BETHESDA, Md., Feb. 15, 2011 /PRNewswire/ -- Host Hotels &
Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate
investment trust (REIT), today announced results of operations for
the fourth quarter and full year ended December 31, 2010.
(Logo: http://photos.prnewswire.com/prnh/20060417/HOSTLOGO )
Highlights
- Comparable hotel RevPAR increased 6.2% for the quarter and 5.8%
for full year 2010.
- The Company recently entered into an agreement to acquire the
1,625-room Manchester Grand Hyatt San Diego Hotel for $570 million and, subsequent to year end, the
Company entered into an agreement to acquire the 775-room New York
Helmsley Hotel for $313.5 million.
Fourth Quarter and Full Year Results
- Hotel revenues for our owned hotels increased
$116 million, or 9%, for the quarter and $201 million, or
5%, for full year 2010. Total revenue increased $168 million,
or 13%, for the fourth quarter and $293 million, or 7%, for
full year 2010. Approximately 31% of the total revenue increase for
the quarter and full year was due to the inclusion of
property-level revenues for 71 leased, select-service hotels for
which the Company previously recorded rental income due to the
termination of two subleases in July
2010. See the notes to the consolidated statements of
operations for further information.
- Net loss was $6 million, or $.01 per diluted share, for the quarter compared
to a net loss of $72 million, or $.12 per diluted share, for the fourth quarter of
2009. For full year 2010, the net loss was $132 million, or
$.21 per diluted share, compared to a
net loss of $258 million, or $.45 per diluted share, for full year 2009.
The Company's operating results include transactions such as
gains or losses on debt extinguishments, impairment charges,
litigation costs, gains on dispositions and acquisition costs that
can significantly affect earnings, FFO per diluted share and
Adjusted EBITDA. The net effect of these items was a decrease to
earnings per diluted share of $.02
and $.06 for the quarter and full
year 2010, respectively, and a decrease of $.07 and $.23 in
earnings per diluted share for the quarter and full year 2009,
respectively.
- FFO increased 57% to $177 million, or $.26 per diluted share, for the quarter. The net
effect of the transactions noted above decreased FFO per diluted
share by $.02 and $.06 for the fourth quarter of 2010 and 2009,
respectively. For full year 2010, FFO increased 48% to
$452 million, and FFO per diluted share increased 33% to
$.68 per diluted share. The net
effect of the above transactions decreased FFO per diluted share by
$.06 and $.28 for full year 2010 and 2009,
respectively.
- Adjusted EBITDA, which is Earnings before Interest Expense,
Income Taxes, Depreciation, Amortization and other items increased
25% to $286 million for the quarter and 3% to
$824 million for full year 2010. Costs associated with
successful acquisitions, which are now required to be expensed,
decreased Adjusted EBITDA by $6 million and $10 million
for the quarter and full year 2010, respectively. For 2009,
litigation costs decreased Adjusted EBITDA by $41 million for
both the quarter and full year.
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, 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 increased 6.2% in the fourth quarter as
a result of the improvement in average room rate of 2.8% combined
with an increase in occupancy of 2.2 percentage points. For full
year 2010, comparable hotel RevPAR increased 5.8%, primarily as a
result of the improvement in occupancy of 3.8 percentage points,
along with an increase in average room rate of 0.1%. Comparable
hotel adjusted operating profit margins for the quarter increased
110 basis points. For full year 2010, comparable hotel operating
profit margins increased 20 basis points.
Acquisitions
Subsequent to year end, the Company entered into an agreement to
acquire the 775-room New York Helmsley Hotel in March 2011 for $313.5 million. The hotel is located in the
heart of midtown Manhattan, and
benefits from its oversized guest rooms and close proximity to
Grand Central Station, the United Nations Headquarters, the Midtown
Tunnel and the Chrysler Building. After our acquisition, the
property will be operated by Starwood and, upon the completion of
renovations to rooms and meeting spaces, will be converted to the
Westin brand in 2012.
The Company also entered into an agreement to acquire the entity
that owns the 1,625-room Manchester Grand Hyatt San Diego Hotel,
and certain related rights, for $570
million. The hotel has a premier waterfront location
adjacent to the city's Convention Center, central business
district, three miles from the San
Diego International Airport and within walking distance of
Seaport Village, the Gaslamp Quarter and Petco Park. The
hotel has approximately 125,000 net square feet of meeting space,
including a 34,000 square foot finished exhibit hall, additional
ballrooms of 30,000 and 25,000 net square feet, a junior ballroom
of 10,000 net square feet, and 41 breakout rooms. The hotel
also has a 10,000 square foot spa and six food and beverage
outlets. The transaction will be comprised of a combination
of cash, including the repayment of existing loans, and the
issuance by the Company of common and preferred operating
partnership units. The transaction is expected to close in
March 2011, and is subject to various
closing conditions, including approval by the San Diego Unified
Port District.
The Company also expects to complete the acquisition of a
portfolio of seven midscale and upscale hotels in New Zealand in February for approximately
$145 million, including
$80 million of mortgage debt. The properties are located in
cities that represent New
Zealand's main commercial, political and tourist centers:
Auckland, Queenstown,
Christchurch and Wellington. The hotels will be operated by
Accor under the ibis and Novotel brands.
Repositioning and Return on Investment Expenditures
During 2010, the Company completed $114 million of
repositioning and return on investment (ROI) expenditures. These
projects are designed to improve operating performance, as well as
to take advantage of changing market conditions and favorable
locations of the Company's properties to enhance customer
experience and profitability. For 2010, repositioning and ROI
expenditures included the following projects:
- San Diego Marriott Hotel & Marina – an extensive,
multi-year $190 million project to
reposition and renovate the hotel including all 1,360 guest rooms,
the pool and fitness center, as well as the expansion and
development of new meeting space and an exhibit hall;
- Westin Kierland Resort & Spa – the development of a new
21,500 square foot ballroom and 4,500 square foot outdoor venue
space; and
- Miami Marriott Biscayne Bay –
the renovation of the lobby and development of a three-meal
restaurant, as well as the conversion of underutilized restaurant
space into 3,900 square feet of meeting space.
Renewal and Replacement Expenditures
The Company also invested approximately $195 million in
2010 in renewal and replacement expenditures designed to ensure
that the high-quality standards of both the Company and its
operators are maintained. Major renovation projects that were
underway during the fourth quarter include: 450 rooms at the
Fairmont Kea Lani, 98,700 square feet of meeting space at the
Sheraton Boston, 87,500 square feet of meeting space at the
Philadelphia Marriott Downtown, 1,001 rooms at the San Antonio
Marriott Rivercenter and 36,000 square feet of meeting space at the
Hyatt Regency Washington on Capitol Hill.
Balance Sheet
During the fourth quarter, the Company continued to execute on
its strategic goal of strengthening its balance sheet by reducing
leverage and balancing debt maturities through the following
transactions:
- Issuance of $500 million of 6%
Series U senior notes maturing in 2020 and using a portion of the
proceeds to redeem $250 million of 7 1/8% Series K senior
notes due 2013;
- Issuance of 15.1 million shares of common stock at an average
price of $16.52 for net proceeds of
approximately $247.5 million.
These sales were made in "at-the-market" offerings pursuant
to a Sales Agency Financing Agreement with BNY Mellon Capital
Markets, LLC. There is approximately $100
million of capacity remaining under the agreement;
- Defeasance of the $115 million
mortgage loan assumed in conjunction with the acquisition of the W
Union Square, New York;
- Repayment of the $71 million
mortgage loan on the JW Marriott, Desert Springs; and,
- Extension of the mortgage on the Orlando World Center Marriott
by two years to July 1, 2013. In conjunction with the
extension, the Company fixed the interest rate on the loan at 4.75%
and repaid $54 million of the $300 million in principal.
As of December 31, 2010, the Company had over $1.1 billion of cash and cash equivalents
and $542 million of available capacity under its credit
facility.
Dividend
On January 18, 2011, the Company paid a fourth quarter
dividend of $0.01 per share on its
common stock. The Company's policy on common dividends is generally
to distribute, over time, 100% of its taxable income. Based
on the current guidance for 2011, the Company intends to declare,
subject to approval by the Company's board of directors, a
quarterly dividend of $0.02 per share
in the first quarter, and expects to declare an aggregate dividend
in 2011 of between $0.10 and $0.15
per share.
Expected Acquisitions, Investments and Operating Performance
for 2011
The discussion below assumes the Company will complete the
acquisitions of the New York Helmsley Hotel, the Manchester Grand
Hyatt San Diego and the New
Zealand portfolio of seven hotels. While the Company is
actively pursuing several other transactions, no further
acquisitions or dispositions are assumed for 2011.
The Company expects that its investment in ROI and repositioning
expenditures for 2011 will total approximately $290 million to $310 million, including
$190 million of projects at the following properties:
- Sheraton New York Hotel & Towers – the complete renovation
of all 1,756 rooms, as well as major mechanical upgrades to the
heating and cooling system;
- Atlanta Marriott Perimeter Center – complete repositioning of
the hotel including rooms renovation, lobby enhancements,
mechanical systems upgrades, parking garage and exterior
enhancements;
- Chicago Marriott O'Hare – complete repositioning of the hotel
including rooms renovation, new meeting space and the creation of a
new great room, food and beverage platform and lobby;
- San Diego Marriott Hotel & Marina – continuation of the
extensive renovation and repositioning project begun in 2010;
and,
- Sheraton Indianapolis –
renovation of rooms, lobby, fitness center, bar and restaurant, as
well as the conversion of an existing tower into 129 managed
apartments.
The Company anticipates its operating performance for 2011 will
be within the following ranges:
- Comparable hotel RevPAR will increase 6% to 8%;
- Operating profit margins under GAAP will increase approximately
220 basis points to 280 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 100 basis points to 140 basis points.
Outlook 2011
Based upon the estimates and expectations noted above, the
Company's full year 2011 guidance is as follows:
- earnings per diluted share should be approximately $.02 to $.07;
- net income should be approximately $19 million to
$54 million;
- FFO per diluted share should be approximately $.87 to $.92 (including the effect of a reduction
of $.01 due to debt extinguishment
costs and pursuit costs for completed acquisitions); and
- Adjusted EBITDA should be approximately $1,000 million to $1,035 million.
See the 2011 Forecast Schedules and Notes to Financial
Information for other assumptions used in the forecasts and items
that may affect forecasted results. Effective January 1, 2011, the Company has modified its
definition of Adjusted EBITDA to exclude pursuit costs for
completed acquisitions as these costs are now required to be
expensed. Prior to 2009, such costs were capitalized and
depreciated over the life of the acquisitions. See the Notes to
Financial Information for more information on this change.
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 104 properties in the United States and nine international
properties totaling approximately 62,000 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®, Le Meridien®, 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 include forecast results and 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 annual report on Form 10K and quarterly reports on
Form 10-Q filed with the SEC. The completion of the acquisition of
the New York Helmsley Hotel, the Manchester Grand Hyatt San Diego
and the New Zealand portfolio are
subject to numerous closing conditions and there can be no
assurances that the transactions will be completed. These closing
conditions include, but are not limited to: the accuracy of the
representations and warranties and compliance with covenants, the
absence of material events or conditions, other customary closing
conditions and, for the Manchester Grand Hyatt, approval by the San
Diego Unified Port District. 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
February 15, 2011, 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. (Host LP), of which we
are the sole general partner. When distinguishing between Host and
Host LP, the primary difference is approximately 1.6% of the
partnership interests in Host LP held by outside partners as of
December 31, 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)
|
|
|
|
|
|
|
|
|
|
|
December
31,
2010
|
December
31,
2009
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
$
10,514
|
$
10,231
|
|
|
Assets held for sale
|
-
|
8
|
|
|
Due from managers
|
45
|
29
|
|
|
Investments in
affiliates
|
148
|
153
|
|
|
Deferred financing costs,
net
|
44
|
49
|
|
|
Furniture, fixtures and
equipment replacement fund
|
152
|
124
|
|
|
Other
|
354
|
266
|
|
|
Restricted cash
|
41
|
53
|
|
|
Cash and cash
equivalents
|
1,113
|
1,642
|
|
|
Total assets
|
$
12,411
|
$
12,555
|
|
|
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
Senior notes, including
$1,156 million and $1,123 million, respectively, net of
discount, of Exchangeable Senior Debentures (b)
|
$
4,249
|
$
4,534
|
|
|
Credit facility
|
58
|
-
|
|
|
Mortgage debt
|
1,025
|
1,217
|
|
|
Other
|
145
|
86
|
|
|
Total debt
|
5,477
|
5,837
|
|
|
Accounts payable and accrued
expenses
|
208
|
174
|
|
|
Other
|
203
|
194
|
|
|
Total liabilities
|
5,888
|
6,205
|
|
|
|
|
|
|
Non-controlling interests—Host
Hotels & Resorts, L.P.
|
191
|
139
|
|
|
|
|
|
|
Host Hotels & Resorts, Inc.
stockholders’ equity:
|
|
|
|
|
Cumulative redeemable
preferred stock (liquidation preference $0 and $100 million,
respectively) 50 million shares authorized; 0 and
4 million shares issued and outstanding,
respectively
|
-
|
97
|
|
|
Common stock, par value
$.01, 1,050 million shares authorized; 675.6 million
shares and 646.3 million shares issued and outstanding,
respectively
|
7
|
6
|
|
|
Additional paid-in
capital
|
7,236
|
6,875
|
|
|
Accumulated other
comprehensive income
|
25
|
12
|
|
|
Deficit
|
(965)
|
(801)
|
|
|
Total equity of Host
Hotels & Resorts, Inc. stockholders
|
6,303
|
6,189
|
|
|
Non-controlling interests—other
consolidated partnerships
|
29
|
22
|
|
|
Total equity
|
6,332
|
6,211
|
|
|
Total liabilities,
non-controlling interests and equity
|
$
12,411
|
$
12,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Our consolidated
balance sheet as of December 31, 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 at December
31, 2010.
|
|
|
|
HOST HOTELS
& RESORTS, INC.
|
|
|
|
|
Consolidated
Statements of Operations (a)
|
|
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
Revenues
|
|
|
|
|
|
|
Rooms
|
$ 883
|
$ 795
|
$2,668
|
$2,490
|
|
|
Food and
beverage
|
444
|
414
|
1,293
|
1,236
|
|
|
Other
|
85
|
87
|
277
|
311
|
|
|
Total hotel revenues for
owned hotels
|
1,412
|
1,296
|
4,238
|
4,037
|
|
|
Other revenues (b)
|
82
|
30
|
199
|
107
|
|
|
Total revenues
|
1,494
|
1,326
|
4,437
|
4,144
|
|
|
Expenses
|
|
|
|
|
|
|
Rooms
|
239
|
218
|
736
|
683
|
|
|
Food and
beverage
|
326
|
309
|
967
|
935
|
|
|
Other departmental and
support expenses
|
376
|
348
|
1,154
|
1,102
|
|
|
Management fees
|
60
|
53
|
171
|
158
|
|
|
Other property-level
expenses (b)
|
182
|
116
|
489
|
386
|
|
|
Depreciation and
amortization (c)
|
183
|
185
|
592
|
615
|
|
|
Corporate and other
expenses
|
40
|
64
|
108
|
116
|
|
|
Gain on insurance
settlement
|
(3)
|
-
|
(3)
|
-
|
|
|
Total operating costs and
expenses
|
1,403
|
1,293
|
4,214
|
3,995
|
|
|
Operating profit
|
91
|
33
|
223
|
149
|
|
|
Interest income
|
5
|
1
|
8
|
7
|
|
|
Interest expense (d)
|
(116)
|
(115)
|
(384)
|
(379)
|
|
|
Net gains on property
transactions and other
|
1
|
1
|
1
|
14
|
|
|
Gain (loss) on foreign currency
transactions and derivatives
|
-
|
-
|
(6)
|
5
|
|
|
Equity in earnings (losses) of
affiliates
|
5
|
5
|
(1)
|
(32)
|
|
|
Loss before income
taxes
|
(14)
|
(75)
|
(159)
|
(236)
|
|
|
Benefit for income
taxes
|
10
|
10
|
31
|
39
|
|
|
Loss from continuing
operations
|
(4)
|
(65)
|
(128)
|
(197)
|
|
|
Loss from discontinued
operations
|
(2)
|
(7)
|
(4)
|
(61)
|
|
|
Net loss
|
(6)
|
(72)
|
(132)
|
(258)
|
|
|
Less: Net loss attributable to
non-controlling interests
|
-
|
1
|
2
|
6
|
|
|
Net loss attributable to Host
Hotels & Resorts, Inc.
|
(6)
|
(71)
|
(130)
|
(252)
|
|
|
Less: Dividends on preferred
stock
|
-
|
(2)
|
(4)
|
(9)
|
|
|
Issuance costs of redeemed
preferred stock
|
-
|
-
|
(4)
|
-
|
|
|
Net loss available to common
stockholders
|
$
(6)
|
$
(73)
|
$
(138)
|
$
(261)
|
|
|
Basic and diluted loss per
common share:
|
|
|
|
|
|
|
Continuing
operations
|
$ (.01)
|
$ (.11)
|
$ (.20)
|
$ (.34)
|
|
|
Discontinued
operations
|
-
|
(.01)
|
(.01)
|
(.11)
|
|
|
Basic and diluted loss per
common share
|
$
(.01)
|
$
(.12)
|
$
(.21)
|
$
(.45)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) As a result of the
terminated subleases for the 71 hotels leased from Hospitality
Properties Trust (HPT), we recorded $74 million of revenues and $87
million of expenses during the fourth quarter. For full year 2010,
we recorded $167 million of revenues and $180 million of expenses.
By comparison, in 2009, we only recorded rental income and expense
for the hotels. We recorded $25 million of rental income and $25
million of rental expense in the fourth quarter 2009 and $79
million of rental income and $80 million of rental expense for the
full year.
|
|
|
(c) For full year 2009, we
recorded non-cash impairment charges totaling $131 million based on
the difference between the discounted cash flows and the carrying
amount. Of these impairment charges, $20 million has been included
in depreciation expense, $77 million has been included in
discontinued operations and $34 million included in equity in
earnings (losses) of affiliates.
|
|
|
(d) Interest expense
includes the following items:
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
Non-cash interest for
exchangeable debentures
|
$ 9
|
$ 8
|
$ 32
|
$ 27
|
|
|
|
Loss (gain) on debt
extinguishments
|
6
|
(1)
|
21
|
(9)
|
|
|
|
Total
|
$
15
|
$
7
|
$
53
|
$
18
|
|
|
|
|
|
|
|
|
|
Earnings per
Common Share
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
|
|
Net loss
|
$ (6)
|
$ (72)
|
$ (132)
|
$ (258)
|
|
|
Net loss attributable to
non-controlling interests
|
-
|
1
|
2
|
6
|
|
|
Dividends on preferred
stock
|
-
|
(2)
|
(4)
|
(9)
|
|
|
Issuance costs of redeemed
preferred stock (a)
|
-
|
-
|
(4)
|
-
|
|
|
Loss available to common
stockholders
|
(6)
|
(73)
|
(138)
|
(261)
|
|
|
Assuming deduction of gain
recognized for the repurchase of the 2004 Debentures (b)
|
-
|
-
|
-
|
(2)
|
|
|
Diluted loss available to common
stockholders
|
$
(6)
|
$
(73)
|
$
(138)
|
$
(263)
|
|
|
|
|
|
|
|
|
Basic weighted average shares
outstanding
|
666.1
|
626.5
|
656.1
|
586.3
|
|
|
Diluted weighted average shares
outstanding (c)
|
666.1
|
626.5
|
656.1
|
587.2
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
(d)(e)
|
$ (.01)
|
$ (.12)
|
$ (.21)
|
$ (.45)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents the original
issuance costs associated with the Class E preferred stock, which
were redeemed during the second quarter of 2010.
|
|
|
(b) During 2009, we repurchased
$75 million face amount of our 3 1/4% Exchangeable Senior
Debentures ("the 2004 Debentures") with a carrying value of $72
million for $69 million. The associated adjustments to dilutive
earnings per common share include the $3 million gain on
repurchase, net of interest expense on the repurchased debentures.
|
|
|
(c) 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.
|
|
|
(d) 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.
|
|
|
(e) See notes to the
"Reconciliation of Net Loss 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
December 31, 2010
|
Quarter
ended December 31, 2010
|
Quarter
ended December 31, 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
|
26
|
14,581
|
$ 162.91
|
68.8%
|
$112.08
|
$ 159.44
|
64.9%
|
$103.48
|
8.3%
|
|
|
Mid-Atlantic
|
10
|
8,328
|
263.35
|
80.1
|
211.01
|
250.48
|
81.7
|
204.60
|
3.1
|
|
|
North Central
|
13
|
5,897
|
141.94
|
62.9
|
89.22
|
134.89
|
62.5
|
84.32
|
5.8
|
|
|
South Central
|
9
|
5,687
|
142.54
|
63.8
|
90.93
|
142.10
|
61.6
|
87.59
|
3.8
|
|
|
Florida
|
9
|
5,677
|
162.47
|
62.0
|
100.71
|
166.62
|
58.3
|
97.18
|
3.6
|
|
|
DC Metro
|
12
|
5,416
|
199.44
|
69.9
|
139.39
|
189.80
|
69.6
|
132.06
|
5.6
|
|
|
Atlanta
|
8
|
4,253
|
158.34
|
63.6
|
100.74
|
150.86
|
54.5
|
82.26
|
22.5
|
|
|
New England
|
7
|
3,924
|
178.36
|
67.6
|
120.49
|
171.10
|
68.9
|
117.81
|
2.3
|
|
|
Mountain
|
7
|
2,889
|
150.63
|
60.2
|
90.68
|
148.35
|
58.9
|
87.41
|
3.7
|
|
|
International
|
7
|
2,473
|
165.09
|
66.8
|
110.34
|
153.03
|
62.9
|
96.30
|
14.6
|
|
|
All Regions
|
108
|
59,125
|
179.56
|
67.8
|
121.78
|
174.63
|
65.7
|
114.68
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2010
|
Year ended
December 31, 2010
|
Year ended
December 31, 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
|
26
|
14,581
|
$ 161.38
|
71.6%
|
$115.55
|
$ 166.08
|
67.1%
|
$111.38
|
3.7%
|
|
|
Mid-Atlantic
|
10
|
8,328
|
225.63
|
79.9
|
180.38
|
219.22
|
76.4
|
167.47
|
7.7
|
|
|
North Central
|
13
|
5,897
|
133.87
|
63.9
|
85.52
|
130.80
|
61.8
|
80.85
|
5.8
|
|
|
South Central
|
9
|
5,687
|
142.83
|
67.1
|
95.80
|
143.88
|
63.8
|
91.83
|
4.3
|
|
|
Florida
|
9
|
5,677
|
178.23
|
68.7
|
122.37
|
182.88
|
62.9
|
115.04
|
6.4
|
|
|
DC Metro
|
12
|
5,416
|
191.55
|
74.0
|
141.83
|
190.52
|
73.6
|
140.13
|
1.2
|
|
|
Atlanta
|
8
|
4,253
|
152.04
|
63.8
|
96.94
|
152.32
|
58.2
|
88.63
|
9.4
|
|
|
New England
|
7
|
3,924
|
172.19
|
69.6
|
119.83
|
165.77
|
65.2
|
108.10
|
10.8
|
|
|
Mountain
|
7
|
2,889
|
149.32
|
63.2
|
94.30
|
157.85
|
59.4
|
93.69
|
0.7
|
|
|
International
|
7
|
2,473
|
157.91
|
65.7
|
103.80
|
143.29
|
61.6
|
88.21
|
17.7
|
|
|
All Regions
|
108
|
59,125
|
171.43
|
70.2
|
120.26
|
171.25
|
66.4
|
113.66
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
Hotels by Property Type (a)
|
|
|
|
|
|
|
|
|
As of
December 31, 2010
|
Quarter
ended December 31, 2010
|
Quarter
ended December 31, 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
|
52
|
33,123
|
$ 201.30
|
70.6%
|
$142.02
|
$ 193.81
|
68.8%
|
$133.41
|
6.5%
|
|
|
Suburban
|
29
|
10,964
|
139.59
|
64.2
|
89.55
|
135.45
|
61.1
|
82.74
|
8.2
|
|
|
Resort/Conference
|
13
|
8,082
|
192.98
|
58.8
|
113.38
|
199.44
|
55.7
|
110.99
|
2.2
|
|
|
Airport
|
14
|
6,956
|
118.83
|
71.1
|
84.53
|
113.27
|
69.5
|
78.67
|
7.4
|
|
|
All Types
|
108
|
59,125
|
179.56
|
67.8
|
121.78
|
174.63
|
65.7
|
114.68
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2010
|
Year ended
December 31, 2010
|
Year ended
December 31, 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
|
52
|
33,123
|
$ 185.53
|
72.5%
|
$134.50
|
$ 182.59
|
69.0%
|
$125.90
|
6.8%
|
|
|
Suburban
|
29
|
10,964
|
138.29
|
65.6
|
90.73
|
139.71
|
61.1
|
85.32
|
6.3
|
|
|
Resort/Conference
|
13
|
8,082
|
204.83
|
65.3
|
133.76
|
215.19
|
61.1
|
131.57
|
1.7
|
|
|
Airport
|
14
|
6,956
|
115.98
|
71.8
|
83.30
|
115.61
|
68.5
|
79.18
|
5.2
|
|
|
All Types
|
108
|
59,125
|
171.43
|
70.2
|
120.26
|
171.25
|
66.4
|
113.66
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 December 31,
|
Year ended December 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
Number of hotels
|
108
|
108
|
108
|
108
|
|
|
Number of rooms
|
59,125
|
59,125
|
59,125
|
59,125
|
|
|
Percent change in comparable
hotel RevPAR
|
6.2%
|
-
|
5.8%
|
-
|
|
|
Operating profit margin under
GAAP (b)
|
6.1%
|
2.5%
|
5.0%
|
3.6%
|
|
|
Comparable hotel adjusted
operating profit margin (b)
|
22.3%
|
21.2%
|
21.3%
|
21.1%
|
|
|
|
|
|
|
|
|
Comparable hotel
revenues
|
|
|
|
|
|
|
Room
|
$ 835
|
$ 786
|
$ 2,591
|
$ 2,448
|
|
|
Food and beverage
|
433
|
413
|
1,285
|
1,230
|
|
|
Other (c)
|
85
|
86
|
273
|
304
|
|
|
Comparable hotel revenues
(d)
|
1,353
|
1,285
|
4,149
|
3,982
|
|
|
Comparable hotel
expenses
|
|
|
|
|
|
|
Room
|
228
|
216
|
717
|
674
|
|
|
Food and beverage
|
318
|
308
|
957
|
929
|
|
|
Other
|
49
|
48
|
156
|
155
|
|
|
Management fees, ground rent and
other costs
|
456
|
440
|
1,437
|
1,386
|
|
|
Comparable hotel expenses
(e)
|
1,051
|
1,012
|
3,267
|
3,144
|
|
|
Comparable hotel adjusted
operating profit
|
302
|
273
|
882
|
838
|
|
|
Non-comparable hotel results,
net (f)
|
23
|
8
|
52
|
41
|
|
|
Income (loss) from hotels leased
from HPT and office buildings, net (g)
|
(11)
|
1
|
(11)
|
1
|
|
|
Depreciation and amortization
|
(183)
|
(185)
|
(592)
|
(615)
|
|
|
Corporate and other expenses
|
(40)
|
(64)
|
(108)
|
(116)
|
|
|
Operating profit
|
$
91
|
$
33
|
$
223
|
$
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See the Notes to
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) Other revenues for
2009 include incremental cancellation and attrition fees of $4
million and $37 million for the fourth quarter and full year,
respectively, as compared to 2010. The incremental attrition and
cancellation fees adversely affected 2010 comparable hotel adjusted
operating profit margins by 20 basis points and 65 basis points for
the quarter and full year, respectively, when compared to 2009.
|
|
|
(d) The reconciliation of
total revenues per the consolidated statements of operations to the
comparable hotel revenues is as follows:
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
Revenues per the consolidated
statements of operations
|
$ 1,494
|
$ 1,326
|
$ 4,437
|
$ 4,144
|
|
|
Non-comparable hotel
revenues
|
(81)
|
(32)
|
(162)
|
(113)
|
|
|
Business interruption issuance
proceeds for comparable hotels
|
3
|
-
|
3
|
-
|
|
|
Hotel revenues for the property
for which we record rental income, net
|
13
|
12
|
48
|
42
|
|
|
Income for hotels leased from
HPT and office buildings
|
(76)
|
(26)
|
(172)
|
(84)
|
|
|
Adjustment for hotel revenues
for comparable hotels to reflect Marriott’s fiscal year for
Marriott-managed hotels
|
-
|
5
|
(5)
|
(7)
|
|
|
Comparable hotel
revenues
|
$
1,353
|
$
1,285
|
$
4,149
|
$
3,982
|
|
|
|
|
|
|
|
|
|
|
(e) The reconciliation of
operating costs per the consolidated statements of
operations to the comparable hotel expenses is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
Operating costs and expenses per
the consolidated statements of operations
|
$ 1,403
|
$ 1,293
|
$ 4,214
|
$ 3,995
|
|
|
Non-comparable hotel
expenses
|
(58)
|
(23)
|
(110)
|
(75)
|
|
|
Hotel expenses for the property
for which we record rental income
|
13
|
12
|
48
|
42
|
|
|
Expense for hotels leased from
HPT and office buildings
|
(87)
|
(25)
|
(183)
|
(83)
|
|
|
Adjustment for hotel expenses
for comparable hotels to reflect Marriott’s fiscal year for
Marriott-managed hotels
|
-
|
4
|
(5)
|
(4)
|
|
|
Depreciation and
amortization
|
(183)
|
(185)
|
(592)
|
(615)
|
|
|
Corporate and other
expenses
|
(40)
|
(64)
|
(108)
|
(116)
|
|
|
Gain on insurance
settlement
|
3
|
-
|
3
|
-
|
|
|
Comparable hotel
expenses
|
$
1,051
|
$
1,012
|
$
3,267
|
$
3,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) 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.
|
|
|
(g) Represents income less
expense for hotels leased from HPT and office buildings.
|
|
|
|
HOST HOTELS
& RESORTS, INC.
|
|
|
Other
Financial and Operating Data
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
2010
|
December
31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common shares
outstanding
|
675.6
|
646.3
|
|
|
Common shares outstanding
assuming conversion of minority partner OP Units
(a)
|
686.3
|
658.2
|
|
|
Preferred OP Units
outstanding
|
.02
|
.02
|
|
|
Class E Preferred shares
outstanding (b)
|
-
|
4.0
|
|
|
|
|
|
|
Security pricing
|
|
|
|
|
Common (c)
|
$
17.87
|
$
11.67
|
|
|
Class E Preferred
(b)(c)
|
$
-
|
$
25.23
|
|
|
3 1/4% Exchangeable Senior
Debentures (d)
|
$
1,179.4
|
$
1,002.8
|
|
|
2 5/8% Exchangeable Senior
Debentures (d)
|
$
991.9
|
$
942.1
|
|
|
2 1/2% Exchangeable Senior
Debentures (d)
|
$
1,416.6
|
$
1,062.8
|
|
|
|
|
|
|
Dividends declared per share for
calendar year
|
|
|
|
|
Common (e)(f)
|
$
.04
|
$
.25
|
|
|
Class E Preferred (b)
|
$
.95
|
$
2.22
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes
|
Rate
|
Maturity date
|
|
|
|
|
Series K
|
7 1/8%
|
11/2013
|
$
250
|
$
725
|
|
|
Series M
|
7%
|
8/2012
|
-
|
344
|
|
|
Series O
|
6 3/8%
|
3/2015
|
650
|
650
|
|
|
Series Q
|
6 3/4%
|
6/2016
|
800
|
800
|
|
|
Series S
|
6 7/8%
|
11/2014
|
498
|
498
|
|
|
Series T
|
9%
|
5/2017
|
388
|
387
|
|
|
Series U (g)
|
6%
|
11/2020
|
500
|
-
|
|
|
Exchangeable senior
debentures
|
3 1/4%
|
4/2024
|
325
|
323
|
|
|
Exchangeable senior debentures
(h)
|
2 5/8%
|
4/2027
|
502
|
484
|
|
|
Exchangeable senior debentures
(h)
|
2 1/2%
|
10/2029
|
329
|
316
|
|
|
Senior notes
|
10%
|
5/2012
|
7
|
7
|
|
|
Credit facility (i)
|
1.5%
|
9/2011
|
58
|
-
|
|
|
|
|
|
|
4,307
|
4,534
|
|
|
Mortgage debt and
other
|
|
|
|
|
|
|
Mortgage debt (non-recourse)
(j)
|
1.9-8.5%
|
3/2011-12/2023
|
1,025
|
1,217
|
|
|
Other (k)
|
7.0-7.8%
|
10/2014-12/2017
|
145
|
86
|
|
|
Total debt
(l)(m)
|
|
|
$
5,477
|
$
5,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of fixed rate
debt
|
|
|
90%
|
88%
|
|
|
Weighted average interest
rate
|
|
|
6.2%
|
6.6%
|
|
|
Weighted average debt
maturity
|
|
|
4.4 years
|
4.4 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December
31,
|
Year ended December
31,
|
|
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
Hotel Operating Statistics for
All Properties (n)
|
|
|
|
|
|
|
Average daily
rate
|
$
183.46
|
$
174.31
|
$
173.17
|
$
170.93
|
|
|
Average
occupancy
|
68.0%
|
65.2%
|
70.1%
|
65.9%
|
|
|
RevPAR
|
$
124.80
|
$
113.61
|
$
121.46
|
$
112.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Each OP Unit is
redeemable for cash or, at the option of the Company, 1.021494
common shares of Host. At December 31, 2010 and December 31, 2009,
there were 10.5 million and 11.7 million common OP Units,
respectively, held by minority partners that were redeemable into
10.7 million and 11.9 million shares, respectively, of Host common
stock.
|
|
|
(b) On June 18, 2010, the
Company redeemed its 8 7/8% Class E cumulative redeemable preferred
stock at a redemption price of $25.00 per share, plus accrued
dividends.
|
|
|
(c) Share prices are the
closing price as reported by the New York Stock Exchange.
|
|
|
(d) Amount reflects market
price of a single $1,000 debenture as quoted by Bloomberg L.P.
|
|
|
(e) 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.
|
|
|
(f) On December 17, 2010,
the Company declared a fourth quarter common cash dividend of $0.01
per share.
|
|
|
(g) The 6% Series U senior
notes issued on October 25, 2010 were exchanged for 6% Series V
senior notes in February 2011. The terms were substantially
identical, except the new series of notes were issued in a
registered offering under the Securities Act of 1933 and are,
therefore, freely transferable by the holders.
|
|
|
(h) The principal balance
outstanding of the 2 5/8% Exchangeable Senior Debentures due 2027
(the "2007 Debentures") and the 2 1/2% Exchangeable Senior
Debentures due 2029 (the "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) We have $542 million
of available capacity under the revolver portion of the credit
facility.
|
|
|
(j) Mortgage debt is
secured by real estate assets with an undepreciated book value of
$1.6 billion and $2.1 billion and an average interest rate of 4.7%
and 5.1% at December 31, 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 fair value of the assets.
|
|
|
(k) In conjunction with
the acquisition of the leasehold interest in the Le Meridien
Piccadilly, we recorded a capital lease liability of $58 million
(38 million pounds Sterling).
|
|
|
(l) 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 December 31, 2010, our
non-controlling partners’ share of consolidated debt is $68 million
and our share of debt in unconsolidated investments is $303
million.
|
|
|
(m) Total debt as of
December 31, 2010 and December 31, 2009 includes net discounts of
$95 million and $142 million, respectively.
|
|
|
(n) The operating
statistics reflect all consolidated properties as of December 31,
2010 and December 31, 2009, respectively. The operating statistics
include the results of operations through their date of disposition
for two properties disposed of in 2010 and six properties disposed
of in 2009.
|
|
|
|
HOST HOTELS
& RESORTS, INC.
|
|
|
|
|
Reconciliation of Net Loss to
EBITDA, Adjusted EBITDA
|
|
|
|
|
and Funds
From Operations per Diluted Share
|
|
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
|
|
Net loss
|
$
(6)
|
$ (72)
|
$
(132)
|
$(258)
|
|
|
Interest
expense
|
116
|
115
|
384
|
379
|
|
|
Depreciation and
amortization
|
183
|
185
|
592
|
595
|
|
|
Income taxes
|
(10)
|
(10)
|
(31)
|
(39)
|
|
|
Discontinued operations
(a)
|
-
|
2
|
(1)
|
10
|
|
|
EBITDA
|
283
|
220
|
812
|
687
|
|
|
(Gains) losses on
dispositions
|
1
|
-
|
2
|
(35)
|
|
|
Non-cash impairment
charges
|
-
|
-
|
-
|
131
|
|
|
Amortization of deferred
gains
|
-
|
(1)
|
-
|
(4)
|
|
|
Equity investment
adjustments:
|
|
|
|
|
|
|
Equity in (earnings)
losses of affiliates
|
(5)
|
(5)
|
1
|
(3)
|
|
|
Pro rata EBITDA of equity
investments
|
11
|
17
|
23
|
33
|
|
|
Consolidated partnership
adjustments:
|
|
|
|
|
|
|
Pro rata EBITDA
attributable to non-controlling partners in other consolidated
partnerships
|
(4)
|
(2)
|
(14)
|
(11)
|
|
|
Adjusted
EBITDA(b)
|
$
286
|
$
229
|
$
824
|
$
798
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31,
|
Year ended December 31,
|
|
|
|
|
2010
|
2009
|
2010
|
2009
|
|
|
|
|
|
|
|
|
Net loss
|
$
(6)
|
$ (72)
|
$
(132)
|
$(258)
|
|
|
Less: Net loss
attributable to non-controlling interests
|
-
|
1
|
2
|
6
|
|
|
Dividends on preferred
stock
|
-
|
(2)
|
(4)
|
(9)
|
|
|
Issuance costs of redeemed
preferred stock
|
-
|
-
|
(4)
|
-
|
|
|
Net loss available to common
stockholders
|
(6)
|
(73)
|
(138)
|
(261)
|
|
|
Adjustments:
|
|
|
|
|
|
|
(Gains) losses on
dispositions, net of taxes
|
1
|
-
|
2
|
(31)
|
|
|
Amortization of deferred
gains and other property transactions, net of taxes
|
-
|
(1)
|
-
|
(4)
|
|
|
Depreciation and
amortization (c)
|
182
|
188
|
591
|
604
|
|
|
Partnership
adjustments
|
3
|
1
|
4
|
4
|
|
|
FFO of non-controlling
interests of Host LP
|
(3)
|
(2)
|
(7)
|
(7)
|
|
|
Funds From
Operations
|
177
|
113
|
452
|
305
|
|
|
Adjustments for dilutive
securities (d):
|
|
|
|
|
|
|
Assuming conversion of 2004
Exchangeable Senior Debentures
|
3
|
-
|
13
|
-
|
|
|
Assuming conversion of 2009
Exchangeable Senior Debentures
|
7
|
-
|
-
|
-
|
|
|
Assuming deduction of gain
recognized for the repurchase of 2004 Exchangeable Senior
Debentures (e)
|
-
|
-
|
-
|
(2)
|
|
|
Diluted FFO (d)(f)
|
$
187
|
$
113
|
$
465
|
$
303
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding-EPS
|
666.1
|
626.5
|
656.1
|
587.2
|
|
|
Assuming issuance of common
shares granted under the Comprehensive Stock Plan
|
3.0
|
2.4
|
2.9
|
1.8
|
|
|
Assuming conversion of 2004
Exchangeable Senior Debentures
|
21.2
|
-
|
21.2
|
-
|
|
|
Assuming conversion of 2009
Exchangeable Senior Debentures
|
28.4
|
-
|
-
|
-
|
|
|
Diluted weighted average shares
outstanding-FFO (d)(f)
|
718.7
|
628.9
|
680.2
|
589.0
|
|
|
FFO per diluted share
(d)(f)
|
$
.26
|
$
.18
|
$
.68
|
$
.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Reflects the interest
expense, depreciation and amortization and income taxes included in
discontinued operations.
|
|
|
(b) Costs associated with
successful acquisitions, which are now required to be expensed,
decreased Adjusted EBITDA by $6 million and $10 million for the
fourth quarter and full year 2010, respectively. For 2009,
litigation costs decreased Adjusted EBITDA by $41 million for both
the fourth quarter and full year.
|
|
|
(c) In accordance with the
guidance on FFO per diluted share provided by the National
association of Real Estate Investment Trusts (NAREIT), we do not
adjust net income for the non-cash impairment charges when
determining our FFO per diluted share.
|
|
|
(d) Earnings/loss per
diluted share and FFO per diluted share in accordance with NAREIT
are 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.
|
|
|
(e) During 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.
|
|
|
(f) FFO per diluted share
and earnings per diluted share were significantly affected by
certain transactions, the effects of which are shown in the table
below (in millions, except per share amounts):
|
|
|
|
|
|
|
|
Quarter
ended
December 31,
2010
|
Quarter
ended
December 31,
2009
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
FFO
|
Net Income
(Loss)
|
FFO
|
|
|
|
|
|
|
Loss on dispositions, net of
taxes
|
$
(1)
|
$
-
|
$
-
|
$
-
|
|
|
Gain (loss) on debt
extinguishments (1)
|
(8)
|
(8)
|
1
|
1
|
|
|
Acquisition costs (2)
|
(6)
|
(6)
|
-
|
-
|
|
|
Potential loss on
litigation
|
-
|
-
|
(41)
|
(41)
|
|
|
Loss attributable to
non-controlling interest
|
-
|
-
|
1
|
1
|
|
|
Total
|
$
(15)
|
$
(14)
|
$
(39)
|
$
(39)
|
|
|
Diluted shares
|
666.1
|
718.7
|
626.5
|
628.9
|
|
|
Per diluted
share
|
$
(.02)
|
$
(.02)
|
$
(.07)
|
$
(.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
December 31,
2010
|
Year
ended
December 31,
2009
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
FFO
|
Net Income
(Loss)
|
FFO
|
|
|
|
|
|
|
Gain (loss) on dispositions, net
of taxes
|
$
(2)
|
$
-
|
$
31
|
$
-
|
|
|
Non-cash impairment charges
(3)
|
-
|
-
|
(131)
|
(131)
|
|
|
Gain (loss) on debt
extinguishments (1)
|
(22)
|
(22)
|
7
|
7
|
|
|
Preferred stock redemption
(4)
|
(4)
|
(4)
|
-
|
-
|
|
|
Acquisition costs (2)
|
(10)
|
(10)
|
-
|
-
|
|
|
Potential loss on litigation
(5)
|
(4)
|
(4)
|
(41)
|
(41)
|
|
|
Loss attributable to
non-controlling interests (6)
|
1
|
1
|
3
|
3
|
|
|
Total
|
$
(41)
|
$
(39)
|
$
(131)
|
$(162)
|
|
|
Diluted shares
|
656.1
|
680.2
|
587.2
|
589.7
|
|
|
Per diluted
share
|
$
(.06)
|
$
(.06)
|
$
(.23)
|
$
(.28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For 2010, these costs
include those associated with the redemption of the Series M and
Series K Senior Notes. For 2009, the costs include gain/losses
associated with the repayment of exchangeable debentures and the
credit facility term loan. Additionally, as prescribed by the
sharing agreement with the successor borrower in connection with
the 2007 defeasance of a $514 million collateralized
mortgage-backed security, we received $7 million for year ended
2009 and recorded the gain as a reduction of interest expense.
|
|
|
(2) Represents costs incurred
related to acquisitions and investments during 2010.
Previously, these costs would have been capitalized as part
of the acquisition; however, under accounting requirements
effective January 1, 2009, these costs are expensed and deducted
from net income and FFO.
|
|
|
(3) During 2009, we recorded
non-cash impairment charges totaling $131 million in accordance
with GAAP based on the difference between the fair value and the
carrying amount of certain properties.
|
|
|
(4) Represents the original
issuance costs of the Class E preferred stock, which were redeemed
on June 18, 2010.
|
|
|
(5) Includes the accrual in the
first quarter of 2010 for an additional potential loss related to
the 2009 litigation.
|
|
|
(6) 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 2011 Forecasts (a)
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Full Year
2011
|
|
|
|
|
Low-end
of range
|
High-end
of range
|
|
|
|
|
|
|
Net income
|
$
19
|
$
54
|
|
|
Interest expense
|
357
|
357
|
|
|
Depreciation and
amortization
|
609
|
609
|
|
|
Income taxes
|
1
|
1
|
|
|
EBITDA
|
986
|
1,021
|
|
|
Equity investment
adjustments:
|
|
|
|
|
Equity in earnings of
affiliates
|
(4)
|
(4)
|
|
|
Pro rata Adjusted EBITDA
of equity investments
|
31
|
31
|
|
|
Consolidated partnership
adjustments:
|
|
|
|
|
Pro rata Adjusted EBITDA
attributable to non-controlling partners in other consolidated
partnerships
|
(17)
|
(17)
|
|
|
Acquisition
costs
|
4
|
4
|
|
|
Adjusted EBITDA
|
$
1,000
|
$
1,035
|
|
|
|
|
|
|
|
|
Full Year
2011 Forecast
|
|
|
Low-end
of range
|
High-end
of range
|
|
|
|
|
Net income
|
$
19
|
$
54
|
|
|
Less: Net loss attributable to
non-controlling interests
|
(3)
|
(3)
|
|
|
Net income available to common
stockholders
|
16
|
51
|
|
|
Adjustments:
|
|
|
|
|
Depreciation and
amortization
|
607
|
607
|
|
|
Partnership
adjustments
|
8
|
9
|
|
|
FFO of non-controlling
interests of Host LP
|
(9)
|
(10)
|
|
|
FFO
|
622
|
657
|
|
|
Adjustment for dilutive
securities:
|
|
|
|
|
Assuming conversion of
exchangeable senior debentures
|
30
|
30
|
|
|
Diluted FFO
|
$
652
|
$
687
|
|
|
|
|
|
|
Weighted average diluted shares
(EPS)
|
706.8
|
706.8
|
|
|
Weighted average diluted shares
(FFO) (b)
|
749.7
|
749.7
|
|
|
Earnings per diluted
share
|
$
.02
|
$
.07
|
|
|
FFO per diluted
share
|
$
.87
|
$
.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The 2011 forecasts
were based on the below assumptions:
|
|
|
--
Comparable hotel RevPAR will increase 6% to 8% for the low
and high ends of the forecasted range, respectively.
|
|
|
--
Comparable hotel adjusted operating profit margins will
increase 100 basis points to 140 basis points for the low and high
ends of the forecasted range, respectively.
|
|
|
--
The above results reflect our expected acquisitions of the
New York Helmsley Hotel, the Manchester Grand Hyatt San Diego and
the New Zealand portfolio early in 2011.
|
|
|
-- We
expect to spend approximately $290 million to $310 million on
ROI/repositioning capital expenditures.
|
|
|
--
Costs associated with debt extinguishments and acquisition
costs will decrease earnings and FFO per share by $.01.
|
|
|
--
Interest expense includes approximately $41 million related
to non-cash interest expense for exchangeable debentures,
amortization of original issue discounts and deferred financing
fees.
|
|
|
-- We
expect to spend approximately $260 million to $280 million on
renewal and replacement expenditures in 2011.
|
|
|
--
Effective January 1, 2009, the accounting treatment under
GAAP for costs associated with completed property acquisitions
changed and these costs are now expensed in the year incurred as
opposed to capitalized as part of the acquisition. Beginning with
our 2011 forecasts, we will exclude the effect of these costs from
Adjusted EBITDA because we believe that including them is not
reflective of the ongoing performance of our properties. This is
consistent with the EBITDA calculation under the prior GAAP
accounting treatment which expensed these costs over time as part
of depreciation expense, which is excluded from EBITDA.
For a discussion
of additional items that may affect forecasted results see Notes to
the Financial Information.
|
|
|
(b) The 2011 forecast FFO
per diluted share for both the low and high ends include 49.6
million shares related to the 2004 and 2009 Debentures.
|
|
|
|
HOST HOTELS
& RESORTS, INC.
|
|
|
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
|
|
|
for Full
Year 2011 Forecasts (a)
|
|
|
(unaudited,
in millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
|
|
Full Year
2011
|
|
|
|
|
Low-end
of range
|
High-end
of range
|
|
|
|
|
|
|
Operating profit margin under
GAAP (b)
|
7.2%
|
7.8%
|
|
|
Comparable hotel adjusted
operating profit margin (c)
|
22.4%
|
22.8%
|
|
|
|
|
|
|
Comparable hotel
revenues
|
|
|
|
|
Room
|
$ 2,712
|
$ 2,763
|
|
|
Other
|
1,583
|
1,614
|
|
|
Comparable hotel revenues
(d)
|
4,295
|
4,377
|
|
|
Comparable hotel
expenses
|
|
|
|
|
Rooms and other
departmental costs
|
1,854
|
1,892
|
|
|
Management fees, ground
rent and other costs
|
1,480
|
1,488
|
|
|
Comparable hotel expenses
(e)
|
3,334
|
3,380
|
|
|
Comparable hotel adjusted
operating profit
|
961
|
997
|
|
|
Non-comparable hotel results,
net
|
117
|
117
|
|
|
Hotels leased from HPT and
office buildings, net
|
(11)
|
(11)
|
|
|
Depreciation and amortization
|
(609)
|
(609)
|
|
|
Corporate and other
expenses
|
(101)
|
(101)
|
|
|
Operating
profit
|
$
357
|
$
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Forecasted comparable
hotel results include 105 hotels that we have assumed will be
classified as comparable as of December 31, 2011. No assurances can
be made as to the hotels that will be in the comparable hotel set
for 2011. Also, see the notes to the Reconciliation of Net Income
to EBITDA, Adjusted EBITDA and Funds From Operations per Diluted
Share For Full Year 2011 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
revenues per the table above.
|
|
|
(d) The reconciliation of
forecast total revenues to the forecast comparable hotel revenues
is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Full Year
2011
|
|
|
|
|
Low-end
of range
|
High-end
of range
|
|
|
|
|
|
|
Revenues
|
$ 4,930
|
$ 5,017
|
|
|
Non-comparable hotel
revenues
|
(471)
|
(476)
|
|
|
Revenues for hotels leased from
HPT and office buildings
|
(216)
|
(216)
|
|
|
Hotel revenues for the property
for which we record rental income, net
|
52
|
52
|
|
|
Comparable hotel
revenues
|
$
4,295
|
$
4,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) The reconciliation of
forecast operating costs and expenses to the comparable hotel
expenses is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Full Year
2011
|
|
|
|
|
Low-end
of range
|
High-end
of range
|
|
|
|
|
|
|
Operating costs and
expenses
|
$ 4,573
|
$ 4,624
|
|
|
Non-comparable hotel and other
expenses
|
(354)
|
(359)
|
|
|
Expenses for hotels leased from
HPT and office buildings
|
(227)
|
(227)
|
|
|
Hotel expenses for the property
for which we record rental income
|
52
|
52
|
|
|
Depreciation and
amortization
|
(609)
|
(609)
|
|
|
Corporate and other
expenses
|
(101)
|
(101)
|
|
|
Comparable hotel
expenses
|
$
3,334
|
$
3,380
|
|
|
|
|
|
|
|
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 annual report on Form 10K and quarterly reports on Form
10Q filed 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. (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 2010
ended on September 10, and the third quarter of 2009 ended on
September 11, though both quarters reflect twelve weeks of
operations. In contrast, the fourth quarter results for 2010
reflect 112 days of operations, while our fourth quarter results
for 2009 reflect 111 days of operations.
While the reporting calendar we adopted is more closely aligned
with the reporting calendar used by the manager of a majority of
our properties, one final consequence of our calendar is we are
unable to report the month of operations that ends after our fiscal
quarter-end until the following quarter because our hotel managers
using a monthly reporting period do not make mid-month results
available to us. Hence, the month of operation that ends after our
fiscal quarter-end is included in our quarterly results of
operations in the following quarter for those hotel managers
(covering approximately 42% of our hotels). As a result, our
quarterly results of operations include results from hotel managers
reporting results on a monthly basis as follows: first
quarter (January, February), second quarter (March to May), third
quarter (June to August) and fourth quarter (September to
December). While this does not affect full-year results, it does
affect the reporting of quarterly results.
Reporting Periods for Hotel Operating Statistics and
Comparable Hotel Results
In contrast to the reporting periods for our consolidated
statement of operations, our hotel operating statistics (i.e.,
RevPAR, average daily rate and average occupancy) and our
comparable hotel results are always reported based on the reporting
cycle used by Marriott for our Marriott-managed hotels. This
facilitates year-to-year comparisons, as each reporting period will
be comprised of the same number of days of operations as in the
prior year (except in the case of fourth quarters comprised of
seventeen weeks (such as fiscal year 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 fourth quarter of 2010 reflect 16 weeks
of operations for the period from September 11, 2010 to
December 31, 2010 for our Marriott-managed hotels and results
from September 1, 2010 to December 31, 2010 for
operations of all other hotels which report results on a monthly
basis.
- Hotel results for the fourth quarter of 2009 reflect 16 weeks
of operations for the period from September 12, 2009 to
January 1, 2010 for our Marriott-managed hotels and results
from September 1, 2009 to December 31, 2009 for
operations of all other hotels which report results on a monthly
basis.
- Hotel results for full year 2010 reflect 52 weeks for the
period from January 2, 2010 to December 31, 2010 for our
Marriott-managed hotels and results from January 1, 2010 to
December 31, 2010 for operations of all other hotels which
report results on a monthly basis.
- Hotel results for full year 2009 reflect 52 weeks for the
period from January 3, 2009 to January 1, 2010 for our
Marriott-managed hotels and results from January 1, 2009 to
December 31, 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 associated margins) 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 113 hotels that we owned on December 31, 2010,
108 have been classified as comparable hotels. The operating
results of the following hotels that we owned or leased as of
December 31, 2010 are excluded from comparable hotel results
for these periods:
- Le Meridien Piccadilly (acquired leasehold interest in
July 2010);
- Westin Chicago River North (acquired in August 2010);
- W New York, Union Square
(acquired in September 2010);
- JW Marriott, Rio de Janeiro
(acquired in September 2010);
- San Diego Marriott Hotel & Marina (business interruption
due to significant renovations); and
- 53 Courtyard by Marriott properties leased from HPT (sublease
was terminated in July 2010).
The operating results of the eight hotels we disposed of during
2010 and 2009 are 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 and 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 and FFO per Diluted Share
We present FFO and FFO per diluted share as non-GAAP measures 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, as adjusted for the effect of dilutive securities,
divided by the number of fully diluted shares outstanding during
such period. 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.
- Acquisition Costs – Effective January 1, 2009, the
accounting treatment under GAAP for costs associated with completed
property acquisitions changed and these costs are now expensed in
the year incurred as opposed to capitalized as part of the
acquisition. Beginning with our 2011 forecasts, we will exclude the
effect of these costs from Adjusted EBITDA because we believe that
including them is not reflective of the ongoing performance of our
properties. This is consistent with the EBITDA calculation under
the prior GAAP accounting treatment which expensed these costs over
time as part of depreciation expense, which is 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.