HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
March 24, December 31,
2006 2005
ASSETS
Property and equipment, net
$ 7,244 $ 7,434
Assets held for sale
191 73
Due from managers
81 41
Investments in affiliates
24 41
Deferred financing costs, net
53 63
Furniture, fixtures and equipment
replacement
fund
129 143
Other
194 157
Restricted cash
88 109
Cash and cash equivalents
481 184
Total assets
$ 8,485 $ 8,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes, including
$493 million, net of
discount, of Exchangeable
Senior Debentures $ 3,047
$ 3,050
Mortgage debt
1,927 1,823
Convertible Subordinated
Debentures
2 387
Other
88 110
Total debt
5,064 5,370
Accounts payable and accrued expenses
169 165
Other
211 148
Total liabilities
5,444 5,683
Interest of minority partners of Host
Hotels
& Resorts, L.P.
130 119
Interest of minority partners of other
consolidated partnerships
29 26
Stockholders' equity
Cumulative redeemable
preferred stock
(liquidation preference
$250 million), 50
million shares authorized;
10.0 million
shares issued and
outstanding
241 241
Common stock, par value
$.01, 750 million
shares authorized;
386.6 million shares and
361.0 million shares
issued and outstanding,
respectively
4
4
Additional paid-in capital
3,434 3,080
Accumulated other comprehensive
income
15 15
Deficit
(812) (923)
Total stockholders' equity
2,882 2,417
Total liabilities and stockholders' equity $ 8,485
$ 8,245
(a) Our consolidated balance sheet
as of March 24, 2006 has been prepared
without audit.
Certain information and footnote disclosures normally
included in
financial statements presented in accordance with GAAP
have been
omitted. The consolidated balance sheets should be read in
conjunction
with the consolidated financial statements and notes
thereto included
in our most recent Annual Report on Form 10-K.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended
March 24, March 25,
2006 2005
Revenues
Rooms
$ 507 $ 467
Food and beverage
261 244
Other
51 50
Total hotel
sales
819 761
Rental income (b)
29 29
Total revenues
848 790
Expenses
Rooms
121 114
Food and beverage
189 180
Hotel departmental expenses
211 210
Management fees
35 32
Other property-level expenses
(b)
67 64
Depreciation and amortization
89 81
Corporate and other expenses
20 14
Total operating
costs and expenses
732 695
Operating profit
116 95
Interest income
5
7
Interest expense
(91) (109)
Net gains on property transactions
1
3
Gain on foreign currency and derivative
contracts -
2
Minority interest expense
(13) (4)
Equity in earnings (losses) of affiliates
1 (4)
Income (loss) before income taxes
19 (10)
Provision for income taxes
(1) -
Income (loss) from continuing operations
18 (10)
Income from discontinued operations
(c)
154 16
Net income
172
6
Less: Dividends on preferred stock
(6) (8)
Net income (loss) available to common
stockholders $ 166
$ (2)
Basic and diluted earnings (loss)
per common share:
Continuing operations
$ 0.03 $(0.05)
Discontinued operations
0.41 0.04
Basic and diluted earnings (loss)
per common share $ 0.44
$(0.01)
(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 most recent Annual Report
on Form 10-K.
(b) Rental income and expense are as
follows:
Quarter ended
March 24, March 25,
2006
2005
Rental
income
$ 11
$ 11
Full-service
18
18
Limited service and office buildings $
29
$ 29
Rental
and other expenses (included in
other property level expenses)
$ 1
$ 2
Full-service
19
18
Limited service and office buildings $
20
$ 20
(c) Reflects the results of operations
and gain (loss) on sale, net of the
related income
tax, for four properties sold in 2006, one property
classified
as held for sale as of March 24, 2006 and five properties
sold in 2005.
HOST HOTELS & RESORTS, INC.
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended March 24, 2006 Quarter ended March 25,
2005
Income
Per Income
Per
(loss) Shares Share
(loss) Shares Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
Net income
$ 172 378.0 $ .46
$ 6 352.0
$ .02
Dividends on
preferred
stock
(6) -
(.02) (8)
- (.03)
Basic earnings
available to
common
stockholders
(a)(b)
166 378.0 .44
(2) 352.0 (.01)
Assuming
distribution
of common
shares granted
under the
comprehensive
stock plan
less shares
assumed
purchased at
average market
price
- .9
- -
-
Diluted earnings
available to
common
stockholders
(a)(b)
$ 166 378.9 $ .44
$ (2) 352.0
$(.01)
(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 certain periods
presented were significantly affected
by certain
transactions, which are detailed in the table entitled,
"Schedule
of Significant Transactions Affecting Earnings per Share
and Funds
From Operations per Diluted Share."
HOST
HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of March 24, 2006 Quarter ended March 24, 2006
Average
No. of No. of Average
Occupancy
Properties Rooms Daily Rate Percentages
RevPAR
Pacific
21 11,485 $ 196.54
73.6% $ 144.61
Florida
10 6,448
222.15 77.8
172.79
Mid-Atlantic
9 6,361
207.17 73.1
151.53
North Central
13 5,130
127.35 64.7
82.45
DC Metro
11 4,661
192.96 63.3
122.06
South Central
7 4,126
143.21 76.0
108.82
Atlanta
10 3,743
168.24 71.7
120.70
New England
6 3,032
142.28 63.7
90.60
Mountain
6 2,210
157.87 63.1
99.61
International
5 1,953
141.07 68.0
95.88
All Regions
98 49,149
181.24 71.0
128.65
Quarter ended March 25, 2005
Average
Percent
Average Occupancy
Change in
Daily Rate Percentages RevPAR
RevPAR
Pacific
$ 179.62 74.5%
$ 133.77 8.1%
Florida
205.96 81.0
166.92 3.5
Mid-Atlantic
186.88 73.9
138.12 9.7
North Central
119.86 56.9
68.17 20.9
DC Metro
180.73 71.9
129.92 (6.1)
South Central
133.87 74.2
99.32 9.6
Atlanta
154.19 68.5
105.58 14.3
New England
136.25 58.9
80.26 12.9
Mountain
146.02 62.6
91.47 8.9
International
125.15 68.7
86.04 11.4
All Regions
168.25 71.1
119.59 7.6
Comparable Hotels by Property Type (a)
As of March 24, 2006 Quarter ended March 24, 2006
Average
No. of No. of Average
Occupancy
Properties Rooms Daily Rate Percentages
RevPAR
Urban
41 23,620 $ 186.70
72.7% $ 135.72
Suburban
30 11,363
144.51 65.1
94.01
Airport
16 7,328
136.53 71.9
98.13
Resort/Convention
11 6,838
269.08 74.2
199.78
All Types
98 49,149
181.24 71.0
128.65
Quarter ended March 25, 2005
Average
Percent
Average Occupancy
Change in
Daily Rate Percentages RevPAR
RevPAR
Urban
$ 173.44 72.5%
$ 125.73 7.9%
Suburban
131.41 64.1
84.27 11.6
Airport
124.11 73.0
90.60 8.3
Resort/Convention
254.37 76.0
193.40 3.3
All Types
168.25 71.1
119.59 7.6
(a) See the notes to financial information
for a discussion of reporting
periods and
comparable hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended
March 24, March 25,
2006 2005
Number of hotels
98 98
Number of rooms
49,149 49,149
Percent change in Comparable Hotel
RevPAR
7.6%
-
Operating profit margin under GAAP
(b)
13.7% 12.0%
Comparable hotel adjusted operating
profit
margin (c)
25.9% 23.7%
Comparable hotel sales
Room
$ 492 $ 457
Food and beverage
258 240
Other
52 51
Comparable
hotel sales (d)
802 748
Comparable hotel expenses
Room
119 112
Food and beverage
185 177
Other
31 32
Management fees, ground
rent and other costs
259 250
Comparable
hotel expenses (e)
594 571
Comparable hotel adjusted operating
profit
208 177
Non-comparable hotel results, net
(f)
19 14
Comparable hotels classified as held
for sale, net (1)
(1)
Office buildings and limited service
properties,
net (g)
(1) -
Depreciation and amortization
(89) (81)
Corporate and other expenses
(20) (14)
Operating profit
$ 116 $ 95
(a) See the 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:
Quarter ended
March 24, March 25,
2006 2005
Revenues per the consolidated statements
of operations
$ 848 $ 790
Revenues of hotels held for sale
7
7
Non-comparable hotel sales
(54) (43)
Hotel sales for the property for which we
record rental income, net
12 12
Rental income for office buildings and
limited service hotels
(18) (18)
Adjustment for hotel sales for comparable
hotels to reflect Marriott's fiscal year
for Marriott-managed hotels
7
-
Comparable hotel sales
$ 802 $ 748
(e) The reconciliation of operating
costs per the consolidated statements
of operations
to the comparable hotel expenses is as follows (in
millions):
Quarter ended
March 24, March 25,
2006 2005
Operating costs and expenses per the
consolidated statements of operations
$ 732 $ 695
Operating cost of hotels held for sale
6 6
Non-comparable hotel expenses
(36) (31)
Hotel expenses for the property for which
we record rental income
15 14
Rent expense for office buildings and
limited service hotels
(19) (18)
Adjustment for hotel expenses for comparable
hotels to reflect Marriott's fiscal year for
Marriott-managed hotels
5 -
Depreciation and amortization
(89) (81)
Corporate and other expenses
(20) (14)
Comparable hotel expenses
$ 594 $ 571
(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.
(g) Represents rental income less rental
expense for limited service
properties
and office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per unit amounts)
March 24, December 31,
2006 2005
Equity
Common shares outstanding
(a)
386.6 361.0
Common shares and minority
held common OP
Units outstanding
(a)
405.8 380.8
Preferred OP Units outstanding
.02 .02
Class C Preferred shares
outstanding
6.0 6.0
Class E Preferred shares
outstanding
4.0 4.0
Security pricing (per share price)
Common (a)
$ 21.10 $ 18.95
Class C Preferred (a)
(b)
$ 26.15 $ 25.25
Class E Preferred (a)
$ 26.92 $ 26.75
Convertible Preferred
Securities (c)
$ - $
61.02
Exchangeable Senior Debentures
(d)
$1,269.13 $1,163.70
Dividends declared per share for calendar
year
Common (e)
$ .14 $
.41
Class B Preferred (f)
$ - $
.87
Class C Preferred (e)
(b)
$ .625 $ 2.50
Class E Preferred (e)
$ .555 $ 2.22
Debt
Series B senior notes, with a rate
of 7 7/8%
due August 2008 (g)
$ 136 $
136
Series G senior notes, with a rate
of 9 1/4%
due October 2007 (h)
235 236
Series I senior notes, with a rate
of 9 1/2%
due January 2007 (i)
449 451
Series K senior notes, with a rate
of 7 1/8%
due November 2013
725 725
Series M senior notes, with a rate
of 7% due
August 2012
346 346
Series O senior notes, with a rate
of 6 3/8%
due March 2015
650 650
Exchangeable Senior Debentures, with
a rate of
3.25% due April 2024
493 493
Senior notes, with an average rate
of 9.7%,
maturing through May 2012
13 13
Total senior
notes
3,047 3,050
Mortgage debt (non-recourse) secured
by $3.2
billion of real estate assets,
with an average
interest rate of 7.7% and 7.8%
at March 24, 2006
and December 31, 2005, respectively,
maturing
through February 2023
1,927 1,823
Credit facility (j)
- 20
Convertible Subordinated Debentures,
with a
rate of 6 3/4% due December
2026 (c)
2 387
Other
88 90
Total debt
(l)
$ 5,064 $ 5,370
Percentage of fixed rate debt
85% 85%
Weighted average interest rate (c)
7.3% 7.2%
Weighted average debt maturity (c)
5.0 years 6.4 years
Quarter ended
March 24, March 25,
2006 2005
Hotel Operating Statistics for All
Full-Service
Properties (k)
Average daily rate
$ 179.21 $ 165.83
Average occupancy
70.6% 70.8%
RevPAR
$ 126.55 $ 117.41
(a) Share prices are the closing price
as reported by the New York Stock
Exchange.
In conjunction with the acquisition of the Starwood
portfolio,
we issued approximately 133.5 million shares of common
stock on April
10, 2006, which increased our common shares and
minority held
common OP unites outstanding to approximately 539.3
million.
(b) On April 19, 2006, we announced
that on May 19, 2006 we intend to
redeem, at
par, all of the shares of our 10% Class C Cumulative
Redeemable
Preferred Stock for approximately $151 million, including
accrued dividends.
(c) Effective February 10, 2006, the
Company exercised its right to cause
the conversion
rights of its Convertible Subordinated Debentures (and
corresponding
Convertible Preferred Securities) to expire. Prior to
this date,
a substantial majority of holders of the Convertible
Subordinated
Debentures exercised their right to convert their
debentures
into the Company's common stock. The remaining $2 million
of Convertible
Subordinated Debentures were redeemed for cash on
April 5, 2006.
As a result, between December 2005 through February
10, 2006,
the Company issued 30.8 million shares of its common stock
to converting
holders. Market price for December 31, 2005 is as
quoted by
Bloomberg L.P. Amount reflects the price of a single $50
security.
(d) 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) On March 21, 2006, we declared
a first quarter common dividend of
$.14 per share
and preferred dividends per share for our Class C and
Class E preferred
stock of $.625 and $.5546875, respectively.
(f) On May 20, 2005, we redeemed, at
par, all four million shares of our
10% Class
B Cumulative Redeemable Preferred stock for approximately
$101 million,
including accrued dividends.
(g) In connection with the issuance
of $800 million of 6 3/4% Series P
senior notes
on April 4, 2006, we announced that we will use a
portion of
the proceeds from that issuance to redeem the remaining
7 7/8% Series
B senior notes. We expect to redeem the Series B senior
notes on May
15, 2006.
(h) Includes the fair value of interest
rate swap agreements of $(7)
million and
$(6) million as of March 24, 2006 and December 31, 2005,
respectively.
(i) Includes the fair value of an interest
rate swap agreement of $(1)
million and
$1 million as of March 24, 2006 and December 31, 2005,
respectively.
(j) The outstanding balance on our
credit facility of $20 million as of
December 31,
2005 was repaid on January 13, 2006. Currently, we have
$575 million
of available capacity under our credit facility.
(k) The operating statistics reflect
all consolidated properties as of
March 24,
2006 and March 25, 2005, respectively. The operating
statistics
include the results of operations for four properties sold
in 2006 and
five properties sold in 2005 prior to their disposition.
(l) As discussed in footnote g above,
we issued new senior notes in the
second quarter
and will utilize a portion of the proceeds to pay off
certain debt.
In addition, we assumed approximately $77 million of
debt in the
Starwood acquisition on April 10, 2006 and expect to incur
an additional
$31 million of debt with the acquisition of the two
hotels in
Fiji. After adjusting for these items, our total debt
balance would
be approximately $5,836 million.
HOST HOTELS & RESORTS, INC.
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 Quarter
ended
March 24, 2006 March 25,
2005
Per
Per
Income Share
Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) available
to common stockholders
$ 166 378.0 $ .44 $ (2)
352.0 $(.01)
Adjustments:
Gains on dispositions,
net of taxes
(153) - (.41)
(13) - (.04)
Amortization of deferred
gains and other
property transactions,
net of taxes
(1) -
- (2)
- (.01)
Depreciation and
amortization
89 - .24
83 - .24
Partnership adjustments
8 - .02
6 - .02
FFO of minority partners
of Host LP (a)
(5) - (.01)
(4) - (.01)
Adjustments for dilutive
securities: Assuming
distribution of common
shares granted under the
comprehensive stock plan
less shares assumed
purchased at average
market price
- .9
- - 2.0
-
Assuming conversion of
Exchangeable Senior
Debentures
5 28.1 (.01)
5 27.4 -
Assuming conversion of
Convertible Subordinated
Debentures
2 8.2 -
- -
-
FFO per diluted share
(b)(c)
$ 111 415.2 $ .27 $ 73
381.4 $ .19
(a) Represents FFO attributable to
the minority interests 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, convertible debt securities and other minority
interests
that have the option to convert their limited partnership
interest to
common OP units. No effect is shown for securities if they
are anti-dilutive.
(c) FFO per diluted share for certain
periods presented was significantly
affected by
certain 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 HOTELS & RESORTS, INC.
Schedule of Significant
Transactions Affecting Earnings per Share
and Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
March 24, 2006 March 25, 2005
Net Income
Net Income
(Loss) FFO
(Loss) FFO
Senior notes redemptions and debt
prepayments (a)
$ - $ -
$ (14) $ (14)
Gain on hotel dispositions,
net of taxes
153 -
13 -
Minority interest expense (b)
(7) -
- 1
Total
$ 146 $ - $
(1) $ (13)
Per diluted
share
$ .39 $ - $
- $ (.04)
(a) Represents call premiums and the
acceleration of original issue
discounts
and deferred financing costs, as well as incremental
interest during
the call or prepayment notice period, included in
interest expense
in the consolidated statements of operations. We
recognized
these costs in conjunction with the prepayment or
refinancing
of senior notes and mortgages during certain periods
presented.
(b) Represents the portion of the significant
transactions attributable
to minority
partners in Host LP.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net
Income (Loss) to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended
March 24, March 25,
2006 2005
Net income
$ 172 $ 6
Interest expense
91 109
Depreciation and amortization
89 81
Income taxes
1 -
Discontinued operations
(a)
- 3
EBITDA
353 199
Gains on dispositions
(153) (13)
Amortization of deferred
gains
(1) (3)
Consolidated partnership
adjustments:
Minority interest
expense
13 4
Distributions
to minority partners
- -
Equity investment adjustments:
Equity in
(earnings) losses of affiliates
(1) 4
Distributions
received from equity investments
1 1
Adjusted EBITDA of Host LP
212 192
Distributions to minority
interest partners of
Host LP
(2) -
Adjusted EBITDA of Host
$ 210 $ 192
(a) Reflects the interest expense,
depreciation and amortization and
income taxes
included in discontinued operations.
HOST HOTELS & RESORTS, L.P.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per unit amounts)
Quarter ended
March 24, March 25,
2006 2005
Revenues
Rooms
$ 507 $ 467
Food and beverage
261 244
Other
51 50
Total hotel
sales
819 761
Rental income
29 29
Total revenues
848 790
Expenses
Rooms
121 114
Food and beverage
189 180
Hotel departmental expenses
211 210
Management fees
35 32
Other property-level expenses
67 64
Depreciation and amortization
89 81
Corporate and other expenses
20 14
Total operating
costs and expenses
732 695
Operating profit
116 95
Interest income
5 7
Interest expense
(91) (109)
Net gains on property transactions
1 3
Gain on foreign currency and derivative
contracts -
2
Minority interest expense
(4) (4)
Equity in earnings (losses) of affiliates
1 (4)
Income (loss) before income taxes
28 (10)
Provision for income taxes
(1) -
Income (loss) from continuing operations
27 (10)
Income from discontinued operations
(b)
154 16
Net income
181 6
Less: Distributions on preferred units
(6) (8)
Net income (loss) available to common
unitholders $ 175 $
(2)
Basic and diluted earnings (loss)
per common unit:
Continuing operations
$ .05 $ (.05)
Discontinued operations
.39 .04
Basic and diluted earnings (loss)
per common unit $ .44 $
(.01)
(a) Our consolidated statements of
operations presented above have been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance
with GAAP
have been omitted. When distinguishing between Host and
Host LP, the
primary difference is the partnership interests in Host
LP held by
outside partners, which is reflected as minority interest
in our consolidated
balance sheets and minority interest expense in
our consolidated
statements of operations. The consolidated
statements
of operations should be read in conjunction with the
consolidated
financial statements and notes thereto included in our
most recent
Annual Report on Form 10-K.
(b) Reflects the results of operations
and gain (loss) on sale, net of
the related
income tax, for four properties sold in 2006, one
property classified
as held for sale as of March 24, 2006, and five
properties
sold in 2005.
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net
Income (Loss) to EBITDA and Adjusted EBITDA
for HOST HOTELS & RESORTS, L.P.
(unaudited, in millions)
Quarter ended
March 24, March 25,
2006 2005
Net income
$ 181 $ 6
Interest expense
91 109
Depreciation and amortization
89 81
Income taxes
1 -
Discontinued operations
(a)
- 3
EBITDA
362 199
Gains on dispositions
(153) (13)
Amortization of deferred
gains
(1) (3)
Consolidated partnership
adjustments:
Minority interest
expense
4 4
Distributions
to minority partners
- -
Equity investment adjustments:
Equity in
(earnings) losses of affiliates
(1) 4
Distributions
received from equity investments
1 1
Adjusted EBITDA of Host LP
$ 212 $ 192
(a) Reflects the interest expense,
depreciation and amortization and
income taxes
included in discontinued operations.
HOST HOTELS & RESORTS, INC.
Reconciliation of
Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share for
Second Quarter 2006 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Second Quarter 2006 Forecast
Income
Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders
$ 300 494.9
$ .61
Adjustments:
Depreciation and amortization
104 -
.21
Gain on dispositions,
net of taxes (237)
- (.48)
Partnership adjustments
14 -
.03
FFO of minority partners
of Host LP (b) (6)
- (.02)
Adjustment for dilutive securities:
Assuming distribution
of common shares
granted under the
comprehensive stock
plan less shares
assumed purchased at
average market price
- .9
-
Assuming conversion of
Exchangeable
Senior Debentures
4 28.5
(.01)
FFO per diluted share
$ 179 524.3
$ .34
High-end of Range
Second Quarter 2006 Forecast
Income
Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders
$ 310 494.9
$ .63
Adjustments:
Depreciation and amortization
104 -
.21
Gain on dispositions,
net of taxes (237)
- (.48)
Partnership adjustments
15 -
.03
FFO of minority partners
of Host LP (b) (7)
- (.02)
Adjustment for dilutive securities:
Assuming distribution
of common shares
granted under the
comprehensive stock
plan less shares
assumed purchased at
average market price
- .9
-
Assuming conversion of
Exchangeable
Senior Debentures
4 28.5
(.01)
FFO per diluted share
$ 189 524.3
$ .36
See the notes following the table reconciling net income
to EBITDA and Adjusted EBITDA for assumptions relating to the 2006 forecasts.
HOST HOTELS & RESORTS, INC.
Reconciliation of
Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share
for Full Year 2006 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2006 Forecast
Income
Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders
$ 718 482.6
$ 1.49
Adjustments:
Depreciation and amortization
454 -
.94
Gain on dispositions,
net of taxes (441)
- (.91)
Partnership adjustments
32 -
.06
FFO of minority partners
of Host LP (b) (28)
- (.06)
Adjustment for dilutive securities:
Assuming distribution
of common shares
granted under the
comprehensive stock
plan less
shares assumed purchased
at average market
price
- .9
-
Assuming conversion of
Exchangeable
Senior Debentures
19 28.9
(.05)
Assuming conversion of
Convertible
Subordinated Debentures
2 1.9
-
FFO per diluted share
$ 756 514.3
$ 1.47
High-end of Range
Full Year 2006 Forecast
Income
Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders
$ 759 482.6
$ 1.57
Adjustments:
Depreciation and amortization
454 -
.94
Gain on dispositions,
net of taxes (441)
- (.91)
Partnership adjustments
34 -
.07
FFO of minority partners
of Host LP (b) (30)
- (.06)
Adjustment for dilutive securities:
Assuming distribution
of common share
granted under the
comprehensive stock
plan less shares
assumed purchased at
average market price
- 0.9
(.01)
Assuming conversion of
Exchangeable
Senior Debentures
19 28.9
(.05)
Assuming conversion of
Convertible
Subordinated Debentures
2 1.9
-
FFO per diluted share (c)
$ 797 514.3
$ 1.55
See the notes following the table reconciling net income
to EBITDA and Adjusted EBITDA for assumptions relating to the 2006 forecasts.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA for Full Year
2006 Forecasts (a)
(unaudited, in millions)
Full Year 2006
Low-end High-end
of Range of Range
Net income
$ 738 $ 779
Interest expense
434 434
Depreciation and amortization
455 455
Income taxes
10
8
EBITDA
1,637 1,676
Gains on dispositions
(441) (441)
Consolidated partnership
adjustments:
Minority interest
expense
40 41
Distributions
to minority partners
(5) (5)
Equity investment adjustments:
Equity in
losses of affiliates
1
1
Distributions
received from equity investments 3
3
Adjusted EBITDA of Host LP
1,235 1,275
Distributions to minority
interest partners of
Host LP
(11) (11)
Adjusted EBITDA of Host
$ 1,224 $ 1,264
(a) The second quarter and full year
2006 forecasts were based on the
following
assumptions (the comparable hotel guidance below does not
include the
Starwood portfolio):
* Comparable hotel RevPAR will increase 8% to 10% for both the
second quarter and full year for the low and high ends of the
forecasted range, respectively.
* Comparable hotel adjusted operating profit margins will increase
140 basis points and 175 basis points for the full year for the
low and high ends of the forecasted range, respectively.
* Approximately $950 million of hotels and other assets will be sold
during 2006, including approximately $700 million of hotels
already sold.
* The remaining seven hotels in the Starwood portfolio will be
acquired in the second quarter (two by Host LP and five by the
European joint venture). In addition to the Starwood portfolio
acquisition, approximately $250 million of acquisitions will be
made during 2006.
* Approximately $735 million of debt and perpetual preferred stock
will be refinanced, and approximately $170 million will be repaid.
Charges, net of the minority interest benefit, totaling
approximately $10 million ($.02 of FFO per diluted share) and $17
million ($.03 of FFO per diluted share) related to costs
associated with the debt and perpetual preferred stock repayments
will be incurred for the second quarter and full year 2006,
respectively.
* Fully diluted weighted average shares will be 524.3 million and
514.3 million for the second quarter and full year, respectively.
The amounts
shown in these forecasts are based on these and other
assumptions,
as well as management's estimate of operations for 2006.
These forecasts
are forward-looking and are not guarantees of future
performance
and involve known and unknown risks, uncertainties and
other factors
which may cause actual transactions, results and
performance
to differ materially from those expressed or implied by
these forecasts.
Although we believe the expectations reflected in the
forecasts
are based upon reasonable assumptions, we can give no
assurance
that the expectations will be attained or that the results
will be materially
different. Risks that may affect these assumption
and forecasts
include the following:
* the level of RevPAR and margin growth may change significantly;
* the amount and timing of acquisitions and dispositions of hotel
properties is an estimate that can substantially affect financial
results, including such items as net income, depreciation and
gains (losses) on dispositions;
* the level of capital expenditures may change significantly, which
will directly affect the level of depreciation expense and net
income; and
* other risks and uncertainties associated with our business
described herein and in the Company's filings with the SEC.
(b) Represents FFO attributable to
the minority interests in Host LP.
HOST HOTELS & RESORTS, INC.
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2006 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2006 Forecast
Low-end High-end
of range of range
Percent change in Comparable Hotel
RevPAR
8.0% 10.0%
Operating profit margin under GAAP
(b)
15.5% 16.1%
Comparable hotel adjusted operating
profit margin (c) 26.1%
26.4%
Comparable hotel sales
Room
$ 2,379 $ 2,423
Other
1,447 1,473
Comparable hotel sales (d)
3,826 3,896
Comparable hotel expenses
Rooms and other departmental
costs
1,584 1,614
Management fees, ground
rent and other costs
1,244 1,253
Comparable hotel expenses (e)
2,828 2,867
Comparable hotel adjusted operating
profit
998 1,029
Non-comparable hotel results, net
279 287
Office buildings and limited service
properties, net 6
6
Depreciation and amortization
(455) (455)
Corporate and other expenses
(70) (70)
Operating profit
$ 758 $ 797
(a) Forecasted comparable hotel results
include assumptions on the number
of hotels
that will be included in our comparable hotel set in 2006.
We have assumed
that 97 hotels will be classified as comparable as of
December 31,
2006, reflecting identified dispositions through the
second quarter
of 2006. No assurances can be made as to the hotels
that will
be in the comparable hotel set for 2006. Also, see the notes
following
the table reconciling net income to EBITDA and Adjusted
EBITDA for
assumptions relating to the full year 2006 forecasts.
(b) Operating profit margin under GAAP
is calculated as the operating
profit divided
by the forecast total revenues per the consolidated
statements
of operations. See (d) below for forecasted revenues.
(c) Comparable hotel adjusted operating
profit margin is calculated as the
comparable
hotel adjusted operating profit divided by the comparable
hotel sales
per the table above. We forecasted an increase in margins
of 140 basis
points to 175 basis points over the comparable adjusted
operating
profit margin of 24.7% from 2005.
(d) The reconciliation of forecast
total revenues to the forecast
comparable
hotel sales is as follows (in millions):
Full Year 2006
Low-end High-end
of range of range
Revenues
$ 4,875 $ 4,953
Non-comparable hotel sales
(1,012) (1,020)
Hotel sales for the property for which we
record rental income, net
51 51
Rental income for office buildings and
limited service hotels
(88) (88)
Comparable hotel sales
$ 3,826 $ 3,896
(e) The reconciliation of forecast
operating costs and expenses to the
comparable
hotel expenses is as follows (in millions):
Full Year 2005
Low-end High-end
of range of range
Operating costs and expenses
$ 4,117 $ 4,156
Non-comparable hotel expenses
(733) (733)
Hotel expenses for the property for which
we record rental income
51 51
Rent expense for office buildings and
limited service hotels
(82) (82)
Depreciation and amortization
(455) (455)
Corporate and other expenses
(70) (70)
Comparable hotel expenses
$ 2,828 $ 2,867
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
for Full Year 2005
Forecasts for Host Hotels & Resorts, L.P. (a)
(unaudited, in millions)
Full Year 2006
Low-end High-end
of range of range
Net income
$ 769 $ 811
Interest expense
434 434
Depreciation and amortization
455 455
Income taxes
10 8
EBITDA
1,668 1,708
Gains on dispositions
(441) (441)
Consolidated partnership
adjustments:
Minority interest
expense
9 9
Distributions
to minority partners
(5) (5)
Equity investment adjustments:
Equity in
earnings of affiliates
1 1
Distributions
received from equity investments
3 3
Adjusted EBITDA of Host LP
$ 1,235 $ 1,275
(a) The amounts shown in these reconciliations
are based on management's
estimate of
operations for 2006. 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
condition,
competition and governmental actions will affect future
transactions,
results performance and achievements. Although we
believe the
expectations 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
the full year forecasts, we have utilized the same,
previously
detailed assumptions as those utilized for the full year
forecasts
for Host Hotels & Resorts, Inc.
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Reporting Periods for Statement of
Operations
The results we report in our consolidated statements of
operations are based on results of our hotels reported to us by our hotel
managers. Our hotel managers use different reporting periods. Marriott
International, Inc., or Marriott International, the manager of the majority
of our properties, uses a fiscal year ending on the Friday closest to December
31 and reports twelve weeks of operations for the first three quarters
and sixteen or seventeen weeks for the fourth quarter of the year for its
Marriott-managed hotels. In contrast, other managers of our hotels, such
as Hyatt, report results on a monthly basis. Additionally, Host, as a REIT,
is required by tax laws to report results on a calendar year. As a result,
we elected to adopt the reporting periods used by Marriott International
except that our fiscal year always ends on December 31 to comply with REIT
rules. Our first three quarters of operations end on the same day as Marriott
International but our fourth quarter ends on December 31 and our full year
results, as reported in our statement of operations, always includes the
same number of days as the calendar year.
Two consequences of the reporting cycle we have adopted
are: (1) quarterly start dates will usually differ between years, except
for the first quarter which always commences on January 1, and (2) our
first and fourth quarters of operations and year-to-date operations may
not include the same number of days as reflected in prior years. For example,
the first quarter of 2006 ended on March 24 and reflects 83 days of operations,
while the first quarter of 2005 ended on March 25 and reflects 84 days
of operations.
While the reporting calendar we adopted is more closely
aligned with the reporting calendar used by the manager of a majority of
our properties, one final consequence of our calendar is we are unable
to report the month of operations that ends after our fiscal quarter-end
until the following quarter because our hotel managers using a monthly
reporting period do not make mid- month results available to us. Hence,
the month of operation that ends after our fiscal quarter-end is included
in our quarterly results of operations in the following quarter for those
hotel managers (covering approximately one- fourth of our full-service
hotels). As a result, our quarterly results of operations include results
from hotel managers reporting results on a monthly basis as follows: first
quarter (January, February), second quarter (March to May), third quarter
(June to August) and fourth quarter (September to December). While this
does not affect full-year results, it does affect the reporting of quarterly
results.
Reporting Periods for Hotel Operating Statistics and Comparable
Hotel Results
In contrast to the reporting periods for our consolidated
statement of operations, our hotel operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and our comparable hotel results
are always reported based on the reporting cycle used by Marriott International
for our Marriott- managed hotels. This facilitates year-to-year comparisons,
as each reporting period will be comprised of the same number of days of
operations as in the prior year (except in the case of fourth quarters
comprised of seventeen weeks (such as fiscal year 2002) versus sixteen
weeks). This means, however, that the reporting periods we use for hotel
operating statistics and our comparable hotels results may differ slightly
from the reporting periods used for our statements of operations for the
first and fourth quarters and the full year. Results from hotel managers
reporting on a monthly basis are included in our operating statistics and
comparable hotels results consistent with their reporting in our consolidated
statement of operations herein:
* Hotel results for the
first quarter of 2006 reflect 83 days of
operations
for the period from January 1, 2006 to March 24, 2006 for
our Marriott-managed
hotels and results from January 1, 2006 to
February 28,
2006 for operations of all other hotels which report
results on
a monthly basis.
* Hotel results for the
first quarter of 2005 reflect 84 days of
operations
for the period from January 1, 2005 to March 25, 2005 for
our Marriott-managed
hotels and results from January 1, 2005 to
February 28,
2005 for operations of all other hotels which report
results on
a monthly basis.
Comparable Hotel Operating Statistics
We present certain operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and operating results (revenues,
expenses, adjusted operating profit and adjusted operating profit margin)
for the periods included in this report on a comparable hotel basis. We
define our comparable hotels as full-service properties (i) that are owned
or leased by us and the operations of which are included in our consolidated
results, whether as continuing operations or discontinued operations, for
the entirety of the reporting periods being compared, and (ii) that have
not sustained substantial property damage or business interruption or undergone
large-scale capital projects during the reporting periods being compared.
Of the 103 full-service hotels that we owned as of March 24, 2006, 98 hotels
have been classified as comparable hotels. The operating results of the
following five hotels that we owned as of March 24, 2006 are excluded from
comparable hotel results for these periods:
* the Newport Beach Marriott
Hotel (major renovation started in July
2004);
* the Mountain Shadows
Resort (hotel to be sold pending completion of
significant
contingencies, which have not been resolved as of March
24, 2006);
* the Atlanta Marriott
Marquis (major renovation started in August
2005);
* the New Orleans Marriott
(property damage and business interruption
from Hurricane
Katrina in August 2005); and
* the Hyatt Regency, Washington
on Capitol Hill (acquired in September
2005).
In addition, the operating results of the nine hotels
we disposed of in 2006 and 2005 are also not included in comparable hotel
results for the periods presented herein. Moreover, because these statistics
and operating results are for our full-service hotel properties, they exclude
results for our non-hotel properties and leased limited-service hotels.
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial
measures," which are measures of our historical or future financial performance
that are not calculated and presented in accordance GAAP within the meaning
of applicable SEC rules. They are as follows: (i) FFO per diluted share,
(ii) EBITDA of both Host and Host LP, (iii) Adjusted EBITDA of both Host
and Host LP and (iv) Comparable Hotel Operating Results. The following
discussion defines these terms and presents why we believe they are useful
supplemental measures of our performance.
FFO per Diluted Share
We present FFO per diluted share as a non-GAAP measure
of our performance in addition to our earnings per share (calculated in
accordance with GAAP). We calculate FFO per diluted share for a given operating
period as our FFO (defined as set forth below) for such period divided
by the number of fully diluted shares outstanding during such period. The
National Association of Real Estate Investment Trusts (NAREIT) defines
FFO as net income (calculated in accordance with GAAP) excluding gains
(losses) from sales of real estate, the cumulative effect of changes in
accounting principles, real estate-related depreciation and amortization
and adjustments for unconsolidated partnerships and joint ventures. We
present FFO on a per share basis after making adjustments for the effects
of dilutive securities and the payment of preferred stock dividends, in
accordance with NAREIT guidelines.
We believe that FFO per diluted share is a useful supplemental
measure of our operating performance and that the presentation of FFO per
diluted share, when combined with the primary GAAP presentation of earnings
per share, provides beneficial information to investors. By excluding the
effect of real estate depreciation, amortization and gains and losses from
sales of real estate, all of which are based on historical cost accounting
and which may be of lesser significance in evaluating current performance,
we believe such measures can facilitate comparisons of operating performance
between periods and with other REITs, even though FFO per diluted share
does not represent an amount that accrues directly to holders of our common
stock. Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminishes predictably over time.
As noted by NAREIT in its April 2002 "White Paper on Funds From Operations,"
since real estate values have historically risen or fallen with market
conditions, many industry investors have considered presentation of operating
results for real estate companies that use historical cost accounting to
be insufficient by themselves. For these reasons, NAREIT adopted the definition
of FFO in order to promote an industry-wide measure of REIT operating performance.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation
and Amortization (EBITDA) is a commonly used measure of performance in
many industries. Management believes EBITDA provides useful information
to investors regarding our results of operations because it helps us and
our investors evaluate the ongoing operating performance of our properties
and facilitates comparisons between us and other lodging REITs, hotel owners
who are not REITs and other capital-intensive companies. Management uses
EBITDA to evaluate property-level results and as one measure in determining
the value of acquisitions and dispositions and, like FFO per diluted share,
it is widely used by management in the annual budget process. We present
Adjusted EBITDA of Host and Adjusted EBITDA of Host LP. The difference
between these two presentations is equal to the amount of distributions
to OP Unitholders other than Host.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating
our performance because we believe that the exclusion of certain additional
recurring and non-recurring items described below provides useful supplemental
information to investors regarding our ongoing operating performance and
that the presentation of Adjusted EBITDA, when combined with the primary
GAAP presentation of net income, is beneficial to an investor's complete
understanding of our operating performance. We adjust EBITDA for the following
items, which may occur in any period, and refer to this measure as Adjusted
EBITDA:
* Gains and Losses on Dispositions
-- We exclude the effect of gains and
losses recorded
on the disposition of assets in our consolidated
statement
of operations because we believe that including them in
EBITDA is
not consistent with reflecting the ongoing performance of
our remaining
assets. In addition, material gains or losses from the
depreciated
value of the disposed assets could be less important to
investors
given that the depreciated asset often does not reflect the
market value
of real estate assets (as noted above for FFO).
* Consolidated Partnership
Adjustments -- We exclude the minority
interest in
the income or loss of our consolidated partnerships as
presented
in our consolidated statement of operations because we
believe that
including these amounts in EBITDA does not reflect the
effect of
the minority interest position on our performance because
these amounts
include our minority partners' pro-rata portion of
depreciation,
amortization and interest expense. However, we believe
that the cash
distributions paid to minority partners are a more
relevant measure
of the effect of our minority partners' interest on
our performance,
and we have deducted these cash distributions from
Adjusted EBITDA.
* Equity Investment Adjustments
-- We exclude the equity in earnings
(losses) of
unconsolidated investments in partnerships and joint
ventures as
presented in our consolidated statement of operations
because our
percentage interest in the earnings (losses) does not
reflect the
impact of our minority interest position on our
performance
and these amounts include our pro-rata portion of
depreciation,
amortization and interest expense. However, we believe
that cash
distributions we receive are a more relevant measure of the
performance
of our investment and, therefore, we include the cash
distributed
to us from these investments in the calculation of
Adjusted EBITDA.
* Cumulative effect of
a change in accounting principle -- Infrequently,
the Financial
Accounting Standards Board (FASB) promulgates new
accounting
standards that require the consolidated statement of
operations
to reflect the cumulative effect of a change in accounting
principle.
We exclude these one-time adjustments because they do not
reflect our
actual performance for that period.
* Impairment Losses --
We exclude the effect of impairment losses
recorded because
we believe that including them in EBITDA is not
consistent
with reflecting the ongoing performance of our remaining
assets.
In addition, we believe that impairment charges are similar
to gains (losses)
on dispositions and depreciation expense, both of
which are
also excluded from EBITDA.
Adjusted EBITDA of Host LP
As of April 25, 2006, Host owns approximately 96% of the
partnership interest of Host LP and is its sole general partner. We conduct
all of our operations through Host LP, and Host LP is the obligor on our
senior notes and on our credit facility. The difference between the Adjusted
EBITDA of Host and the Adjusted EBITDA of Host LP is the distributions
to OP Unitholders other than Host, which are equal on a per unit basis
to the dividends paid per common share by Host. The Adjusted EBITDA of
Host LP is presented in addition to the Adjusted EBITDA of Host because
we believe it is a relevant measure in calculating certain credit ratios,
since Host LP is the owner of all of our hotels and is the obligor on our
debt noted above.
Limitations on the Use of FFO per Diluted Share, EBITDA
and Adjusted EBITDA
We calculate FFO per diluted share in accordance with
standards established by NAREIT, which may not be comparable to measures
calculated by other companies who do not use the NAREIT definition of FFO
or calculate FFO per diluted share in accordance with NAREIT guidance.
In addition, although FFO per diluted share is a useful measure when comparing
our results to other REITs, it may not be helpful to investors when comparing
us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also not
be comparable to measures calculated by other companies. This information
should not be considered as an alternative to net income, operating profit,
cash from operations or any other operating performance measure calculated
in accordance with GAAP. Cash expenditures for various long-term assets
(such as renewal and replacement capital expenditures), interest expense
(for EBITDA and Adjusted EBITDA purposes only) and other items have been
and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA
and FFO per diluted share presentations. Management compensates for these
limitations by separately considering the impact of these excluded items
to the extent they are material to operating decisions or assessments of
our operating performance. Our consolidated statement of operations and
cash flows include interest expense, capital expenditures, and other excluded
items, all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures. Additionally,
FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered
as a measure of our liquidity or indicative of funds available to fund
our cash needs, including our ability to make cash distributions. In addition,
FFO per diluted share does not measure, and should not be used as a measure
of, amounts that accrue directly to stockholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our full-service
hotels, such as hotel revenues, expenses and adjusted operating profit
(and the related margin), on a comparable hotel, or "same store," basis
as supplemental information for investors. Our comparable hotel results
present operating results for full-service hotels owned during the entirety
of the periods being compared without giving effect to any acquisitions
or dispositions, significant property damage or large scale capital improvements
incurred during these periods. We present these comparable hotel operating
results by eliminating corporate-level costs and expenses related to our
capital structure, as well as depreciation and amortization. We eliminate
corporate- level costs and expenses to arrive at property-level results
because we believe property-level results provide investors with supplemental
information into the ongoing operating performance of our hotels. We eliminate
depreciation and amortization because, even though depreciation and amortization
are property-level expenses, these non-cash expenses, which are based on
historical cost accounting for real estate assets, implicitly assume that
the value of real estate assets diminishes predictably over time. As noted
earlier, because real estate values have historically risen or fallen with
market conditions, many industry investors have considered presentation
of operating results for real estate companies that use historical cost
accounting to be insufficient by themselves.
As a result of the elimination of corporate-level costs
and expenses and depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses, operating
profit or operating profit margin and should not be used to evaluate our
performance as a whole. Management compensates for these limitations by
separately considering the impact of these excluded items to the extent
they are material to operating decisions or assessments of our operating
performance. Our consolidated statements of operations include such amounts,
all of which should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable
hotel basis because we believe that doing so provides investors and management
with useful information for evaluating the period-to-period performance
of our hotels and facilitates comparisons with other hotel REITs and hotel
owners. In particular, these measures assist management and investors in
distinguishing whether increases or decreases in revenues and/or expenses
are due to growth or decline of operations at comparable hotels (which
represent the vast majority of our portfolio) or from other factors, such
as the effect of acquisitions or dispositions. While management believes
that presentation of comparable hotel results is a "same store" supplemental
measure that provides useful information in evaluating our ongoing performance,
this measure is not used to allocate resources or to assess the operating
performance of each of these hotels, as these decisions are based on data
for individual hotels and are not based on comparable hotel results. For
these reasons, we believe that comparable hotel operating results, when
combined with the presentation of GAAP operating profit, revenues and expenses,
provide useful information to investors and management. |
