HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
June 19, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
------
Property and equipment, net
$10,431 $10,739
Assets held for sale
55 -
Due from managers
81 65
Investments in affiliates
144 229
Deferred financing costs, net
51 46
Furniture, fixtures and equipment replacement
fund
121 119
Other
197 200
Restricted cash
46 44
Cash and cash equivalents
1,346 508
----- ---
Total assets
$12,472 $11,950
======= =======
LIABILITIES AND EQUITY
----------------------
Debt
Senior notes, including $859 million
and $916
million, respectively, net of
$4,272 $3,943
discount, of Exchangeable Senior
Debentures (b)
Mortgage debt
1,524 1,436
Credit facility, including the $210
million term
loan
210 410
Other
87 87
-- --
Total debt
6,093 5,876
Accounts payable and accrued expenses
86 119
Other
171 183
--- ---
Total liabilities
6,350 6,178
----- -----
Non-controlling interests in Host Hotels &
Resorts, L.P.
115 156
Host Hotels & Resorts, Inc. stockholders'
equity:
Cumulative redeemable preferred stock
(liquidation preference $100
million)
50 million shares authorized;
4 million shares
issued and outstanding
97 97
Common stock, par value $.01, 1,050
million
shares and 750 million shares
authorized, respectively; 604.6
million shares
and 525.3 million shares
issued and outstanding, respectively
6 5
Additional paid-in capital
6,397 5,874
Accumulated other comprehensive income
2 5
Deficit
(518) (389)
----- -----
Total Host Hotels
& Resorts, Inc. stockholders'
equity
5,984 5,592
Non-controlling interests-other consolidated
partnerships (c)
23 24
-- --
Total equity
6,007 5,616
----- -----
Total liabilities
and equity
$12,472 $11,950
======= =======
(a) Our consolidated balance sheet as of
June 19, 2009 has been prepared
without audit. Certain
information and footnote disclosures
normally included
in financial statements presented in accordance
with GAAP
have been omitted.
(b) As a result of the adoption of a new
accounting requirement for
convertible debt
instruments that may be settled in cash upon
conversion (including
partial cash settlement), the principal
balance for our
Exchangeable Senior Debentures was reduced by
$60 million and
$76 million as of June 19, 2009 and December 31,
2008, respectively,
with an offsetting increase to equity. The
decline in principal
reflects the unamortized discount balance
related to the implementation
of the new accounting requirement. The
face amount of the
debentures was $925 million at June 19, 2009.
See notes to "Other
Financial and Operating Data," for further
discussion.
(c) As a result of the adoption of a new
accounting requirement, non-
controlling interests
of other consolidated partnerships (previously
referred to as "Interest
of minority partners of other consolidated
partnerships") is
now included as a separate component of equity.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
----- ----- ----- -----
Revenues
Rooms
$629 $837 $1,134 $1,450
Food and beverage
323 433 592
762
Other
87 91
156 161
-- --
--- ---
Total hotel sales
1,039 1,361 1,882 2,373
Rental income
25 27
54 57
-- --
-- --
Total revenues
1,064 1,388 1,936 2,430
----- ----- ----- -----
Expenses
Rooms
166 194 302
348
Food and beverage
232 297 431
535
Hotel departmental expenses
271 318 505
571
Management fees
41 71
74 123
Other property-level expenses
96 94
177 175
Depreciation and amortization (b)
196 128 353
249
Corporate and other expenses
17 14
32 31
Gain on insurance settlement
- -
- (7)
- -
- ---
Total operating costs
and expenses 1,019 1,116 1,874
2,025
----- ----- ----- -----
Operating profit
45 272
62 405
Interest income
2 4
4 9
Interest expense (c)
(82) (88) (169) (171)
Net gains on property transactions and
other
1 1
2 2
Gain on foreign currency
6 -
4 -
Equity in earnings (losses) of
affiliates (b)
(32) 1
(34) 2
---- -
---- -
Income (loss) before income taxes
(60) 190 (131)
247
Benefit (provision) for income taxes
(10) (13) 4
(7)
---- ----
- ---
Income (loss) from continuing
operations
(70) 177 (127)
240
Income (loss) from discontinued
operations
1 16
(2) 16
- --
--- --
Net income (loss)
(69) 193 (129)
256
Less: Net (income) loss attributable
to non-controlling
interests (d)
1 (10)
2 (18)
- ----
- ----
Net income (loss) attributable to
common stockholders
(68) 183 (127)
238
Less: Dividends on preferred stock
(2) (2) (4)
(4)
--- --- ---
---
Net income (loss) available to common
stockholders
$(70) $181 $(131) $234
==== ==== =====
====
Basic earnings (loss) per common share:
Continuing operations
$(.12) $.32 $(.24) $.42
Discontinued operations
- .03
- .03
- --- -----
---
Basic earnings (loss) per common share $(.12)
$.35 $(.24) $.45
===== ==== =====
====
Diluted earnings (loss) per common
share:
Continuing operations
$(.12) $.31 $(.24) $.42
Discontinued operations
- .03
- .03
- --- -----
---
Diluted earnings (loss) per common
share
$(.12) $.34 $(.24) $.45
===== ==== =====
====
(a) Our consolidated statements of operations
presented above have been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance
with GAAP have been
omitted.
(b) During 2009, we identified several properties
to be tested for
impairment based
on certain triggering events, as prescribed by
GAAP. We tested
these properties for impairment based on
management's estimate
of expected future undiscounted cash flows
over our expected
holding period. As a result, we recorded
non-cash impairment
charges totaling $91 million for the second
quarter and $131
million year-to-date based on the difference between
the discounted cash
flows and the carrying amount. Of these
impairment charges,
$57 million and $78 million for second quarter
and year-to-date,
respectively, have been included in depreciation
expense and $19
million was included in discontinued operations for
the year to date.
The remaining $34 million of impairment charges
were for our investment
in the European joint venture, which is
included in equity
in earnings (losses) of affiliates.
(c) The retroactive adoption of a new accounting
requirement regarding
the exchangeable
debentures increased interest expense by $6
million and $7 million
for both the second quarter of 2009 and 2008,
respectively, and
$13 million and $14 million for year-to-date 2009
and 2008, respectively.
Interest expense for year-to-date 2009
includes the $3
million gain on the first quarter repurchase of a
portion of the 3.25%
Exchangeable Senior Debentures issued in April
2004 (the "2004
Debentures"). See notes to the "Reconciliation of
Net Income to EBITDA,
Adjusted EBITDA and FFO per Diluted Share" for
further discussion.
(d) As a result of the adoption of a new
accounting requirement, net
income attributable
to non-controlling interests of Host LP and of
other non-consolidated
partnerships are no longer included in the
determination of
net income. Prior periods have been revised to
reflect this presentation.
The net income attributable to non-
controlling interests
is included in the net income available to
common stockholders;
therefore, the implementation of this
requirement had
no effect on our basic or diluted earnings per
share calculation.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
----- ----- ----- -----
Net income (loss)
$(69) $193 $(129) $256
Net (income) loss attributable to
non-controlling
1 (10)
2 (18)
interests
Dividends on preferred stock
(2) (2) (4)
(4)
--- --- ---
---
Earnings (loss) available to common
stockholders
(70) 181 (131)
234
Assuming conversion of 2004
Exchangeable Senior
Debentures
- 7
- -
Assuming deduction of gain recognized
for the repurchase of 2004 Exchangeable
Senior Debentures (a)
- -
(2) -
- -
--- -
Diluted earnings (loss) available to
common stockholders
$(70) $188 $(133) $234
==== ==== ===== ====
Basic weighted average shares
outstanding
575.0 520.5 550.3 521.5
Diluted weighted average shares
outstanding (b)
575.0 551.7 552.2 521.8
Basic earnings (loss) per share (c)
$(.12) $.35 $(.24) $.45
Diluted earnings (loss) per share (c)
(d)
$(.12) $.34 $(.24) $.45
(a) During the first quarter of 2009, we
repurchased $75 million face
amount of the 2004
Debentures with a carrying value of $72 million
for $69 million.
The adjustments to dilutive earnings per common
share related to
the 2004 Debentures repurchased during the year
include the $3 million
gain on repurchase, net of interest expense
on the repurchased
debentures.
(b) Dilutive securities may include shares
granted under comprehensive
stock plans, preferred
OP Units held by minority partners,
exchangeable debt
securities and other non-controlling interests
that have the option
to convert their limited partnership interests
to common OP Units.
No effect is shown for any securities that are
anti-dilutive.
(c) Basic earnings per common share is computed
by dividing net income
available to common
stockholders by the weighted average number of
shares of common
stock outstanding. Diluted earnings per common
share is computed
by dividing net income available to common
stockholders, as
adjusted for potentially dilutive securities, by the
weighted average
number of shares of common stock outstanding plus
potentially dilutive
securities.
(d) See notes to the "Reconciliation of
Net Income to EBITDA, Adjusted
EBITDA and FFO per
Diluted Share" for information on significant
items affecting
diluted earnings per common share for which no
adjustments were
made.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of June 19, 2009 Quarter ended June 19,
2009
------------------- ---------------------------
Average
No. of No. of
Average Occupancy
Properties Rooms Room Rate
Percentages RevPAR
---------- ----- ---------- -----------
------
Pacific
27 15,943 $176.06
67.2% $118.23
Mid-Atlantic
11 8,683
207.41 76.3
158.15
North
Central
14 6,204
133.85 61.2
81.92
Florida
9 5,677
197.36 66.9
132.11
DC Metro
13 5,666
198.71 80.9
160.79
New England
10 5,165
164.84 60.7
100.12
South
Central
9 5,687
148.89 65.0
96.79
Mountain
8 3,364
166.68 57.8
96.35
Atlanta
8 4,252
154.70 58.5
90.55
International
7 2,473
137.37 60.9
83.69
- -----
All
Regions
116 63,114
175.24 67.0
117.36
=== ======
Quarter ended June 13, 2008
---------------------------
Average
Percent
Average Occupancy
Change in
Room Rate Percentages RevPAR
RevPAR
---------- ----------- ------
------
Pacific
$206.12 76.5%
$157.60 (25.0)%
Mid-Atlantic 265.87
81.9 217.73
(27.4)
North
Central
158.90 70.6
112.15 (27.0)
Florida
236.85 78.3
185.51 (28.8)
DC Metro
214.11 83.7
179.31 (10.3)
New England
182.33 77.0
140.39 (28.7)
South
Central
169.51 71.3
120.93 (20.0)
Mountain
182.61 69.8
127.49 (24.4)
Atlanta
176.53 69.4
122.43 (26.0)
International 181.20
74.0 134.00
(37.5)
All
Regions
205.28 76.1
156.22 (24.9)
As of June 19, 2009 Year-to-date ended June 19, 2009
------------------- --------------------------------
Average
No. of No. of
Average Occupancy
Properties Rooms Room Rate
Percentages RevPAR
---------- ----- ---------- -----------
------
Pacific
27 15,943 $180.89
64.8% $117.21
Mid-Atlantic
11 8,683
206.48 69.8
144.20
North
Central
14 6,204
128.79 56.1
72.21
Florida
9 5,677
209.66 68.6
143.90
DC Metro
13 5,666
204.54 74.5
152.44
New England
10 5,165
156.36 54.0
84.45
South
Central
9 5,687
152.68 65.1
99.44
Mountain
8 3,364
174.64 56.5
98.69
Atlanta
8 4,252
157.57 59.6
93.88
International
7 2,473
138.08 60.9
84.14
- -----
All
Regions
116 63,114
177.94 64.1
114.07
=== ======
Year-to-date ended June 13, 2008
--------------------------------
Average
Percent
Average Occupancy
Change in
Room Rate Percentages RevPAR
RevPAR
---------- ----------- ------
------
Pacific
$206.10 74.7%
$154.01 (23.9)%
Mid-Atlantic 253.22
78.1 197.72
(27.1)
North
Central
149.45 63.0
94.21 (23.3)
Florida
242.60 79.7
193.29 (25.5)
DC Metro
208.79 74.4
155.40 (1.9)
New England
172.26 69.4
119.54 (29.4)
South
Central
168.65 71.9
121.33 (18.0)
Mountain
192.74 67.4
129.99 (24.1)
Atlanta
175.74 69.5
122.16 (23.2)
International 172.90
71.9 124.29
(32.3)
All
Regions
202.30 72.9
147.57 (22.7)
Comparable Hotels by Property Type (a)
As of June 19, 2009 Quarter ended June 19,
2009
------------------- ---------------------------
Average
No. of No. of
Average Occupancy
Properties Rooms Room Rate
Percentages RevPAR
---------- ------ ---------- -----------
------
Urban
54 34,920 $184.07
69.5% $128.01
Suburban
34 12,904 141.42
58.2 82.28
Resort/
Conference
13 8,082
231.93 67.6
156.71
Airport
15 7,208
119.40 69.5
82.96
-- -----
All Types
116 63,114
175.24 67.0
117.36
=== ======
Quarter ended June 13, 2008
---------------------------
Average
Percent
Average Occupancy
Change in
Room Rate Percentages RevPAR
RevPAR
---------- ----------- ------
------
Urban
$216.59 77.5%
$167.86 (23.7)%
Suburban
161.59 69.2
111.89 (26.5)
Resort/
Conference
274.55 78.5
215.40 (27.2)
Airport
140.59 78.9
110.94 (25.2)
All Types
205.28 76.1
156.22 (24.9)
As of June 19, 2009 Year-to-date ended June 19, 2009
------------------- --------------------------------
Average
No. of No. of
Average Occupancy
Properties Rooms Room Rate
Percentages RevPAR
---------- ------ ---------- -----------
------
Urban
54 34,920 $185.52
65.6% $121.73
Suburban
34 12,904 144.82
57.3 82.93
Resort/
Conference
13 8,082
241.16 66.5
160.42
Airport
15 7,208
124.08 66.4
82.42
-- -----
All Types
116 63,114
177.94 64.1
114.07
=== ======
Year-to-date ended June 13, 2008
--------------------------------
Average
Percent
Average Occupancy
Change in
Room Rate Percentages RevPAR
RevPAR
---------- ----------- ------
------
Urban
$209.96 74.1%
$155.55 (21.7)%
Suburban
162.38 66.2
107.46 (22.8)
Resort/
Conference
279.07 77.4
216.04 (25.7)
Airport
142.11 74.7
106.14 (22.4)
All Types
202.30 72.9
147.57 (22.7)
(a) See the notes to financial information for
a discussion of reporting
periods and comparable
hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
----- ----- ----- -----
Number of hotels
116 116 116
116
Number of rooms
63,114 63,114 63,114 63,114
Percent change in comparable hotel
RevPAR
(24.9)% -% (22.7)%
-%
Operating profit margin under GAAP (b)
4.2% 19.6% 3.2% 16.7%
Comparable hotel adjusted operating
profit margin (b)
24.4% 30.0% 23.2% 28.2%
Comparable hotel sales
Room
$645 $858 $1,161 $1,506
Food and beverage
332 445 608
793
Other
90 95 161
173
-- -- ---
---
Comparable hotel sales
(c) 1,067
1,398 1,930 2,472
----- ----- ----- -----
Comparable hotel expenses
Room
170 199 308
360
Food and beverage
238 305 440
556
Other
41 49 73
88
Management fees, ground rent and other
costs
358 426 661
772
--- --- ---
---
Comparable hotel expenses
(d) 807
979 1,482 1,776
--- --- ----- -----
Comparable hotel adjusted operating
profit
260 419 448
696
Non-comparable hotel results, net (e)
- -
3 (5)
Office buildings and select service
properties, net (f)
1 (1) -
(1)
Comparable hotels classified as
held-for-sale, net
(3) (4) (4)
(5)
Depreciation and amortization
(196) (128) (353) (249)
Corporate and other expenses
(17) (14) (32) (31)
---- ---- ---- ----
Operating profit
$45 $272 $62
$405
=== ==== ===
====
(a) See the notes to the financial information
for discussion of
non-GAAP measures, reporting
periods and comparable hotel results.
(b) Operating profit margins are calculated by
dividing the applicable
operating profit by the
related revenue amount. GAAP margins are
calculated using amounts
presented in the consolidated statement of
operations. Comparable
margins are calculated using amounts presented
in the above table.
(c) The reconciliation of total revenues per the
consolidated statements
of operations to the comparable
hotel sales is as follows:
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
---- ---- ----
----
Revenues per the consolidated
statements of operations
$1,064 $1,388 $1,936 $2,430
Business interruption revenues
for comparable hotels
- -
- 7
Hotel sales for the property
for which we record
rental income, net
10 14
22 27
Hotel sales for comparable
hotels classified as
held-for-sale
13 15
23 25
Rental income for office
buildings and select
service hotels
(20) (19) (39)
(38)
Adjustment for hotel sales for
comparable hotels
to reflect Marriott's fiscal
year for Marriott-
managed hotels
- -
(12) 21
- - ----
--
Comparable hotel
sales $1,067 $1,398 $1,930
$2,472
====== ====== ====== ======
(d) The reconciliation of operating costs per the
consolidated statements
of operations to the comparable
hotel expenses is as follows:
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
---- ---- ----
----
Operating costs and expenses
per the consolidated
statements of operations
$1,019 $1,116 $1,874 $2,025
Hotel expenses for the
property for which we
record rental income
10 13
22 28
Hotel expense for comparable
hotels classified as
held-for-sale
10 12
19 20
Rent expense for office
buildings and select
service hotels
(19) (20) (39)
(39)
Adjustment for hotel expenses
for comparable
hotels to reflect Marriott's
fiscal year for
Marriott-managed hotels
- -
(9) 15
Depreciation and amortization
(196) (128) (353)
(249)
Corporate and other expenses
(17) (14) (32)
(31)
Gain on insurance settlement
- -
- 7
- -
- -
Comparable hotel
expenses $807 $979
$1,482 $1,776
==== ==== ======
======
(e) Non-comparable hotel results, net, includes
the results of operations
of our non-comparable
hotels whose operations are included in our
consolidated statements
of operations as continuing operations and
the difference between
the number of days of operations reflected in
the comparable hotel
results and the number of days of operations
reflected in the
consolidated statements of operations.
(f) Represents rental income less rental
expense for select service
properties and office
buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per share amounts)
June 19, December 31,
2009 2008
------ ------
Equity
------
Common shares outstanding
604.6 525.3
Common shares and minority held common
OP
Units outstanding
616.4 540.4
Preferred OP Units outstanding
.02 .02
Class E Preferred shares outstanding
4.0 4.0
Security pricing
----------------
Common (a)
$7.66 $7.57
Class E Preferred (a)
$21.22 $17.20
3(1)/4% Exchangeable Senior
Debentures (b)
$975.94 $861.51
2(5)/8% Exchangeable Senior
Debentures (b)
$836.24 $663.70
Dividends declared per share for calendar
year
Common
$- $.65
Class E Preferred (c)
$1.11 $2.22
Debt
----
Series K senior notes, with a rate of
7(1)/8% due November 2013
$725 $725
Series M senior notes, with a rate of 7%
due August 2012
348 348
Series O senior notes, with a rate of
6(3)/8% due March 2015
650 650
Series Q senior notes, with a rate of
6(3)/4% due June 2016
800 800
Series S senior notes, with a rate of
6(7)/8% due November 2014
497 497
Series T senior notes, with a rate of 9%
due May 2017
386 -
Exchangeable Senior Debentures, with a
rate of 3(1)/4% due April 2024 (d)(e)
317 383
Exchangeable Senior Debentures, with a
rate of 2(5)/8% due April 2027 (the "2007
Debentures") (e)
542 533
Senior notes, with rate of 10.0% due May
2012
7 7
- -
Total senior notes
4,272 3,943
Mortgage debt (non-recourse) secured by
$2.1 billion of real estate assets,
with an average interest rate of 6.0% and
6.2% at June 19, 2009 and
December 31, 2008, respectively, maturing
through December 2023
1,524 1,436
Credit facility, including the $210 million
term loan(f)
210 410
Other
87 87
-- --
Total debt
(g)(h)
$6,093 $5,876
====== ======
Percentage of fixed rate debt
90% 88%
Weighted average interest rate
6.1% 5.8%
Weighted average debt maturity
4.5 years 4.6 years
Quarter ended Year-to-date ended
------------- ------------------
June 19, June 13, June 19, June
13,
2009 2008
2009 2008
---- ----
---- ----
Hotel Operating Statistics
for All
Properties (i)
Average daily rate
$175.24 $205.10 $177.83
$201.99
Average occupancy
67.0% 76.2%
64.1% 73.0%
RevPAR
$117.36 $156.20 $114.01
$147.46
(a) Share prices are the closing price as
reported by the New York
Stock Exchange.
(b) Amount reflects market price of a single
$1,000 debenture as quoted
by Bloomberg L.P.
(c) On June 25, 2009, we declared a second
quarter preferred dividend of
$.5546875 per share
for our Class E cumulative redeemable preferred
stock.
(d) During the first quarter of 2009, we
repurchased $75 million face
amount of the 2004
Debentures with a carrying value of $72 million
for $69 million.
We recorded a gain on repurchase of approximately
$3 million.
(e) During the first quarter of 2009, we
adopted a new accounting
requirement that
issuers of cash-settled exchangeable debentures
must separately
account for the liability and equity components in a
manner that will
reflect the entity's nonconvertible debt borrowing
rate on the instrument's
issuance date. Therefore, we are required
to record the debt
components of the debentures at fair value as of
the date of issuance
with the adjustment to additional paid-in
capital and amortize
the resulting discount as an increase to
interest expense
over the expected life of the debt. This treatment
has been applied
retrospectively to all periods presented. The
principal balance
for our 2004 and 2007 Debentures was reduced by
$60 million and
$76 million as of June 19, 2009 and December 31,
2008, respectively,
which reflects the remaining unamortized
discount balance
at these dates. The discounts will be amortized
through the first
date at which the holders can require Host to
repurchase the debentures
for cash (April 2010 for the 2004
Debentures and March
2012 for the 2007 Debentures). The retroactive
adoption of the
standard increased interest expense by $6 million
and $7 million for
the second quarter of 2009 and 2008,
respectively, and
$13 million and $14 million for year-to-date 2009
and 2008, respectively.
The face amount of the 2004 and 2007
Debentures is $325
million and $600 million at June 19, 2009.
(f) Currently, we have $600 million of available
capacity under the
revolver portion
of the credit facility.
(g) In accordance with GAAP, total debt
includes the debt of entities
that we consolidate,
but do not own 100% of the interests, and
excludes the debt
of entities that we do not consolidate, but have
a non-controlling
ownership interest and record our investment
therein under the
equity method of accounting. As of June 19, 2009,
our non-controlling
partners' share of consolidated debt is $68
million and our
share of debt in unconsolidated investments is
$353 million.
(h) Total debt as of June 19, 2009 and December
31, 2008 includes net
(discounts)/premiums
of $(81) million and $(86) million,
respectively.
(i) The operating statistics reflect all
consolidated properties as
of June 19, 2009
and June 13, 2008, respectively. The operating
statistics include
the results of operations for three properties
held-for-sale at
June 19, 2009, one property sold in 2009 and two
properties sold
as of June 13, 2008 prior to their disposition.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA
and Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter Year-to-date
ended
ended
------------- -----------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
------ ------ ------ ------
Net income (loss)
$(69) $193 $(129)
$256
Interest expense
82 88
169 171
Depreciation and amortization
139 128
276 249
Income taxes
10 13
(4) 7
Discontinued operations (a)
2 3
4 6
- -
- -
EBITDA
164 425
316 689
Gains on dispositions
1 (10) (18)
(10)
Non-cash impairment charges
91 -
131 -
Amortization of deferred gains
(1) (1)
(2) (2)
Equity investment adjustments:
Equity in earnings of affiliates
(2) (1)
- (2)
Pro rata EBITDA of equity investments
6 11
10 17
Consolidated partnership adjustments:
Pro rata EBITDA attributable
to
non-controlling
partners in other consolidated
partnerships
(3) (5)
(7) (11)
--- ---
--- ----
Adjusted EBITDA
$256 $419 $430
$681
==== ==== ====
====
Quarter Year-to-date
ended
ended
------------- -----------------
June 19, June 13, June 19, June 13,
2009 2008 2009
2008
------ ------ ------ ------
Net income (loss)
$(69) $193 $(129) $256
Less: Net (income) loss attributable
to non-controlling interests 1
(10) 2 (18)
Dividends on preferred stock (2)
(2) (4) (4)
--- ---
--- ---
Net income (loss) available to common
stockholders
(70) 181 (131)
234
Adjustments:
Gains on dispositions, net of taxes
1 (10) (17)
(10)
Amortization of deferred gains and
other property
transactions, net of taxes
(1) (1)
(2) (2)
Depreciation and amortization (b)
140 130
279 254
Partnership adjustments
- 12
- 15
FFO of non-controlling interests of
Host LP
(2) (14) (3)
(20)
Adjustments for dilutive securities
(c):
Assuming conversion of 2004
Exchangeable Senior Debentures
- 8
- 15
Assuming deduction of gain recognized
for the repurchase of 2004 Exchangeable
Debentures (d)
- -
(2) -
- -
--- -
Diluted FFO (c)(e)
$68 $306 $124
$486
=== ==== ====
====
Diluted weighted average shares
outstanding (c)(e)
575.8 551.7 552.8 552.7
Diluted FFO per share (c)(e)
$.12 $.55 $.22
$.88
(a) Reflects the interest expense, depreciation
and amortization and
income taxes included
in discontinued operations.
(b) In accordance with the guidance on FFO
per diluted share provided by
the National Association
of Real Estate Investment Trusts, we do
not adjust net income
for the non-cash impairment charges when
determining our
FFO per diluted share.
(c) FFO per diluted share in accordance
with NAREIT is adjusted for the
effects of dilutive
securities. Dilutive securities may include
shares granted under
comprehensive stock plans, preferred OP Units
held by non-controlling
partners, exchangeable debt securities and
other non-controlling
interests that have the option to convert
their limited partnership
interest to common OP Units. No effect is
shown for securities
if they are anti-dilutive.
(d) During the first quarter of 2009, we
repurchased $75 million face
amount of the 2004
Debentures with a carrying value of $72 million
for $69 million.
The adjustments to dilutive FFO related to the 2004
Debentures repurchased
during the year include the $3 million gain
on repurchase, net
of interest expense on the repurchased debentures.
(e) FFO per diluted share and earnings per
diluted share were
significantly affected
by certain transactions, the effects of which
are shown in the
table below (in millions, except per share amounts):
Quarter ended Quarter ended
June 19, 2009 June 13, 2008
------------- -------------
Net
Net
Income
Income
(Loss) FFO
(Loss) FFO
------ ---
------ ---
Gain (loss) on hotel
disposition, net of taxes
$(1) $-
$10 $-
Non-cash interest expense -
2007 Debentures (1)
(4) (4)
(3) (3)
Non-cash interest expense -
2004 Debentures (2)
(2) (2)
- -
Dilutive effect of 2004
Debentures (3)
- (3)
- -
Non-cash impairment charges
(91) (91)
- -
Gain on CMBS defeasance
sharing agreement (4)
7 7
- -
(Gain) loss attributable to
non-controlling interests (5)
2 2
(1) -
- -
--- -
Total
$(89) $(91)
$6 $(3)
==== ====
== ===
Diluted shares
575.0 596.4
551.7 551.7
Per diluted share
$(.16) $(.15) $.01
$(.01)
===== =====
==== =====
Year-to-date ended Year-to-date ended
June 19, 2009 June 13,
2008
------------- -------------
Net
Net
Income
Income
(Loss) FFO
(Loss) FFO
------ ---
------ ---
Gain on hotel dispositions,
net of taxes
$17 $-
$10 $-
Non-cash interest expense -
2007 Debentures (1)
(8) (8)
(7) (7)
Non-cash interest expense -
2004 Debentures (2)
(5) (5)
(7) -
Dilutive effect of 2004
Debentures (3)
- (6)
- -
Non-cash impairment charges
(131) (131)
- -
Gain on CMBS defeasance
sharing agreement (4)
7 7
- -
(Gain) loss attributable to
non-controlling interests (5)
3 4
- -
- -
- -
Total
$(117) $(139)
$(4) $(7)
===== =====
=== ===
Diluted shares
552.2 573.5
521.8 552.7
Per diluted share
$(.21) $(.24) $(.01)
$(.01)
===== =====
===== =====
(1) Represents the non-cash interest expense
recognized related to the
2007 Debentures
in accordance with the retroactive implementation of
new accounting requirements
in the first quarter of 2009.
(2) Represents the non-cash interest expense
recognized related to the
2004 Debentures
in accordance with the retroactive implementation of
new accounting requirements
in the first quarter of 2009. No effect
is shown for the
2004 Debentures if they were dilutive in the
calculation of Earnings
per Diluted Share or FFO per Diluted Share,
as the interest
expense is added-back to earnings in the dilution
calculation.
(3) Represents dilutive effect, if applicable,
of the 2004 Debentures
after adjustment
(2) above for non-cash interest expense related to
the new accounting
requirement.
(4) As prescribed by the sharing agreement
with the successor borrower
in connection with
the 2007 defeasance of $514 million in
collateralized mortgage-backed
securities, we received $7 million
and recorded the
gain as a reduction of interest expense in the
second quarter 2009.
The loan had an initial maturity date of
September 15, 2009,
and was prepayable beginning on May 1, 2009.
We had been legally
released from all obligations under the loan
upon the defeasance
in 2007.
(5) Represents the portion of the significant
items attributable to
non-controlling
partners in Host LP.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and
Funds From Operations per Diluted
Share for Full Year 2009 Forecasts (a)
(unaudited, in millions, except per share amounts)
Full Year 2009
-----------------------
Low-end High-end
of range of range
-------- --------
Net loss
$(310) $(267)
Interest expense
385 385
Depreciation and amortization
600 600
Income taxes
(44) (37)
---- ----
EBITDA
631 681
Gains on dispositions
(34) (34)
Non-cash impairment charges
131 131
Equity investment adjustments:
Equity in losses of affiliates
5
5
Pro rata Adjusted EBITDA of
equity
investments
27
27
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA attributable
to
non-controlling partners
in other
consolidated partnerships
(10) (10)
---- ----
Adjusted EBITDA
$750 $800
==== ====
Full Year 2009 Forecast
-----------------------
Low end High end
of Range of Range
-------- --------
Net loss
$(310) $(267)
Less: Net loss attributable to
non-controlling interests
10
9
Dividends on preferred
stock
(9) (9)
--- ---
Net loss available to common
stockholders
(309) (267)
Adjustments:
Depreciation and amortization
600 600
Gain on dispositions, net of taxes
(34) (34)
Partnership adjustments
4
4
FFO of non-controlling interests of
Host
LP
(6) (7)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive
stock plan less shares assumed
purchased
at average market price
-
-
Assuming the reduction of the gain
recognized upon the repurchase
of the
2004 Exchangeable Senior Debentures
(2) (2)
--- ---
Diluted FFO
$253 $294
==== ====
Weighted average diluted shares (FFO)
583.9 583.9
Weighted average diluted shares (EPS)
582.3 582.3
Loss per diluted share
$ (.53) $ (.46)
FFO per diluted share
$ .43 $ .50
(a) The full year 2009 forecasts were based
on the below assumptions:
-- Comparable hotel
RevPAR will decrease 20% to 23% for the high and
low ends of the forecasted range, respectively.
-- Comparable hotel
adjusted operating profit margins will range
from a decrease of 600 basis points to 650 basis points for the
high and low ends of the forecasted range, respectively.
-- The implementation
of a new accounting requirement will increase
the non-cash interest expense applied to the 2004 and 2007
Debentures by approximately $26 million. Additionally, we
recorded non-cash impairment charges of $131 million, which
included $97 million of impairments on four of our properties and
a $34 million impairment of our investment in the European joint
venture. These non-cash charges will decrease earnings and FFO
per diluted share by approximately $.25.
-- We do not anticipate
that any acquisitions will be made during
2009.
-- We expect to
have annual hotel dispositions of approximately
$200 million during 2009.
-- We expect to
spend approximately $340 million to $360 million on
capital expenditures in 2009.
For a discussion
of additional items that may affect forecasted
results see Notes
to the Financial Information.
HOST HOTELS & RESORTS, INC.
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2009 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2009
-------------------
Low-end High-end
of range of range
-------- --------
Operating profit margin under GAAP (b)
1.2% 2.4%
Comparable hotel adjusted operating profit margin
(c) 19.8% 20.3%
Comparable hotel sales
Room
$2,451 $2,547
Other
1,538 1,607
----- -----
Comparable
hotel sales (d)
3,989 4,154
----- -----
Comparable hotel expenses
Rooms and other departmental costs
1,735 1,836
Management fees, ground rent and other
costs 1,466
1,478
----- -----
Comparable
hotel expenses (e)
3,201 3,314
----- -----
Comparable hotel adjusted operating profit
788 840
Non-comparable hotel results, net
3 3
Office buildings and select service properties,
net (1) (1)
Depreciation and amortization
(675) (675)
Corporate and other expenses
(67) (67)
---- ----
Operating
profit
$48 $100
=== ====
(a) Forecasted comparable hotel results include
113 hotels that we have
assumed will be
classified as comparable as of December 31, 2009.
No assurances can
be made as to the hotels that will be in the
comparable hotel
set for 2009. Also, see the notes to the
"Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and Funds
From Operations
per Diluted Share For Full Year 2009 Forecasts" for
other forecast assumptions.
(b) Operating profit margin under GAAP is
calculated as the operating
profit divided by
the forecast total revenues per the consolidated
statements of operations.
See (d) below for forecasted revenues.
(c) Comparable hotel adjusted operating
profit margin is calculated as
the comparable hotel
adjusted operating profit divided by the
comparable hotel
sales per the table above. The forecasted decline
in the comparable
hotel adjusted operating profit margin includes
the following two
items which accounts for 50 basis points of the
above decline. Additionally,
the decline in the adjusted operating
profit margins includes
the effect of these two items of
approximately 40
basis points and 50 basis points for the quarter and
year-to-date periods
ended June 19, 2009. (1) The 2008 comparable
hotel operating
profit includes business interruption proceeds of
approximately $5
million, net of expenses, received in 2008 for the
New Orleans Marriott
which had previously been non-comparable. We do
not expect to receive
any business interruption proceeds in 2009. (2)
We will incur additional
expenses in 2009 due to the treatment of the
ground lease payments
related to the New York Marriott Marquis. Since
the renegotiation
of the ground lease on the New York Marriott
Marquis in 1998,
the ground lease payments have reduced the deferred
ground rent liability,
and more recently, have been applied against
the deferred purchase
price of the land. As a result, there was no
operating profit
reduction for these payments. In 2009, a small
portion of the payments
will fully fund the deferred purchase price
and the remainder
of approximately $19 million will be deducted from
operating profit.
(d) The reconciliation of forecast total
revenues to the forecast
comparable hotel
sales is as follows (in millions):
Full Year 2009
-------------------
Low-end High-end
of range of range
-------- --------
Revenues
$4,035 $4,200
Non-comparable hotel sales
(1) (1)
Hotel sales for the property for which we
record rental income, net
40 40
Rental income for office buildings and select
service hotels
(85) (85)
---- ----
Comparable hotel
sales
$3,989 $4,154
====== ======
(e) The reconciliation of forecast operating
costs and expenses to
the comparable hotel
expenses is as follows (in millions):
Full Year 2009
-----------------------
Low-end High-end
of range of range
-------- --------
Operating costs and expenses
$3,987 $4,100
Non-comparable hotel expenses
-
-
Hotel expenses for the property for which
we record rental income
40
40
Rent expense for office buildings and
select service hotels
(84) (84)
Depreciation and amortization
(675) (675)
Corporate and other expenses
(67) (67)
---- ----
Comparable hotel
expenses
$3,201 $3,314
====== ======
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Forecasts
Our forecast of earnings per diluted share, FFO per diluted
share, EBITDA, Adjusted EBITDA and comparable hotel adjusted operating
profit margins are forward-looking statements and are not guarantees of
future performance and involve known and unknown risks, uncertainties and
other factors which may cause actual results and performance to differ
materially from those expressed or implied by these forecasts. Although
we believe the expectations reflected in the forecasts are based upon reasonable
assumptions, we can give no assurance that the expectations will be attained
or that the results will be materially different. Risks that may affect
these assumptions and forecasts include the following: the level of RevPAR
and margin growth may change significantly and the continued economic recession
and volatility in the credit markets have created limited visibility for
advance bookings for both transient and group business and accordingly,
our ability to predict operating results; the amount and timing of acquisitions
and dispositions of hotel properties is an estimate that can substantially
affect financial results, including such items as net income, depreciation
and gains on dispositions; the level of capital expenditures may change
significantly, which will directly affect the level of depreciation expense
and net income; the amount and timing of debt payments may change significantly
based on market conditions, which will directly affect the level of interest
expense and net income; the number of shares of our common stock may change
based on market conditions; and other risks and uncertainties associated
with our business described herein and in our filings with the SEC.
Reporting Periods for Statement of Operations
The results we report in our consolidated statements
of operations are based on results of our hotels reported to us by our
hotel managers. Our hotel managers use different reporting periods. Marriott
International, Inc., or Marriott, the manager of the majority of our properties,
uses a fiscal year ending on the Friday closest to December 31 and reports
twelve weeks of operations for the first three quarters and sixteen or
seventeen weeks for the fourth quarter of the year for its Marriott-managed
hotels. In contrast, other managers of our hotels, such as Starwood and
Hyatt, report results on a monthly basis. Additionally, Host, as a REIT,
is required by tax laws to report results on a calendar year. As a result,
we elected to adopt the reporting periods used by Marriott except that
our fiscal year always ends on December 31 to comply with REIT rules. Our
first three quarters of operations end on the same day as Marriott but
our fourth quarter ends on December 31 and our full year results, as reported
in our consolidated statement of operations, always includes the same number
of days as the calendar year.
Two consequences of the reporting cycle we have adopted
are: (1) quarterly start dates will usually differ between years, except
for the first quarter which always commences on January 1, and (2) our
first and fourth quarters of operations and year-to-date operations may
not include the same number of days as reflected in prior years. For example,
the second quarter of 2009 ended on June 19, and the second quarter of
2008 ended on June 13, though both quarters reflect twelve weeks of operations.
In contrast, the June 19, 2009 year-to-date operations included 170 days
of operations, while the June 13, 2008 year-to-date operations included
165 days of operations.
While the reporting calendar we adopted is more closely
aligned with the reporting calendar used by the manager of a majority of
our properties, one final consequence of our calendar is we are unable
to report the month of operations that ends after our fiscal quarter-end
until the following quarter because our hotel managers using a monthly
reporting period do not make mid-month results available to us. Hence,
the month of operation that ends after our fiscal quarter-end is included
in our quarterly results of operations in the following quarter for those
hotel managers (covering approximately 41% of our hotels). As a result,
our quarterly results of operations include results from hotel managers
reporting results on a monthly basis as follows: first quarter (January,
February), second quarter (March to May), third quarter (June to August)
and fourth quarter (September to December). While this does not affect
full-year results, it does affect the reporting of quarterly results.
Reporting Periods for Hotel Operating Statistics and
Comparable Hotel Results
In contrast to the reporting periods for our consolidated
statement of operations, our hotel operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and our comparable hotel results
are always reported based on the reporting cycle used by Marriott for our
Marriott-managed hotels. This facilitates year-to-year comparisons, as
each reporting period will be comprised of the same number of days of operations
as in the prior year (except in the case of fourth quarters comprised of
seventeen weeks (such as fiscal year 2008) versus sixteen weeks). This
means, however, that the reporting periods we use for hotel operating statistics
and our comparable hotels results may differ slightly from the reporting
periods used for our statements of operations for the first and fourth
quarters and the full year. Results from hotel managers reporting on a
monthly basis are included in our operating statistics and comparable hotels
results consistent with their reporting in our consolidated statement of
operations herein:
-- Hotel results for the second quarter
of 2009 reflect 12 weeks of
operations for the period
from March 28, 2009 to June 19, 2009 for our
Marriott-managed hotels
and results from March 1, 2009 to May 31, 2009
for operations of all
other hotels which report results on a monthly
basis.
-- Hotel results for the second quarter
of 2008 reflect 12 weeks of
operations for the period
from March 22, 2008 to June 13, 2008 for our
Marriott-managed hotels
and results from March 1, 2008 to May 31, 2008
for operations of all
other hotels which report results on a monthly
basis.
-- Hotel results for year-to-date 2009 reflect
24 weeks for the period
from January 3, 2009 to
June 19, 2009 for our Marriott-managed hotels
and results from January
1, 2009 to May 31, 2009 for operations of all
other hotels which report
results on a monthly basis.
-- Hotel results for year-to-date 2008 reflect
24 weeks for the period
from December 29, 2007
to June 13, 2008 for our Marriott-managed
hotels and results from
January 1, 2008 to May 31, 2008 for operations
of all other hotels which
report results on a monthly basis.
Comparable Hotel Operating Statistics
We present certain operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and operating results (revenues,
expenses, adjusted operating profit and adjusted operating profit margin)
for the periods included in this report on a comparable hotel basis. We
define our comparable hotels as properties (i) that are owned or leased
by us and the operations of which are included in our consolidated results,
whether as continuing operations or discontinued operations, for the entirety
of the reporting periods being compared, and (ii) that have not sustained
substantial property damage or business interruption or undergone large-scale
capital projects during the reporting periods being compared. All of our
hotels that we owned as of June 19, 2009, have been classified as comparable
hotels.
The operating results of one hotel we disposed of as
of June 19, 2009 and the two hotels we disposed of in 2008 are also not
included in comparable hotel results for the periods presented herein.
Moreover, because these statistics and operating results are for our hotel
properties, they exclude results for our non-hotel properties and other
real estate investments.
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP
financial measures," which are measures of our historical or future financial
performance that are not calculated and presented in accordance with GAAP,
within the meaning of applicable SEC rules. They are as follows: (i) FFO
per diluted share, (ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable
Hotel Operating Results. The following discussion defines these terms and
presents why we believe they are useful supplemental measures of our performance.
FFO per Diluted Share
We present FFO per diluted share as a non-GAAP measure
of our performance in addition to our earnings per share (calculated in
accordance with GAAP). We calculate FFO per diluted share for a given operating
period as our FFO (defined as set forth below) for such period divided
by the number of fully diluted shares outstanding during such period. The
National Association of Real Estate Investment Trusts (NAREIT) defines
FFO as net income (calculated in accordance with GAAP) excluding gains
(losses) from sales of real estate, the cumulative effect of changes in
accounting principles, real estate-related depreciation and amortization
and adjustments for unconsolidated partnerships and joint ventures. We
present FFO on a per share basis after making adjustments for the effects
of dilutive securities and the payment of preferred stock dividends, in
accordance with NAREIT guidelines.
We believe that FFO per diluted share is a useful supplemental
measure of our operating performance and that the presentation of FFO per
diluted share, when combined with the primary GAAP presentation of earnings
per share, provides beneficial information to investors. By excluding the
effect of real estate depreciation, amortization and gains and losses from
sales of real estate, all of which are based on historical cost accounting
and which may be of lesser significance in evaluating current performance,
we believe such measures can facilitate comparisons of operating performance
between periods and with other REITs, even though FFO per diluted share
does not represent an amount that accrues directly to holders of our common
stock. Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminishes predictably over time.
As noted by NAREIT in its April 2002 "White Paper on Funds From Operations,"
since real estate values have historically risen or fallen with market
conditions, many industry investors have considered presentation of operating
results for real estate companies that use historical cost accounting to
be insufficient by themselves. For these reasons, NAREIT adopted the definition
of FFO in order to promote an industry-wide measure of REIT operating performance.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation
and Amortization (EBITDA) is a commonly used measure of performance in
many industries. Management believes EBITDA provides useful information
to investors regarding our results of operations because it helps us and
our investors evaluate the ongoing operating performance of our properties
and facilitates comparisons between us and other lodging REITs, hotel owners
who are not REITs and other capital-intensive companies. Management uses
EBITDA to evaluate property-level results and as one measure in determining
the value of acquisitions and dispositions and, like FFO per diluted share,
it is widely used by management in the annual budget process.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating
our performance because we believe that the exclusion of certain additional
recurring and non-recurring items described below provides useful supplemental
information to investors regarding our ongoing operating performance and
that the presentation of Adjusted EBITDA, when combined with the primary
GAAP presentation of net income, is beneficial to an investor's complete
understanding of our operating performance and is a relevant measure in
calculating certain credit ratios. We adjust EBITDA for the following items,
which may occur in any period, and refer to this measure as Adjusted EBITDA:
-- Real Estate Transactions - We exclude
the effect of gains and losses,
including the amortization
of deferred gains, recorded on the
disposition of assets
and property insurance gains in our consolidated
statement of operations
because we believe that including them in
Adjusted EBITDA is not
consistent with reflecting the ongoing
performance of our remaining
assets. In addition, material gains or
losses from the depreciated
value of the disposed assets could be less
important to investors
given that the depreciated asset often does not
reflect the market value
of real estate assets (as noted above for
FFO).
-- Equity Investment Adjustments - We exclude
the equity in earnings
(losses) of unconsolidated
investments in partnerships and joint
ventures as presented
in our consolidated statement of operations
because it includes our
pro-rata portion of depreciation, amortization
and interest expense.
We include our pro rata share of the Adjusted
EBITDA of our equity investments
as we believe this more accurately
reflects the performance
of our investment. The pro rata Adjusted
EBITDA of equity investments
is defined as the EBITDA of our equity
investments adjusted for
any gains or losses on property transactions
multiplied by our percentage
ownership in the partnership or joint
venture.
-- Consolidated Partnership Adjustments
- We deduct the non-controlling
partners' pro rata share
of the Adjusted EBITDA of our consolidated
partnerships as this reflects
the non-controlling owners' interest in
the EBITDA of our consolidated
partnerships. The pro rata Adjusted
EBITDA of non-controlling
partners is defined as the EBITDA of our
consolidated partnerships
adjusted for any gains or losses on property
transactions multiplied
by the non-controlling partners' positions in
the partnership or joint
venture.
-- Cumulative Effect of a Change in Accounting
Principle - Infrequently,
the Financial Accounting
Standards Board (FASB) promulgates new
accounting standards that
require the consolidated statement of
operations to reflect
the cumulative effect of a change in accounting
principle. We exclude
these one-time adjustments because they do not
reflect our actual performance
for that period.
-- Impairment Losses - We exclude the effect
of impairment losses
recorded because we believe
that including them in Adjusted EBITDA is
not consistent with reflecting
the ongoing performance of our
remaining assets.
In addition, we believe that impairment charges are
similar to gains (losses)
on dispositions and depreciation expense,
both of which are also
excluded from EBITDA.
Limitations on the Use of FFO per Diluted Share, EBITDA
and Adjusted EBITDA
We calculate FFO per diluted share in accordance with
standards established by NAREIT, which may not be comparable to measures
calculated by other companies who do not use the NAREIT definition of FFO
or calculate FFO per diluted share in accordance with NAREIT guidance.
In addition, although FFO per diluted share is a useful measure when comparing
our results to other REITs, it may not be helpful to investors when comparing
us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also not
be comparable to measures calculated by other companies. This information
should not be considered as an alternative to net income, operating profit,
cash from operations or any other operating performance measure calculated
in accordance with GAAP. Cash expenditures for various long-term assets
(such as renewal and replacement capital expenditures), interest expense
(for EBITDA and Adjusted EBITDA purposes only) and other items have been
and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA
and FFO per diluted share presentations. Management compensates for these
limitations by separately considering the impact of these excluded items
to the extent they are material to operating decisions or assessments of
our operating performance. Our consolidated statement of operations and
cash flows include interest expense, capital expenditures, and other excluded
items, all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures. Additionally,
FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered
as a measure of our liquidity or indicative of funds available to fund
our cash needs, including our ability to make cash distributions. In addition,
FFO per diluted share does not measure, and should not be used as a measure
of, amounts that accrue directly to stockholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our hotels,
such as hotel revenues, expenses, adjusted operating profit (and the related
margin) and food and beverage adjusted profit (and the related margin),
on a comparable hotel, or "same store," basis as supplemental information
for investors. Our comparable hotel results present operating results for
hotels owned during the entirety of the periods being compared without
giving effect to any acquisitions or dispositions, significant property
damage or large scale capital improvements incurred during these periods.
We present these comparable hotel operating results by eliminating corporate-level
costs and expenses related to our capital structure, as well as depreciation
and amortization. We eliminate corporate-level costs and expenses to arrive
at property-level results because we believe property-level results provide
investors with supplemental information into the ongoing operating performance
of our hotels. We eliminate depreciation and amortization because, even
though depreciation and amortization are property-level expenses, these
non-cash expenses, which are based on historical cost accounting for real
estate assets, implicitly assume that the value of real estate assets diminishes
predictably over time. As noted earlier, because real estate values have
historically risen or fallen with market conditions, many industry investors
have considered presentation of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves.
As a result of the elimination of corporate-level costs
and expenses and depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses, operating
profit or operating profit margin and should not be used to evaluate our
performance as a whole. Management compensates for these limitations by
separately considering the impact of these excluded items to the extent
they are material to operating decisions or assessments of our operating
performance. Our consolidated statements of operations include such amounts,
all of which should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable
hotel basis because we believe that doing so provides investors and management
with useful information for evaluating the period-to-period performance
of our hotels and facilitates comparisons with other hotel REITs and hotel
owners. In particular, these measures assist management and investors in
distinguishing whether increases or decreases in revenues and/or expenses
are due to growth or decline of operations at comparable hotels (which
represent the vast majority of our portfolio) or from other factors, such
as the effect of acquisitions or dispositions. While management believes
that presentation of comparable hotel results is a "same store" supplemental
measure that provides useful information in evaluating our ongoing performance,
this measure is not used to allocate resources or to assess the operating
performance of each of these hotels, as these decisions are based on data
for individual hotels and are not based on comparable hotel results. For
these reasons, we believe that comparable hotel operating results, when
combined with the presentation of GAAP operating profit, revenues and expenses,
provide useful information to investors and management. |