Published:
Host Hotels & Resorts, Inc. Reports Results of Operations for the Third Quarter of 2008
BETHESDA, Md., Oct. 10 /PRNewswire-FirstCall/ -- Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate investment trust
(REIT), today announced its results of operations for the third quarter ended
September 5, 2008.
-- Total revenue decreased $29 million, or 2.4%, to $1,168 million for the
third quarter and increased $34 million, or 0.9%, to $3,641 million for
year-to-date 2008.
-- Net income decreased $43 million to $54 million and income from
continuing operations decreased $52 million to $41 million for the third
quarter of 2008. For year-to-date 2008, net income decreased $128 million to
$305 million and income from continuing operations increased $1 million to
$280 million compared to year-to-date 2007. Earnings per diluted share
decreased $.08 to $.10 for the third quarter and decreased $.23 to $.56 for
year-to-date 2008.
Net income in 2008 included a net gain of approximately $12 million, or
$.02 per diluted share, for the third quarter and $22 million, or $.04 per
diluted share, for year-to-date associated with hotel dispositions. By
comparison, net income in 2007 included a net gain of approximately $90
million, or $.16 per diluted share, for year-to-date 2007 associated with
gains from hotel dispositions, partially offset by debt refinancing costs.
There were no dispositions in the third quarter of 2007.
-- Funds from Operations (FFO) per diluted share decreased 18.4% to $.31
for the third quarter and increased 4.3% to $1.21 for year-to-date 2008. For
year-to-date 2007, FFO was reduced by $.08 per diluted share for costs
associated with debt refinancings.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO )
The Company also announced the following third quarter results for Host
Hotels & Resorts, L.P., (Host LP) through which it conducts all of its
operations and, as of September 5, 2008, holds approximately 96% of the
partnership interests:
-- Net income decreased $44 million to $57 million for the third quarter
and decreased $130 million to $319 million for year-to-date 2008.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items, decreased $27 million, for
both third quarter and year-to-date 2008, to $270 million for the third
quarter and to $951 million for year-to-date 2008.
For further detail of certain transactions affecting net income of the
Company and Host LP, earnings per diluted share and FFO per diluted share,
refer to the "Schedule of Significant Transactions Affecting Earnings per
Share and Funds From Operations per Diluted Share" attached to this press
release.
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted
operating profit margins (discussed below) are non-GAAP (generally accepted
accounting principles) financial measures within the meaning of the rules of
the Securities and Exchange Commission (SEC). See the discussion included in
this press release for information regarding these non-GAAP financial
measures.
Operating Results
Comparable hotel RevPAR for the third quarter of 2008 decreased 2.1% when
compared to the third quarter of 2007. RevPAR for the third quarter was
significantly affected by the performance of the Company's two properties in
Hawaii, which experienced a significant decline as a result of a decrease in
leisure transient and group demand in this market. Excluding the two Hawaiian
hotels from our comparable portfolio, the Company's RevPAR decline is reduced
by 170 basis points to a decline of .4%. Year-to-date 2008 comparable hotel
RevPAR increased .6% when compared to year-to-date 2007. Comparable hotel
adjusted operating profit margins decreased 140 basis points and 60 basis
points for the third quarter and year-to-date 2008, respectively. For further
detail, see "Notes to the Financial Information."
Balance Sheet
As of September 5, 2008, the Company had approximately $494 million of
cash and cash equivalents. Subsequent to the end of the third quarter, the
Company increased its available cash by $200 million through a draw under the
revolver portion of its credit facility. Currently the Company has access to
an additional $400 million of available capacity under the credit facility.
The Company intends to maintain higher than historical cash levels for working
capital because of the uncertainty in the financial markets. In addition to
working capital, the Company intends to use its available funds for dividend
payments, stock repurchases, investments in its portfolio, to acquire new
properties or to make debt repayments.
Stock Repurchase Program
Under its previously announced stock repurchase program, the Company
repurchased 2.1 million shares of its common stock valued at approximately
$27.7 million during the third quarter. Year-to-date, the Company has
repurchased approximately 6.5 million shares for approximately $100 million.
Capital Expenditures
The Company continued its capital expenditure program which totaled
approximately $153 million and $463 million for the third quarter and
year-to-date 2008, respectively. These expenditures included return on
investment (ROI) and repositioning projects of approximately $78 million and
$218 million for the third quarter and year-to-date 2008, respectively.
Dividend
As previously announced, the Company expects to declare a fixed $.20 per
share common dividend each quarter, as well as a special dividend in the
fourth quarter of each year, the amount of which will be based on the
Company's estimated taxable income. Based on the Company's current guidance
for 2008, which assumes that no hotel sales will be completed in the fourth
quarter, the Company expects that the fourth quarter special dividend will be
in the range of zero to $.05.
2008 Outlook
The Company expects comparable hotel RevPAR to decline approximately 3% to
5% for the fourth quarter and to range from flat to a decrease of 1% for the
full year. For full year 2008, the Company expects its operating profit
margins under GAAP to decrease approximately 280 basis points to 320 basis
points and its comparable hotel adjusted operating profit margins to decrease
approximately 100 basis points to 125 basis points. Based upon this guidance,
the Company estimates that full year 2008 guidance for Host Hotels & Resorts,
Inc. and Host Hotels & Resorts, L.P. is as follows:
Host Hotels & Resorts, Inc.
-- earnings per diluted share should be approximately $.81 to $.86 for the
full year;
-- net income should be approximately $437 million to $465 million for the
full year; and
-- FFO per diluted share should be approximately $1.75 to $1.80 for the
full year.
Host Hotels & Resorts, L.P.
-- net income for 2008 should be approximately $456 million to $485
million; and
-- Adjusted EBITDA for 2008 should be approximately $1,375 million to
$1,400 million.
About Host Hotels & Resorts
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is
the largest lodging real estate investment trust and one of the largest owners
of luxury and upper upscale hotels. The Company currently owns 117 properties
with approximately 64,000 rooms, and also holds a minority interest in a joint
venture that owns 11 hotels inEurope with approximately 3,500 rooms. Guided
by a disciplined approach to capital allocation and aggressive asset
management, the Company partners with premium brands such as Marriott(R),
Ritz-Carlton(R), Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury
Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R) and
Swissotel(R)* in the operation of properties in over 50 major markets
worldwide. For additional information, please visit the Company's website at
www.hosthotels.com.
Note: This press release contains forward-looking statements within the
meaning of federal securities regulations. These forward-looking statements
are identified by their use of terms and phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan," "predict,"
"project," "will," "continue" and other similar terms and phrases, including
references to assumption and forecasts of future results. Forward-looking
statements are not guarantees of future performance and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results to differ materially from those anticipated at the time the forward-
looking statements are made. These risks include, but are not limited to:
national and local economic and business conditions, including the potential
for terrorist attacks, that will affect occupancy rates at our hotels and the
demand for hotel products and services; operating risks associated with the
hotel business; risks associated with the level of our indebtedness and our
ability to meet covenants in our debt agreements; relationships with property
managers; our ability to maintain our properties in a first-class manner,
including meeting capital expenditure requirements; our ability to compete
effectively in areas such as access, location, quality of accommodations and
room rate structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices, construction
procedures and costs; our ability to complete acquisitions and dispositions;
and our ability to continue to satisfy complex rules in order for us to
qualify as a REIT for federal income tax purposes and other risks and
uncertainties associated with our business described in the Company's filings
with the SEC. Although the Company believes the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it can give
no assurance that the expectations will be attained or that any deviation will
not be material. All information in this release is as of October 9, 2008,
and the Company undertakes no obligation to update any forward-looking
statement to conform the statement to actual results or changes in the
Company's expectations.
* This press release contains registered trademarks that are the exclusive
property of their respective owners. None of the owners of these trademarks
has any responsibility or liability for any information contained in this
press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein referred to as "we" or "Host," is a
self-managed and self-administered real estate investment trust (REIT) that
owns hotel properties. We conduct our operations as an umbrella partnership
REIT through an operating partnership, Host Hotels & Resorts, L.P., or Host
LP, of which we are the sole general partner. For each share of our common
stock, Host LP has issued to us one unit of operating partnership interest, or
OP Unit. When distinguishing between Host and Host LP, the primary difference
is approximately 4% of the partnership interests in Host LP held by outside
partners as of September 5, 2008, which is reflected as minority interest in
our consolidated balance sheets and minority interest expense in our
consolidated statements of operations. Readers are encouraged to find further
detail regarding our organizational structure in our annual report on Form
10-K.
For information on our reporting periods and non-GAAP financial measures
(including Adjusted EBITDA, FFO per diluted share and comparable hotel
adjusted operating profit margin) which we believe is useful to investors, see
the Notes to the Financial Information included in this release.
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
September 5, December 31,
2008 2007
(unaudited)
ASSETS
Property and equipment, net $10,731 $10,588
Due from managers 99 106
Investments in affiliates 210 194
Deferred financing costs, net 51 51
Furniture, fixtures and equipment
replacement fund 121 122
Other 228 198
Restricted cash 55 65
Cash and cash equivalents 494 488
Total assets $11,989 $11,812
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes, including $1,091 million
and $1,088 million, respectively, net of
discount, of Exchangeable Senior Debentures $4,117 $4,114
Mortgage debt 1,492 1,423
Credit facility, including the $210 million
term loan 210 -
Other 87 88
Total debt 5,906 5,625
Accounts payable and accrued expenses (b) 132 315
Other 206 215
Total liabilities 6,244 6,155
Interest of minority partners of Host
Hotels & Resorts, L.P. 223 188
Interest of minority partners of other
consolidated partnerships 26 28
Stockholders' equity
Cumulative redeemable preferred stock
(liquidation preference $100 million)
50 million shares authorized; 4.0
million shares issued and outstanding 97 97
Common stock, par value $.01, 750 million
shares authorized; 518.9 million shares
and 522.6 million shares issued and
outstanding, respectively 5 5
Additional paid-in capital 5,638 5,673
Accumulated other comprehensive income 44 45
Deficit (288) (379)
Total stockholders' equity 5,496 5,441
Total liabilities and stockholders'
equity $11,989 $11,812
(a) Our consolidated balance sheet as of September 5, 2008 has been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance
with GAAP have been omitted. The consolidated balance sheets should
be read in conjunction with the consolidated financial statements
and notes thereto included in our most recent Annual Report on Form
10-K.
(b) Amount includes $209 million at year end 2007 for the accrual of
the year end 2007 dividend of $.40 per common share. The third
quarter 2008 dividend of $.20 per common share was declared
subsequent to the end of the third quarter on September 18, 2008.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Revenues
Rooms $757 $769 $2,236 $2,216
Food and beverage 311 323 1,085 1,071
Other 78 83 241 242
Total hotel sales 1,146 1,175 3,562 3,529
Rental income 22 22 79 78
Total revenues 1,168 1,197 3,641 3,607
Expenses
Rooms 191 190 547 533
Food and beverage 254 260 798 791
Hotel departmental expenses 313 307 897 870
Management fees 49 55 173 171
Other property-level expenses 91 93 268 268
Depreciation and amortization 133 119 388 352
Corporate and other expenses 14 14 45 51
Gain on insurance settlement (b) - (5) (7) (5)
Total operating costs and
expenses 1,045 1,033 3,109 3,031
Operating profit 123 164 532 576
Interest income 4 9 13 27
Interest expense (83) (82) (240) (312)
Net gains on property transactions
and other - 3 2 5
Minority interest expense - (5) (19) (21)
Equity in earnings of affiliates 1 - 3 5
Income before income taxes 45 89 291 280
Benefit (provision) for income taxes (4) 4 (11) (1)
Income from continuing operations 41 93 280 279
Income from discontinued operations ( c ) 13 4 25 154
Net income 54 97 305 433
Less: Dividends on preferred stock (2) (2) (6) (6)
Net income available to common
stockholders $52 $95 $299 $427
Basic earnings per common share:
Continuing operations $.07 $.17 $.52 $.52
Discontinued operations .03 .01 .05 .30
Basic earnings per common share $.10 $.18 $.57 $.82
Diluted earnings per common share
Continuing operations $.07 $.17 $.52 $.51
Discontinued operations .03 .01 .04 .28
Diluted earnings per common share $.10 $.18 $.56 $.79
(a) Our consolidated statements of operations presented above have
been prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted.
(b) The gain on insurance settlement reflects business interruption
insurance proceeds from damages incurred from Hurricane Katrina in
2005 and excludes the $2 million of management fees due to the
manager of the hotel for the first quarter of 2008 related to the
proceeds.
( c ) Reflects the results of operations and gains on sale, net of the
related income tax, for two properties sold in 2008, and nine
properties sold in 2007.
HOST HOTELS & RESORTS, INC.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
September 5, 2008 September 7, 2007
Per Per
Share Share
Income Shares Amount Income Shares Amount
Net income $54 519.3 $.10 $97 522.3 $.19
Dividends on preferred stock (2) - - (2) - (.01)
Basic earnings available to common
stockholders (a)(b) 52 519.3 .10 95 522.3 .18
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average market price - .3 - - .8 -
Assuming conversion of minority OP
units issuable - - - - 1.2 -
Assuming conversion of 2004
Exchangeable Senior Debentures - - - 4 29.5 -
Diluted earnings available to
common stockholders (a)(b) $52 519.6 $.10 $99 553.8 $.18
Year-to-date ended Year-to-date ended
September 5, 2008 September 7, 2007
Per Per
Share Share
Income Shares Amount Income Shares Amount
Net income $305 520.8 $.58 $433 522.0 $.83
Dividends on preferred stock (6) - (.01) (6) - (.01)
Basic earnings available to common
stockholders (a)(b) 299 520.8 .57 427 522.0 .82
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average market price - .4 - - .9 -
Assuming conversion of minority OP
units issuable - - - - 1.2 -
Assuming conversion of 2004
Exchangeable Senior Debentures 13 31.2 (.01) 13 29.5 (.03)
Diluted earnings available to
common stockholders (a)(b) $312 552.4 $.56 $440 553.6 $.79
(a) Basic earnings per common share is computed by dividing net income
available to common stockholders by the weighted average number of
shares of common stock outstanding. Diluted earnings per common share
is computed by dividing net income available to common stockholders,
as adjusted for potentially dilutive securities by the weighted
average number of shares of common stock outstanding plus potentially
dilutive securities. Dilutive securities may include shares granted
under comprehensive stock plans, preferred OP Units held by minority
partners, exchangeable debt securities and other minority interests
that have the option to convert their limited partnership interests
to common OP Units. No effect is shown for any securities that are
anti-dilutive.
(b) Our results for both periods presented were significantly affected by
certain transactions. For further detail see "Schedule of Significant
Transactions Affecting Earnings per Share and Funds From Operations
per Diluted Share."
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
Quarter ended
As of September 5, 2008 September 5, 2008
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR
Pacific 27 15,936 $193.33 80.9% $156.43
Mid-Atlantic 11 8,684 258.56 81.6 210.89
North Central 14 6,175 153.73 72.8 111.91
Florida 9 5,676 165.06 67.8 111.95
DC Metro 13 5,666 175.31 80.0 140.29
New England 11 5,663 175.51 77.4 135.76
South Central 8 4,358 149.97 62.7 94.09
Mountain 8 3,372 136.63 65.6 89.70
Atlanta 7 2,589 179.13 62.1 111.24
International 7 2,471 171.67 64.7 111.05
All Regions 115 60,590 187.00 74.9 140.13
Quarter ended September 7, 2007
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $198.97 82.6% $164.36 (4.8)%
Mid-Atlantic 240.98 85.8 206.70 2.0
North Central 157.40 75.6 119.06 (6.0)
Florida 161.15 68.5 110.46 1.3
DC Metro 175.09 77.5 135.63 3.4
New England 171.34 84.7 145.14 (6.5)
South Central 146.60 65.8 96.53 (2.5)
Mountain 130.13 71.0 92.45 (3.0)
Atlanta 184.37 66.1 121.91 (8.8)
International 155.41 66.6 103.50 7.3
All Regions 184.54 77.5 143.15 (2.1)
Year-to-date ended
As of September 5, 2008 September 5, 2008
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR
Pacific 27 15,936 $201.37 76.9% $154.86
Mid-Atlantic 11 8,684 255.14 79.3 202.32
North Central 14 6,175 150.95 66.6 100.48
Florida 9 5,676 218.67 75.6 165.31
DC Metro 13 5,666 196.54 76.4 150.13
New England 11 5,663 174.84 72.7 127.13
South Central 8 4,358 163.73 68.7 112.56
Mountain 8 3,372 173.01 66.8 115.57
Atlanta 7 2,589 190.25 67.1 127.74
International 7 2,471 172.50 69.3 119.60
All Regions 115 60,590 198.30 73.8 146.27
Year-to-date ended September 7, 2007
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $201.57 77.6% $156.33 (0.9)%
Mid-Atlantic 241.03 82.4 198.69 1.8
North Central 150.04 70.3 105.53 (4.8)
Florida 214.38 73.7 158.03 4.6
DC Metro 193.00 77.6 149.72 0.3
New England 168.33 74.4 125.30 1.5
South Central 158.83 72.0 114.30 (1.5)
Mountain 166.73 69.9 116.49 (0.8)
Atlanta 193.47 69.1 133.70 (4.5)
International 151.35 67.5 102.11 17.1
All Regions 193.26 75.3 145.46 0.6
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Property Type (a)
Quarter ended
As of September 5, 2008 September 5, 2008
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR
Urban 55 32,989 $204.22 78.2% $159.70
Suburban 32 12,311 154.84 70.3 108.84
Resort/Conference 13 8,082 209.98 67.3 141.32
Airport 15 7,208 132.26 76.4 101.10
All Types 115 60,590 187.00 74.9 140.13
Quarter ended September 7, 2007
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Urban $197.08 81.0% $159.73 -%
Suburban 153.75 71.2 109.48 (0.6)
Resort/Conference 221.06 72.9 161.26 (12.4)
Airport 132.42 77.6 102.70 (1.6)
All Types 184.54 77.5 143.15 (2.1)
Year-to-date ended
As of September 5, 2008 September 5, 2008
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR
Urban 55 32,989 $210.29 75.8% $159.44
Suburban 32 12,311 159.58 67.3 107.43
Resort/Conference 13 8,082 256.76 73.8 189.58
Airport 15 7,208 138.69 75.3 104.42
All Types 115 60,590 198.30 73.8 146.27
Year-to-date ended September 7, 2007
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Urban $202.31 78.0% $157.73 1.1%
Suburban 156.11 68.6 107.04 0.4
Resort/Conference 258.75 74.1 191.67 (1.1)
Airport 137.20 75.7 103.91 0.5
All Types 193.26 75.3 145.46 0.6
(a) See the notes to financial information for a discussion of reporting
periods and comparable hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Number of hotels 115 115 115 115
Number of rooms 60,590 60,590 60,590 60,590
Percent change in comparable hotel
RevPAR (2.1%) - .6% -
Operating profit margin under GAAP (b) 10.5% 13.7% 14.6% 16.0%
Comparable hotel adjusted operating
profit margin (b) 23.45% 24.85% 26.6% 27.2%
Food and beverage profit margin under
GAAP (b) 18.3% 19.5% 26.5% 26.1%
Comparable food and beverage adjusted
profit margin (b) 18.5% 20.1% 26.7% 26.5%
Comparable hotel sales
Room $741 $757 $2,204 $2,188
Food and beverage ( c ) 308 323 1,079 1,071
Other 79 84 245 247
Comparable hotel sales (d) 1,128 1,164 3,528 3,506
Comparable hotel expenses
Room 187 186 538 524
Food and beverage (e) 251 258 791 787
Other 45 49 132 135
Management fees, ground rent and other
costs 380 382 1,130 1,108
Comparable hotel expenses (f) 863 875 2,591 2,554
Comparable hotel adjusted operating
profit 265 289 937 952
Non-comparable hotel results, net (g) 5 3 22 23
Office buildings and select service
properties, net (h) - - (1) (1)
Depreciation and amortization (133) (119) (388) (352)
Corporate and other expenses (14) (14) (45) (51)
Gain on insurance settlement - 5 7 5
Operating profit $123 $164 $532 $576
(a) See the notes to the financial information for discussion of non-
GAAP measures, reporting periods and comparable hotel results.
(b) Operating profit margins are calculated by dividing the applicable
operating profit by the related revenue amount. GAAP margins are
calculated using amounts presented in the consolidated statement of
operations. Comparable margins are calculated using amounts
presented in the above table.
( c ) The reconciliation of total food and beverage sales per the
consolidated statements of operations to the comparable food and
beverage sales is as follows:
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Food and beverage sales per the
consolidated statements of
operations $311 $323 $1,085 $1,071
Non-comparable food and beverage
sales (8) (4) (34) (24)
Food and beverage sales for the
property for which we record
rental income 5 4 21 20
Adjustment for food and beverage
sales for comparable hotels to
reflect Marriott's fiscal year
for Marriott-managed hotels - - 7 4
Comparable food and beverage
sales $308 $323 $1,079 $1,071
(d) The reconciliation of total revenues per the consolidated statements
of operations to the comparable hotel sales is as follows:
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Revenues per the consolidated
statements of operations $1,168 $1,197 $3,641 $3,607
Non-comparable hotel sales (31) (24) (114) (96)
Hotel sales for the property for
which we record rental income,
net 11 10 38 37
Rental income for office
buildings and select service
hotels (20) (19) (58) (56)
Adjustment for hotel sales for
comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels - - 21 14
Comparable hotel sales $1,128 $1,164 $3,528 $3,506
(e) The reconciliation of total food and beverage expenses per the
consolidated statements of operations to the comparable food and
beverage expenses is as follows:
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Food and beverage expenses per
the consolidated statements of
operations $254 $260 $798 $791
Non-comparable food and beverage
expense (6) (5) (25) (19)
Food and beverage expenses for
the property for which we
record rental income 3 3 13 12
Adjustment for food and beverage
expenses for comparable hotels
to reflect Marriott's fiscal
year for Marriott-managed
hotels - - 5 3
Comparable food and beverage
expenses $251 $258 $791 $787
(f) The reconciliation of operating costs per the consolidated
statements of operations to the comparable hotel expenses is as
follows:
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Operating costs and expenses per
the consolidated statements of
operations $1,045 $1,033 $3,109 $3,031
Non-comparable hotel expenses (26) (20) (87) (70)
Hotel expenses for the property
for which we record rental
income 11 9 39 38
Rent expense for office buildings
and select service hotels (20) (19) (59) (57)
Adjustment for hotel expenses for
comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels - - 15 10
Depreciation and amortization (133) (119) (388) (352)
Corporate and other expenses (14) (14) (45) (51)
Gain on insurance settlement - 5 7 5
Comparable hotel expenses $863 $875 $2,591 $2,554
(g) Non-comparable hotel results, net, includes the following items: (i)
the results of operations of our non-comparable hotels whose
operations are included in our consolidated statement of operations
as continuing operations and (ii) the difference between the number
of days of operations reflected in the comparable hotel results and
the number of days of operations reflected in the consolidated
statements of operations.
(h) Represents rental income less rental expense for select service
properties and office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per share amounts)
September 5, December 31,
2008 2007
Equity
Common shares outstanding 518.9 522.6
Common shares and minority held
common OP Units outstanding 540.2 540.9
Preferred OP Units outstanding .02 .02
Class E Preferred shares outstanding 4.0 4.0
Security pricing
Common (a) $14.32 $17.04
Class E Preferred (a) $24.03 $25.05
3 1/4% Exchangeable Senior Debentures (b) $1,032.50 $1,153.19
2 5/8% Exchangeable Senior Debentures (b) $810.00 $855.44
Dividends declared per share for calendar year
Common ( c ) $.60 $1.00
Class E Preferred ( c ) $1.67 $2.22
Debt
Series K senior notes, with a rate of 7 1/8%
due November 2013 $725 $725
Series M senior notes, with a rate of 7%
due August 2012 348 347
Series O senior notes, with a rate of 6 3/8%
due March 2015 650 650
Series Q senior notes, with a rate
of 6 3/4% due June 2016 800 800
Series S senior notes, with a rate
of 6 7/8% due November 2014 497 497
$500 million Exchangeable Senior
Debentures, with a rate of 3 1/4% due
April 2024 497 496
$600 million Exchangeable Senior
Debentures, with a rate of 2 5/8%
due April 2027 593 592
Senior notes, with a rate of 10.0%
due May 2012 7 7
Total senior notes 4,117 4,114
Mortgage debt (non-recourse) secured by
$2.2 billion of real estate assets, with
an average interest rate of 6.4% and 6.6% at
September 5, 2008 and December 31, 2007,
respectively, maturing through December 2023 1,492 1,423
Credit facility, including the $210 million
term loan (d) 210 -
Other 87 88
Total debt (e)(f) $5,906 $5,625
Percentage of fixed rate debt 91.4% 100%
Weighted average interest rate 5.9% 6.0%
Weighted average debt maturity 5.0 years 5.7 years
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Hotel Operating Statistics for All
Properties (g)
Average daily rate $184.53 $181.71 $195.80 $190.20
Average occupancy 74.7% 76.5% 73.6% 74.6%
RevPAR $137.75 $138.97 $144.07 $141.81
(a) Share prices are the closing price as reported by the New York Stock
Exchange.
(b) Amount reflects market price of a single $1,000 debenture as quoted
by Bloomberg L.P.
( c ) On September 18, 2008, the Company declared a third quarter common
dividend of $0.20 per share and a third quarter preferred dividend
of $.5546875 per share for its Class E cumulative redeemable
preferred stock.
(d) Subsequent to the end of the third quarter, the Company drew $200
million under the revolver portion of its credit facility. The
Company currently has $400 million of remaining available capacity
under the revolver portion of the Credit Facility.
(e) In accordance with GAAP, total debt includes the debt of entities
that we consolidate, but do not own 100% of the interests, and
excludes the debt of entities that we do not consolidate, but have a
minority ownership interest and record our investment therein under
the equity method of accounting. As of September 5, 2008, our
minority partners' share of consolidated debt is $68 million and our
share of debt in unconsolidated investments is $365 million.
(f) Total debt as of September 5, 2008 and December 31, 2007 includes
net discounts of $11 million and $13 million, respectively.
(g) The operating statistics reflect all consolidated properties as of
September 5, 2008 and September 7, 2007, respectively. The operating
statistics include the results of operations for eleven properties
sold as of September 5, 2008 prior to their disposition.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders
to Funds From Operations per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
September 5, 2008 September 7, 2007
Per Per
Share Share
Income Shares Amount Income Shares Amount
Net income available to common
stockholders $52 519.3 $.10 $95 522.3 $.18
Adjustments:
Gains on dispositions, net of
taxes (13) - (.03) - - -
Gains on insurance settlement (a) - - - (6) - (.01)
Amortization of deferred gains
and other property transactions,
net of taxes (1) - - (3) - (.01)
Depreciation and amortization 133 - .25 120 - .23
Partnership adjustments 5 - .01 7 - .01
FFO of minority partners of
Host LP (b) (7) - (.01) (7) - (.01)
Adjustments for dilutive securities:
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average market price - .3 - - 0.8 -
Assuming conversion of 2004
Exchangeable Senior Debentures 4 31.2 (.01) 4 29.5 (.01)
FFO per diluted share ( c )(d) $173 550.8 $.31 $210 552.6 $.38
Year-to-date ended Year-to-date ended
September 5, 2008 September 7, 2007
Per Per
Share Share
Income Shares Amount Income Shares Amount
Net income available to common
stockholders $299 520.8 $.57 $427 522.0 $.82
Adjustments:
Gains on dispositions, net of
taxes (23) - (.04) (139) - (.27)
Gains on insurance settlement (a) - - - (6) - (.01)
Amortization of deferred gains
and other property transactions,
net of taxes (3) - (.01) (5) - (.01)
Depreciation and amortization 387 - .74 354 - .68
Partnership adjustments 22 - .04 20 - .04
FFO of minority partners of
Host LP (b) (28) - (.05) (22) - (.04)
Adjustments for dilutive
securities:
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average market price - .4 - - 0.9 -
Assuming conversion of 2004
Exchangeable Senior Debentures 13 31.2 (.04) 13 29.5 (.05)
FFO per diluted share ( c )(d) $667 552.4 $1.21 $642 552.4 $1.16
(a) Represents the gain during the period for the settlement of property
insurance claims, including the gains that are included in
discontinued operations related to hotels that we have sold.
(b) Represents FFO attributalbe to the minority interests in Host LP.
( c ) FFO per diluted share in accordance with NAREIT is adjusted for the
effects of dilutive securities. Dilutive securities may include
shares granted under comprehensive stock plans, preferred OP Units
held by minority partners, exchangeable debt securities and other
minority interests that have the option to convert their limited
partnership interest to common OP Units. No effect is shown for
securities if they are anti-dilutive.
(d) FFO per diluted share was significantly affected by certain
transactions. For further detail see "Schedule of Significant
Transactions Affecting Earnings per Diluted Share and Funds From
Operations per Diluted Share."
HOST HOTELS & RESORTS, INC.
Schedule of Significant Transactions Affecting Earnings per Share
and Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
September 5, 2008 September 7,2007
Net Income Net Income
(Loss) FFO (Loss) FFO
Gain on hotel dispositions, net of
taxes $13 $- $- $-
Minority interest expense (a) (1) - - -
Total (b) $12 $- $- $-
Diluted shares 519.6 - - -
Per diluted share $.02 $- $- $-
Year-to-date ended Year-to-date ended
September 5, 2008 September 7, 2007
Net Income Net Income
(Loss) FFO (Loss) FFO
Senior notes redemptions and
debt prepayments ( c ) $- $- $(46) $(46)
Gain on hotel dispositions, net
of taxes 23 - 139 -
Minority interest income
(expense) (a) (1) - (3) 2
Total (b) $22 $- $90 $(44)
Diluted shares 552.4 - 553.6 552.4
Per diluted share $.04 $- $.16 $(.08)
(a) Represents the portion of the significant transactions attributable
to minority partners in Host LP.
(b) Net income of Host LP was also affected by the transactions
discussed above, with the exception of the minority interest income
(expense) item discussed in footnote (a). Accordingly, the total
adjustments to the net income of Host LP were approximately $13
million and $23 million for the third quarter and year-to-date 2008
and $93 million for the year-to-date 2007.
( c ) Represents call premiums and the acceleration of original issue
discounts and deferred financing costs, as well as incremental
interest during the call or prepayment notice period, included in
interest expense in the consolidated statements of operations. We
recognized these costs in conjunction with the prepayment or
refinancing of senior notes and mortgages during the periods
presented.
HOST HOTELS & RESORTS, L.P.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per unit amounts)
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Revenues
Rooms $757 $769 $2,236 $2,216
Food and beverage 311 323 1,085 1,071
Other 78 83 241 242
Total hotel sales 1,146 1,175 3,562 3,529
Rental income 22 22 79 78
Total revenues 1,168 1,197 3,641 3,607
Expenses
Rooms 191 190 547 533
Food and beverage 254 260 798 791
Hotel departmental expenses 313 307 897 870
Management fees 49 55 173 171
Other property-level expenses 91 93 268 268
Depreciation and amortization 133 119 388 352
Corporate and other expenses 14 14 45 51
Gain on insurance settlement - (5) (7) (5)
Total operating costs and expenses 1,045 1,033 3,109 3,031
Operating profit 123 164 532 576
Interest income 4 9 13 27
Interest expense (83) (82) (240) (312)
Net gains on property transactions
and other - 3 2 5
Minority interest income/(expense) 3 (1) (5) (5)
Equity in earnings of affiliates 1 - 3 5
Income before income taxes 48 93 305 296
Provision for income taxes (4) 4 (11) (1)
Income from continuing operations 44 97 294 295
Income from discontinued operations (b) 13 4 25 154
Net income 57 101 319 449
Less: Distributions on preferred units (2) (2) (6) (6)
Net income available to common
unitholders $55 $99 $313 $443
Basic earnings per common unit:
Continuing operations $.08 $.17 $.53 $.54
Discontinued operations .02 .01 .05 .28
Basic earnings per common unit $.10 $.18 $.58 $.82
Diluted earnings per common unit:
Continuing operations $.08 $.17 $.52 $.53
Discontinued operations .02 .01 .05 .27
Diluted earnings per common unit $.10 $.18 $.57 $.80
(a) Our consolidated statements of operations presented above have been
prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted. When distinguishing between
Host and Host LP, the primary difference is the partnership
interests in Host LP held by outside partners, which is reflected
as minority interest in Host's consolidated balance sheets and
minority interest expense in Host's consolidated statements of
operations. The consolidated statements of operations should be
read in conjunction with the consolidated financial statements and
notes thereto included in our most recent Annual Report on Form
10-K.
(b) Reflects the results of operations and gain on sale, net of the
related income tax, for two properties sold in 2008 and nine
properties sold in 2007.
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended Year-to-date ended
September September September September
5, 2008 7, 2007 5, 2008 7, 2007
Net income $57 $101 $319 $449
Interest expense 83 82 240 312
Depreciation and amortization 133 119 388 352
Income taxes 4 (4) 11 1
Discontinued operations (a) 1 1 1 4
EBITDA 278 299 959 1,118
Gains on dispositions (13) - (23) (139)
Amortization of deferred gains (1) (3) (3) (5)
Property insurance gains - (6) - (6)
Equity investment adjustments:
Equity in earnings of affiliates (1) - (3) (5)
Pro rata EBITDA of equity
investments 12 9 29 24
Consolidated partnership
adjustments:
Minority interest expense (3) 1 5 5
Pro rata EBITDA of minority
partners (2) (3) (13) (14)
Adjusted EBITDA of Host LP $270 $297 $951 $978
(a) Reflects the interest expense, depreciation and amortization and
income taxes included in discontinued operations.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share for
Full Year 2008 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2008 Forecast
Per Share
Income Shares Amount
Forecast net income available to
common stockholders $428 521.2 $.82
Adjustments:
Depreciation and amortization 559 - 1.07
Gain on dispositions, net of taxes (27) - (.05)
Partnership adjustments 30 - .05
FFO of minority partners of Host LP (b) (38) - (.07)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive stock
plan less shares assumed purchased at
average market price - .3 -
Assuming conversion of 2004
Exchangeable Senior Debentures 19 32.3 (.07)
FFO per diluted share $971 553.8 $1.75
High-end of Range
Full Year 2008 Forecast
Per Share
Income Shares Amount
Forecast net income available to
common stockholders $456 521.2 $.87
Adjustments:
Depreciation and amortization 559 - 1.07
Gain on dispositions, net of taxes (27) - (.05)
Partnership adjustments 30 - .05
FFO of minority partners of Host LP (b) (39) - (.07)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive stock
plan less shares assumed purchased at
average market price - .3 -
Assuming conversion of 2004
Exchangeable Senior Debentures 19 32.3 (.07)
FFO per diluted share $998 553.8 $1.80
(a) The full year 2008 forecasts were based on the following
assumptions:
-- Comparable hotel RevPAR will range from flat to a decrease of 1%
for the full year for the low and high ends of the
forecasted range, respectively.
-- Comparable hotel adjusted operating profit margins will range
from a decrease of 100 basis points to 125 basis points for
the full year for the low and high ends of the forecasted
range, respectively.
-- We do not anticipate that any acquisitions will be made
during 2008.
-- We do not anticipate that any hotel dispositions will be made
during the fourth quarter of 2008.
-- We expect to spend approximately $650 million on capital
expenditures in 2008.
-- Fully diluted weighted average shares for FFO per diluted
share and earnings per diluted share will be approximately
553.8 million for the full year.
The amounts shown in these forecasts are based on these and other
assumptions, as well as management's estimate of operations for
2008. These forecasts are forward-looking and are not guarantees of
future performance and involve known and unknown risks,
uncertainties and other factors which may cause actual transactions,
results and performance to differ materially from those expressed or
implied by these forecasts. Although we believe the expectations
reflected in the forecasts are based upon reasonable assumptions, we
can give no assurance that the expectations will be attained or that
the results will be materially different. Risks that may affect
these assumptions and forecasts include the following:
-- the level of RevPAR and margin growth or decline may change
significantly;
-- the amount and timing of acquisitions and dispositions of
hotel properties is an estimate that can substantially affect
financial results, including such items as net income,
depreciation and gains on dispositions;
-- the level of capital expenditures may change significantly,
which will directly affect the level of depreciation expense
and net income;
-- the amount and timing of debt payments may change
significantly based on market conditions, which will directly
affect the level of interest expense and net income;
-- the number of shares of the Company's common stock
repurchased may change based on market conditions; and
-- other risks and uncertainties associated with our business
described herein and in the Company's filings with the SEC.
(b) Represents FFO attributable to the minority interests in Host LP.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2008 Forecasts (a)(b)
(unaudited, in millions, except hotel statistics)
Full Year 2008
Low-end High-end
of range of range
Operating profit margin under GAAP ( c ) 14.4% 14.7%
Comparable hotel adjusted operating
profit margin (d) 26.2% 26.5%
Comparable hotel sales
Room $3,203 $3,236
Other 1,939 1,950
Comparable hotel sales (e) 5,142 5,186
Comparable hotel expenses
Rooms and other departmental costs 2,135 2,148
Management fees, ground rent and
other costs 1,659 1,666
Comparable hotel expenses (f) 3,794 3,814
Comparable hotel adjusted operating profit 1,348 1,372
Non-comparable hotel results, net 39 39
Office buildings and select service
properties, net 8 8
Depreciation and amortization (559) (559)
Corporate and other expenses (70) (70)
Operating profit $766 $790
(a) Forecasted comparable hotel results include assumptions on the
number of hotels that will be included in our comparable hotel set
in 2008. We have assumed that 115 hotels will be classified as
comparable as of December 31, 2008. No assurances can be made as to
the hotels that will be in the comparable hotel set for 2008. Also,
see the notes following the table reconciling net income available
to common shareholders to Funds From Operations per Diluted Share
for assumptions relating to the full year 2008 forecasts.
(b) Our comparable hotel results are recorded based on the reporting
cycle used by Marriott International, Inc., or Marriott, for our
Marriott-managed hotels. Marriott uses a fiscal year ending on the
Friday closest to December 31 and will generally report 52 weeks of
operations in a given year. However, Marriott will report its
results of operations based on a 53-week year for 2008 based on a
fourth quarter of 17 weeks. For comparative purposes, we include the
standard 52 weeks and exclude the extra week of operations in our
forecast comparable hotel operating data for the full year 2008. For
further information, see "Reporting Periods for Statement of
Operations" and "Reporting Periods for Hotel Operating Statistics
and Comparable Hotel Results" in the Notes to Financial
Information.
( c ) Operating profit margin under GAAP is calculated as the operating
profit divided by the forecast total revenues per the consolidated
statements of operations. See (d) below for forecasted revenues.
(d) Comparable hotel adjusted operating profit margin is calculated as
the comparable hotel adjusted operating profit divided by the
comparable hotel sales per the table above. We forecasted a
decrease in margins of 100 basis points to 125 basis points under
the 2007 comparable hotel adjusted operating profit margin of 27.5%.
(e) The reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions):
Full Year 2008
Low-end High-end
of range of range
Revenues $5,332 $5,377
Non-comparable hotel sales (152) (153)
Hotel sales for the property for which
we record rental income, net 54 54
Rental income for office buildings and
select service hotels (92) (92)
Comparable hotel sales $5,142 $5,186
(f) The reconciliation of forecast operating costs and expenses to the
comparable hotel expenses is as follows (in millions):
Full Year 2008
Low-end High-end
of range of range
Operating costs and expenses $4,566 $4,587
Non-comparable hotel expenses (113) (114)
Hotel expenses for the property
for which we record rental income 54 54
Rent expense for office buildings and
select service hotels (84) (84)
Depreciation and amortization (559) (559)
Corporate and other expenses (70) (70)
Comparable hotel expenses $3,794 $3,814
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA for Full Year 2008 Forecasts (a)
(unaudited, in millions)
Full Year 2008
Low-end High-end
of range of range
Net income $456 $485
Interest expense 359 359
Depreciation and amortization 559 559
Income taxes 1 (3)
EBITDA 1,375 1,400
Gains on dispositions (27) (27)
Equity investment adjustments: (8) (8)
Equity in earnings of affiliates
Pro rata Adjusted EBITDA of equity
investments 48 48
Consolidated partnership adjustments:
Minority interest expense 5 5
Pro rata Adjusted EBITDA of minority
partners (18) (18)
Adjusted EBITDA of Host LP $1,375 $1,400
(a) See the notes following the table reconciling net income available
to common shareholders to Funds From Operations per Diluted Share
for assumptions relating to the full year 2008.
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are
based on results of our hotels reported to us by our hotel managers. Our hotel
managers use different reporting periods. Marriott International, Inc., or
Marriott, the manager of the majority of our properties, uses a fiscal year
ending on the Friday closest to December 31 and reports twelve weeks of
operations for the first three quarters and sixteen or seventeen weeks for the
fourth quarter of the year for its Marriott-managed hotels. In contrast, other
managers of our hotels, such as Starwood and Hyatt, report results on a
monthly basis. Additionally, Host, as a REIT, is required by tax laws to
report results on a calendar year. As a result, we elected to adopt the
reporting periods used by Marriott except that our fiscal year always ends on
December 31 to comply with REIT rules. Our first three quarters of operations
end on the same day as Marriott but our fourth quarter ends on December 31 and
our full year results, as reported in our consolidated statement of
operations, always includes the same number of days as the calendar year.
Two consequences of the reporting cycle we have adopted are: (1)
quarterly start dates will usually differ between years, except for the first
quarter which always commences on January 1, and (2) our first and fourth
quarters of operations and year-to-date operations may not include the same
number of days as reflected in prior years. For example, the third quarter of
2008 ended on September 5, and the third quarter of 2007 ended on September 7,
though both quarters reflect twelve weeks of operations. In contrast, the
September 5, 2008 year-to-date operations included 249 days of operations,
while the September 7, 2007 year-to-date operations included 250 days of
operations.
While the reporting calendar we adopted is more closely aligned with the
reporting calendar used by the manager of a majority of our properties, one
final consequence of our calendar is we are unable to report the month of
operations that ends after our fiscal quarter-end until the following quarter
because our hotel managers using a monthly reporting period do not make mid-
month results available to us. Hence, the month of operation that ends after
our fiscal quarter-end is included in our quarterly results of operations in
the following quarter for those hotel managers (covering approximately 41% of
our hotels). As a result, our quarterly results of operations include results
from hotel managers reporting results on a monthly basis as follows: first
quarter (January, February), second quarter (March to May), third quarter
(June to August) and fourth quarter (September to December). While this does
not affect full-year results, it does affect the reporting of quarterly
results.
Reporting Periods for Hotel Operating Statistics and Comparable Hotel
Results
In contrast to the reporting periods for our consolidated statement of
operations, our hotel operating statistics (i.e., RevPAR, average daily rate
and average occupancy) and our comparable hotel results are always reported
based on the reporting cycle used by Marriott for our Marriott-managed hotels.
This facilitates year-to-year comparisons, as each reporting period will be
comprised of the same number of days of operations as in the prior year
(except in the case of fourth quarters comprised of seventeen weeks (such as
fiscal year 2008) versus sixteen weeks). This means, however, that the
reporting periods we use for hotel operating statistics and our comparable
hotels results may differ slightly from the reporting periods used for our
statements of operations for the first and fourth quarters and the full year.
Results from hotel managers reporting on a monthly basis are included in our
operating statistics and comparable hotels results consistent with their
reporting in our consolidated statement of operations herein:
-- Hotel results for the third quarter of 2008 reflect 12 weeks of
operations for the period from June 14, 2008 to September 5, 2008 for our
Marriott-managed hotels and results from June 1, 2008 to August 31, 2008 for
operations of all other hotels which report results on a monthly basis.
-- Hotel results for the third quarter of 2007 reflect 12 weeks of
operations for the period from June 16, 2007 to September 7, 2007 for our
Marriott-managed hotels and results from June 1, 2007 to August 31, 2007 for
operations of all other hotels which report results on a monthly basis.
-- Hotel results for year-to-date 2008 reflect 36 weeks for the period
from December 29, 2007 to September 5, 2008 for our Marriott-managed hotels
and results from January 1, 2008 to August 31, 2008 for operations of all
other hotels which report results on a monthly basis.
-- Hotel results for year-to-date 2007 reflect 36 weeks for the period
from December 30, 2006 to September 7, 2007 for our Marriott-managed hotels
and results from January 1, 2007 to August 31, 2007 for operations of all
other hotels which report results on a monthly basis.
Comparable Hotel Operating Statistics
We present certain operating statistics (i.e., RevPAR, average daily rate
and average occupancy) and operating results (revenues, expenses, adjusted
operating profit and adjusted operating profit margin) for the periods
included in this report on a comparable hotel basis. We define our comparable
hotels as properties (i) that are owned or leased by us and the operations of
which are included in our consolidated results, whether as continuing
operations or discontinued operations, for the entirety of the reporting
periods being compared, and (ii) that have not sustained substantial property
damage or business interruption or undergone large-scale capital projects
during the reporting periods being compared. Of the 117 hotels that we owned
as of September 5, 2008, 115 hotels have been classified as comparable hotels.
The operating results of the following hotels that we owned as of September 5,
2008 are excluded from comparable hotel results for these periods:
-- Atlanta Marriott Marquis (a two-year major renovation that was
completed in June 2008); and
-- New Orleans Marriott (property damage and business interruption from
Hurricane Katrina in August 2005).
The operating results of the two hotels we disposed of in 2008 and the nine
hotels we disposed of in 2007 are also not included in comparable hotel
results for the periods presented herein. Moreover, because these statistics
and operating results are for our hotel properties, they exclude results for
our non-hotel properties and other real estate investments.
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial measures,"
which are measures of our historical or future financial performance that are
not calculated and presented in accordance with GAAP, within the meaning of
applicable SEC rules. They are as follows: (i) FFO per diluted share of Host,
(ii) EBITDA of Host LP, (iii) Adjusted EBITDA of Host LP and (iv) Comparable
Hotel Operating Results of Host. The following discussion defines these terms
and presents why we believe they are useful supplemental measures of our
performance.
FFO per Diluted Share
We present FFO per diluted share as a non-GAAP measure of our performance
in addition to our earnings per share (calculated in accordance with GAAP). We
calculate FFO per diluted share for a given operating period as our FFO
(defined as set forth below) for such period divided by the number of fully
diluted shares outstanding during such period. The National Association of
Real Estate Investment Trusts (NAREIT) defines FFO as net income (calculated
in accordance with GAAP) excluding gains (losses) from sales of real estate,
the cumulative effect of changes in accounting principles, real estate-related
depreciation and amortization and adjustments for unconsolidated partnerships
and joint ventures. We present FFO on a per share basis after making
adjustments for the effects of dilutive securities and the payment of
preferred stock dividends, in accordance with NAREIT guidelines.
We believe that FFO per diluted share is a useful supplemental measure of
our operating performance and that the presentation of FFO per diluted share,
when combined with the primary GAAP presentation of earnings per share,
provides beneficial information to investors. By excluding the effect of real
estate depreciation, amortization and gains and losses from sales of real
estate, all of which are based on historical cost accounting and which may be
of lesser significance in evaluating current performance, we believe such
measures can facilitate comparisons of operating performance between periods
and with other REITs, even though FFO per diluted share does not represent an
amount that accrues directly to holders of our common stock. Historical cost
accounting for real estate assets implicitly assumes that the value of real
estate assets diminishes predictably over time. As noted by NAREIT in its
April 2002 "White Paper on Funds From Operations," since real estate values
have historically risen or fallen with market conditions, many industry
investors have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves. For these reasons, NAREIT adopted the definition of FFO in order
to promote an industry-wide measure of REIT operating performance.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and
Amortization (EBITDA) is a commonly used measure of performance in many
industries. Management believes EBITDA provides useful information to
investors regarding our results of operations because it helps us and our
investors evaluate the ongoing operating performance of our properties and
facilitates comparisons between us and other lodging REITs, hotel owners who
are not REITs and other capital-intensive companies. Management uses EBITDA to
evaluate property-level results and as one measure in determining the value of
acquisitions and dispositions and, like FFO per diluted share, it is widely
used by management in the annual budget process.
Adjusted EBITDA
As of September 5, 2008, Host owns approximately 96% of the partnership
interest of Host LP and is its sole general partner. We conduct all of our
operations through Host LP, and Host LP is the obligor on our senior notes and
on our credit facility. Historically, management has adjusted EBITDA when
evaluating our performance because we believe that the exclusion of certain
additional recurring and non-recurring items described below provides useful
supplemental information to investors regarding our ongoing operating
performance and that the presentation of Adjusted EBITDA, when combined with
the primary GAAP presentation of net income, is beneficial to an investor's
complete understanding of our operating performance. In addition, the Adjusted
EBITDA of Host LP is presented because we believe it is a relevant measure in
calculating certain credit ratios, since Host LP is the owner of all of our
hotels and is the obligor on our debt noted above. We adjust EBITDA for the
following items, which may occur in any period, and refer to this measure as
Adjusted EBITDA:
-- Real Estate Transactions - We exclude the effect of gains and losses,
including the amortization of deferred gains, recorded on the disposition of
assets and property insurance gains in our consolidated statement of
operations because we believe that including them in Adjusted EBITDA is not
consistent with reflecting the ongoing performance of our remaining assets. In
addition, material gains or losses from the depreciated value of the disposed
assets could be less important to investors given that the depreciated asset
often does not reflect the market value of real estate assets (as noted above
for FFO).
-- Equity Investment Adjustments - We exclude the equity in earnings
(losses) of unconsolidated investments in partnerships and joint ventures as
presented in our consolidated statement of operations because it includes our
pro-rata portion of depreciation, amortization and interest expense. We
include our pro rata share of the Adjusted EBITDA of our equity investments as
we believe this more accurately reflects the performance of our investment.
The pro rata Adjusted EBITDA of equity investments is defined as the EBITDA of
our equity investments adjusted for any gains or losses on property
transactions multiplied by our percentage ownership in the partnership or
joint venture.
-- Consolidated Partnership Adjustments - We exclude the minority interest
in the income or loss of our consolidated partnerships as presented in our
consolidated statement of operations because it includes our minority
partners' pro-rata portion of depreciation, amortization and interest expense.
We deduct the minority partners' pro rata share of the Adjusted EBITDA of our
consolidated partnerships as we believe this more accurately reflects the
minority owners' interest in our consolidated partnerships. The pro rata
Adjusted EBITDA of minority partners is defined as the EBITDA of our
consolidated partnerships adjusted for any gains or losses on property
transactions multiplied by the minority partners' positions in the partnership
or joint venture.
-- Cumulative Effect of a Change in Accounting Principle - Infrequently,
the Financial Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to reflect the
cumulative effect of a change in accounting principle. We exclude these one-
time adjustments because they do not reflect our actual performance for that
period.
-- Impairment Losses - We exclude the effect of impairment losses recorded
because we believe that including them in Adjusted EBITDA is not consistent
with reflecting the ongoing performance of our remaining assets. In addition,
we believe that impairment charges are similar to gains (losses) on
dispositions and depreciation expense, both of which are also excluded from
EBITDA.
Limitations on the Use of FFO per Diluted Share, EBITDA and Adjusted
EBITDA
We calculate FFO per diluted share in accordance with standards
established by NAREIT, which may not be comparable to measures calculated by
other companies who do not use the NAREIT definition of FFO or calculate FFO
per diluted share in accordance with NAREIT guidance. In addition, although
FFO per diluted share is a useful measure when comparing our results to other
REITs, it may not be helpful to investors when comparing us to non-REITs.
EBITDA and Adjusted EBITDA, as presented, may also not be comparable to
measures calculated by other companies. This information should not be
considered as an alternative to net income, operating profit, cash from
operations or any other operating performance measure calculated in accordance
with GAAP. Cash expenditures for various long-term assets (such as renewal and
replacement capital expenditures), interest expense (for EBITDA and Adjusted
EBITDA purposes only) and other items have been and will be incurred and are
not reflected in the EBITDA, Adjusted EBITDA and FFO per diluted share
presentations. Management compensates for these limitations by separately
considering the impact of these excluded items to the extent they are material
to operating decisions or assessments of our operating performance. Our
consolidated statement of operations and cash flows include interest expense,
capital expenditures, and other excluded items, all of which should be
considered when evaluating our performance, as well as the usefulness of our
non-GAAP financial measures. Additionally, FFO per diluted share, EBITDA and
Adjusted EBITDA should not be considered as a measure of our liquidity or
indicative of funds available to fund our cash needs, including our ability to
make cash distributions. In addition, FFO per diluted share does not measure,
and should not be used as a measure of, amounts that accrue directly to
stockholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our hotels, such as hotel
revenues, expenses, adjusted operating profit (and the related margin) and
food and beverage adjusted profit (and the related margin), on a comparable
hotel, or "same store," basis as supplemental information for investors. Our
comparable hotel results present operating results for hotels owned during the
entirety of the periods being compared without giving effect to any
acquisitions or dispositions, significant property damage or large scale
capital improvements incurred during these periods. We present these
comparable hotel operating results by eliminating corporate-level costs and
expenses related to our capital structure, as well as depreciation and
amortization. We eliminate corporate-level costs and expenses to arrive at
property-level results because we believe property-level results provide
investors with supplemental information into the ongoing operating performance
of our hotels. We eliminate depreciation and amortization because, even though
depreciation and amortization are property-level expenses, these non-cash
expenses, which are based on historical cost accounting for real estate
assets, implicitly assume that the value of real estate assets diminishes
predictably over time. As noted earlier, because real estate values have
historically risen or fallen with market conditions, many industry investors
have considered presentation of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves.
As a result of the elimination of corporate-level costs and expenses and
depreciation and amortization, the comparable hotel operating results we
present do not represent our total revenues, expenses, operating profit or
operating profit margin and should not be used to evaluate our performance as
a whole. Management compensates for these limitations by separately
considering the impact of these excluded items to the extent they are material
to operating decisions or assessments of our operating performance. Our
consolidated statements of operations include such amounts, all of which
should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable hotel basis
because we believe that doing so provides investors and management with useful
information for evaluating the period-to-period performance of our hotels and
facilitates comparisons with other hotel REITs and hotel owners. In
particular, these measures assist management and investors in distinguishing
whether increases or decreases in revenues and/or expenses are due to growth
or decline of operations at comparable hotels (which represent the vast
majority of our portfolio) or from other factors, such as the effect of
acquisitions or dispositions. While management believes that presentation of
comparable hotel results is a "same store" supplemental measure that provides
useful information in evaluating our ongoing performance, this measure is not
used to allocate resources or to assess the operating performance of each of
these hotels, as these decisions are based on data for individual hotels and
are not based on comparable hotel results. For these reasons, we believe that
comparable hotel operating results, when combined with the presentation of
GAAP operating profit, revenues and expenses, provide useful information to
investors and management.
SOURCE Host Hotels & Resorts, Inc.
Copyright © 2008, PRNewswire
Copyright © 2008, NewsBlaze,
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