HOST MARRIOTT CORPORATION
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
December 31,
2004
2003
ASSETS
Property and equipment, net
$7,274
$7,085
Assets held for sale
113
73
Notes and other receivables
7
54
Due from managers
75
62
Investments in affiliates (b)
69
74
Deferred financing costs, net
70
82
Furniture, fixtures and equipment
replacement fund
151
144
Other
161
138
Restricted cash
154
116
Cash and cash equivalents
347
764
Total assets
$8,421
$8,592
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes, including $491 million,
net of discount, of Exchangeable
Senior Debentures as of December
31, 2004 $2,890
$3,180
Mortgage debt
2,043
2,205
Convertible Subordinated Debentures
(b) 492
-
Other
98
101
Total debt
5,523
5,486
Accounts payable and accrued expenses
113
108
Liabilities associated with assets
held for sale
26
2
Other
156
166
Total liabilities
5,818
5,762
Interest of minority partners of Host
Marriott L.P.
122
130
Interest of minority partners of
other consolidated partnerships
86
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
Stockholders' equity
Cumulative redeemable preferred stock
(liquidation preference $350
million and
$354 million, respectively),
50 million
shares authorized; 14.0 million
shares
and 14.1 million shares issued
and
outstanding, respectively
337
339
Common stock, par value $.01, 750
million
shares authorized; 350.3 million
shares
and 320.3 million shares issued
and
outstanding, respectively
3
3
Additional paid-in capital
2,953
2,617
Accumulated other comprehensive income
13
28
Deficit
(911)
(851)
Total stockholders' equity
2,395
2,136
Total liabilities and
stockholders' equity $8,421
$8,592
(a) Our consolidated balance sheets
as of December 31, 2004 and 2003 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 balance sheets should be read in conjunction with the
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K.
(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") 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
(the "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 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 Trust,
which is included in "Investments in affiliates" on our consolidated balance
sheet. Additionally, we classified the related dividend payment of
approximately $10 million and $32 million for the fourth quarter and full
year 2004, respectively, as interest expense. We adopted FIN 46R prospectively
and, therefore, did not restate prior periods. The adoption of FIN
46R had no effect on our net loss, loss per diluted share or the financial
covenants under our senior notes indentures.
HOST MARRIOTT CORPORATION Consolidated Statements of Operations (a) (in
millions, except per share amounts)
Quarter ended Year ended
December 31, December 31,
2004 2003 2004
2003
Revenues
Rooms
$686 $592 $2,153 $1,914
Food and beverage
387 352 1,141
1,042
Other
75 69 239
220
Total hotel
sales
1,148 1,013 3,533 3,176
Rental income (b)
32 29 106
100
Other income
1 -
1 12
Total revenues
1,181 1,042 3,640 3,288
Expenses
Rooms
168 151 536
483
Food and beverage
282 262 856
786
Hotel departmental expenses
315 276 983
888
Management fees
47 41 145
132
Other property-level expenses
(b) 86
82 292 293
Depreciation and amortization
111 108 354
347
Corporate and other expenses
24 21
67 60
Total expenses
1,033 941 3,233
2,989
Operating profit
148 101 407
299
Interest income
3 4
11 11
Interest expense, including interest
expense for the Convertible
Subordinated Debentures in 2004
(c) (127) (166) (483)
(488)
Net gains on property transactions
7 1
17 5
Loss on foreign currency and
derivative contracts
(4) (17) (6)
(19)
Minority interest expense
(6) (16) (4)
(5)
Equity in losses of affiliates
(4) (9) (16)
(22)
Dividends on Convertible Preferred
Securities (c)
- (10) -
(32)
Income (loss) before income taxes
17 (112) (74)
(251)
Benefit from income taxes
8 4
10 13
Income (loss) from continuing
operations
25 (108) (64)
(238)
Income from discontinued operations
(d) 36 234
64 252
Income (loss) before cumulative effect
of a change in accounting principle
61 126
- 14
Cumulative effect of a change in
accounting principle (e)
- 24
- -
Net income (loss)
61 150
- 14
Less: Dividends on preferred
stock (9) (8)
(37) (35)
Issuance costs of redeemed Class
A preferred stock (f)
- -
(4) - Net income (loss) available to
common stockholders
$52 $142 $(41)
$(21) Basic and diluted earnings (loss) per common share
$0.15 $0.46 $(0.12) $(0.07)
(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.
(b) Rental income and expense for
the quarters ended and years ended
December 31,
2004 and 2003 are as follows:
Quarter ended Year ended
December 31, December 31,
2004 2003 2004
2003
Rental income
Full-service
$5 $5
$26 $25
Limited service and office buildings 27
24 80
75
$32 $29 $106
$100
Rental and
other expenses (included
in other
property-level expenses)
Full-service
$2 $2
$7 $7
Limited service and office buildings 24
24 78
74
$26 $26 $85
$81
(c) See discussion of FIN 46R in footnote
(b) to the consolidated balance
sheets. Interest
expense also includes approximately $59 million for full year 2004 and
$36 million and $33 million for full year 2003 and the fourth quarter of
2003, respectively, for the payment of call premiums, the acceleration
of deferred financing costs and incremental interest expense related to
the debt redemptions and repayments.
(d) Reflects the results of operations
and gain on sale, net of the
related income
tax, for nine properties sold in 2004 and eight properties sold in 2003,
as well as the results of operations for four properties classified as
held for sale as of December 31, 2004 and the gain on disposition and business
interruption proceeds for the New York Marriott World Trade Center hotel.
(e) We adopted SFAS No. 150 "Accounting
for Certain Financial Instruments
with Characteristics
of both Liabilities and Equity" on June 21, 2003 and recorded a loss of
$24 million as a cumulative effect of change in accounting principle in
the third quarter of 2003. Subsequently, on November 7, 2003, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 150-3
indefinitely deferring the application of a portion of SFAS 150 with respect
to minority interests in consolidated ventures entered into prior to November
5, 2003, effectively reversing its guidance of October 8, 2003. In accordance
with the FSP 150-3, we recorded a gain from a cumulative effect of a change
in accounting principle of $24 million in the fourth quarter of 2003, reversing
the impact of our adoption of SFAS 150 with respect to consolidated ventures
with finite lives.
(f) Emerging Issues Task Force Topic
D-42, "The Effect on the Calculation
of Earnings
per Share for the Redemption or Induced Conversion of Preferred Stock,"
requires that the excess of the fair value of the consideration transferred
to the holders of preferred stock redeemed over the carrying amount of
the preferred stock should be subtracted from net earnings to determine
net earnings available to common stockholders in the calculation of earnings
per share.
On August
3, 2004, the fair value paid to holders of our Class A preferred stock,
or $104 million (which was equal to the redemption price and par value)
exceeded the carrying value of the preferred stock ($100 million, which
was net of $4 million of original issuance costs). Accordingly, the $4
million of original issuance costs has been included in the determination
of net loss available to common stockholders for the purpose of calculating
our full year 2004 basic and diluted loss per share.
HOST MARRIOTT CORPORATION
Earnings (Loss) per Common Share (unaudited, in millions, except per share
amount)
Quarter ended
Quarter ended
December 31, 2004
December 31, 2003
Income
Income
Per (loss)
Per
(loss) Shares Share
(Numer-) Shares Share
(Numerator) (Denominator) Amount (ator) (Denominator) Amount
Net income
$61 350.2
$0.17 $150 310.7
$0.48
Dividends on
preferred stock
(9) -
(0.02) (8)
- (0.02)
Basic earnings
available to
common
stockholders
per share (a)
52 350.2
0.15 142 310.7
0.46
Assuming
distribution
of common
shares granted
under the
comprehensive
stock plan, less
shares assumed
purchased at
average market
price
- 2.9
- -
- -
Diluted earnings
available to
common
stockholders
per share (a)(b) $52
353.1 $0.15 $142
310.7 $0.46
Year ended
Year ended December
December 31, 2004
31, 2003
Income
Income
Per (loss)
Per
(loss) Shares Share
(Numer-) Shares Share
(Numerator) (Denominator) Amount (ator) (Denominator) Amount
Net income
(loss)
$- 337.3
$- $14 281
$0.05
Dividends on
preferred stock
(37)
- (0.11) (35)
- (0.12)
Issuance costs
of redeemed
Class A
preferred
stock(c)
(4) -
(0.01) -
- -
Basic and
diluted loss
available
to common
stockholders
per share(a)(b) $(41)
337.3 $(0.12) $(21) 281.0
$(0.07)
(a) Basic earnings (loss) per common
share is computed by dividing net
income (loss)
available to common stockholders 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 stockholders
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, the Exchangeable Senior Debentures and the
Convertible Subordinated Debentures. No effect is shown for any securities
that are anti-dilutive.
(b) Our results for 2004 and 2003
were significantly affected by several
transactions,
which are detailed in the table entitled, "Schedule of Significant Transactions
Affecting Earnings per Share, Funds from Operations per Diluted Share and
Adjusted EBITDA."
(c) For discussion of accounting treatment,
see footnote (f) to the
consolidated
statements of operations.
HOST MARRIOTT CORPORATION
Hotel Operational Data Comparable Hotels by Region (a)
(unaudited)
As of December 31, 2004
No. of
No. of
Properties Rooms
Pacific
20
10,720
Florida
12
7,337
Mid-Atlantic
10
6,720
Atlanta
13
5,940
North Central
13
4,923
South Central
7
4,816
DC Metro
10
3,890
New England
7
3,413
Mountain
6
2,351
International
5
1,953
All Regions
103
52,063
Quarter ended December 31, 2004
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific
$149.43 68.8%
$102.83
Florida
159.17 66.9
106.41
Mid-Atlantic
212.85 79.9
170.16
Atlanta
148.36 63.3
93.86
North Central
134.43 66.2
88.99
South Central
136.64 70.8
96.73
DC Metro
161.54 72.6
117.26
New England
156.11 72.2
112.70
Mountain
107.67 54.0
58.14
International
127.57 71.4
91.10
All Regions
156.58 69.2
108.34
Quarter ended December 31, 2003
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages RevPAR RevPAR
Pacific
$146.08 65.8% $96.11
7.0%
Florida
150.18 64.1 96.32
10.5
Mid-Atlantic
197.99 76.4 151.34
12.4
Atlanta
141.96 62.9 89.30
5.1
North Central
128.42 64.9 83.37
6.7
South Central
131.61 73.8 97.06
(0.3)
DC Metro
152.68 67.4 102.90
14.0
New England
149.34 67.1 100.27
12.4
Mountain
100.68 55.0 55.39
5.0
International
116.94 71.9 84.07
8.4
All Regions
148.49 67.2 99.74
8.6
As of December 31, 2004
No. of
No. of
Properties Rooms
Pacific
20
10,720
Florida
12
7,337
Mid-Atlantic
10
6,720
Atlanta
13
5,940
North Central
13
4,923
South Central
7
4,816
DC Metro
10
3,890
New England
7
3,413
Mountain
6
2,351
International
5
1,953
All Regions
103
52,063
Year ended December 31, 2004
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific
$148.93 73.3%
$109.10
Florida
163.16 71.5
116.69
Mid-Atlantic
189.17 78.3
148.19
Atlanta
143.30 67.1
96.15
North Central
123.93 67.8
84.06
South Central
131.73 75.1
98.87
DC Metro
155.75 73.4
114.29
New England
146.12 73.0
106.72
Mountain
102.34 59.7
61.10
International
122.86 72.3
88.87
All Regions
149.64 71.9
107.66
Year ended December 31, 2003
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages RevPAR RevPAR
Pacific
$148.71 67.9% $101.03 8.0%
Florida
158.40 68.8 109.00
7.1
Mid-Atlantic
180.11 74.3 133.85
10.7
Atlanta
138.16 65.6 90.67
6.0
North Central
123.52 66.6 82.28
2.2
South Central
131.46 75.9 99.79
(0.9)
DC Metro
148.07 70.7 104.65
9.2
New England
142.32 67.5 96.11
11.0
Mountain
97.56 61.0 59.52
2.7
International
114.67 66.0 75.64
17.5
All Regions
145.42 69.0 100.35
7.3
HOST MARRIOTT CORPORATION
Comparable Hotel Operating Data
Comparable Hotels by Property Type (a)
(unaudited)
As of December 31, 2004
No. of
No. of
Properties Rooms
Urban
40
25,068
Suburban
38
14,081
Airport
16
7,332
Resort/Conference
9
5,582
All Types
103
52,063
Quarter ended December 31, 2004
Average
Average Occupancy
Daily Rate Percentages RevPAR
Urban
$178.66 72.3%
$129.16
Suburban
124.40 64.6
80.31
Airport
115.21 72.3
83.31
Resort/Conference
186.61 62.8
117.19
All Types
156.58 69.2
108.34
Quarter ended December 31, 2003
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages RevPAR RevPAR
Urban
$168.08 71.3% $119.85
7.8%
Suburban
117.73 63.3 74.51
7.8
Airport
111.12 66.5 73.92
12.7
Resort/Conference
179.40 59.2 106.28
10.3
All Types
148.49 67.2 99.74
8.6
As of December 31, 2003
No. of
No. of
Properties Rooms
Urban
40
25,068
Suburban
38
14,081
Airport
16
7,332
Resort/Conference
9
5,582
All Types
103
52,063
Year ended December 31, 2004
Average
Average Occupancy
Daily Rate Percentages RevPAR
Urban
$165.67 74.4%
$123.21
Suburban
121.44 67.2
81.63
Airport
113.12 74.6
84.37
Resort/Conference
192.56 69.6
133.99
All Types
149.64 71.9
107.66
Year ended December 31, 2003
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages RevPAR RevPAR
Urban
$159.79 72.2% $115.40
6.8%
Suburban
117.25 65.4
76.72 6.4
Airport
111.66 67.5
75.36 12.0
Resort/Conference
190.79 65.7 125.26
7.0
All Types
145.42 69.0 100.35
7.3
(a) See the introductory notes to financial
information for a discussion
of reporting
periods and comparable hotel results.
/FIRST ADD -- DCTH002 -- Host Marriott Corporation results/
Host Marriott Corporation logo. (PRNewsFoto)[RV]
BETHESDA, MD USA 03/24/2004
HOST MARRIOTT CORPORATION
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year ended
December 31, December 31,
2004 2003 2004
2003
Number of hotels
103 103 103
103
Number of rooms
52,063 52,183 52,063 52,183
Percent change in Comparable Hotel
RevPAR
8.6%
7.3%
Operating profit margin under GAAP
(b) 12.5% 9.7% 11.2%
9.1%
Comparable hotel adjusted operating
profit margin (c)
23.7% 21.7% 22.4%
21.4%
Comparable hotel sales
Room
$643 $593 $2,045 $1,907
Food and beverage
375 355 1,102
1,043
Other
72 67
226 220
Comparable hotel sales
(d) 1,090
1,015 3,373 3,170
Comparable hotel expenses
Room
159 152 515
483
Food and beverage
271 263 823
784
Other
45 42
141 134
Management fees, ground rent
and
other costs
357 338 1,140
1,091
Comparable hotel expenses
(e) 832
795 2,619 2,492
Comparable Hotel Adjusted Operating
Profit
258 220 754
678
Non-comparable hotel results,
net (f) 25
14 83
26
Comparable hotels classified
as held for sale (g)
(4) (4) (12)
(11)
Office building and limited
service
properties, net (h)
3 -
2 1
Other income
1 -
1 12
Depreciation and amortization
(111) (108) (354)
(347)
Corporate and other expenses
(24) (21) (67)
(60)
Operating Profit
$148 $101 $407
$299
(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 table 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 ended
December 31, December 31,
2004 2003 2004
2003
Revenues per the consolidated
statements of operations
$1,181 $1,042 $3,640 $3,288
Revenues of hotels held for sale
21 21
70 66
Non-comparable hotel sales
(100) (50) (292)
(137)
Hotel sales for the property for
which we record rental income,
net 16
15 47
46
Rental income for office buildings
and limited service hotels
(27) (24) (80)
(75)
Other income
(1) -
(1) (12)
Adjustment for hotel sales for
comparable hotels to reflect
Marriott's fiscal year for Marriott-
managed hotels
- 11
(11) (6)
Comparable hotel sales
$1,090 $1,015 $3,373 $3,170
(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 Ended
December 31, December 31,
2004 2003 2004
2003
Operating costs and expenses per the
consolidated statements of
operations
$1,033 $941 $3,233 $2,989
Operating costs of hotels held for
sale
18 17
58 55
Non-comparable hotel expenses
(75) (34) (210)
(112)
Hotel expenses for the property for
which we record rental income
15 14
47 46 Rent expense for office buildings
and limited service hotels
(24) (24) (78)
(74)
Adjustment for hotel expenses for
comparable hotels to reflect
Marriott's fiscal year for Marriott-
managed hotels
- 10
(10) (5)
Depreciation and amortization
(111) (108) (354)
(347)
Corporate and other expenses
(24) (21) (67)
(60)
Comparable hotel expenses
$832 $795 $2,619 $2,492
(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 statement of operations as continuing operations and
(ii) the difference between the number of days of operations reflected
in the comparable hotel results and the number of days of operations reflected
in the consolidated statements of operations. For detail, see "Introductory
Notes to Financial Information."
(g) Included in our comparable hotel
results are four hotels that are
classified
as held for sale as of December 31, 2004. Because the hotels are classified
as held for sale, their operating results are not included in the revenues
or operating costs and expenses from continuing operations, but are instead
included in discontinued operations. We continue to include them
as comparable hotels, however, because the operating results for these
properties were reported by us throughout the entire reporting periods
being compared.
(h) Represents rental income less
rental expense for limited service
properties
and office buildings. For detail, see footnote (b) to the statements
of operations.
HOST MARRIOTT CORPORATION
Other Financial and Operating Data (unaudited, in millions, except per
share amounts)
December 31,
2004 2003
Equity
Common shares outstanding
350.3 320.3
Common shares and minority
held
common OP Units
outstanding
371.3 343.8
Preferred OP Units outstanding
.02 .02
Class A Preferred shares
outstanding (a)
- 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 (per share price)
Common (b)
$17.30 $12.32
Class A Preferred (a)
$ - $26.74
Class B Preferred (b)
$25.80 $27.00
Class C Preferred (b)
$26.37 $27.26
Class E Preferred (b)
$27.45 $ -
Convertible Preferred
Securities (c)
$57.25 $51.00
Exchangeable Senior
Debentures (d)
$1,156.00 $ -
Dividends per share for calendar year
Common
$ .05 $ -
Class A Preferred (a)
$1.38 $2.50
Class B Preferred
$2.50 $2.50
Class C Preferred
$2.50 $2.50
Class D Preferred
$2.50 $1.88
Class E Preferred
$1.37 $ -
Other Financial Data
Construction in progress
$85 $56
Quarter ended Year Ended
December 31, December 31,
2004 2003 2004
2003
Hotel Operating Statistics for All
Full-Service Properties (e)
Average daily rate
$160.20 $145.84 $152.03 $141.93
Average occupancy
69.2% 67.1% 72.0%
69.1%
RevPAR
$110.84 $97.88 $109.51 $98.01
Debt
December 31,
2004 2003
Series B senior notes, with a rate
of 7 7/8% due August 2008
$304 $1,196
Series C senior notes, with a rate
of 8.45% due December 2008
- 218
Series E senior notes, with a rate
of 8 3/8% due February 2006
300 300
Series G senior notes, with a rate
of 9 1/4% due October 2007 (f)
243 244
Series I senior notes, with a rate
of 9 1/2% due January 2007 (g)
468 484
Series J senior notes with a rate
of 7 1/8% due November 2013
- 725
Series K senior notes, with a rate
of 7 1/8% due November 2013
725 -
Series L senior notes, with a rate
of 7% due August 2012
346 -
Exchangeable Senior Debentures,
with a rate of 3.25% due April
2024 491
-
Senior notes, with an average rate
of 9.7%, maturing through 2012
13 13
Total senior
notes
2,890 3,180
Mortgage debt (non-recourse)
secured by $2.9 billion of real
estate assets, with an average
interest rate of 7.7% and 7.8%
at
December 31, 2004 and 2003,
respectively (h)
2,043 2,205
Credit facility (i)
- -
Convertible Subordinated
Debentures, with a rate of 6
3/4%
due December 20, 2026 (j)
492 -
Other
98 101
Total debt
$5,523 $5,486
Percentage of fixed rate debt
86% 85%
Weighted average interest rate (j)
7.1% 7.7%
Weighted average debt maturity (j)
6.6 years 5.5 years
(a) On August 3, 2004, we redeemed
all 4.16 million shares of the
outstanding
Class A preferred stock at a price of $25.00 per share plus dividends accrued
to that date.
(b) Share prices are the closing price
as reported by the New York Stock
Exchange.
(c) Reflects the closing market price
as quoted by Bloomberg L.P. Amount
reflects the
price of a single $50 debenture, which is convertible into common stock
upon the occurrence of certain events.
(d) Reflects the closing market price
as quoted by Bloomberg L.P. Amount
reflects the
price of a single $1,000 debenture, which is exchangeable for common stock
upon the occurrence of certain events.
(e) The operating statistics reflect
all consolidated properties as of
December 31,
2004 and 2003, respectively. The operating statistics include the results
of operations for nine hotels sold in 2004 and eight hotels sold in 2003
prior to their disposition.
(f) Includes fair value adjustments
for interest rate swap agreements of
$1 million
and $2 million as of December 31, 2004 and 2003, respectively.
(g) Includes fair value adjustments
for interest rate swap agreements of
$18 million
and $34 million as of December 31, 2004 and 2003, respectively.
(h) Excludes approximately $20 million
of mortgage debt related to a hotel
that was reclassified
as liabilities associated with held for sale at December 31, 2004. The
hotel was sold in January of 2005.
(i) Our credit facility was amended
on September 10, 2004, which increased
the available
capacity to $575 million. Currently, there are no amounts outstanding.
(j) Beginning in January 2004, we
recorded the Convertible Subordinated
Debentures
as debt in accordance with a revision to FIN 46. The Convertible Subordinated
Debentures were previously classified in the mezzanine section of our consolidated
balance sheet. For additional information, see footnote (b) to the consolidated
balance sheets. The weighted average maturity excluding the effect of the
Convertible Subordinated Debentures is 5.1 years and 5.5 years in 2004
and 2003, respectively.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income
(Loss) Available to Common Stockholders
to Funds From Operations per Diluted Share (unaudited, in millions, except
per share amounts)
Quarter ended December Quarter ended December
31, 2004
31, 2003
Per
Per
Income Share
Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income available to common stockholders
$52 350.2 $.15 $142
310.7 $.46 Adjustments:
Cumulative effect of change
in accounting principle
- - -
(24) - (.08)
Gain on the disposition
of
the New York Marriott
World
Trade Center hotel
- - -
(56) - (.18)
Gains on dispositions,
net (35) - (.10)
(9) - (.03)
Amortization of deferred
gains
(1) - -
(1) -
-
Depreciation and
amortization
114 - .32
115 - .37
Partnership adjustments
8 - .02
21 - .07
FFO of minority partners
of
Host LP (a)
(8) - (.02)
(14) - (.05)
Adjustments for dilutive
securities:
Assuming distribution
of
common shares granted
under
the comprehensive
stock
plan less shares
assumed
purchased at average
market
price
- 2.9 -
- 3.9 (.01)
Assuming conversion of
Convertible Subordinated
Debentures
10 30.9 (.01)
10 30.9 (.02)
Assuming conversion of
Exchangeable Senior
Debentures (b)
6 27.4 (.01)
- -
-
Assuming conversion of
minority OP Units
issuable
- - -
- 2.0 -
FFO per diluted share (c)(d) $146
411.4 $.35 $184 347.5
$.53
Year ended December Year ended December
31, 2004
31, 2003
Per
Per
Income Share
Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net loss available to common stockholders
$(41) 337.2 (.12) $(21) 281.0
(.07)
Adjustments:
Gain on the disposition
of
the New York Marriott
World
Trade Center hotel
- - -
(56) - (.20)
Gain on dispositions,
net (59) - (.18)
(9) - (.04)
Amortization of deferred
gains
(4) - (.01)
(4) - (.01)
Depreciation and
amortization
364 - 1.08
375 - 1.33
Partnership adjustments
21 - .06
24 - .08
FFO of minority partners
of
Host LP (a)
(18) - (.05)
(26) - (.09)
Adjustments for dilutive
securities:
Assuming distribution
of
common shares granted
under
the comprehensive
stock
plan less shares
assumed
purchased at average
market
price
- 3.0 (.01)
- 3.5 (.01)
Assuming conversion of
Convertible Subordinated
Debentures
- - -
- -
-
Assuming conversion of
Exchangeable Senior
Debentures (b)
15 21.7 -
- -
-
FFO per diluted share (c)(d) $278
361.9 $.77 $283 $284.5
$.99
(a) Represents FFO attributable to
the minority interests in Host LP.
(b) EITF 04-08, "The Effect of Contingently
Convertible Debt on Diluted
Earnings per
Share," became effective in the fourth quarter of 2004 and, as a result,
the Exchangeable Senior Debentures are now included as a potentially dilutive
security.
(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, 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, the Convertible Subordinated Debentures
and the Exchangeable Senior Debentures. No effect is shown for securities
if they are anti-dilutive.
(d) FFO per diluted share for 2004
and 2003 was affected by several
transactions,
which are detailed in the table entitled, "Schedule of Significant Transactions
Affecting Earnings per Share, Funds from Operations per Diluted Share and
Adjusted EBITDA."
HOST MARRIOTT CORPORATION
Schedule of Significant
Transactions Affecting Earnings per Share,
Funds
From Operations per Diluted Share and Adjusted EBITDA
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
December 31, 2004 December 31, 2003
Net
Net
Income Adjusted Income
Adjusted
(Loss) FFO EBITDA (Loss) FFO
EBITDA
Senior notes redemptions
and debt prepayments (1)
$- $- $-
$(33) $(33) $-
World Trade Center insurance
gain (2)
- - -
212 156 -
Loss on foreign currency
forward contracts (3)
- - -
(17) (17) (17)
Minority interest expense (4)
- - -
(14) (8) -
Total
$- $- $-
$148 $98 $(17)
Per diluted
share $-
$- $0.48
$0.29
Year ended
Year ended
December 31, 2004 December 31, 2003
Net
Net
Income Adjusted Income
Adjusted
(Loss) FFO EBITDA (Loss) FFO
EBITDA
Senior notes redemptions and debt prepayments
(1) $(59) $(59) $-
$(36) $(36) - World Trade Center insurance gain
(2)
- - -
212 156 - Loss on foreign currency
forward contracts (3)
- - -
(18) (18) (18)
Class A preferred stock
redemption (5)
(6) (6) -
- - -
Directors' and officers'
insurance settlement (6)
- - -
7 7 10
Minority interest benefit
(expense) (4)
4 4 -
(14) (10) -
Total
$(61) $(61) $- $151
$99 $(8)
Per diluted
share $(0.18)$(0.17)
$0.54 $0.34
(1) Represents call premiums and the
acceleration of original issue
discounts
and deferred financing costs, as well as incremental interest during the
call period for refinancings, included in interest expense in the consolidated
statements of operations. We recognized these costs in conjunction
with the prepayment or refinancing of senior notes and mortgages during
2003 and 2004.
(2) As a result of the New York Marriott
World Trade Center hotel
insurance
settlement in the fourth quarter of 2003, we recorded a gain of approximately
$212 million, which was comprised of $156 million in post-2003 business
interruption proceeds and $56 million from the disposition of the hotel.
See the previous discussion of non-GAAP financial measures, which describes
why we exclude gain and loss on dispositions from FFO per diluted share
and Adjusted EBITDA. For these reasons, we have also excluded the $156
million gain on settlement for business interruption insurance proceeds
for the periods subsequent to December 31, 2003 from Adjusted EBITDA. These
business interruptions proceeds, because they relate to future periods
for a hotel that, even if rebuilt would be in a different location and
would be significantly different from the prior hotel, are not consistent
with reflecting the ongoing performance of our remaining assets.
(3) In the fourth quarter of 2003,
we made a partial repayment of the
Canadian mortgage
debt which resulted in the related forward currency contracts hedge being
deemed ineffective for accounting purposes. Accordingly, we recorded
an approximate $17 million decrease in net income, FFO and Adjusted EBITDA
in the fourth quarter in addition to the approximate $1 million recorded
in the first three quarters of 2003.
(4) Represents the portion of the
significant transactions attributable to
minority partners
in Host LP.
(5) Represents the original issuance
costs for the Class A preferred
stock, which
was required to be included in the calculation of earnings (loss) per share
in conjunction with the redemption of the Class A preferred stock in the
third quarter of 2004, as well as the incremental dividends from the date
of issuance of the Class E preferred stock to the date of redemption of
the Class A preferred stock. For additional information, see footnote (f)
to the consolidated statements of operations.
(6) During the third quarter of 2003,
we recognized approximately $10
million of
other income from the settlement of a claim that we brought against our
directors' and officers' insurance carriers for reimbursement of defense
costs and settlement payments incurred in resolving a series of related
actions brought against us and Marriott International that arose from the
sale of certain limited partnership units to investors prior to 1993.
The effect on net income (loss) and FFO is approximately $7 million due
to income taxes on the proceeds.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended Year ended
December 31, December 31,
2004 2003 2004
2003
Net income (loss)
$61 $150 $ -
$14
Interest expense (a)
127 166 483
488
Dividends on Convertible
Preferred
Securities (a)
- 10
- 32
Depreciation and amortization
111 108 354
347
Income taxes
(8) (4) (10)
(13)
Discontinued operations
(b)
3 13
13 40
EBITDA (c)
294 443 840
908
Gains and losses on dispositions
(33) (10) (53)
(8)
Amortization of deferred
gains (7)
(1) (17) (5)
Gain on settlement of
the New York
Marriott World Trade
Center hotel
for post-2003 business
interruption
insurance (d)
- (156) -
(156)
Gain on the disposition
of the New
York Marriott World
Trade Center
hotel (d)
- (56)
- (56)
Impairment of assets held
for sale 1
2 1
2
Consolidated partnership
adjustments:
Minority interest expense
6 16
4 5
Distributions to minority
partners (1)
(1) (6) (6)
Equity investment adjustments:
Equity in losses of affiliates
4 9
16 22
Distributions received
from equity
investments
4 -
6 3
Cumulative effect of a
change in
accounting principle
(e)
- (24)
- -
Adjusted EBITDA of Host
LP
268 222 791
709
Distributions to minority
interest
partners of Host
LP
(1) -
(1) -
Adjusted EBITDA of Host Marriott (d)
$267 $222 $790
$709
(a) Interest expense in the fourth
quarter and year-to-date 2004 includes
approximately
$10 million and $32 million, respectively, previously classified as dividends
on Convertible Preferred Securities. See footnote (b) to the consolidated
balance sheets.
(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.
(d) Our results for the periods presented
were significantly affected by
several transactions,
which are detailed in the table entitled, "Schedule of Significant Transactions
Affecting Earnings per Share, Funds from Operations per Diluted Share and
Adjusted EBITDA."
(e) For additional information, see
footnote (e) to the consolidated
statements
of operations.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income
(Loss) Available to Common Stockholders
to Funds From Operations per Diluted Share for
First Quarter 2005 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
First Quarter Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to common
stockholders
$37 352.2
$0.10 Adjustments:
Depreciation and amortization
83 -
0.24
Gain on dispositions, net
(50) -
(0.14)
Partnership adjustments
8 -
0.02
FFO of minority partners of Host LP
(b) (4)
- (0.01)
Adjustment for dilutive securities:
Assuming distribution of common share
granted under the comprehensive
stock plan less shares assumed
purchased at average market
price
- 2.0
-
Assuming conversion of Convertible
Subordinated Debentures
- -
-
Assuming conversion of Exchangeable
Senior Debentures
4 27.5
(0.01)
FFO per diluted share (c)
$78 381.7
$0.20
High-end of Range
First Quarter 2005 Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to common
stockholders
$43 352.2
$0.12 Adjustments:
Depreciation and amortization
83 -
0.24
Gain on dispositions, net
(50) -
(0.14)
Partnership adjustments
8 -
0.02
FFO of minority partners of Host LP
(b) (5)
- (0.01)
Adjustment for dilutive securities:
Assuming distribution of common share
granted under the comprehensive
stock plan less shares assumed
purchased at average market
price
- 2.0
-
Assuming conversion of Convertible
Subordinated Debentures
- -
-
Assuming conversion of Exchangeable
Senior Debentures
4 27.5
(0.01)
FFO per diluted share (c)
$83 381.7
$0.22
HOST MARRIOTT CORPORATION
Reconciliation of Net Income
Available to Common Stockholders to Funds From Operations
per Diluted Share for Full Year 2005 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2005 Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to common
stockholders
$63 355.4
$0.18 Adjustments:
Depreciation and amortization
360 -
1.01
Gain on dispositions,
net
(54) -
(0.15)
Partnership adjustments
7 -
0.02
FFO of minority partners
of Host LP (b) (20)
- (0.05)
Adjustment for dilutive securities:
Assuming distribution
of common share
granted under the
comprehensive
stock plan less
shares assumed
purchased at average
market price -
2.0 -
Assuming conversion of
Convertible
Subordinated Debentures
- -
-
Assuming conversion of
Exchangeable
Senior Debentures
19 28.0
(0.03)
FFO per diluted share (c)
$375 385.4
$0.98
High-end of Range
Full Year 2005 Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to common
stockholders
$99 355.4
$0.28 Adjustments:
Depreciation and amortization
360 -
1.01
Gain on dispositions,
net
(54) -
(0.15)
Partnership adjustments
10 -
0.03
FFO of minority partners
of Host LP(b) (22)
- (0.06)
Adjustment for dilutive securities:
Assuming distribution
of common share
granted under the
comprehensive
stock plan less
shares assumed
purchased at average
market price -
2.0 -
Assuming conversion of
Convertible
Subordinated Debentures
32 30.9
(0.01)
Assuming conversion of
Exchangeable
Senior Debentures
19 28.0
(0.03)
FFO per diluted share(c)
$444 416.3
$1.07
See the notes following the table reconciling
net income to EBITDA and Adjusted EBITDA for full year 2005 forecasts.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full Year
2005 Forecasts (a)
(unaudited, in millions)
Full Year 2005
Low-end High-end
of Range of Range
Net income
$100
$136
Interest expense
447
447
Depreciation and amortization
361
361
Income taxes
28
30
EBITDA
936
974
Gains on dispositions
(75)
(75)
Consolidated partnership
adjustments:
Minority interest
expense
10
12
Distributions
to minority partners
(5)
(5)
Equity investment adjustments:
Equity in
losses of affiliates
3
3
Distributions
received from equity
investments
1
1
Adjusted EBITDA of Host
LP
870
910
Distributions to minority
interest
partners of Host
LP
(6)
(6)
Adjusted EBITDA of Host Marriott
$864
$904
(a) The amounts shown in these reconciliations
are based on management's
estimate of
operations for 2005. 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 first quarter 2005 forecasts, we have made
the following assumptions:
* RevPAR will
increase between 6.5% to 8.5% for the full year and 6.0% to 8.0% for the
first quarter for the low and high ends of the forecasted range, respectively.
* Comparable
hotel adjusted operating profit margins will increase 100 basis points
and 150 basis points for the full year for the low and high ends of the
forecasted range, respectively.
* Approximately
$325 million of hotels will be sold in 2005, including $128 million of
sales in January 2005 and 85% of the Company's interest in the Courtyard
joint venture will be sold for approximately $92 million.
* Approximately
$400 million of acquisitions will be made in 2005.
* Approximately
$500 million of debt will be refinanced and approximately $140 million
of debt will be prepaid in 2005. Charges, net of the minority interest
benefit, totaling approximately $40 million, or $.10 of FFO per diluted
share, in call premiums and the acceleration of deferred financing costs
associated with the debt repayments will be incurred for the full year.
* Fully diluted
shares will be 385.4 million for the low-end of the range and 416.3 million
for the high-end of the range for the full year and 381.7 million for the
first quarter.
(b) Represents FFO attributable to
the minority interests in Host LP.
(c) FFO per diluted share in accordance
with NAREIT is adjusted for the
effects of
dilutive securities. Dilutive securities may include shares granted under
comprehensive stock plans, 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, the Convertible Subordinated Debentures
and the Exchangeable Senior Debentures. No effect is shown for securities
if they are anti-dilutive.
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