quarter, the Company sold the 374-room Sheraton
Braintree for $9 million and recorded a gain of approximately
$1 million on the sale.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $50 million for
the quarter, which included return on investment (ROI) and
repositioning projects of approximately $23 million. Projects
completed during the quarter included the renovation of over 95,000
square feet of ballroom and meeting space at the San Francisco
Marriott Marquis. In 2010, the Company has begun a
$190 million project at the 1,362-room San Diego Marriott
Hotel & Marina, which will include a complete renovation of all
guest rooms, the pool and fitness center, as well as the planned
development of new meeting space and an exhibit hall. The Company
will also be adding a new ballroom and renovating meeting space at
the Westin Kierland Resort & Spa. The Company intends to
accelerate the timing of certain capital projects to benefit from
lower construction costs in anticipation of the further
strengthening of the lodging recovery. The Company anticipates that
capital expenditures will be between $300 million to
$340 million during 2010.
DIVIDEND
The Company paid a $.01 per share
common dividend on April 15, 2010 and expects to continue to
pay a quarterly $.01 per share common
dividend in 2010 regardless of taxable income.
2010 OUTLOOK
The Company believes that recent improvements in the economy
will continue to positively affect the lodging industry and hotel
operating results for the remainder of 2010. Although the strength
and speed of the recovery is difficult to predict and booking pace
remains short, the Company now anticipates that for 2010:
- RevPAR will increase 1% to 4%;
- Operating profit margins under GAAP would increase
approximately 100 basis points to 220 basis points; and
- Comparable hotel adjusted operating profit margins would
decrease approximately 125 basis points to 50 basis points.
Based upon these parameters, the Company estimates that its full
year 2010 guidance is as follows:
- loss per diluted share should be approximately $.32 to $.25;
- net loss should be approximately $205 million to
$158 million;
- FFO per diluted share should be approximately $.58 to $.65; and
- Adjusted EBITDA should be approximately $750 million to
$800 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 110 properties with approximately 61,000
rooms, and also holds a non-controlling 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®, Ritz-Carlton®,
Westin®, Sheraton®, W®, St. Regis®, The Luxury Collection®, Hyatt®,
Fairmont®, Four Seasons®, Hilton® and Swissotel®* in the operation
of properties in over 50 major markets worldwide. For additional
information, please visit the Company's website at
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," "should," "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 effect on travel of potential 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 remain 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 27, 2010, 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. When distinguishing between Host
and Host LP, the primary difference is approximately 2% of the
partnership interests in Host LP held by outside partners as of
March 26, 2010, which is non-controlling interests in Host LP
in our consolidated balance sheets and is included in net
income/loss attributable to non-controlling interests in our
consolidated statements of operations. Readers are encouraged to
find further detail regarding our organizational structure in our
annual report on Form 10K.
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
26,
|
December
31,
|
|
|
|
|
2010
|
2009
|
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Property and equipment, net
|
$
10,144
|
$
10,231
|
|
Assets held for sale
|
3
|
8
|
|
Due from managers
|
41
|
29
|
|
Investments in affiliates
|
140
|
153
|
|
Deferred financing costs,
net
|
46
|
49
|
|
Furniture, fixtures and equipment
replacement fund
|
128
|
124
|
|
Other
|
279
|
266
|
|
Restricted cash
|
34
|
53
|
|
Cash and cash equivalents
|
1,245
|
1,642
|
|
Total
assets
|
$
12,060
|
$
12,555
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
Debt
|
|
|
|
Senior notes,
including $1,132 million and $1,123 million,
respectively, net of discount, of Exchangeable Senior Debentures
(b)
|
$
4,199
|
$
4,534
|
|
Mortgage
debt
|
1,098
|
1,217
|
|
Other
|
86
|
86
|
|
Total
debt
|
5,383
|
5,837
|
|
Accounts payable and accrued
expenses
|
164
|
174
|
|
Other
|
194
|
194
|
|
Total liabilities
|
5,741
|
6,205
|
|
|
|
|
|
Non-controlling interests--Host Hotels
& Resorts, L.P.
|
160
|
139
|
|
|
|
|
|
Host Hotels & Resorts, Inc.
stockholders’ equity:
|
|
|
|
Cumulative
redeemable preferred stock (liquidation preference
$100 million) 50 million shares authorized;
4 million shares issued and outstanding
|
97
|
97
|
|
Common stock, par
value $.01, 1,050 million shares authorized;
652.4 million shares and 646.3 million shares issued and
outstanding, respectively
|
7
|
6
|
|
Additional paid-in
capital
|
6,916
|
6,875
|
|
Accumulated other
comprehensive income
|
9
|
12
|
|
Deficit
|
(894)
|
(801)
|
|
Total equity of
Host Hotels & Resorts, Inc. stockholders
|
6,135
|
6,189
|
|
Non-controlling interests--other
consolidated partnerships
|
24
|
22
|
|
Total
equity
|
6,159
|
6,211
|
|
Total liabilities,
non-controlling interests and equity
|
$
12,060
|
$
12,555
|
|
|
|
|
|
(a) Our consolidated balance sheet as
of March 26, 2010 has been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with GAAP have been
omitted.
|
|
(b) The principal balance of the
exchangeable senior debentures is $1,251 million. On April 15,
2010, holders of the 3.25% Exchangeable Senior Debentures due April
2024 (the "2004 Debentures") had the option to require Host to
repurchase the debentures for cash equal to 100% of the aggregate
principal amount. None of the holders exercised this option and,
therefore, the $325 million face amount of the 2004 Debentures
remains outstanding.
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
Consolidated
Statements of Operations (a)
|
|
(unaudited, in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
26,
|
March
27,
|
|
|
|
|
2010
|
2009
|
|
|
|
|
|
Revenues
|
|
|
|
Rooms
|
$
484
|
$
500
|
|
Food and
beverage
|
252
|
266
|
|
Other
|
57
|
69
|
|
Total hotel
sales
|
793
|
835
|
|
Rental
income
|
30
|
29
|
|
Total
revenues
|
823
|
864
|
|
Expenses
|
|
|
|
Rooms
|
140
|
134
|
|
Food and
beverage
|
187
|
195
|
|
Other departmental
and support expenses
|
222
|
230
|
|
Management
fees
|
29
|
33
|
|
Other
property-level expenses
|
86
|
81
|
|
Depreciation and
amortization (b)
|
136
|
155
|
|
Corporate and
other expenses
|
25
|
16
|
|
Total operating
costs and expenses
|
825
|
844
|
|
Operating profit (loss)
|
(2)
|
20
|
|
Interest income
|
1
|
2
|
|
Interest expense (c)
|
(96)
|
(87)
|
|
Net gains on property transactions and
other
|
-
|
1
|
|
Loss on foreign currency transactions
and derivatives
|
(2)
|
(1)
|
|
Equity in earnings (losses) of
affiliates
|
(5)
|
(3)
|
|
Loss before income
taxes
|
(104)
|
(68)
|
|
Benefit for income taxes
|
22
|
14
|
|
Loss from continuing
operations
|
(82)
|
(54)
|
|
Loss from discontinued operations
|
(2)
|
(6)
|
|
Net loss
|
(84)
|
(60)
|
|
Less: Net loss attributable to
non-controlling interests
|
-
|
1
|
|
Net loss attributable to Host Hotels
& Resorts, Inc.
|
(84)
|
(59)
|
|
Less: Dividends on preferred
stock
|
(2)
|
(2)
|
|
Net loss available to common
stockholders
|
$
(86)
|
$
(61)
|
|
Basic and diluted loss per common
share:
|
|
|
|
Continuing
operations
|
$
(.13)
|
$
(.11)
|
|
Discontinued
operations
|
-
|
(.01)
|
|
Basic and diluted loss per common
share
|
$
(.13)
|
$
(.12)
|
|
|
|
|
|
|
|
(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) During the first quarter of 2009,
we recorded non-cash impairment charges totaling $40 million based
on the difference between the discounted cash flows and the
carrying amount as prescribed by GAAP, $20 million of which was
included in depreciation expense and $20 million of which was
included in discontinued operations.
|
|
(c) Interest expense includes non-cash
charges of $8 million and $7 million related to the exchangeable
debentures for 2010 and 2009, respectively. Interest expense also
includes an $8 million loss on the repurchase of the Series M
senior notes for the first quarter of 2010 and a $3 million gain on
the repurchase of a portion of the 2004 Debentures for 2009. As of
April 15, 2010, the discount related to the $325 million in
outstanding 2004 Debentures was fully amortized. Therefore,
subsequent to April 15, 2010, the interest expense for the 2004
Debentures will equal the cash coupon of 3.25%.
|
|
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
Earnings per
Common Share
|
|
(unaudited, in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
26,
|
March
27,
|
|
|
|
|
2010
|
2009
|
|
|
|
|
|
Net loss
|
$
(84)
|
$
(60)
|
|
Net loss
attributable to non-controlling interests
|
-
|
1
|
|
Dividends on
preferred stock
|
(2)
|
(2)
|
|
Loss available to common
stockholders
|
(86)
|
(61)
|
|
Assuming deduction
of gain recognized for the repurchase of the 2004 Debentures
(a)
|
-
|
(2)
|
|
Diluted loss available to common
stockholders
|
$
(86)
|
$
(63)
|
|
|
|
|
|
Basic weighted average shares
outstanding
|
648.1
|
526.1
|
|
Diluted weighted average shares
outstanding (b)
|
648.1
|
530.0
|
|
|
|
|
|
Basic and diluted loss per share
(c)(d)
|
$
(.13)
|
$
(.12)
|
|
|
|
|
|
(a) During the first quarter of 2009,
we repurchased $75 million face amount of the 2004 Debentures with
a carrying value of $72 million for $69 million. The adjustments to
dilutive earnings per common share related to the 2004 Debentures
repurchased during the first quarter 2009 include the $3 million
gain on repurchase, net of interest expense on the repurchased
debentures.
|
|
(b) Dilutive securities may include
shares granted under comprehensive stock plans, preferred OP Units
held by minority partners, exchangeable debt securities and other
non-controlling 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.
|
|
(c) 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.
|
|
(d) See notes to the "Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share"
for information on significant items affecting diluted earnings per
common share for which no adjustments were made.
|
|
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
|
|
|
|
Comparable Hotel
Operating Data
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Hotels
by Region (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 26,
2010
|
Quarter ended
March 26, 2010
|
Quarter ended
March 27, 2009
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Pacific
|
27
|
15,941
|
$
163.40
|
65.4%
|
$106.80
|
$
187.16
|
62.0%
|
$115.99
|
(7.9)%
|
|
Mid-Atlantic
|
10
|
8,330
|
191.93
|
70.9
|
136.00
|
206.86
|
62.6
|
129.58
|
5.0
|
|
North Central
|
14
|
6,204
|
112.02
|
51.0
|
57.18
|
121.18
|
49.8
|
60.32
|
(5.2)
|
|
South Central
|
9
|
5,687
|
147.86
|
71.1
|
105.09
|
156.52
|
65.3
|
102.14
|
2.9
|
|
Florida
|
9
|
5,677
|
208.08
|
76.9
|
160.01
|
222.58
|
70.5
|
156.94
|
2.0
|
|
DC Metro
|
12
|
5,416
|
185.75
|
65.1
|
121.01
|
214.02
|
66.9
|
143.27
|
(15.5)
|
|
Atlanta
|
8
|
4,252
|
153.71
|
66.2
|
101.78
|
160.78
|
60.8
|
97.76
|
4.1
|
|
New England
|
7
|
3,923
|
140.28
|
50.8
|
71.28
|
146.85
|
46.1
|
67.64
|
5.4
|
|
Mountain
|
7
|
2,889
|
164.60
|
65.2
|
107.30
|
193.36
|
58.0
|
112.15
|
(4.3)
|
|
International
|
7
|
2,473
|
146.05
|
63.5
|
92.81
|
138.95
|
61.0
|
84.70
|
9.6
|
|
All Regions
|
110
|
60,792
|
166.66
|
65.5
|
109.18
|
182.57
|
61.2
|
111.79
|
(2.3)
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Hotels
by Property Type (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 26,
2010
|
Quarter ended
March 26, 2010
|
Quarter ended
March 27, 2009
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Urban
|
53
|
34,483
|
$
173.21
|
65.2%
|
$112.95
|
$
188.04
|
61.1%
|
$114.90
|
(1.7)%
|
|
Suburban
|
30
|
11,272
|
136.07
|
62.5
|
85.04
|
150.52
|
57.9
|
87.17
|
(2.4)
|
|
Resort/Conference
|
13
|
8,082
|
226.29
|
69.4
|
156.97
|
252.83
|
65.2
|
164.95
|
(4.8)
|
|
Airport
|
14
|
6,955
|
117.06
|
67.6
|
79.10
|
127.12
|
62.8
|
79.81
|
(0.9)
|
|
All Types
|
110
|
60,792
|
166.66
|
65.5
|
109.18
|
182.57
|
61.2
|
111.79
|
(2.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
26,
|
March
27,
|
|
|
2010
|
2009
|
|
|
|
|
|
Number of hotels
|
110
|
110
|
|
Number of rooms
|
60,792
|
60,792
|
|
Percent change in comparable hotel
RevPAR
|
(2.3)%
|
-
|
|
Operating profit margin under GAAP
(b)
|
(0.2)%
|
2.3%
|
|
Comparable hotel adjusted operating
profit margin (b)
|
19.35%
|
22.1%
|
|
|
|
|
|
Comparable hotel sales
|
|
|
|
Room
|
$
494
|
$
505
|
|
Food and beverage
|
260
|
270
|
|
Other
|
59
|
71
|
|
Comparable hotel
sales (c)
|
813
|
846
|
|
Comparable hotel expenses
|
|
|
|
Room
|
142
|
135
|
|
Food and beverage
|
192
|
197
|
|
Other
|
31
|
32
|
|
Management fees,
ground rent and other costs
|
291
|
295
|
|
Comparable hotel
expenses (d)
|
656
|
659
|
|
Comparable hotel adjusted operating
profit
|
157
|
187
|
|
Non-comparable hotel results, net (e)
|
-
|
3
|
|
Office buildings and select service
properties, net (f)
|
1
|
(1)
|
|
Comparable hotels classified as
held-for-sale, net
|
1
|
2
|
|
Depreciation and amortization
|
(136)
|
(155)
|
|
Corporate and other expenses
|
(25)
|
(16)
|
|
Operating profit (loss)
|
$
(2)
|
$
20
|
|
|
|
|
|
(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 (loss) 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
revenues per the consolidated statements of operations to the
comparable hotel sales is as follows:
|
|
|
|
|
|
Quarter
ended
|
|
|
March
26,
|
March
27,
|
|
|
2010
|
2009
|
|
|
Revenues per the consolidated
statements of operations
|
$
823
|
$
864
|
|
|
Hotel sales for comparable hotels
classified as held-for-sale
|
1
|
1
|
|
|
Hotel sales for the property for which
we record rental income, net
|
13
|
12
|
|
|
Rental income for office buildings and
select service hotels
|
(19)
|
(19)
|
|
|
Adjustment for hotel sales for
comparable hotels to reflect Marriott’s fiscal year for
Marriott-managed hotels
|
(5)
|
(12)
|
|
|
Comparable hotel
sales
|
$
813
|
$
846
|
|
|
|
|
|
|
|
(d) The reconciliation of operating
costs per the consolidated statements of operations to the
comparable hotel expenses is as follows:
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
March
26,
|
March
27,
|
|
|
2010
|
2009
|
|
|
Operating costs and expenses per the
consolidated statements of operations
|
$
825
|
$
844
|
|
|
Hotel expenses for comparable hotels
classified as held-for-sale
|
2
|
3
|
|
|
Hotel expenses for the property for
which we record rental income
|
13
|
12
|
|
|
Rent expense for office buildings and
select service hotels
|
(18)
|
(20)
|
|
|
Adjustment for hotel expenses for
comparable hotels to reflect Marriott’s fiscal year for
Marriott-managed hotels
|
(5)
|
(9)
|
|
|
Depreciation and
amortization
|
(136)
|
(155)
|
|
|
Corporate and other
expenses
|
(25)
|
(16)
|
|
|
Comparable hotel
expenses
|
$
656
|
$
659
|
|
|
|
|
|
|
|
(e) Non-comparable hotel results, net,
includes the results of operations of our non-comparable hotels
whose operations are included in our consolidated statements of
operations as continuing operations and 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.
|
|
(f) 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
26,
|
December
31,
|
|
|
|
|
|
|
2010
|
2009
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common shares
outstanding
|
|
|
652.4
|
646.3
|
|
Common shares
outstanding assuming conversion of minority partner OP Units
(a)
|
|
|
663.4
|
658.2
|
|
Preferred OP Units
outstanding
|
|
|
.02
|
.02
|
|
Class E Preferred
shares outstanding
|
|
|
4.0
|
4.0
|
|
|
|
|
|
|
|
|
|
Security pricing
|
|
|
|
|
|
Common
(b)
|
|
|
$
14.60
|
$
11.67
|
|
Class E Preferred
(b)
|
|
|
$
25.50
|
$
25.23
|
|
3¼% Exchangeable
Senior Debentures (c)
|
|
|
$
1,009.9
|
$
1,002.8
|
|
2⅝% Exchangeable
Senior Debentures (c)
|
|
|
$
963.6
|
$
942.1
|
|
2½% Exchangeable
Senior Debentures (c)
|
|
|
$
1,207.2
|
$
1,062.8
|
|
Dividends declared per share for
calendar year
|
|
|
|
|
|
Common
(d)(e)
|
|
|
$
.01
|
$
.25
|
|
Class E Preferred
(e)
|
|
|
$
.555
|
$
2.22
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes
|
Coupon
rate
|
Maturity
date
|
|
|
|
Series K
|
7⅛%
|
11/2013
|
$
725
|
$
725
|
|
Series M (f)
|
7%
|
8/2012
|
-
|
344
|
|
Series O
|
6⅜%
|
3/2015
|
650
|
650
|
|
Series Q
|
6¾%
|
6/2016
|
800
|
800
|
|
Series S
|
6⅞%
|
11/2014
|
498
|
498
|
|
Series T
|
9%
|
5/2017
|
387
|
387
|
|
Exchangeable senior debentures
(g)
|
3¼%
|
4/2024
|
325
|
323
|
|
Exchangeable senior debentures
(h)
|
2⅝%
|
4/2027
|
488
|
484
|
|
Exchangeable senior debentures
(h)
|
2½%
|
10/2029
|
319
|
316
|
|
Senior notes
|
10%
|
5/2012
|
7
|
7
|
|
|
|
|
|
|
4,199
|
4,534
|
|
Mortgage debt and other
|
|
|
|
|
|
Mortgage debt (non-recourse)
(f)(i)
|
3.7-8.5%
|
3/2011-12/2023
|
1,098
|
1,217
|
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
86
|
86
|
|
Total debt
(j)(k)(l)
|
|
|
$
5,383
|
$
5,837
|
|
|
|
|
|
|
|
|
|
Percentage of fixed rate
debt
|
|
|
87%
|
88%
|
|
Weighted average interest
rate
|
|
|
6.6%
|
6.6%
|
|
Weighted average debt
maturity
|
|
|
4.25
years
|
4.4
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
|
|
March
26,
|
March
27,
|
|
|
|
|
|
|
2010
|
2009
|
|
Hotel Operating Statistics for All
Properties (m)
|
|
|
|
|
|
Average daily
rate
|
|
|
$
166.59
|
$
181.12
|
|
Average
occupancy
|
|
|
65.4%
|
60.8%
|
|
RevPAR
|
|
|
$
108.97
|
$
110.08
|
|
|
|
|
|
|
|
(a) Each OP Unit is convertible
into 1.021494 common shares of Host. At March 26, 2010 and December
31, 2009, there are 10.8 million and 11.7 million common OP Units,
respectively, held by minority partners that are convertible into
11.0 and 11.9 million shares, respectively, of Host common stock.
|
|
(b) Share prices are the closing
price as reported by the New York Stock Exchange.
|
|
(c) Amount reflects market price
of a single $1,000 debenture as quoted by Bloomberg L.P.
|
|
(d) On December 18, 2009, Host
paid approximately 90% of the 2009 special dividend with Host
common stock or 13.4 million common shares, with the remaining 10%
paid with cash of approximately $15.6 million.
|
|
(e) On March 16, 2010, the
Company declared a first quarter common cash dividend of $0.01 per
share and a first quarter preferred cash dividend of $0.5546875 per
share for its Class E cumulative redeemable preferred stock.
|
|
(f) During the first quarter of
2010, we used the proceeds from the issuance of the 2½%
Exchangeable Senior Debentures due 2029 (the "2009 Debentures") and
available cash to redeem $346 million of our Series M senior notes
and to repay the mortgage debt on the Atlanta Marriott Marquis of
$124 million.
|
|
(g) On April 15, 2010, holders
of the 2004 Debentures had the option to require Host to repurchase
the exchangeable debentures for cash equal to 100% of the aggregate
principal amount. None of the holders exercised this option and,
therefore, the $325 million principal balance remains outstanding.
Subsequent to April 15, 2010, the interest expense for the 2004
Debentures will equal the cash coupon of 3.25%.
|
|
(h) The principal balance
outstanding of the 2⅝% Exchangeable Senior Debentures due 2027 (the
"2007 Debentures") and 2009 Debentures is $526 million and $400
million, respectively. The discounts related to these exchangeable
debentures are amortized through the first date at which the
holders can require Host to repurchase the exchangeable debentures
for cash (April 2012 for the 2007 Debentures and October 2015 for
the 2009 Debentures).
|
|
(i) Mortgage debt is secured by
real estate assets with an undepreciated book value of $1.7 billion
and $2.1 billion and an average interest rate of 4.8% and 5.1% at
March 26, 2010 and December 31, 2009, respectively, maturing
through December 2023. The assets securing mortgage debt represents
the book value of real estate assets. These amounts do not
represent the current market value of the assets.
|
|
(j) Currently, we have $600
million of available capacity under the revolver portion of the
credit facility.
|
|
(k) 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 non-controlling ownership
interest and record our investment therein under the equity method
of accounting. As of March 26, 2010, our non-controlling partners’
share of consolidated debt is $68 million and our share of debt in
unconsolidated investments is $309 million.
|
|
(l) Total debt as of March 26,
2010 and December 31, 2009 includes net discounts of $127 million
and $142 million, respectively.
|
|
(m) The operating statistics
reflect all consolidated properties as of March 26, 2010 and March
27, 2009, respectively. The operating statistics include the
results of operations for one property disposed of as of March 26,
2010 and six properties disposed of during 2009 prior to their
disposition.
|
|
|
|
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
Reconciliation of
Net Income to EBITDA, Adjusted EBITDA
|
|
and Funds From
Operations per Diluted Share
|
|
(unaudited, in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
26,
|
March
27,
|
|
|
|
|
2010
|
2009
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(84)
|
$
(60)
|
|
Interest
expense
|
96
|
87
|
|
Depreciation and
amortization
|
136
|
135
|
|
Income
taxes
|
(22)
|
(14)
|
|
Discontinued
operations (a)
|
-
|
4
|
|
EBITDA
|
126
|
152
|
|
Gains on
dispositions
|
-
|
(19)
|
|
Non-cash
impairment charges
|
-
|
40
|
|
Amortization of
deferred gains
|
-
|
(1)
|
|
Equity investment
adjustments:
|
|
|
|
Equity in earnings
of affiliates
|
5
|
3
|
|
Pro rata EBITDA of
equity investments
|
-
|
4
|
|
Consolidated
partnership adjustments:
|
|
|
|
Pro rata EBITDA
attributable to non-controlling partners in other consolidated
partnerships
|
(5)
|
(5)
|
|
Adjusted EBITDA
|
$
126
|
$
174
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
26,
|
March
27,
|
|
|
|
|
2010
|
2009
|
|
|
|
|
|
|
|
Net loss
|
$
(84)
|
$
(60)
|
|
Less: Net loss
attributable to non-controlling interests
|
-
|
1
|
|
Dividends on
preferred stock
|
(2)
|
(2)
|
|
Net loss available to common
stockholders
|
(86)
|
(61)
|
|
Adjustments:
|
|
|
|
Gains on
dispositions, net of taxes
|
-
|
(18)
|
|
Amortization of
deferred gains and other property transactions, net of
taxes
|
-
|
(1)
|
|
Depreciation and
amortization (b)
|
137
|
139
|
|
Partnership
adjustments
|
(1)
|
-
|
|
FFO of
non-controlling interests of Host LP
|
(1)
|
(2)
|
|
Adjustments for
dilutive securities (c):
|
|
|
|
Assuming deduction
of gain recognized for the repurchase of the 2004 Debentures
(d)
|
-
|
(2)
|
|
Diluted FFO (c)(e)
|
$
49
|
$
55
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding (c)(e)
|
648.7
|
530.2
|
|
Diluted FFO per share
(c)(e)
|
$
.08
|
$
.10
|
|
|
|
|
|
|
|
(a) Reflects the interest
expense, depreciation and amortization and income taxes included in
discontinued operations.
|
|
(b) In accordance with the
guidance on FFO per diluted share provided by the National
Association of Real Estate Investment Trusts, we do not adjust net
income for the non-cash impairment charges when determining our FFO
per diluted share.
|
|
(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
non-controlling partners, exchangeable debt securities and other
non-controlling 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) During the first quarter of
2009, we repurchased $75 million of the 2004 Debentures with a
carrying value of $72 million for $69 million. The adjustments to
dilutive FFO related to the 2004 Debentures repurchased during the
year include the $3 million gain on repurchase, net of interest
expense on the repurchased exchangeable debentures.
|
|
(e) FFO per diluted share,
earnings per diluted share and Adjusted EBITDA were significantly
affected by certain transactions, the effects of which are shown in
the table below (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Quarter
ended
|
|
|
|
|
March 26,
2010
|
March 27,
2009
|
|
|
|
|
Net
Income
|
|
Adjusted
|
Net
Income
|
|
Adjusted
|
|
|
|
|
(Loss)
|
FFO
|
EBITDA
|
(Loss)
|
FFO
|
EBITDA
|
|
|
Gain on dispositions, net of
taxes
|
$
-
|
$
-
|
$
-
|
$
18
|
$
-
|
$
-
|
|
|
Non-cash impairment charges (1)
|
-
|
-
|
-
|
(40)
|
(40)
|
-
|
|
|
Debt repayment costs (2)
|
(8)
|
(8)
|
-
|
-
|
-
|
-
|
|
|
Potential loss on litigation
(3)
|
(4)
|
(4)
|
(4)
|
-
|
-
|
-
|
|
|
Loss attributable to non-controlling
interests (4)
|
1
|
1
|
-
|
1
|
1
|
-
|
|
|
Total
|
$
(11)
|
$
(11)
|
$(4)
|
$
(21)
|
$
(39)
|
$
-
|
|
|
Diluted
shares
|
648.1
|
648.7
|
|
530.0
|
530.2
|
|
|
|
Per diluted
share
|
$
(.01)
|
$
(.01)
|
|
$
(.04)
|
$
(.08)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) During the first quarter of
2009, we recorded non-cash impairment charges totaling $40 million
in accordance with GAAP based on the difference between the
discounted cash flows and the carrying amount of certain
properties.
|
|
|
(2) Includes the costs
associated with the redemption of the Series M Senior Notes.
|
|
|
(3) Includes the accrual of a
potential litigation loss in the first quarter of 2010.
|
|
|
(4) Represents the portion of
the significant items attributable to non-controlling partners in
Host LP.
|
|
|
|
|
|
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
Reconciliation of
Net Income to EBITDA, Adjusted EBITDA and
|
|
Funds From
Operations per Diluted Share
|
|
for Full Year 2010
Forecasts (a)
|
|
(unaudited, in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Full Year
2010
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Net loss
|
$ (205)
|
$ (158)
|
|
Interest
expense
|
374
|
374
|
|
Depreciation and
amortization
|
596
|
596
|
|
Income
taxes
|
(30)
|
(27)
|
|
EBITDA
|
735
|
785
|
|
Equity investment
adjustments:
|
|
|
|
Equity in losses
of affiliates
|
5
|
5
|
|
Pro rata Adjusted
EBITDA of equity investments
|
24
|
24
|
|
Consolidated
partnership adjustments:
|
|
|
|
Pro rata Adjusted
EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(14)
|
(14)
|
|
Adjusted EBITDA
|
$ 750
|
$ 800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2010
Forecast
|
|
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
Net loss
|
$ (205)
|
$ (158)
|
|
Less: Net loss attributable to
non-controlling interests
|
4
|
3
|
|
Dividends on
preferred stock
|
(9)
|
(9)
|
|
Net loss available to common
stockholders
|
(210)
|
(164)
|
|
Adjustments:
|
|
|
|
Depreciation and
amortization
|
595
|
595
|
|
Partnership
adjustments
|
4
|
5
|
|
FFO of
non-controlling interests of Host LP
|
(6)
|
(7)
|
|
Adjustment for dilutive
securities:
|
|
|
|
Assuming
conversion of exchangeable senior debentures
|
-
|
13
|
|
Diluted FFO
|
$ 383
|
$ 442
|
|
|
|
|
|
Weighted average diluted shares
(EPS)
|
654.5
|
654.5
|
|
Weighted average diluted shares
(FFO)
|
655.4
|
676.2
|
|
Loss per diluted share
|
$ (.32)
|
$ (.25)
|
|
FFO per diluted share
|
$
.58
|
$
.65
|
|
|
|
|
|
|
|
(a) The full year 2010 forecasts
were based on the below assumptions:
|
|
- Comparable hotel RevPAR will
increase 1% to 4% for the low and high ends of the forecasted
range, respectively.
|
|
- Comparable hotel adjusted
operating profit margins will range from a decrease of 125 basis
points to 50 basis points for the low and high ends of the
forecasted range, respectively.
|
|
- We expect to spend
approximately $300 million to $340 million on capital expenditures
in 2010.
|
|
- Costs associated with debt
extinguishment and an additional accrual for the potential
litigation loss related to the San Antonio Marriott Rivercenter
will decrease earnings and FFO per share by $.02 to $.03.
|
|
- Interest expense includes
approximately $48 million related to non-cash interest expense for
exchangeable senior debentures, amortization of original issue
discounts and deferred financing fees.
|
|
- The above results do not
reflect any acquisitions or dispositions (other than The
Ritz-Carlton, Dearborn, which is classified as held-for-sale at
March 26, 2010) for the remainder of 2010.
|
|
For a discussion of additional
items that may affect forecasted results see Notes to the Financial
Information.
|
|
|
|
|
|
|
HOST HOTELS &
RESORTS, INC.
|
|
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
|
|
for Full Year 2010
Forecasts (a)
|
|
(unaudited, in
millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
|
|
Full Year
2010
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
Operating profit margin under GAAP
(b)
|
3.3%
|
4.5%
|
|
Comparable hotel adjusted operating
profit margin (c)
|
20.0%
|
20.8%
|
|
|
|
|
|
Comparable hotel sales
|
|
|
|
Room
|
$
2,546
|
$
2,622
|
|
Other
|
1,542
|
1,589
|
|
Comparable hotel
sales (d)
|
4,088
|
4,211
|
|
Comparable hotel expenses
|
|
|
|
Rooms and other
departmental costs
|
1,818
|
1,874
|
|
Management fees,
ground rent and other costs
|
1,452
|
1,463
|
|
Comparable hotel
expenses (e)
|
3,270
|
3,337
|
|
Comparable hotel adjusted operating
profit
|
818
|
874
|
|
Non-comparable hotel results,
net
|
3
|
3
|
|
Office buildings and select service
properties, net
|
2
|
2
|
|
Depreciation and amortization
|
(596)
|
(596)
|
|
Corporate and other
expenses
|
(89)
|
(89)
|
|
Operating
profit
|
$
138
|
$
194
|
|
|
|
|
|
|
|
(a) Forecasted comparable hotel
results include 109 hotels that we have assumed will be classified
as comparable as of December 31, 2010. No assurances can be made as
to the hotels that will be in the comparable hotel set for 2010.
Also, see the notes to the "Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Funds From Operations per Diluted Share For
Full Year 2010 Forecasts" for other forecast assumptions.
|
|
(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.
|
|
(d) The reconciliation of
forecast total revenues to the forecast comparable hotel sales is
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Full Year
2010
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
|
Revenues
|
$
4,148
|
$
4,271
|
|
|
Non-comparable hotel sales
|
(21)
|
(21)
|
|
|
Hotel sales for the property for which
we record rental income, net
|
47
|
47
|
|
|
Rental income for office buildings and
select service hotels
|
(86)
|
(86)
|
|
|
Comparable hotel
sales
|
$
4,088
|
$
4,211
|
|
|
|
|
|
|
|
(e)The reconciliation of forecast
operating costs and expenses to the comparable hotel expenses is as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
Full Year
2010
|
|
|
|
|
Low-end
|
High-end
|
|
|
|
|
of
range
|
of
range
|
|
|
Operating costs and
expenses
|
$
4,010
|
$
4,077
|
|
|
Non-comparable hotel
expenses
|
(18)
|
(18)
|
|
|
Hotel expenses for the property for
which we record rental income
|
47
|
47
|
|
|
Rent expense for office buildings and
select service hotels
|
(84)
|
(84)
|
|
|
Depreciation and
amortization
|
(596)
|
(596)
|
|
|
Corporate and other
expenses
|
(89)
|
(89)
|
|
|
Comparable hotel
expenses
|
$
3,270
|
$
3,337
|
|
|
|
|
|
|
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
FORECASTS
Our forecast of earnings per diluted share, FFO per diluted
share, EBITDA, Adjusted EBITDA and comparable hotel adjusted
operating profit margins are forward-looking statements and are not
guarantees of future performance and involve known and unknown
risks, uncertainties and other factors which may cause actual
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 not be materially different. Risks that may
affect these assumptions and forecasts include the following: the
level of RevPAR and margin growth may change significantly and the
continued economic uncertainty and volatility in the credit markets
have created limited visibility for advance bookings for both
transient and group business and, accordingly, our ability to
predict operating results; 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 our common stock
may change based on market conditions; and other risks and
uncertainties associated with our business described herein and in
our filings with the SEC.
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 2010
ended on March 26, 2010, and the first quarter of 2009 ended
on March 27, 2009. As a result, the first quarter of 2010
included 85 days of operations, while the first quarter 2009
included 86 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 will
typically 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 2010 reflect 12 weeks of
operations for the period from January 2, 2010 to
March 26, 2010 for our Marriott-managed hotels and results
from January 1, 2010 to February 28, 2010 for operations
of all other hotels which report results on a monthly basis.
- Hotel results for the first quarter of 2009 reflect 12 weeks of
operations for the period from January 3, 2009 to
March 27, 2009 for our Marriott-managed hotels and results
from January 1, 2009 to February 28, 2009 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. All
of our hotels that we owned as of March 26, 2010, have been
classified as comparable hotels.
The operating results of one hotel we disposed of as of
March 26, 2010 and the six hotels we disposed of in 2009 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, (ii) EBITDA, (iii) Adjusted
EBITDA and (iv) Comparable Hotel Operating Results. 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
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 and is a relevant measure in calculating
certain credit ratios. 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 deduct the
non-controlling partners' pro rata share of the Adjusted EBITDA of
our consolidated partnerships as this reflects the non-controlling
owners' interest in the EBITDA of our consolidated partnerships.
The pro rata Adjusted EBITDA of non-controlling partners is defined
as the EBITDA of our consolidated partnerships adjusted for any
gains or losses on property transactions multiplied by the
non-controlling 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.
SOURCE Host Hotels & Resorts, Inc.