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 Host Marriott Posts 2nd Qtr Net Profit of $17 million
Compared with a Loss of $14 million a Year Earlier;
RevPAR Up 8.8%
Hotel Statistics

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BETHESDA, Md., July 21, 2004 - Host Marriott Corporation (NYSE: HMT), the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the second quarter of 2004.  Second quarter results include the following:
  • Total revenue was $927 million and $1,730 million for the second quarter and year-to-date 2004, respectively, compared to $828 million and $1,597 million for the second quarter and year-to-date 2003, respectively.
  • Net income (loss) was $17 million and $(14) million for the second quarter and year-to-date 2004, respectively, as compared to $(14) million and $(48) million for the second quarter and year-to-date 2003, respectively.
  • Earnings (loss) per diluted share was $.02 and $(.10) for the second quarter and year-to-date 2004, respectively, compared to $(.09) and $(.25) for the second quarter and year-to-date 2003, respectively.
  • Funds from Operations (FFO) per diluted share was $.21 and $.34 for the second quarter and year-to-date 2004, respectively, compared to $.22 and $.37 for the second quarter and year-to-date 2003, respectively.
  • Results of operations for the second quarter and year-to-date 2004 include approximately $30 million and $42 million, respectively, of charges for call premiums and the acceleration of deferred financing costs for prepayment of debt. For the second quarter and year-to-date 2004, this represents approximately $.09 and $.13 of earnings and FFO per diluted share, respectively.
  • Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $218 million and $390 million for the second quarter and year-to-date 2004, respectively, compared to $193 million and $365 million for the same periods in 2003, respectively.
FFO per diluted share and Adjusted EBITDA are non-GAAP 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.

Comparable hotel RevPAR for the second quarter increased 8.8% as compared to the second quarter of 2003, driven by an increase in occupancy of 5.3 percentage points and a 1.1% increase in average room rate.  Comparable hotel adjusted operating profit margins for the second quarter increased 60 basis points.  Year-to-date, comparable hotel RevPAR increased 6.0% and comparable hotel adjusted operating profit margins increased 10 basis points.

Christopher J. Nassetta, president and chief executive officer, stated, "Strengthening demand has accelerated our RevPAR growth, leading to earnings results which exceeded our expectations.  Our leading indicators continue to suggest we are in the early stages of a strong recovery, and that we should continue to see positive results throughout the remainder of the year and into 2005."

Financing Transactions and Balance Sheet

During the second quarter, the Company completed several financing transactions, including:

    *  the redemption of $559 million of 7 7/8% Series B senior notes with the proceeds from the first quarter issuance of 3.25% exchangeable senior debentures, asset sales and available cash.  As a result of these redemptions, the Company recorded a charge for call premiums and the acceleration of deferred financing costs totaling approximately $30 million in the quarter.
    *  the issuance of 4 million shares of 8 7/8% Class E redeemable preferred stock for net proceeds of approximately $97 million.  These proceeds, along with available cash, will be used to redeem all 4.16 million shares of the 10% Class A preferred stock on August 3, 2004 for approximately $104 million.
    *  the issuance of 25 million shares of common stock for net proceeds to the Company of approximately $301 million, which, along with available cash, were used to acquire the Fairmont Kea Lani Maui on July 15, 2004.

As of June 18, 2004, the Company had $771 million of cash and cash equivalents and $250 million of availability under its credit facility. After taking into consideration the acquisition of Fairmont Kea Lani and the redemption of the Class A preferred stock, the Company will have a cash balance of approximately $300 million.

W. Edward Walter, executive vice president and chief financial officer, stated, "Our efforts to strengthen our balance sheet through debt reduction and refinancing, along with the strategic deployment of our capital, have positioned us well to take advantage of opportunities in the lodging market.  We will continue to look at opportunities in the capital markets that will increase our flexibility and lower our financing costs."

Acquisitions and Dispositions

On July 15, 2004, the Company acquired the 450-suite Fairmont Kea Lani Maui, a premier luxury resort hotel located on 21 acres of Wailea's Polo Beach for $355 million.  The Company also completed the sale of the Dallas/Fort Worth Marriott for $59 million in the second quarter.

James F. Risoleo, executive vice president, acquisitions and development stated, "We are pleased with the acquisition of the Fairmont Kea Lani Maui.  In addition to expanding our portfolio of resorts, this hotel benefits from extremely high barriers to entry for new supply and represents the Company's first Fairmont-branded hotel.  It will be the Company's second property in Hawaii, a market that we believe should continue to perform well.  We are continuing to pursue additional acquisitions that are consistent with our target profile of upscale and luxury properties in markets with significant barriers to entry, while seeking to dispose of non-core assets to recycle our capital and build on our truly unmatched portfolio of properties."

2004 Outlook

The Company expects comparable hotel RevPAR for the third quarter of 2004 and full year 2004 to increase approximately 6.0% to 8.0% and 5.5% to 7.0%, respectively.  This reflects an increase from the Company's 2004 RevPAR guidance issued on April 28, 2004.  Based upon this revised guidance, the Company estimates that for 2004 its:

    *  diluted loss per common share should be approximately $.13 to $.11 for the third quarter and $.24 to $.17 for the full year;
    *  net loss should be approximately $32 million to $24 million for the third quarter and $38 million to $17 million for the full year;
    *  FFO per diluted share should be approximately $.09 to $.11 for the third quarter and $.70 to $.76 for the full year (including approximately $5 million, or $.01 per diluted share, for the quarter, and approximately $51 million, or $.15 per diluted share, for the full year related to charges for call premiums and the acceleration of deferred financing costs for debt repaid or expected to be repaid and the redemption of the Class A preferred stock); and
    *  Adjusted EBITDA should be approximately $760 million to $785 million for the full year.

The Company indicated that it will continue to pay its quarterly dividends on its preferred stock.  In addition, the Company expects to pay a $.04 to $.06 per share dividend on its common stock in the fourth quarter of 2004, representing the final distribution of 2003 taxable income.  Assuming continued improvement in operations in 2005 and a corresponding growth in taxable income, the Company intends to reinstate a quarterly dividend on its common stock in the $.04 to $.06 per share range beginning with the first quarter of 2005, which will be payable on or about April 15, 2005.  Assuming further continued improvement in the Company's operations, the Company believes its taxable income and hence its common dividend has the potential to grow substantially in subsequent years.
 

 

HOST MARRIOTT CORPORATION
Consolidated Balance Sheets(a)
(unaudited, in millions, except share amounts)

                                                   June 18,       December 31,
                                                     2004             2003
                         ASSETS
    Property and equipment, net                     $7,031            $7,085
    Assets held for sale                                 -                73
    Notes and other receivables                         54                54
    Due from managers                                   92                62
    Investments in affiliates(b)                        83                74
    Deferred financing costs, net                       75                82
    Furniture, fixture and
     equipment replacement fund                        156               144
    Other                                              152               138
    Restricted cash                                    124               116
    Cash and cash equivalents(c)                       771               764
        Total assets                                $8,538            $8,592

            LIABILITIES AND SHAREHOLDERS' EQUITY
    Debt
      Senior notes, including $490 million, net
       of discount, of Exchangeable
       Senior Debentures at June 18, 2004           $2,884            $3,180
      Mortgage debt                                  2,094             2,205
      Convertible Subordinated Debentures(b)           492                 -
      Other                                             99               101
        Total debt                                   5,569             5,486
    Accounts payable and accrued expenses               93               108
    Liabilities associated with assets
     held for sale                                       -                 2
    Other                                              161               166
        Total liabilities                            5,823             5,762

    Interest of minority partners of
     Host Marriott L.P.                                133               130
    Interest of minority partners of
     other consolidated partnerships                    88                89
    Company-obligated mandatorily redeemable
     convertible preferred securities of a
     subsidiary whose sole assets are convertible
     subordinated debentures due 2026
     ("Convertible Preferred Securities")(b)             -               475

    Shareholders' equity
      Cumulative redeemable preferred stock
       (liquidation preference $453.5
       million), 50 million shares
       authorized; 18.1 million shares
       issued and outstanding(c)                       436               339
      Common stock, par value $.01, 750
       million shares authorized; 347.0
       million shares and 320.3 million
       shares issued and outstanding,
       respectively                                      4                 3
      Additional paid-in capital                     2,914             2,617
      Accumulated other comprehensive income            24                28
      Deficit                                         (884)             (851)
        Total shareholders' equity                   2,494             2,136
        Total liabilities and
         shareholders' equity                       $8,538            $8,592

    (a) Our consolidated balance sheet as of June 18, 2004 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 Annual Report on Form 10-K and as amended from time to time in other filings with the SEC.
    (b) We adopted Financial Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46) in 2003. Under FIN 46, our limited purpose trust subsidiary that was formed to issue trust-preferred securities (the Convertible Preferred Securities Trust) was accounted for on a consolidated basis as of December 31, 2003 since we were the primary beneficiary under FIN 46.

        In December 2003, the FASB issued a revision to FIN 46, which we refer to as FIN 46R. Under FIN 46R, we are not the primary beneficiary and we are required to deconsolidate the accounts of the Convertible Preferred Securities Trust. We adopted the provisions of FIN 46R on January 1, 2004. As a result, we recorded the $492 million in debentures (the Convertible Subordinated Debentures) issued by the Convertible Preferred Securities Trust and eliminated the $475 million of Convertible Preferred Securities that were previously classified in the mezzanine section of our consolidated balance sheet prior to January 1, 2004. The difference of $17 million is our investment in the Convertible Preferred Securities Trust, which is included in "Investments in affiliates" on our consolidated balance sheet.  Additionally, we classified the related dividend payment of approximately $15 million as interest expense.  The adoption of FIN 46R had no effect on our net loss, loss per diluted share or financial covenants under our senior notes indentures.
    (c) On July 1, 2004, we called for the redemption of all of the outstanding 10% Class A Cumulative Redeemable Preferred Stock. The Class A preferred stock will be redeemed on August 3, 2004 at a redemption price of $25.00 per share plus accrued dividends to the redemption date.
 
 

                          HOST MARRIOTT CORPORATION
                   Consolidated Statements of Operations(a)
              (unaudited, in millions, except per share amounts)

                                            Quarter ended   Year-to-date ended
                                          June 18, June 20,  June 18, June 20,
                                            2004     2003     2004     2003
    Revenues
      Rooms                               $  544   $  482   $1,013   $  930
      Food and beverage                      300      267      554      507
      Other                                   59       55      110      107
        Total hotel sales                    903      804    1,677    1,544
      Rental income(b)                        24       24       53       51
      Other income                             -        -        -        2
        Total revenues                       927      828    1,730    1,597

    Expenses
      Rooms                                  132      116      249      226
      Food and beverage                      215      192      404      371
      Hotel departmental expenses            241      217      456      421
      Management fees                         39       35       71       67
      Other property-level expenses(b)        71       76      140      145
      Depreciation and amortization           83       81      165      165
      Corporate expenses                      12       12       25       25
        Total expenses                       793      729    1,510    1,420

    Operating profit                         134       99      220      177
    Interest income                            2        2        5        5
    Interest expense, including interest
     expense for the Convertible
     Subordinated Debentures in 2004(c)     (130)    (107)    (248)    (216)
    Net gains on property transactions         4        2        5        3
    Loss on foreign currency and
     derivative contracts                      -       (1)       -       (2)
    Minority interest income (expense)         1        1       (2)       2
    Equity in losses of affiliates            (3)      (3)      (8)      (9)
    Dividends on Convertible Preferred
     Securities(c)                             -       (8)       -      (15)

    Income (loss) before income taxes          8      (15)     (28)     (55)
    Provision for income taxes               (11)      (6)      (8)      (2)

    Loss from continuing operations           (3)     (21)     (36)     (57)
    Income from discontinued operations(d)    20        7       22        9

    Net income (loss)                         17      (14)     (14)     (48)

    Less: dividends on preferred stock       (10)      (9)     (19)     (18)

    Net income (loss) available to common shareholders                  $    7   $  (23)  $  (33)  $  (66)
    Basic and diluted earnings (loss) per common share                     $ 0.02   $(0.09)  $(0.10)  $(0.25)

    (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. The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K and as amended from time to time in other filings with the SEC.
    (b) Rental income and expense are as follows:
 

                                    Quarter ended       Year-to-date ended
                                June 18,    June 20,   June 18,    June 20,
                                  2004        2003       2004        2003

    Rental income                $    7      $    7      $   18      $   17
      Full-service                   17          17          35          34
      Limited service and
       office buildings          $   24      $   24      $   53      $   51
    Rental and other expenses
     (included in other
     property-level expenses)    $    2      $    2      $    3      $    3
      Full-service                   18          17          36          33
      Limited service and
       office buildings          $   20      $   19      $   39      $   36

    (c) See discussion of FIN 46R in footnote (b) to the consolidated balance sheet. Interest expense also includes approximately $30 million and $42 million for the payment of call premiums and the acceleration of deferred financing costs on debt redemptions and repayments for the second quarter and year-to-date 2004, respectively.
    (d) Reflects the results of operations and gain (loss) on sale, net of the related income tax, for seven properties sold in 2004 and eight properties sold in 2003.
 
 

                          HOST MARRIOTT CORPORATION
                       Earnings (Loss) per Common Share (unaudited, in millions, except per share amounts)

                               Quarter ended              Quarter ended
                               June 18, 2004              June 20, 2003
                                                   Income
                     Income                 Per    (loss)                Per
                     (loss)      Shares     Share  (Numer-)  Shares      Share
                  (Numerator) (Denominator) Amount (ator) (Denominator) Amount
    Net income
     (loss)            $  17      323.1   $  0.05   $ (14)   264.7   $ (0.05)
      Dividends on
       preferred
       stock             (10)         -     (0.03)     (9)       -     (0.04)
    Basic and diluted
     earnings (loss)
     available to
     common
     shareholders
     per share (a)     $   7      323.1   $  0.02   $ (23)   264.7   $ (0.09)
 
 

                            Year-to-date ended         Year-to-date ended
                              June 18, 2004              June 20, 2003

                                                   Income
                     Income                 Per    (loss)                Per
                     (loss)      Shares     Share  (Numer-)   Shares     Share
                  (Numerator) (Denominator) Amount (ator) (Denominator) Amount
    Net loss           $ (14)     322.0   $ (0.04)  $ (48)   264.5   $ (0.18)
      Dividends on
       preferred
       stock             (19)         -     (0.06)    (18)       -     (0.07)
    Basic and diluted
     loss available
     to common
     shareholders
     per share (a)     $ (33)     322.0   $ (0.10)  $ (66)   264.5   $ (0.25)
 

    (a) Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interests to common OP Units and the Convertible Subordinated Debentures. No effect is shown for any securities that are anti-dilutive.
 
 

HOST MARRIOTT CORPORATION
                       Comparable Hotel Operating Data Comparable Hotels by Region(a)
                                 (unaudited)

                      As of June 18, 2004       Quarter ended June 18, 2004
                                                           Average
                        No. of     No. of     Average     Occupancy
                      Properties   Rooms    Daily Rate   Percentages   RevPAR

    Pacific               21       11,302   $  150.12        74.5%  $  111.88
    Florida               12        7,337      174.51        74.8      130.61
    Mid-Atlantic          10        6,720      184.93        80.6      149.06
    Atlanta               13        5,940      142.84        69.3       98.99
    North Central         13        4,923      122.09        70.3       85.87
    South Central          7        4,816      136.88        79.4      108.64
    DC Metro              11        4,297      154.85        79.9      123.72
    New England            7        3,413      146.54        78.5      115.02
    Mountain               8        3,313      106.68        63.6       67.89
    International          5        1,951      122.49        74.4       91.18
       All Regions       107       54,012      150.60        74.8      112.64
 

                                        Quarter ended June 20, 2003
                                             Average                 Percent
                                Average     Occupancy               Change in
                              Daily Rate   Percentages    RevPAR     RevPAR

    Pacific                   $  150.39       66.5%    $   99.98      11.9%
    Florida                      175.33       71.7        125.69       3.9
    Mid-Atlantic                 180.86       75.2        136.02       9.6
    Atlanta                      137.98       63.6         87.71      12.9
    North Central                124.89       67.9         84.75       1.3
    South Central                136.52       76.9        104.93       3.5
    DC Metro                     146.74       75.9        111.38      11.1
    New England                  149.55       69.4        103.82      10.8
    Mountain                     103.78       64.3         66.78       1.7
    International                114.35       57.6         65.86      38.4
       All Regions               149.00       69.5        103.50       8.8
 

                       As of June 18, 2004    Year-to-date ended June 18, 2004
                                                           Average
                        No. of     No. of     Average     Occupancy
                      Properties   Rooms    Daily Rate   Percentages   RevPAR

    Pacific               21       11,302   $  151.34        73.5%  $  111.18
    Florida               12        7,337      179.40        76.9      137.99
    Mid-Atlantic          10        6,720      179.66        75.8      136.09
    Atlanta               13        5,940      142.56        69.5       99.06
    North Central         13        4,923      117.53        65.8       77.33
    South Central          7        4,816      137.83        78.8      108.67
    DC Metro              11        4,297      153.72        73.9      113.57
    New England            7        3,413      138.18        70.1       96.79
    Mountain               8        3,313      112.04        64.6       72.33
    International          5        1,951      119.50        72.4       86.52
       All Regions       107       54,012      150.15        72.8      109.32
 

                                       Year-to-date ended June 20, 2003
                                             Average                 Percent
                                Average     Occupancy               Change in
                              Daily Rate   Percentages    RevPAR     RevPAR

    Pacific                   $  154.30       66.4%    $  102.44       8.5%
    Florida                      178.72       74.1        132.49       4.1
    Mid-Atlantic                 175.64       72.5        127.38       6.8
    Atlanta                      140.79       66.1         93.01       6.5
    North Central                119.76       63.9         76.50       1.1
    South Central                139.27       78.1        108.73      (0.1)
    DC Metro                     145.01       71.3        103.42       9.8
    New England                  140.98       65.3         92.04       5.2
    Mountain                     109.42       64.7         70.82       2.1
    International                109.87       62.1         68.27      26.7
       All Regions               149.24       69.1        103.09       6.0
 

    (a) See the introductory notes to financial information for a discussion of reporting periods and comparable hotel results.
 
 

                          HOST MARRIOTT CORPORATION
                            Hotel Operational Data
                   Schedule of Comparable Hotel Results(a)
              (unaudited, in millions, except hotel statistics)

                                            Quarter ended   Year-to-date ended
                                          June 18, June 20,  June 18, June 20,
                                            2004    2003       2004     2003
 

    Number of hotels                          107     107       107      107
    Number of rooms                        54,012  54,102    54,012   54,012
    Percent change in comparable hotel
     RevPAR                                  8.8%       -       6.0%       -
    Operating profit margin under GAAP(b)   14.5%   12.0%      12.7%   11.1%
    Comparable hotel adjusted
     operating profit margin(c)             24.6%   24.0%      23.6%   23.5%
    Comparable hotel sales
            Room                           $  520  $  478    $  974   $  918
            Food and beverage                 289     267       536      502
            Other                              58      57       108      109
              Comparable hotel sales(d)       867     802     1,618    1,529

    Comparable hotel expenses
            Room                              127     115       241      222
            Food and beverage                 207     192       388      365
            Other                              36      34        66       64
            Management fees, ground rent
             and other costs                  284     269       541      518
              Comparable hotel expenses(e)    654     610     1,236    1,169

    Comparable Hotel Adjusted
     Operating Profit                         213     192       382      360
            Non-comparable hotel
             results, net(f)                   16       -        29        4
            Office building and
             limited service properties,
             net(g)                             -       -        (1)       1
            Other income                        -       -         -        2
            Depreciation and amortization     (83)    (81)     (165)    (165)
            Corporate expenses                (12)    (12)      (25)     (25)

    Operating Profit                       $  134  $   99    $  220   $  177
 

    (a) See the introductory notes to the financial information for discussion of non-GAAP measures, reporting periods and comparable hotel results.
    (b) Operating profit margin under GAAP is calculated as the operating profit divided by the total revenues per the consolidated statements of operations.
    (c) Comparable hotel adjusted operating profit margin is calculated as the comparable hotel adjusted operating profit divided by the comparable hotel sales per the schedule above.
    (d) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel sales is as follows (in millions):
 

                                         Quarter ended      Year-to-date ended
                                       June 18,  June 20,   June 18,  June 20,
                                         2004      2003       2004      2003

    Revenues per the consolidated
     statements of operations          $  927     $  828    $ 1,730   $ 1,597
    Non-comparable hotel sales            (54)       (19)       (89)      (37)
    Hotel sales for the property for
     which we record rental
     income, net                           12         10         23        22
    Rental income for office buildings
     and limited service hotels           (18)       (17)       (35)      (34)
    Other income                            -          -          -        (2)
    Adjustment for hotel sales for
     comparable hotels to reflect
      Marriott's fiscal year for
       Marriott-managed hotels              -          -        (11)      (17)
        Comparable hotel sales         $  867    $   802   $  1,618   $ 1,529
 

    (e) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions):
 

                                         Quarter ended      Year-to-date ended
                                       June 18,  June 20,   June 18,  June 20,
                                         2004      2003       2004      2003
    Operating costs and expenses per
     the consolidated statements of
     operations                        $  793     $  729    $ 1,510   $ 1,420
    Non-comparable hotel expenses         (36)       (20)       (62)      (39)
    Hotel expenses for the property for which we record rental income     10         11         24        26 Rent expense for office buildings and limited service hotels           (18)       (17)       (36)      (33)
    Adjustment for hotel expenses for
     comparable hotels to reflect
     Marriott's fiscal year for
     Marriott-managed hotels                -          -        (10)      (15)
    Depreciation and amortization         (83)       (81)      (165)     (165)
    Corporate expenses                    (12)       (12)       (25)      (25)
        Comparable hotel expenses      $  654     $  610    $ 1,236   $ 1,169
 

    (f) 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 statements of operations as continuing operations and (ii) the difference between comparable hotel adjusted operating profit, which reflects 168 days of operations, and the operating results included in the consolidated statements of operations, which reflects 170 days and 171 days for year-to-date 2004 and 2003, respectively.

    (g) Represents rental income less rental expense for limited service properties and office buildings.  For detail, see footnote (b) to the consolidated statements of operations.
 
 

                          HOST MARRIOTT CORPORATION
                      Other Financial and Operating Data (unaudited, in millions, except per share amounts)

                                                 June 18,       December 31,
                                                   2004             2003
    Equity
      Common shares outstanding                     347.0             320.3
      Common shares and minority held
       common OP Units outstanding                  369.8             343.8
      Preferred OP Units outstanding                  .02               .02
      Class A Preferred shares outstanding(a)         4.1               4.1
      Class B Preferred shares outstanding            4.0               4.0
      Class C Preferred shares outstanding            6.0               6.0
      Class D Preferred shares outstanding            .03               .03
      Class E Preferred shares outstanding            4.0                 -

    Security pricing
      Common (b)                                 $  12.26          $  12.32
      Class A Preferred(a)(b)                    $  25.80          $  26.74
      Class B Preferred(b)                       $  26.39          $  27.00
      Class C Preferred(b)                       $  26.80          $  27.26
      Class E Preferred(b)                       $  25.30                 -
      Convertible Preferred Securities(c)        $  49.81          $  51.00
      Exchangeable Senior Debentures(d)          $ 947.50          $      -

    Dividends per share
      Common                                            -                 -
      Class A Preferred                          $   1.25          $   2.50
      Class B Preferred                          $   1.25          $   2.50
      Class C Preferred                          $   1.25          $   2.50
      Class D Preferred                          $   1.25          $   1.88
      Class E Preferred                          $   0.27          $      -

    Debt
      Percentage of fixed rate debt                   85%               85%
      Weighted average interest rate(e)              7.0%              7.7%
      Weighted average debt maturity (e)        6.9 years         5.5 years
      Credit facility, outstanding balance
       (capacity of $250 million)                $      -          $      -
    Other Financial Data
      Construction in progress                   $     44          $     56
 
 

                                        Quarter ended      Year-to-date ended
                                     June 18,   June 20,   June 18,   June 20,
                                       2004       2003       2004       2003
    Hotel Operating Statistics for
     All Full-Service Properties(f)
      Average Daily Rate             $ 153.04   $ 145.14   $ 151.81   $ 145.50
      Average Occupancy                 75.0%      69.7%      73.0%      69.2%
      RevPAR                         $ 114.85   $ 101.22   $ 110.76   $ 100.73
 

    (a) On July 1, 2004, we called for the redemption of all of the outstanding 10% Class A Cumulative Redeemable Preferred Stock. The Class A preferred stock will be redeemed on August 3, 2004 at a redemption price of $25.00 per share plus accrued dividends to the redemption date.
    (b) Share prices are the closing price on the consolidated balance sheet date, as reported by the New York Stock Exchange, for the common and preferred stock, except our Class E preferred stock which is as of the date of issue, June 21, 2004.
    (c) Market price as of June 18, 2004 as quoted by Bloomberg L.P. We have reclassified these securities as debt on our consolidated balance sheet. See footnote (b) to the consolidated balance sheet.
    (d) Market price as of June 18, 2004 as quoted by Bloomberg L.P.  Quoted price reflects the price of a single $1,000 debenture, which is exchangeable for common stock upon the incurrence of certain events.
    (e) Amounts include the Convertible Subordinated Debentures in 2004.  See footnote (b) to the consolidated balance sheet. Excluding the Convertible Subordinated Debentures, our weighted average interest rate was 7.1% and our weighted average debt maturity was 5.4 years.
    (f) The operating statistics reflect all consolidated properties as of June 18, 2004 and June 20, 2003, respectively. However, the operating statistics include the results of operations for seven hotels sold in 2004 and eight hotels sold in 2003 prior to their disposition.
 
 

                          HOST MARRIOTT CORPORATION
     Reconciliation of Net Income (Loss) Available to Common Shareholders
                  to Funds From Operations per Diluted Share (unaudited, in millions, except per share amounts)

                                      Quarter ended         Quarter ended
                                       June 18, 2004         June 20, 2003

                                                   Per                   Per
                                   Income         Share  Income         Share
                                   (loss) Shares  Amount (loss) Shares  Amount Net income (loss) available to common shareholders           $7   323.1  $ .02  $(23)  264.7  $(0.09)
    Adjustments:
      Gains on dispositions, net     (22)      -  (0.07)    2       -       -
      Depreciation and amortization   83       -   0.26    86       -    0.32
      Partnership adjustments          6       -   0.02     4       -    0.02
      FFO of minority partners of
       Host LP (a)                    (5)      -  (0.02)   (6)      -   (0.02)
    Adjustments for dilutive
     securities:
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
       average market price            -     3.2      -     -     2.8   (0.01)
    FFO per diluted share(b)(c)      $69   326.3  $0.21   $59   267.5   $0.22
 
 

                                    Year-to-date ended     Year-to-date ended
                                       June 18, 2004         June 20, 2003

                                                   Per                   Per
                                   Income         Share  Income         Share
                                   (loss) Shares  Amount (loss) Shares  Amount Net loss available to common shareholders         $(33)  322.0  $(.10) $(66)  264.5  $(0.25)
    Adjustments:
      Gains on dispositions, net     (24)      -  (0.08)   (3)      -   (0.01)
      Depreciation and amortization  166       -   0.52   174       -    0.66
      Partnership adjustments         11       -   0.03     6       -    0.02
      FFO of minority partners of
     Host LP (a)                      (8)      -  (0.02)  (11)      -   (0.04)
    Adjustments for dilutive
     securities:
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
       average market price            -     3.3      -     -     2.7   (0.01)
    FFO per diluted share(b)(c)     $112   325.3  $0.34  $100   267.2   $0.37
 

    (a) Represents FFO attributable to the minority interest in Host LP.
    (b) 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, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interest to common OP Units and the Convertible Subordinated Debentures.  No effect is shown for securities if they are anti-dilutive.
    (c) Amount includes a reduction of approximately $30 million, or $.09 of FFO per diluted share for the second quarter of 2004, and $42 million, or $.13 of FFO per diluted share for year-to-date 2004, related to the charges for call premiums and the acceleration of deferred financing costs related to the repayment of debt.
 
 

                          HOST MARRIOTT CORPORATION
      Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
                           (unaudited, in millions)

                                            Quarter ended   Year-to-date ended
                                           June 18, June 20, June 18, June 20,
                                             2004     2003     2004     2003

    Net income (loss)                       $  17    $ (14)   $ (14)   $ (48)
      Interest expense(a)                     130      107      248      216
      Dividends on Exchangeable
       Preferred Securities(a)                  -        8        -       15
      Depreciation and amortization            83       81      165      165
      Income taxes                             11        6        8        2
      Discontinued operations(b)                -        5        1       11
    EBITDA(c)                                 241      193      408      361
      Gains and losses on dispositions and related debt extinguishments       (23)      (1)     (25)      (2)
      Consolidated partnership adjustments:
       Minority interest (income) expense      (1)      (1)       2       (2)
       Distributions to minority interest
        partners of Host LP and other minority partners                      (3)      (3)      (4)      (4)
      Equity investment adjustments:
       Equity in losses of affiliates           3        3        8        9
       Distributions received from
        equity investments                      1        2        1        3
    Adjusted EBITDA(c)                      $ 218    $ 193    $ 390    $ 365
 

    (a) Interest expense in the second quarter and year-to-date 2004 includes approximately $8 million and $15 million, respectively, previously classified as dividends on Convertible Preferred Securities. See footnote (b) to the consolidated balance sheets for further detail.
    (b) Reflects the interest expense, depreciation and amortization and income taxes included in discontinued operations.
    (c) See the introductory notes to the financial information for discussion of non-GAAP measures.
 
 

                          HOST MARRIOTT CORPORATION
                Reconciliation of Net Loss Available to Common
           Shareholders to Funds From Operations per Diluted Share
                     for Third Quarter 2004 Forecasts(a)
              (unaudited, in millions, except per share amounts)

                                                     Low-end of Range
                                                Third Quarter 2004 Forecast
                                                                    Per
                                                 Income             Share
                                                 (Loss)   Shares    Amount

    Forecast net loss available to common shareholders                       $   (46)    347.2   $  (.13)
    Adjustments:
      Depreciation and amortization            $    83        --   $   .24
      Gain on disposition, net                      (6)       --      (.02)
      Partnership adjustments                        3        --       .01
      FFO of minority partners of Host LP(b)        (2)       --      (.01)
    Adjustment for dilutive securities: (c)
      Assuming distribution of common shares
       granted under the comprehensive stock
       plan less shares assumed purchased
       at average market price                      --       3.2        --
    FFO per diluted share (d)                  $    32     350.4   $   .09
 
 

                                                     High-end of Range
                                                Third Quarter 2004 Forecast
                                                                    Per
                                                Income              Share
                                                (Loss)    Shares    Amount

    Forecast net loss available to             $   (37)     347.2   $  (.11)
     common shareholders Adjustments:
      Depreciation and amortization                 83         --       .24
      Gain on disposition, net                      (6)        --      (.02)
      Partnership adjustments                        3         --       .01
      FFO of minority partners of Host LP(b)        (3)        --      (.01)
    Adjustment for dilutive securities: (c)
      Assuming distribution of common shares
       granted under the comprehensive stock
       plan less shares assumed purchased
       at average market price                      --        3.2        --
    FFO per diluted share (d)                  $    40      350.4   $   .11
 

    See the notes following the table reconciling net loss to EBITDA and Adjusted EBITDA for full year 2004 forecasts.
 

                          HOST MARRIOTT CORPORATION Reconciliation of Net Loss Available to Common Shareholders to Funds From Operations per Diluted Share for Full Year 2004 Forecasts(a)
              (unaudited, in millions, except per share amounts)

                                                      Low-end of Range
                                                   Full Year 2004 Forecast
                                                                      Per
                                                 Income              Share
                                                 (Loss)    Shares    Amount
    Forecast net loss available to common shareholders                         $  (79)    335.6   $  (.24)
    Adjustments:
      Depreciation and amortization                 360        --      1.07
      Gain on dispositions, net                     (49)       --      (.15)
      Partnership adjustments                        21        --       .06
      FFO of minority partners of Host LP(b)        (16)       --      (.04)
    Adjustment for dilutive securities:(c)
      Assuming distribution of common shares
       granted under the comprehensive stock
       plan less shares assumed purchased
       at average market price                       --       3.2        --
    FFO per diluted share (d)                    $  237     338.8   $   .70
 

                                                      High-end of Range
                                                   Full Year 2004 Forecast
                                                                      Per
                                                 Income              Share
                                                 (Loss)    Shares    Amount
    Forecast net loss available to common shareholders                        $   (58)    335.6   $  (.17)
    Adjustments:
     Depreciation and amortization                  360        --      1.07
     Gain on dispositions, net                      (49)       --      (.15)
     Partnership adjustments                         22        --       .06
     FFO of minority partners of Host LP(b)         (17)       --      (.05)
    Adjustment for dilutive securities:(c)
     Assuming distribution of common shares
      granted under the comprehensive stock
      plan less shares assumed purchased
      at average market price                        --       3.2        --
    FFO per diluted share (d)                   $   258     338.8   $   .76
 

    See the notes following the table reconciling net loss to EBITDA and Adjusted EBITDA for full year 2004 forecasts.
 

                          HOST MARRIOTT CORPORATION
           Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
                       for Full Year 2004 Forecasts(a)
                           (unaudited, in millions)

                                                           Full Year 2004
                                                        Low-end      High-end
                                                        of Range     of Range

    Net Loss                                           $    (38)    $    (17)
      Interest expense(e)                                   478          478
      Depreciation and amortization                         360          360
      Income taxes                                           (7)          (5)
    EBITDA                                                  793          816
      Losses (gains) on dispositions                        (49)         (49)
      Consolidated partnership adjustments:
        Minority interest (income) expense                    1            3 Distributions to minority interest partners of Host LP and other minority partners              (6)          (6)
      Equity investment adjustments:
        Equity in losses of affiliates                       19           19
        Distributions received from
         equity investments                                   2            2
    Adjusted EBITDA                                    $    760     $    785
 

    (a) The amounts shown in these reconciliations are based on management's estimate of operations for 2004. These tables are forward-looking and as such contain assumptions by management based on known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by this table. General economic conditions, competition and governmental actions will affect future transactions, results, performance and achievements. Although we believe the expectations reflected in this reconciliation are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviations will not be material.

        For purposes of preparing the full year and third quarter 2004 forecasts, we have made the following assumptions:
        *  RevPAR will increase between 5.5% and 7.0% for the full year and increase between 6.0% and 8.0% for the third quarter for the low and high ends of the forecasted ranges, respectively.
        *  Comparable hotel adjusted operating profit margins will increase 40 basis points and 80 basis points for the full year and will increase 80 basis points and 180 basis points for the third quarter for the low and high ends of the forecasted ranges, respectively.
        *  Approximately $300 million of hotels will be sold during 2004.
        *  Approximately $600 million of acquisitions will be made during 2004.
        *  Approximately $970 million of debt will be redeemed or repaid for the full year ($859 million of which was redeemed or repaid in the first and second quarter). Charges totaling approximately $51 million, or $.15 of FFO per diluted share, for the full year and approximately $5 million, or $.01 of FFO per diluted share, for the quarter, in call premiums and the acceleration of deferred financing costs associated with the debt repayments and the redemption of the Class A preferred stock will be incurred.
        *  Fully diluted shares will be 338.8 million and 350.4 million for the full year and third quarter, respectively.

    (b) Represents FFO attributable to the minority interests in Host LP.
    (c) These shares are dilutive for purposes of the FFO per diluted share calculation, yet are anti-dilutive for the purposes of the earnings per share calculation. This is due to the net loss that is forecasted for 2004 compared to net earnings for FFO for the year.
    (d) 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, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interest to common OP Units and the Exchangeable Preferred Securities.  No effect is shown for securities if they are anti-dilutive.
    (e) Interest expense in 2004 includes amounts previously classified as dividends on Exchangeable Preferred Securities. See footnote (b) to the consolidated balance sheets for further detail.

Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 112 upscale and luxury hotel properties primarily operated under premium brands, such as Marriott, Ritz-Carlton, Hyatt, Four Seasons, Fairmont, Hilton and Westin. 

This press release contains forward-looking statements within the meaning of federal securities regulations. 

 

 
Contact:
Host Marriott Corporation
Gregory J. Larson
+1-240-744-5120
Web Site: http://www.hostmarriott.com
Also See: Host Marriott Corporation Reports 4th Qtr Net Income of $150 million Compared to a net loss of $3 million in 4th Qtr 2002; Results Significantly Affected by Gain of $212 million from the World Trade Center Hotel Insurance Settlement / Hotel Operating Statistics / February 2004
Host Marriott Reports Net loss of $31 million for the 1st Qtr 2004 Compared to $34 million for 2003; Acquires the 455-room Embassy Suites Chicago Downtown-Lakefront for Approximately $89 million / Hotel Operating Statistics / April 2004


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