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.
http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO
http://photoarchive.ap.org/ DATASOURCE: Host Hotels & Resorts,
Inc. CONTACT: Gregory J. Larson, Executive Vice President, Host
Hotels & Resorts, Inc., +1-240-744-5120 Web Site:
http://www.hosthotels.com/
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