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BETHESDA, Md., July 22 /PRNewswire-FirstCall/ -- Host Hotels & Resorts, Inc. (NYSE:HST), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the second quarter ended June 19, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO )
-- Total revenue decreased $324 million, or 23.3%, to $1,064 million for
the second quarter and $494 million, or 20.3%, to $1,936 million for
year-to-date 2009 as compared to last year.
-- Net loss was $69 million for the second quarter of 2009 compared to
net income of $193 million for the second quarter of 2008. For
year-to-date 2009, net loss was $129 million compared to net income of
$256 million for year-to-date 2008. Loss per diluted share was $.12
for the second quarter of 2009 compared to earnings per diluted share
of $.34 in 2008. For year-to-date 2009, loss per diluted share was
$.24 compared to earnings per diluted share of $.45 for year-to-date
2008.
Operating results for the periods presented were affected by several items including:
-- non-cash impairment charges recorded on four hotels and the Company's
investment in its European joint venture of $91 million and $131
million for second quarter and year-to-date 2009, respectively;
-- non-cash interest expense in 2008 and 2009 due to an accounting change
implemented retrospectively in the first quarter of 2009 related to
the Company's exchangeable debentures; and
-- gains associated with hotel dispositions and other items.
The net effect of these items on loss per diluted share for the second quarter of 2009 was a decrease in earnings of $89 million, or $.16 per diluted share. For the second quarter of 2008, these items increased earnings by $6 million, or $.01 per diluted share. The net effect of these items was a decrease in earnings of $117 million, or $.21 per diluted share, and $4 million, or $.01 per diluted share, for year-to-date 2009 and 2008, respectively.
-- Funds from Operations (FFO) per diluted share was $.12 for the second
quarter of 2009 compared to $.55 per diluted share for the second
quarter of 2008. FFO per diluted share was also affected by the
non-cash interest expense, non-cash impairment charges and other items
described above. The net effect of these items was a decrease in FFO
per diluted share of $.15 and $.01 for the second quarter 2009 and
2008, respectively. For year-to-date 2009, FFO per diluted share was
$.22 compared to $.88 per diluted share for year-to-date 2008. The net
effect the non-cash interest expense, non-cash impairment charges and
other items was a decrease in FFO per diluted share of $.24 and $.01
for year-to-date 2009 and 2008, respectively.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items, decreased $163
million to $256 million for the second quarter, and $251 million to
$430 million for year-to-date 2009 when compared to last 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 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 second quarter of 2009 decreased 24.9% when compared to the second quarter of 2008. Year-to-date 2009 comparable hotel RevPAR decreased 22.7% when compared to year-to-date 2008. Comparable hotel adjusted operating profit margins decreased 560 basis points and 500 basis points for the second quarter and year-to-date 2009, respectively. For further detail, see "Notes to the Financial Information."
LIQUIDITY
As of June 19, 2009, the Company had over $1.3 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the second quarter, the Company completed two significant transactions which enhanced its financial flexibility and liquidity. These transactions were:
-- the issuance of 75,750,000 shares of common stock for net proceeds of
approximately $480 million; and
-- the issuance of $400 million, 9% Series T senior notes maturing May
15, 2017 for net proceeds of approximately $380 million;
The proceeds from these transactions, when combined with the first quarter $120 million mortgage loan obtained on the JW Marriott, Washington D.C. and the sale of the Hyatt Regency Boston for $113 million resulted in total proceeds raised year-to-date of over $1.1 billion. Subsequent to the end of the second quarter, we also disposed of three non-core properties: the 253-room Washington Dulles Marriott Suites, the 448-room Sheraton Stamford and the 430-room Boston Marriott Newton, for net proceeds of approximately $64 million. The proceeds from these transactions have been and will continue to be used to repay or redeem near-term debt maturities and to maintain higher than historical cash balances due to the current uncertainty in the credit markets. During the second quarter, the Company repaid $200 million outstanding under the revolver portion of the credit facility. Additionally, subsequent to quarter end, the Company repaid the $175 million mortgage debt secured by the San Diego Marriott Hotel & Marina. As a result of these transactions, the Company's remaining debt maturities total $480 million through year end 2010, which includes principal amortization of $20 million.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $84 million and $192 million for the quarter and year-to-date, which was a decline of approximately 48% and 38%, respectively, from the prior year. These expenditures included return on investment (ROI) and repositioning projects of approximately $47 million and $101 million for the second quarter and year-to-date 2009, respectively.
DIVIDEND
The Company intends to declare a common dividend of approximately $.23 to $.25 per share in the first half of September 2009. The common dividend is expected to consist of cash in the amount of approximately $.03 per share with the remainder to be paid in shares of common stock, both of which will be taxable to stockholders. The common dividend will be paid by the end of 2009. The Company intends to continue paying a cash dividend on its preferred stock.
2009 OUTLOOK
The Company's ability to predict future operating results continues to be significantly affected by the current recession and its effect on business and leisure travel. The Company expects that the trends affecting the economy will continue to depress hotel operating results across the portfolio for the remainder of 2009. In the event that comparable hotel RevPAR were to decline approximately 20% to 23% for the full year 2009, the Company would anticipate that full year 2009 operating profit margins under GAAP would decrease approximately 1,170 basis points to 1,290 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 600 basis points to 650 basis points. Based upon these parameters, the Company would estimate the following would occur for full year 2009:
-- loss per diluted share should be approximately $.46 to $.53;
-- net loss should be approximately $267 million to $310 million;
-- FFO per diluted share should be approximately $.43 to $.50 (including
the effect of the deduction of $131 million in non-cash impairment
charges and $26 million of non-cash interest expense on the
exchangeable debentures due to an accounting change for 2009, or, in
total, a reduction of $.25 per diluted share); 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 113 properties with 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 , 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 http://www.hosthotels.com/.
Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "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 potential for terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions and dispositions; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes and other risks and uncertainties associated with our business described in the Company's filings with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of July 22, 2009, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
* This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein referred to as "we" or "Host," is a self-managed and self-administered real estate investment trust (REIT) that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host and Host LP, the primary difference is approximately 2% of the partnership interests in Host LP held by outside partners as of June 19, 2009, 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)
June 19, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
------
Property and equipment, net $10,431 $10,739
Assets held for sale 55 -
Due from managers 81 65
Investments in affiliates 144 229
Deferred financing costs, net 51 46
Furniture, fixtures and equipment replacement
fund 121 119
Other 197 200
Restricted cash 46 44
Cash and cash equivalents 1,346 508
----- ---
Total assets $12,472 $11,950
======= =======
LIABILITIES AND EQUITY
----------------------
Debt
Senior notes, including $859 million and $916
million, respectively, net of $4,272 $3,943
discount, of Exchangeable Senior Debentures (b)
Mortgage debt 1,524 1,436
Credit facility, including the $210 million term
loan 210 410
Other 87 87
-- --
Total debt 6,093 5,876
Accounts payable and accrued expenses 86 119
Other 171 183
--- ---
Total liabilities 6,350 6,178
----- -----
Non-controlling interests in Host Hotels &
Resorts, L.P. 115 156
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 and 750 million shares
authorized, respectively; 604.6 million shares
and 525.3 million shares
issued and outstanding, respectively 6 5
Additional paid-in capital 6,397 5,874
Accumulated other comprehensive income 2 5
Deficit (518) (389)
----- -----
Total Host Hotels & Resorts, Inc. stockholders'
equity 5,984 5,592
Non-controlling interests-other consolidated
partnerships (c) 23 24
-- --
Total equity 6,007 5,616
----- -----
Total liabilities and equity $12,472 $11,950
======= =======
(a) Our consolidated balance sheet as of June 19, 2009 has 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 adoption of a new accounting requirement for
convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement), the principal
balance for our Exchangeable Senior Debentures was reduced by
$60 million and $76 million as of June 19, 2009 and December 31,
2008, respectively, with an offsetting increase to equity. The
decline in principal reflects the unamortized discount balance
related to the implementation of the new accounting requirement. The
face amount of the debentures was $925 million at June 19, 2009.
See notes to "Other Financial and Operating Data," for further
discussion.
(c) As a result of the adoption of a new accounting requirement, non-
controlling interests of other consolidated partnerships (previously
referred to as "Interest of minority partners of other consolidated
partnerships") is now included as a separate component of equity.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
----- ----- ----- -----
Revenues
Rooms $629 $837 $1,134 $1,450
Food and beverage 323 433 592 762
Other 87 91 156 161
-- -- --- ---
Total hotel sales 1,039 1,361 1,882 2,373
Rental income 25 27 54 57
-- -- -- --
Total revenues 1,064 1,388 1,936 2,430
----- ----- ----- -----
Expenses
Rooms 166 194 302 348
Food and beverage 232 297 431 535
Hotel departmental expenses 271 318 505 571
Management fees 41 71 74 123
Other property-level expenses 96 94 177 175
Depreciation and amortization (b) 196 128 353 249
Corporate and other expenses 17 14 32 31
Gain on insurance settlement - - - (7)
- - - ---
Total operating costs and expenses 1,019 1,116 1,874 2,025
----- ----- ----- -----
Operating profit 45 272 62 405
Interest income 2 4 4 9
Interest expense (c) (82) (88) (169) (171)
Net gains on property transactions and
other 1 1 2 2
Gain on foreign currency 6 - 4 -
Equity in earnings (losses) of
affiliates (b) (32) 1 (34) 2
---- - ---- -
Income (loss) before income taxes (60) 190 (131) 247
Benefit (provision) for income taxes (10) (13) 4 (7)
---- ---- - ---
Income (loss) from continuing
operations (70) 177 (127) 240
Income (loss) from discontinued
operations 1 16 (2) 16
- -- --- --
Net income (loss) (69) 193 (129) 256
Less: Net (income) loss attributable
to non-controlling
interests (d) 1 (10) 2 (18)
- ---- - ----
Net income (loss) attributable to
common stockholders (68) 183 (127) 238
Less: Dividends on preferred stock (2) (2) (4) (4)
--- --- --- ---
Net income (loss) available to common
stockholders $(70) $181 $(131) $234
==== ==== ===== ====
Basic earnings (loss) per common share:
Continuing operations $(.12) $.32 $(.24) $.42
Discontinued operations - .03 - .03
- --- ----- ---
Basic earnings (loss) per common share $(.12) $.35 $(.24) $.45
===== ==== ===== ====
Diluted earnings (loss) per common
share:
Continuing operations $(.12) $.31 $(.24) $.42
Discontinued operations - .03 - .03
- --- ----- ---
Diluted earnings (loss) per common
share $(.12) $.34 $(.24) $.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) During 2009, we identified several properties to be tested for
impairment based on certain triggering events, as prescribed by
GAAP. We tested these properties for impairment based on
management's estimate of expected future undiscounted cash flows
over our expected holding period. As a result, we recorded
non-cash impairment charges totaling $91 million for the second
quarter and $131 million year-to-date based on the difference between
the discounted cash flows and the carrying amount. Of these
impairment charges, $57 million and $78 million for second quarter
and year-to-date, respectively, have been included in depreciation
expense and $19 million was included in discontinued operations for
the year to date. The remaining $34 million of impairment charges
were for our investment in the European joint venture, which is
included in equity in earnings (losses) of affiliates.
(c) The retroactive adoption of a new accounting requirement regarding
the exchangeable debentures increased interest expense by $6
million and $7 million for both the second quarter of 2009 and 2008,
respectively, and $13 million and $14 million for year-to-date 2009
and 2008, respectively. Interest expense for year-to-date 2009
includes the $3 million gain on the first quarter repurchase of a
portion of the 3.25% Exchangeable Senior Debentures issued in April
2004 (the "2004 Debentures"). See notes to the "Reconciliation of
Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share" for
further discussion.
(d) As a result of the adoption of a new accounting requirement, net
income attributable to non-controlling interests of Host LP and of
other non-consolidated partnerships are no longer included in the
determination of net income. Prior periods have been revised to
reflect this presentation. The net income attributable to non-
controlling interests is included in the net income available to
common stockholders; therefore, the implementation of this
requirement had no effect on our basic or diluted earnings per
share calculation.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
----- ----- ----- -----
Net income (loss) $(69) $193 $(129) $256
Net (income) loss attributable to
non-controlling 1 (10) 2 (18)
interests
Dividends on preferred stock (2) (2) (4) (4)
--- --- --- ---
Earnings (loss) available to common
stockholders (70) 181 (131) 234
Assuming conversion of 2004
Exchangeable Senior
Debentures - 7 - -
Assuming deduction of gain recognized
for the repurchase of 2004 Exchangeable
Senior Debentures (a) - - (2) -
- - --- -
Diluted earnings (loss) available to
common stockholders $(70) $188 $(133) $234
==== ==== ===== ====
Basic weighted average shares
outstanding 575.0 520.5 550.3 521.5
Diluted weighted average shares
outstanding (b) 575.0 551.7 552.2 521.8
Basic earnings (loss) per share (c) $(.12) $.35 $(.24) $.45
Diluted earnings (loss) per share (c)
(d) $(.12) $.34 $(.24) $.45
(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 year
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 June 19, 2009 Quarter ended June 19, 2009
------------------- ---------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- ---------- ----------- ------
Pacific 27 15,943 $176.06 67.2% $118.23
Mid-Atlantic 11 8,683 207.41 76.3 158.15
North
Central 14 6,204 133.85 61.2 81.92
Florida 9 5,677 197.36 66.9 132.11
DC Metro 13 5,666 198.71 80.9 160.79
New England 10 5,165 164.84 60.7 100.12
South
Central 9 5,687 148.89 65.0 96.79
Mountain 8 3,364 166.68 57.8 96.35
Atlanta 8 4,252 154.70 58.5 90.55
International 7 2,473 137.37 60.9 83.69
- -----
All
Regions 116 63,114 175.24 67.0 117.36
=== ======
Quarter ended June 13, 2008
---------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
---------- ----------- ------ ------
Pacific $206.12 76.5% $157.60 (25.0)%
Mid-Atlantic 265.87 81.9 217.73 (27.4)
North
Central 158.90 70.6 112.15 (27.0)
Florida 236.85 78.3 185.51 (28.8)
DC Metro 214.11 83.7 179.31 (10.3)
New England 182.33 77.0 140.39 (28.7)
South
Central 169.51 71.3 120.93 (20.0)
Mountain 182.61 69.8 127.49 (24.4)
Atlanta 176.53 69.4 122.43 (26.0)
International 181.20 74.0 134.00 (37.5)
All
Regions 205.28 76.1 156.22 (24.9)
As of June 19, 2009 Year-to-date ended June 19, 2009
------------------- --------------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- ---------- ----------- ------
Pacific 27 15,943 $180.89 64.8% $117.21
Mid-Atlantic 11 8,683 206.48 69.8 144.20
North
Central 14 6,204 128.79 56.1 72.21
Florida 9 5,677 209.66 68.6 143.90
DC Metro 13 5,666 204.54 74.5 152.44
New England 10 5,165 156.36 54.0 84.45
South
Central 9 5,687 152.68 65.1 99.44
Mountain 8 3,364 174.64 56.5 98.69
Atlanta 8 4,252 157.57 59.6 93.88
International 7 2,473 138.08 60.9 84.14
- -----
All
Regions 116 63,114 177.94 64.1 114.07
=== ======
Year-to-date ended June 13, 2008
--------------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
---------- ----------- ------ ------
Pacific $206.10 74.7% $154.01 (23.9)%
Mid-Atlantic 253.22 78.1 197.72 (27.1)
North
Central 149.45 63.0 94.21 (23.3)
Florida 242.60 79.7 193.29 (25.5)
DC Metro 208.79 74.4 155.40 (1.9)
New England 172.26 69.4 119.54 (29.4)
South
Central 168.65 71.9 121.33 (18.0)
Mountain 192.74 67.4 129.99 (24.1)
Atlanta 175.74 69.5 122.16 (23.2)
International 172.90 71.9 124.29 (32.3)
All
Regions 202.30 72.9 147.57 (22.7)
Comparable Hotels by Property Type (a)
As of June 19, 2009 Quarter ended June 19, 2009
------------------- ---------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ------ ---------- ----------- ------
Urban 54 34,920 $184.07 69.5% $128.01
Suburban 34 12,904 141.42 58.2 82.28
Resort/
Conference 13 8,082 231.93 67.6 156.71
Airport 15 7,208 119.40 69.5 82.96
-- -----
All Types 116 63,114 175.24 67.0 117.36
=== ======
Quarter ended June 13, 2008
---------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
---------- ----------- ------ ------
Urban $216.59 77.5% $167.86 (23.7)%
Suburban 161.59 69.2 111.89 (26.5)
Resort/
Conference 274.55 78.5 215.40 (27.2)
Airport 140.59 78.9 110.94 (25.2)
All Types 205.28 76.1 156.22 (24.9)
As of June 19, 2009 Year-to-date ended June 19, 2009
------------------- --------------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ------ ---------- ----------- ------
Urban 54 34,920 $185.52 65.6% $121.73
Suburban 34 12,904 144.82 57.3 82.93
Resort/
Conference 13 8,082 241.16 66.5 160.42
Airport 15 7,208 124.08 66.4 82.42
-- -----
All Types 116 63,114 177.94 64.1 114.07
=== ======
Year-to-date ended June 13, 2008
--------------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
---------- ----------- ------ ------
Urban $209.96 74.1% $155.55 (21.7)%
Suburban 162.38 66.2 107.46 (22.8)
Resort/
Conference 279.07 77.4 216.04 (25.7)
Airport 142.11 74.7 106.14 (22.4)
All Types 202.30 72.9 147.57 (22.7)
(a) See the notes to financial information for a discussion of reporting
periods and comparable hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
----- ----- ----- -----
Number of hotels 116 116 116 116
Number of rooms 63,114 63,114 63,114 63,114
Percent change in comparable hotel
RevPAR (24.9)% -% (22.7)% -%
Operating profit margin under GAAP (b) 4.2% 19.6% 3.2% 16.7%
Comparable hotel adjusted operating
profit margin (b) 24.4% 30.0% 23.2% 28.2%
Comparable hotel sales
Room $645 $858 $1,161 $1,506
Food and beverage 332 445 608 793
Other 90 95 161 173
-- -- --- ---
Comparable hotel sales (c) 1,067 1,398 1,930 2,472
----- ----- ----- -----
Comparable hotel expenses
Room 170 199 308 360
Food and beverage 238 305 440 556
Other 41 49 73 88
Management fees, ground rent and other
costs 358 426 661 772
--- --- --- ---
Comparable hotel expenses (d) 807 979 1,482 1,776
--- --- ----- -----
Comparable hotel adjusted operating
profit 260 419 448 696
Non-comparable hotel results, net (e) - - 3 (5)
Office buildings and select service
properties, net (f) 1 (1) - (1)
Comparable hotels classified as
held-for-sale, net (3) (4) (4) (5)
Depreciation and amortization (196) (128) (353) (249)
Corporate and other expenses (17) (14) (32) (31)
---- ---- ---- ----
Operating profit $45 $272 $62 $405
=== ==== === ====
(a) See the notes to the financial information for discussion of
non-GAAP measures, reporting periods and comparable hotel results.
(b) Operating profit margins are calculated by dividing the applicable
operating profit by the related revenue amount. GAAP margins are
calculated using amounts presented in the consolidated statement of
operations. Comparable margins are calculated using amounts presented
in the above table.
(c) The reconciliation of total revenues per the consolidated statements
of operations to the comparable hotel sales is as follows:
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
---- ---- ---- ----
Revenues per the consolidated
statements of operations $1,064 $1,388 $1,936 $2,430
Business interruption revenues
for comparable hotels - - - 7
Hotel sales for the property
for which we record
rental income, net 10 14 22 27
Hotel sales for comparable
hotels classified as
held-for-sale 13 15 23 25
Rental income for office
buildings and select
service hotels (20) (19) (39) (38)
Adjustment for hotel sales for
comparable hotels
to reflect Marriott's fiscal
year for Marriott-
managed hotels - - (12) 21
- - ---- --
Comparable hotel sales $1,067 $1,398 $1,930 $2,472
====== ====== ====== ======
(d) The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows:
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
---- ---- ---- ----
Operating costs and expenses
per the consolidated
statements of operations $1,019 $1,116 $1,874 $2,025
Hotel expenses for the
property for which we
record rental income 10 13 22 28
Hotel expense for comparable
hotels classified as
held-for-sale 10 12 19 20
Rent expense for office
buildings and select
service hotels (19) (20) (39) (39)
Adjustment for hotel expenses
for comparable
hotels to reflect Marriott's
fiscal year for
Marriott-managed hotels - - (9) 15
Depreciation and amortization (196) (128) (353) (249)
Corporate and other expenses (17) (14) (32) (31)
Gain on insurance settlement - - - 7
- - - -
Comparable hotel expenses $807 $979 $1,482 $1,776
==== ==== ====== ======
(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)
June 19, December 31,
2009 2008
------ ------
Equity
------
Common shares outstanding 604.6 525.3
Common shares and minority held common OP
Units outstanding 616.4 540.4
Preferred OP Units outstanding .02 .02
Class E Preferred shares outstanding 4.0 4.0
Security pricing
----------------
Common (a) $7.66 $7.57
Class E Preferred (a) $21.22 $17.20
3(1)/4% Exchangeable Senior
Debentures (b) $975.94 $861.51
2(5)/8% Exchangeable Senior
Debentures (b) $836.24 $663.70
Dividends declared per share for calendar
year
Common $- $.65
Class E Preferred (c) $1.11 $2.22
Debt
----
Series K senior notes, with a rate of
7(1)/8% due November 2013 $725 $725
Series M senior notes, with a rate of 7%
due August 2012 348 348
Series O senior notes, with a rate of
6(3)/8% due March 2015 650 650
Series Q senior notes, with a rate of
6(3)/4% due June 2016 800 800
Series S senior notes, with a rate of
6(7)/8% due November 2014 497 497
Series T senior notes, with a rate of 9%
due May 2017 386 -
Exchangeable Senior Debentures, with a
rate of 3(1)/4% due April 2024 (d)(e) 317 383
Exchangeable Senior Debentures, with a
rate of 2(5)/8% due April 2027 (the "2007
Debentures") (e) 542 533
Senior notes, with rate of 10.0% due May
2012 7 7
- -
Total senior notes 4,272 3,943
Mortgage debt (non-recourse) secured by
$2.1 billion of real estate assets,
with an average interest rate of 6.0% and
6.2% at June 19, 2009 and
December 31, 2008, respectively, maturing
through December 2023 1,524 1,436
Credit facility, including the $210 million
term loan(f) 210 410
Other 87 87
-- --
Total debt (g)(h) $6,093 $5,876
====== ======
Percentage of fixed rate debt 90% 88%
Weighted average interest rate 6.1% 5.8%
Weighted average debt maturity 4.5 years 4.6 years
Quarter ended Year-to-date ended
------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
---- ---- ---- ----
Hotel Operating Statistics
for All
Properties (i)
Average daily rate $175.24 $205.10 $177.83 $201.99
Average occupancy 67.0% 76.2% 64.1% 73.0%
RevPAR $117.36 $156.20 $114.01 $147.46
(a) Share prices are the closing price as reported by the New York
Stock Exchange.
(b) Amount reflects market price of a single $1,000 debenture as quoted
by Bloomberg L.P.
(c) On June 25, 2009, we declared a second quarter preferred dividend of
$.5546875 per share for our Class E cumulative redeemable preferred
stock.
(d) 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. We recorded a gain on repurchase of approximately
$3 million.
(e) During the first quarter of 2009, we adopted a new accounting
requirement that issuers of cash-settled exchangeable debentures
must separately account for the liability and equity components in a
manner that will reflect the entity's nonconvertible debt borrowing
rate on the instrument's issuance date. Therefore, we are required
to record the debt components of the debentures at fair value as of
the date of issuance with the adjustment to additional paid-in
capital and amortize the resulting discount as an increase to
interest expense over the expected life of the debt. This treatment
has been applied retrospectively to all periods presented. The
principal balance for our 2004 and 2007 Debentures was reduced by
$60 million and $76 million as of June 19, 2009 and December 31,
2008, respectively, which reflects the remaining unamortized
discount balance at these dates. The discounts will be amortized
through the first date at which the holders can require Host to
repurchase the debentures for cash (April 2010 for the 2004
Debentures and March 2012 for the 2007 Debentures). The retroactive
adoption of the standard increased interest expense by $6 million
and $7 million for the second quarter of 2009 and 2008,
respectively, and $13 million and $14 million for year-to-date 2009
and 2008, respectively. The face amount of the 2004 and 2007
Debentures is $325 million and $600 million at June 19, 2009.
(f) Currently, we have $600 million of available capacity under the
revolver portion of the credit facility.
(g) 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 June 19, 2009,
our non-controlling partners' share of consolidated debt is $68
million and our share of debt in unconsolidated investments is
$353 million.
(h) Total debt as of June 19, 2009 and December 31, 2008 includes net
(discounts)/premiums of $(81) million and $(86) million,
respectively.
(i) The operating statistics reflect all consolidated properties as
of June 19, 2009 and June 13, 2008, respectively. The operating
statistics include the results of operations for three properties
held-for-sale at June 19, 2009, one property sold in 2009 and two
properties sold as of June 13, 2008 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 Year-to-date
ended ended
------------- -----------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
------ ------ ------ ------
Net income (loss) $(69) $193 $(129) $256
Interest expense 82 88 169 171
Depreciation and amortization 139 128 276 249
Income taxes 10 13 (4) 7
Discontinued operations (a) 2 3 4 6
- - - -
EBITDA 164 425 316 689
Gains on dispositions 1 (10) (18) (10)
Non-cash impairment charges 91 - 131 -
Amortization of deferred gains (1) (1) (2) (2)
Equity investment adjustments:
Equity in earnings of affiliates (2) (1) - (2)
Pro rata EBITDA of equity investments 6 11 10 17
Consolidated partnership adjustments:
Pro rata EBITDA attributable to
non-controlling
partners in other consolidated
partnerships (3) (5) (7) (11)
--- --- --- ----
Adjusted EBITDA $256 $419 $430 $681
==== ==== ==== ====
Quarter Year-to-date
ended ended
------------- -----------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
------ ------ ------ ------
Net income (loss) $(69) $193 $(129) $256
Less: Net (income) loss attributable
to non-controlling interests 1 (10) 2 (18)
Dividends on preferred stock (2) (2) (4) (4)
--- --- --- ---
Net income (loss) available to common
stockholders (70) 181 (131) 234
Adjustments:
Gains on dispositions, net of taxes 1 (10) (17) (10)
Amortization of deferred gains and
other property
transactions, net of taxes (1) (1) (2) (2)
Depreciation and amortization (b) 140 130 279 254
Partnership adjustments - 12 - 15
FFO of non-controlling interests of
Host LP (2) (14) (3) (20)
Adjustments for dilutive securities
(c):
Assuming conversion of 2004
Exchangeable Senior Debentures - 8 - 15
Assuming deduction of gain recognized
for the repurchase of 2004 Exchangeable
Debentures (d) - - (2) -
- - --- -
Diluted FFO (c)(e) $68 $306 $124 $486
=== ==== ==== ====
Diluted weighted average shares
outstanding (c)(e) 575.8 551.7 552.8 552.7
Diluted FFO per share (c)(e) $.12 $.55 $.22 $.88
(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 face
amount 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 debentures.
(e) 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 Quarter ended
June 19, 2009 June 13, 2008
------------- -------------
Net Net
Income Income
(Loss) FFO (Loss) FFO
------ --- ------ ---
Gain (loss) on hotel
disposition, net of taxes $(1) $- $10 $-
Non-cash interest expense -
2007 Debentures (1) (4) (4) (3) (3)
Non-cash interest expense -
2004 Debentures (2) (2) (2) - -
Dilutive effect of 2004
Debentures (3) - (3) - -
Non-cash impairment charges (91) (91) - -
Gain on CMBS defeasance
sharing agreement (4) 7 7 - -
(Gain) loss attributable to
non-controlling interests (5) 2 2 (1) -
- - --- -
Total $(89) $(91) $6 $(3)
==== ==== == ===
Diluted shares 575.0 596.4 551.7 551.7
Per diluted share $(.16) $(.15) $.01 $(.01)
===== ===== ==== =====
Year-to-date ended Year-to-date ended
June 19, 2009 June 13, 2008
------------- -------------
Net Net
Income Income
(Loss) FFO (Loss) FFO
------ --- ------ ---
Gain on hotel dispositions,
net of taxes $17 $- $10 $-
Non-cash interest expense -
2007 Debentures (1) (8) (8) (7) (7)
Non-cash interest expense -
2004 Debentures (2) (5) (5) (7) -
Dilutive effect of 2004
Debentures (3) - (6) - -
Non-cash impairment charges (131) (131) - -
Gain on CMBS defeasance
sharing agreement (4) 7 7 - -
(Gain) loss attributable to
non-controlling interests (5) 3 4 - -
- - - -
Total $(117) $(139) $(4) $(7)
===== ===== === ===
Diluted shares 552.2 573.5 521.8 552.7
Per diluted share $(.21) $(.24) $(.01) $(.01)
===== ===== ===== =====
(1) Represents the non-cash interest expense recognized related to the
2007 Debentures in accordance with the retroactive implementation of
new accounting requirements in the first quarter of 2009.
(2) Represents the non-cash interest expense recognized related to the
2004 Debentures in accordance with the retroactive implementation of
new accounting requirements in the first quarter of 2009. No effect
is shown for the 2004 Debentures if they were dilutive in the
calculation of Earnings per Diluted Share or FFO per Diluted Share,
as the interest expense is added-back to earnings in the dilution
calculation.
(3) Represents dilutive effect, if applicable, of the 2004 Debentures
after adjustment (2) above for non-cash interest expense related to
the new accounting requirement.
(4) As prescribed by the sharing agreement with the successor borrower
in connection with the 2007 defeasance of $514 million in
collateralized mortgage-backed securities, we received $7 million
and recorded the gain as a reduction of interest expense in the
second quarter 2009. The loan had an initial maturity date of
September 15, 2009, and was prepayable beginning on May 1, 2009.
We had been legally released from all obligations under the loan
upon the defeasance in 2007.
(5) 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 2009 Forecasts (a)
(unaudited, in millions, except per share amounts)
Full Year 2009
-----------------------
Low-end High-end
of range of range
-------- --------
Net loss $(310) $(267)
Interest expense 385 385
Depreciation and amortization 600 600
Income taxes (44) (37)
---- ----
EBITDA 631 681
Gains on dispositions (34) (34)
Non-cash impairment charges 131 131
Equity investment adjustments:
Equity in losses of affiliates 5 5
Pro rata Adjusted EBITDA of equity
investments 27 27
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA attributable to
non-controlling partners in other
consolidated partnerships (10) (10)
---- ----
Adjusted EBITDA $750 $800
==== ====
Full Year 2009 Forecast
-----------------------
Low end High end
of Range of Range
-------- --------
Net loss $(310) $(267)
Less: Net loss attributable to
non-controlling interests 10 9
Dividends on preferred stock (9) (9)
--- ---
Net loss available to common
stockholders (309) (267)
Adjustments:
Depreciation and amortization 600 600
Gain on dispositions, net of taxes (34) (34)
Partnership adjustments 4 4
FFO of non-controlling interests of Host
LP (6) (7)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive
stock plan less shares assumed purchased
at average market price - -
Assuming the reduction of the gain
recognized upon the repurchase of the
2004 Exchangeable Senior Debentures (2) (2)
--- ---
Diluted FFO $253 $294
==== ====
Weighted average diluted shares (FFO) 583.9 583.9
Weighted average diluted shares (EPS) 582.3 582.3
Loss per diluted share $ (.53) $ (.46)
FFO per diluted share $ .43 $ .50
(a) The full year 2009 forecasts were based on the below assumptions:
-- Comparable hotel RevPAR will decrease 20% to 23% for the high and
low ends of the forecasted range, respectively.
-- Comparable hotel adjusted operating profit margins will range
from a decrease of 600 basis points to 650 basis points for the
high and low ends of the forecasted range, respectively.
-- The implementation of a new accounting requirement will increase
the non-cash interest expense applied to the 2004 and 2007
Debentures by approximately $26 million. Additionally, we
recorded non-cash impairment charges of $131 million, which
included $97 million of impairments on four of our properties and
a $34 million impairment of our investment in the European joint
venture. These non-cash charges will decrease earnings and FFO
per diluted share by approximately $.25.
-- We do not anticipate that any acquisitions will be made during
2009.
-- We expect to have annual hotel dispositions of approximately
$200 million during 2009.
-- We expect to spend approximately $340 million to $360 million on
capital expenditures in 2009.
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 2009 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2009
-------------------
Low-end High-end
of range of range
-------- --------
Operating profit margin under GAAP (b) 1.2% 2.4%
Comparable hotel adjusted operating profit margin (c) 19.8% 20.3%
Comparable hotel sales
Room $2,451 $2,547
Other 1,538 1,607
----- -----
Comparable hotel sales (d) 3,989 4,154
----- -----
Comparable hotel expenses
Rooms and other departmental costs 1,735 1,836
Management fees, ground rent and other costs 1,466 1,478
----- -----
Comparable hotel expenses (e) 3,201 3,314
----- -----
Comparable hotel adjusted operating profit 788 840
Non-comparable hotel results, net 3 3
Office buildings and select service properties, net (1) (1)
Depreciation and amortization (675) (675)
Corporate and other expenses (67) (67)
---- ----
Operating profit $48 $100
=== ====
(a) Forecasted comparable hotel results include 113 hotels that we have
assumed will be classified as comparable as of December 31, 2009.
No assurances can be made as to the hotels that will be in the
comparable hotel set for 2009. Also, see the notes to the
"Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Funds
From Operations per Diluted Share For Full Year 2009 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. The forecasted decline
in the comparable hotel adjusted operating profit margin includes
the following two items which accounts for 50 basis points of the
above decline. Additionally, the decline in the adjusted operating
profit margins includes the effect of these two items of
approximately 40 basis points and 50 basis points for the quarter and
year-to-date periods ended June 19, 2009. (1) The 2008 comparable
hotel operating profit includes business interruption proceeds of
approximately $5 million, net of expenses, received in 2008 for the
New Orleans Marriott which had previously been non-comparable. We do
not expect to receive any business interruption proceeds in 2009. (2)
We will incur additional expenses in 2009 due to the treatment of the
ground lease payments related to the New York Marriott Marquis. Since
the renegotiation of the ground lease on the New York Marriott
Marquis in 1998, the ground lease payments have reduced the deferred
ground rent liability, and more recently, have been applied against
the deferred purchase price of the land. As a result, there was no
operating profit reduction for these payments. In 2009, a small
portion of the payments will fully fund the deferred purchase price
and the remainder of approximately $19 million will be deducted from
operating profit.
(d) The reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions):
Full Year 2009
-------------------
Low-end High-end
of range of range
-------- --------
Revenues $4,035 $4,200
Non-comparable hotel sales (1) (1)
Hotel sales for the property for which we
record rental income, net 40 40
Rental income for office buildings and select
service hotels (85) (85)
---- ----
Comparable hotel sales $3,989 $4,154
====== ======
(e) The reconciliation of forecast operating costs and expenses to
the comparable hotel expenses is as follows (in millions):
Full Year 2009
-----------------------
Low-end High-end
of range of range
-------- --------
Operating costs and expenses $3,987 $4,100
Non-comparable hotel expenses - -
Hotel expenses for the property for which
we record rental income 40 40
Rent expense for office buildings and
select service hotels (84) (84)
Depreciation and amortization (675) (675)
Corporate and other expenses (67) (67)
---- ----
Comparable hotel expenses $3,201 $3,314
====== ======
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 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 recession 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 second quarter of 2009 ended on June 19, and the second quarter of 2008 ended on June 13, though both quarters reflect twelve weeks of operations. In contrast, the June 19, 2009 year-to-date operations included 170 days of operations, while the June 13, 2008 year-to-date operations included 165 days of operations.
While the reporting calendar we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report the month of operations that ends after our fiscal quarter-end until the following quarter because our hotel managers using a monthly reporting period do not make mid-month results available to us. Hence, the month of operation that ends after our fiscal quarter-end is included in our quarterly results of operations in the following quarter for those hotel managers (covering approximately 41% of our hotels). As a result, our quarterly results of operations include results from hotel managers reporting results on a monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.
Reporting Periods for Hotel Operating Statistics and Comparable Hotel Results
In contrast to the reporting periods for our consolidated statement of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results are always reported based on the reporting cycle used by Marriott for our Marriott-managed hotels. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year (except in the case of fourth quarters comprised of seventeen weeks (such as fiscal year 2008) versus sixteen weeks). This means, however, that the reporting periods we use for hotel operating statistics and our comparable hotels results may differ slightly from the reporting periods used for our statements of operations for the first and fourth quarters and the full year. Results from hotel managers reporting on a monthly basis are included in our operating statistics and comparable hotels results consistent with their reporting in our consolidated statement of operations herein:
-- Hotel results for the second quarter of 2009 reflect 12 weeks of
operations for the period from March 28, 2009 to June 19, 2009 for our
Marriott-managed hotels and results from March 1, 2009 to May 31, 2009
for operations of all other hotels which report results on a monthly
basis.
-- Hotel results for the second quarter of 2008 reflect 12 weeks of
operations for the period from March 22, 2008 to June 13, 2008 for our
Marriott-managed hotels and results from March 1, 2008 to May 31, 2008
for operations of all other hotels which report results on a monthly
basis.
-- Hotel results for year-to-date 2009 reflect 24 weeks for the period
from January 3, 2009 to June 19, 2009 for our Marriott-managed hotels
and results from January 1, 2009 to May 31, 2009 for operations of all
other hotels which report results on a monthly basis.
-- Hotel results for year-to-date 2008 reflect 24 weeks for the period
from December 29, 2007 to June 13, 2008 for our Marriott-managed
hotels and results from January 1, 2008 to May 31, 2008 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 June 19, 2009, have been classified as comparable hotels.
The operating results of one hotel we disposed of as of June 19, 2009 and the two hotels we disposed of in 2008 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.
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DATASOURCE: Host Hotels & Resorts, Inc.
CONTACT: Gregory J. Larson, Executive Vice President, Host Hotels &
Resorts, Inc., +1-240-744-5120
Web Site: http://www.hosthotels.com/