BETHESDA, Md., April 28, 2011 -- Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate investment
trust (REIT), today announced results of operations for the first
quarter ended March 25, 2011.
- Hotel revenues for owned hotels increased $54 million,
or 7%, for the quarter compared to the first quarter of 2010. Total
revenue increased $80 million, or 10%, of which $27 million
was due to the inclusion of property-level revenues for 53 leased,
select-service hotels for which the Company previously recorded rental
income. Our 2010 and 2011 acquisitions contributed $21 million of
revenues in the quarter. See the notes to the consolidated statements
of operations for further information.
- Net loss was $60 million, or $.09
per diluted share, for the first quarter of 2011 compared to a net loss
of $84 million, or $.13 per diluted
share, for the first quarter of 2010.
- FFO increased 57% to $77 million, or $.11 per diluted share, for the first quarter
of 2011 compared to $49 million, or $.08
per diluted share, for the first quarter of 2010. The Company's
operating results include transactions, such as gains or losses on debt
extinguishments, litigation costs and acquisition costs that can
significantly affect earnings and FFO per diluted share. The net effect
of these items was a decrease to earnings per diluted share and FFO per
diluted share of $.01 for both the first
quarter of 2011 and 2010.
- Adjusted EBITDA, which is Earnings before Interest Expense,
Income Taxes, Depreciation, Amortization and other items, increased 14%
to $144 million for the quarter.
For further detail of the transactions affecting net income,
earnings per diluted share, FFO and FFO per diluted share, refer to the
notes to the "Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
FFO per Diluted Share."
Adjusted EBITDA, FFO, FFO per diluted share and comparable
hotel adjusted operating profit margins (discussed below) are non-GAAP
(generally accepted accounting principles) financial measures within
the meaning of the rules of the Securities and Exchange Commission
(SEC). See the discussion included in this press release for
information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR increased 5.4% for the first quarter
as a result of the improvement in average room rate of 4.8% combined
with a slight increase in occupancy. The first quarter results do
not reflect the month of March for the Company's hotels that report
results on a calendar basis (approximately 42% of comparable hotels by
revenue). On a calendar quarter basis, which includes the March
results for these hotels, as well as the final week of March for the
Company's Marriott hotels, comparable hotel RevPAR increased 6.9%
compared to first quarter of 2010. Two of the Company's larger
properties, the Sheraton New York Hotel & Towers and the
Philadelphia Marriott Downtown, were severely disrupted by major
renovation projects during the quarter. On a calendar quarter basis,
excluding the results of the Sheraton New York Hotel & Towers and
the Philadelphia Marriott Downtown, comparable hotel RevPAR would have
increased by an additional 150 basis points.
Despite the improvements in RevPAR, comparable hotel adjusted
operating profit margins for the first quarter decreased 10 basis
points compared to 2010, largely due to higher payroll taxes,
property-level bonuses, and lower attrition and cancellation revenue.
These items disproportionately effected the first quarter and
collectively reduced margins by approximately 85 basis points.
Comparable hotel adjusted operating profit margins for the quarter were
further reduced by 60 basis points due to the substantial disruption at
the Sheraton New York Hotel & Towers and the Philadelphia Marriott
Downtown.
ACQUISITIONS
During the quarter, the Company invested over $1 billion to complete the acquisitions of the
New York Helmsley Hotel, the Manchester Grand Hyatt San Diego Hotel and
a portfolio of seven hotels in New Zealand.
The Company also obtained an $80 million
mortgage loan in conjunction with the acquisition in New Zealand.
EUROPEAN JOINT VENTURE
On April 27, 2011, the Company
reached an agreement to expand its investment in the European joint
venture through the establishment of a new fund (the “Euro Fund Two”).
The new fund will have a target size of approximately euro 450 million of new equity and a total
investment of approximately euro 1 billion.
Each of the current partners in the European joint venture will own a
33.3% limited partner interest in the Euro Fund Two, while an affiliate
of the Company will have a 0.1% general partner interest. As part of
the expansion, the Company is contributing the Le Meridien Piccadilly
to the joint venture for a transfer price of 64
million pounds Sterling. The agreement and the transfer of the
Le Meridien Piccadilly is subject to certain regulatory approvals.
RETURN ON INVESTMENT EXPENDITURES
During the first quarter, the Company invested
$46 million in return on investment (ROI) projects. These projects
are designed to increase cash flow and improve profitability by
capitalizing on changing market conditions and the favorable locations
of the Company's properties. During the quarter, these expenditures
included approximately $30 million for
significant redevelopment projects in progress at the Sheraton New
York, the Sheraton Indianapolis and the San Diego Marriott Marquis
& Marina. On February 28, 2011, the
San Diego Marriott Marquis & Marina became only the fifth hotel in
the country to earn the premier Marquis distinction from Marriott, as
key elements of its extensive, multi-year renovation project were
completed. Significant improvements include an entirely new
arrival experience, updated lobby and concierge level, completely
remodeled guest rooms and a state-of-the-art-fitness center overlooking
a new pool area. The Company expects that its investment in ROI
expenditures for 2011 will total approximately $230
million to $250 million.
RENEWAL AND REPLACEMENT EXPENDITURES
The Company also spent approximately $48 million in the
first quarter for renewal and replacement expenditures designed to
ensure that the high-quality standards of both the Company and its
operators are maintained. Major renovation projects that were
completed during the first quarter include 98,700 square feet of
meeting space at the Sheraton Boston, 87,500 square feet of meeting
space at the Philadelphia Marriott Downtown, 36,000 square feet of
meeting space at the Hyatt Regency Washington on Capitol Hill and the
renovation of 1,001 rooms at the San Antonio Marriott Rivercenter. The
Company expects that renewal and replacement expenditures for 2011 will
total approximately $300 million to $325 million.
BALANCE SHEET
On March 1, 2011, the Company
repaid the CAD129 million ($132 million) mortgage debt on a portfolio of
four hotels in Canada. The
Company drew CAD100 million ($103 million) from its credit facility in the
form of bankers' acceptances with an initial average interest rate of
2.18% to fund a portion of this repayment. As of March
25, 2011 the Company has approximately $154
million of cash and cash equivalents and $438 million of
available capacity under its credit facility.
DIVIDEND
On March 17, 2011, the Company's board of directors
authorized a regular quarterly cash dividend of $0.02
per share on its common stock, an increase of $0.01
per share from the prior quarter. The dividend was paid on April 15, 2011 to stockholders of record on
March 31, 2011. Based on the current guidance for 2011, the
Company intends to declare, subject to approval by the Company's board
of directors, an aggregate annual dividend of between $0.10 and $0.15 per share.
2011 OUTLOOK
The Company anticipates that for 2011:
- Comparable hotel RevPAR will increase 6% to 8%;
- Operating profit margins under GAAP would increase
approximately 210 basis points to 260 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 100 basis points to 140 basis points.
Based upon these parameters, the Company estimates that its
full year 2011 guidance is as follows:
- income per diluted share should be approximately $.01 to $.06;
- net income should be approximately $8 million to
$42 million;
- FFO per diluted share should be approximately $.88 to $.93 (including the effect of a
reduction of $.02 due to debt
extinguishment costs and pursuit costs for completed acquisitions); and
- Adjusted EBITDA should be approximately $1,010 million to $1,045 million.
See the 2011 Forecast Schedules and Notes to Financial
Information for other assumptions used in the forecasts and items that
may affect forecasted results. Effective January
1, 2011, the Company modified its definition of Adjusted EBITDA
to exclude pursuit costs for completed acquisitions as these costs,
which were previously capitalized, are now required to be expensed. See
the Notes to Financial Information for more information on this change.
ABOUT HOST HOTELS & RESORTS
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune
500 company and is the largest lodging real estate investment trust and
one of the largest owners of luxury and upper-upscale hotels. The
Company currently owns 106 properties in the
United States and 16 international properties totaling
approximately 65,000 rooms, and also holds a non-controlling interest
in a joint venture in Europe that
owns 11 hotels with approximately 3,500 rooms. Guided by a disciplined
approach to capital allocation and aggressive asset management, the
Company partners with premium brands such as Marriott®,
Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®,
Le Meridien®, The Luxury Collection®, Hyatt®,
Fairmont®, Four Seasons®, Hilton®, Swissotel®,
ibis® and Novotel®* in the operation of properties in over 50
major markets worldwide. For additional information, please visit the
Company's website at www.hosthotels.com.
Note: This press release contains forward-looking
statements within the meaning of federal securities regulations.
These forward-looking statements include forecast results and are
identified by their use of terms and phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "should,"
"plan," "predict," "project," "will," "continue" and other similar
terms and phrases, including references to assumption and forecasts of
future results. Forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and
other factors which may cause the actual results to differ materially
from those anticipated at the time the forward-looking statements are
made. These risks include, but are not limited to: national and
local economic and business conditions, including the effect on travel
of potential terrorist attacks, that will affect occupancy rates at our
hotels and the demand for hotel products and services; operating risks
associated with the hotel business; risks associated with the level of
our indebtedness and our ability to meet covenants in our debt
agreements; relationships with property managers; our ability to
maintain our properties in a first-class manner, including meeting
capital expenditure requirements; our ability to compete effectively in
areas such as access, location, quality of accommodations and room rate
structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices, construction
procedures and costs; our ability to complete acquisitions and
dispositions; the risk that the Company's board of directors will
determine to pay dividends at a rate different than currently
anticipated and our ability to continue to satisfy complex rules in
order for us to remain a REIT for federal income tax purposes and other
risks and uncertainties associated with our business described in the
Company's annual report on Form 10 K, quarterly reports on Form
10-Q and current reports on Form 8-K filed with the SEC. Although the
Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no
assurance that the expectations will be attained or that any deviation
will not be material. All information in this release is as of April 28, 2011, and the Company undertakes no
obligation to update any forward-looking statement to conform the
statement to actual results or changes in the Company's expectations.
* This press release contains registered
trademarks that are the exclusive property of their respective owners.
None of the owners of these trademarks has any responsibility or
liability for any information contained in this press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein referred to as "we" or
"Host," is a self-managed and self-administered real estate investment
trust (REIT) that owns hotel properties. We conduct our operations as
an umbrella partnership REIT through an operating partnership, Host
Hotels & Resorts, L.P. (Host LP), of which we are the sole general
partner. When distinguishing between Host and Host LP, the primary
difference is approximately 1.6% of the partnership interests in Host
LP held by outside partners as of March 25, 2011, which is
non-controlling interests in Host LP in our consolidated balance sheets
and is included in net income/loss attributable to non-controlling
interests in our consolidated statements of operations. Readers are
encouraged to find further detail regarding our organizational
structure in our annual report on Form 10K.
For information on our reporting periods and non-GAAP
financial measures (including Adjusted EBITDA, FFO per diluted share
and comparable hotel adjusted operating profit margin) which we believe
is useful to investors, see the Notes to the Financial Information
included in this release.
HOST
HOTELS & RESORTS, INC.
|
|
Consolidated
Balance Sheets (a)
|
|
(in
millions, except shares and per share amounts)
|
|
|
|
|
|
|
|
|
March
25,
|
December
31,
|
|
|
|
2011
|
2010
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
Property
and equipment, net
|
$
11,485
|
$
10,514
|
|
Due
from managers
|
54
|
45
|
|
Investments
in affiliates
|
158
|
148
|
|
Deferred
financing costs, net
|
41
|
44
|
|
Furniture,
fixtures and equipment replacement fund
|
221
|
152
|
|
Other
|
339
|
354
|
|
Restricted
cash
|
41
|
41
|
|
Cash
and cash equivalents
|
154
|
1,113
|
|
Total
assets
|
$
12,493
|
$
12,411
|
|
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
Debt
|
|
|
|
Senior
notes, including $1,163 million and $1,156 million,
respectively, net of discount, of Exchangeable Senior Debentures
|
$
4,257
|
$
4,249
|
|
Credit
facility
|
162
|
58
|
|
Mortgage
debt
|
973
|
1,025
|
|
Other
|
146
|
145
|
|
Total
debt
|
5,538
|
5,477
|
|
Accounts
payable and accrued expenses
|
166
|
208
|
|
Other
|
213
|
203
|
|
Total
liabilities
|
5,917
|
5,888
|
|
|
|
|
|
Non-controlling
interests-Host Hotels & Resorts, L.P.
|
193
|
191
|
|
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders’ equity:
|
|
|
|
Common
stock, par value $.01, 1,050 million shares authorized;
682.5 million shares and 675.6 million shares issued and
outstanding, respectively
|
7
|
7
|
|
Additional
paid-in capital
|
7,356
|
7,236
|
|
Accumulated
other comprehensive income
|
29
|
25
|
|
Deficit
|
(1,039)
|
(965)
|
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
6,353
|
6,303
|
|
Non-controlling
interests-other consolidated partnerships
|
30
|
29
|
|
Total
equity
|
6,383
|
6,332
|
|
Total
liabilities, non-controlling interests and equity
|
$
12,493
|
$
12,411
|
|
|
|
|
|
(a)
Our consolidated balance sheet as of March 25, 2011 has been
prepared without audit. Ce rtain
information and footnote disclosures normally included in financial
statements presented in accordance with GAAP have been omitted.
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Consolidated
Statements of Operations (a)
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
Quarter
ended
|
|
|
March
25,
|
March
26,
|
|
|
2011
|
2010
|
|
|
|
|
|
Revenues
|
|
|
|
Rooms
|
$
523
|
$
484
|
|
Food
and beverage
|
270
|
252
|
|
Other
|
54
|
57
|
|
Total
hotel revenues for owned hotels
|
847
|
793
|
|
Other
revenues (b)
|
56
|
30
|
|
Total
revenues
|
903
|
823
|
|
Expenses
|
|
|
|
Rooms
|
151
|
140
|
|
Food
and beverage
|
201
|
187
|
|
Other
departmental and support expenses
|
239
|
222
|
|
Management
fees
|
32
|
29
|
|
Other
property-level expenses (b)
|
117
|
86
|
|
Depreciation
and amortization
|
141
|
136
|
|
Corporate
and other expenses
|
25
|
25
|
|
Total
operating costs and expenses
|
906
|
825
|
|
Operating
loss
|
(3)
|
(2)
|
|
Interest
income
|
4
|
1
|
|
Interest
expense (c)
|
(82)
|
(96)
|
|
Net
gains on property transactions and other
|
2
|
-
|
|
Gain
(loss) on foreign currency transactions and derivatives
|
1
|
(2)
|
|
Equity
in losses of affiliates
|
(2)
|
(5)
|
|
Loss
before income taxes
|
(80)
|
(104)
|
|
Benefit
for income taxes
|
20
|
22
|
|
Loss
from continuing operations
|
(60)
|
(82)
|
|
Income
(loss) from discontinued operations
|
-
|
(2)
|
|
Net
loss
|
(60)
|
(84)
|
|
Less:
Net loss attributable to non-controlling interests
|
-
|
-
|
|
Net
loss attributable to Host Hotels & Resorts, Inc.
|
(60)
|
(84)
|
|
Less:
Dividends on preferred stock
|
-
|
(2)
|
|
Net
loss available to common stockholders
|
$
(60)
|
$
(86)
|
|
Basic
and diluted earnings (loss) per common share:
|
|
|
|
Continuing
operations
|
$
(.09)
|
$
(.13)
|
|
Discontinued
operations
|
-
|
-
|
|
Basic
and diluted loss per common share
|
$
(.09)
|
$
(.13)
|
|
|
|
|
|
(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) On
July 6, 2010, we terminated the subleases for the hotels that we lease
from Hospitality Properties Trust ("HPT"). As a result of the
transaction, we now record the gross hotel revenues and expenses of
these hotels as opposed to rental income earned under the subleases;
however, we are still subject to the rental expense due to HPT.
Therefore, other revenue for the first quarter of 2011 includes
$45 million related to these properties (which represents the
associated hotel sales) compared to $18 million in the first quarter of
2010 (which represents the associated rental income). Similarly, other
property-level expenses for the first quarter of 2011 includes $51
million related to these properties (which represents property-level
expenses, as well as the rental expense due to HPT) compared to $18
million of rental expense in the first quarter of 2010.
|
|
(c)
Interest expense includes non-cash charges of $7 million and $8 million
related to the exchangeable debentures for 2011 and 2010, respectively.
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Earnings
per Common Share
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
Quarter
ended
|
|
|
March
25,
|
March
26,
|
|
|
2011
|
2010
|
|
|
|
|
|
Net
loss
|
$
(60)
|
$
(84)
|
|
Net
loss attributable to non-controlling interests
|
-
|
-
|
|
Dividends
on preferred stock
|
-
|
(2)
|
|
Loss
available to common stockholders
|
(60)
|
(86)
|
|
Diluted
loss available to common stockholders
|
$
(60)
|
$
(86)
|
|
|
|
|
|
Basic
and diluted weighted average shares outstanding (a)
|
677.3
|
648.1
|
|
Basic
and diluted loss per share (b)
|
$
(.09)
|
$
(.13)
|
|
|
|
|
|
(a)
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.
|
|
(b)
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.
|
|
|
|
|
HOST HOTELS & RESORTS, INC.
|
|
Comparable
Hotel Operating Data
|
|
(unaudited)
|
|
|
|
Comparable
Hotels by Region (a)
|
|
|
|
|
As of
March 25, 2011
|
Quarter
ended March 25, 2011
|
Quarter
ended March 26, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Pacific
|
26
|
14,581
|
$
174.06
|
70.6%
|
$122.94
|
$
160.65
|
65.8%
|
$105.75
|
16.3%
|
|
Mid-Atlantic
|
10
|
8,328
|
201.87
|
64.6
|
130.43
|
191.93
|
70.9
|
136.00
|
(4.1)
|
|
South Central
|
9
|
5,687
|
153.30
|
73.0
|
111.86
|
147.86
|
71.1
|
105.09
|
6.4
|
|
Florida
|
9
|
5,677
|
207.25
|
79.5
|
164.69
|
208.08
|
76.9
|
160.01
|
2.9
|
|
DC
Metro
|
12
|
5,416
|
192.90
|
63.8
|
123.07
|
185.75
|
65.1
|
121.01
|
1.7
|
|
North Central
|
12
|
5,337
|
118.68
|
52.1
|
61.84
|
112.35
|
53.3
|
59.88
|
3.3
|
|
Atlanta
|
8
|
4,246
|
153.92
|
65.6
|
101.05
|
153.71
|
66.2
|
101.78
|
(0.7)
|
|
New
England
|
7
|
3,924
|
145.55
|
52.1
|
75.82
|
140.28
|
50.8
|
71.28
|
6.4
|
|
Mountain
|
7
|
2,889
|
180.06
|
63.9
|
115.07
|
164.60
|
65.2
|
107.30
|
7.2
|
|
International
|
7
|
2,473
|
166.26
|
62.0
|
103.04
|
146.05
|
63.5
|
92.81
|
11.0
|
|
All Regions
|
107
|
58,558
|
174.34
|
66.4
|
115.79
|
166.43
|
66.0
|
109.85
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
Hotels by Property Type (a)
|
|
|
As of
March 25, 2011
|
Quarter
ended March 25, 2011
|
Quarter
ended March 26, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
Urban
|
51
|
32,556
|
$
181.18
|
65.2%
|
$118.05
|
$
173.00
|
65.8%
|
$113.85
|
3.7%
|
|
Suburban
|
29
|
10,964
|
144.50
|
63.7
|
91.97
|
136.16
|
63.2
|
86.08
|
6.8
|
|
Resort/Conference
|
13
|
8,082
|
232.85
|
73.2
|
170.53
|
226.29
|
69.4
|
156.97
|
8.6
|
|
Airport
|
14
|
6,956
|
122.70
|
68.9
|
84.59
|
117.06
|
67.6
|
79.10
|
6.9
|
|
All Types
|
107
|
58,558
|
174.34
|
66.4
|
115.79
|
166.43
|
66.0
|
109.85
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
25,
|
March
26,
|
|
|
2011
|
2010
|
|
|
|
|
|
Number
of hotels
|
107
|
107
|
|
Number
of rooms
|
58,558
|
58,558
|
|
Percent
change in comparable hotel RevPAR
|
5.4%
|
-
|
|
Operating
profit margin under GAAP (b)
|
(0.3)%
|
(0.2)%
|
|
Comparable
hotel adjusted operating profit margin (b)
|
19.4%
|
19.5%
|
|
|
|
|
|
Comparable
hotel sales
|
|
|
|
Room
|
$
505
|
$
479
|
|
Food
and beverage
|
268
|
254
|
|
Other
|
53
|
56
|
|
Comparable
hotel sales (c)
|
826
|
789
|
|
Comparable
hotel expenses
|
|
|
|
Room
|
144
|
136
|
|
Food
and beverage
|
198
|
186
|
|
Other
|
30
|
30
|
|
Management
fees, ground rent and other costs
|
294
|
283
|
|
Comparable
hotel expenses (d)
|
666
|
635
|
|
Comparable
hotel adjusted operating profit
|
160
|
154
|
|
Non-comparable
hotel results, net (e)
|
9
|
4
|
|
Income
(loss) from hotels leased from HPT and office buildings
|
(6)
|
1
|
|
Depreciation
and amortization
|
(141)
|
(136)
|
|
Corporate
and other expenses
|
(25)
|
(25)
|
|
Operating
loss
|
$
(3)
|
$
(2)
|
|
|
|
|
|
(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 (loss) 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
|
|
|
March
25,
|
March
26,
|
|
|
2011
|
2010
|
|
|
|
Revenues
per the consolidated statements of operations
|
$
903
|
$
823
|
|
|
|
Non-comparable
hotel sales
|
(44)
|
(23)
|
|
|
|
Hotel
sales for the property for which we record rental income, net
|
13
|
13
|
|
|
|
Revenues
for hotels leased from HPT and office buildings
|
(46)
|
(19)
|
|
|
|
Adjustment
for hotel sales for comparable hotels to reflect Marriott’s fiscal year
for Marriott-managed hotels
|
-
|
(5)
|
|
|
|
Comparable
hotel sales
|
$
826
|
$
789
|
|
|
|
|
|
|
|
(d)
The reconciliation of operating costs per the consolidated
statements of operations to the comparable hotel expenses is as
follows:
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
March
25,
|
March
26,
|
|
|
2011
|
2010
|
|
|
|
Operating
costs and expenses per the consolidated statements of operations
|
$
906
|
$
825
|
|
|
|
Non-comparable
hotel expenses
|
(35)
|
(19)
|
|
|
|
Hotel
expenses for the property for which we record rental income
|
13
|
13
|
|
|
|
Expense
for hotels leased from HPT and office buildings
|
(52)
|
(18)
|
|
|
|
Adjustment
for hotel expenses for comparable hotels to reflect Marriott’s fiscal
year for Marriott-managed hotels
|
-
|
(5)
|
|
|
|
Depreciation
and amortization
|
(141)
|
(136)
|
|
|
|
Corporate
and other expenses
|
(25)
|
(25)
|
|
|
|
Comparable
hotel expenses
|
$
666
|
$
635
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Other
Financial and Operating Data
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
March
25,
|
December
31,
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common
shares outstanding
|
682.5
|
675.6
|
|
Common
shares outstanding assuming conversion of non-controlling interest OP
Units (a)
|
693.4
|
686.3
|
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
|
|
|
|
Security
pricing
|
|
|
|
|
|
Common
(b)
|
$
17.71
|
$
17.87
|
|
3 1/4%
Exchangeable Senior Debentures (c)
|
$
1,143.5
|
$
1,179.4
|
|
2 5/8%
Exchangeable Senior Debentures (c)
|
$
1,006.4
|
$
991.9
|
|
2 1/2%
Exchangeable Senior Debentures (c)
|
$
1,407.3
|
$
1,416.6
|
|
|
|
|
|
|
|
Dividends
declared per share for calendar year
|
|
|
|
Common
(d)
|
|
|
$
.02
|
$
.04
|
|
Class
E Preferred (e)
|
|
|
$
-
|
$
.95
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
Senior
notes
|
Rate
|
Maturity
date
|
|
|
|
Series
K
|
7 1/8%
|
11/2013
|
$
250
|
$
250
|
|
Series
O
|
6 3/8%
|
3/2015
|
650
|
650
|
|
Series
Q
|
6 3/4%
|
6/2016
|
800
|
800
|
|
Series
S
|
6 7/8%
|
11/2014
|
498
|
498
|
|
Series
T
|
9%
|
5/2017
|
389
|
388
|
|
Series
V (f)
|
6%
|
11/2020
|
500
|
500
|
|
Exchangeable
senior debentures (g)
|
3 1/4%
|
4/2024
|
325
|
325
|
|
Exchangeable
senior debentures (g)
|
2 5/8%
|
4/2027
|
506
|
502
|
|
Exchangeable
senior debentures (g)
|
2 1/2%
|
10/2029
|
332
|
329
|
|
Senior
notes
|
10%
|
5/2012
|
7
|
7
|
|
Credit
facility (h)
|
1.9%
|
9/2011
|
162
|
58
|
|
|
|
|
4,419
|
4,307
|
|
Mortgage
debt and other
|
|
|
|
|
|
Mortgage
debt (non-recourse) (i)
|
1.9-8.5%
|
1/2012-12/2023
|
973
|
1,025
|
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
146
|
145
|
|
Total
debt (j)(k)
|
|
|
$
5,538
|
$
5,477
|
|
|
|
|
|
|
|
Percentage
of fixed rate debt
|
|
|
88%
|
90%
|
|
Weighted
average interest rate
|
|
|
6.1%
|
6.2%
|
|
Weighted
average debt maturity
|
|
|
4.2
years
|
4.4
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
25,
|
March
26,
|
|
|
|
|
2011
|
2010
|
|
Hotel
Operating Statistics for All Properties (l)
|
|
|
|
|
|
Average
daily rate
|
|
|
$
176.16
|
$
166.59
|
|
Average
occupancy
|
|
|
66.2%
|
65.4%
|
|
RevPAR
|
|
|
$
116.61
|
$
108.97
|
|
|
|
|
|
|
|
(a)
Each OP Unit is redeemable for cash or, at the option of the
Company, 1.021494 common shares of Host. At March 25, 2011 and December
31, 2010, there were 10.7 million and 10.5 million common OP Units,
respectively, held by non-controlling interests that were redeemable
into 10.9 million and 10.7 million shares, respectively, of Host common
stock.
|
|
(b)
Share prices are the closing price as reported by the New York
Stock Exchange.
|
|
(c)
Amount reflects market price of a single $1,000 debenture as
quoted by Bloomberg L.P.
|
|
(d)
On March 17, 2011, the Company declared a first quarter common
cash dividend of $0.02 per share.
|
|
(e)
On June 18, 2010, the Company redeemed its 8 7/8% Class E
cumulative redeemable preferred stock at a redemption price of $25.00
per share, plus accrued dividends.
|
|
(f)
The 6% Series U senior notes issued on October 25, 2010 were
exchanged for 6% Series V senior notes in February 2011. The terms were
substantially identical, except the new series of notes were issued in
a registered offering under the Securities Act of 1933 and are,
therefore, freely transferable by the holders.
|
|
(g)
The principal balance of the Exchangeable senior debentures is
$1,251 million. The principal balance outstanding of the 2 5/8%
Exchangeable Senior Debentures due 2027 (the "2007 Debentures") and the
2 1/2% Exchangeable Senior Debentures due 2029 (the "2009 Debentures")
is $526 million and $400 million, respectively. The discounts related
to these exchangeable debentures are amortized through the first date
at which the holders can require Host to repurchase the exchangeable
debentures for cash (April 2012 for the 2007 Debentures and October
2015 for the 2009 Debentures). The discount related to the 3 1/4%
Exchangeable Senior Debentures due 2024 (the "2004 Debentures") has
been fully amortized as of December 31, 2010.
|
|
(h)
The interest rate shown is the weighted average rate of the
outstanding credit facility at March 25, 2011. At March 25, 2011, we
have $438 million of available capacity under the revolver portion of
the credit facility.
|
|
(i)
Mortgage debt is secured by real estate assets with an
undepreciated book value of $1.6 billion and has a weighted average
interest rate of 4.7% at both March 25, 2011 and December 31, 2010,
maturing through December 2023. The book value of the assets securing
mortgage debt does not represent the current fair value of the assets.
|
|
(j)
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 March 25, 2011, our
non-controlling partners’ share of consolidated debt is $67 million and
our share of debt in unconsolidated investments is $319 million.
|
|
(k)
Total debt as of March 25, 2011 and December 31, 2010 includes
net discounts of $89 million and $95 million, respectively.
|
|
(l)
The operating statistics reflect all consolidated properties as
of March 25, 2011 and March 26, 2010, respectively. The operating
statistics include the results of operations through their date of
disposition for two properties disposed of in 2010.
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Reconciliation
of Net Loss to EBITDA, Adjusted EBITDA
|
|
and
Funds From Operations per Diluted Share
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
25,
|
March
26,
|
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
(60)
|
$
(84)
|
|
|
|
Interest
expense
|
82
|
96
|
|
|
|
Depreciation
and amortization
|
141
|
136
|
|
|
|
Income
taxes
|
(20)
|
(22)
|
|
|
|
EBITDA
|
143
|
126
|
|
|
|
Acquisition
costs
|
3
|
-
|
|
|
|
Amortization
of deferred gains
|
(1)
|
-
|
|
|
|
Equity
investment adjustments:
|
|
|
|
|
|
Equity
in losses of affiliates
|
2
|
5
|
|
|
|
Pro
rata EBITDA of equity investments
|
2
|
-
|
|
|
|
Consolidated
partnership adjustments:
|
|
|
|
|
|
Pro
rata EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(5)
|
(5)
|
|
|
|
Adjusted
EBITDA
|
$
144
|
$
126
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
March
25,
|
March
26,
|
|
|
|
|
2011
|
2010
|
|
|
|
Net
loss
|
$
(60)
|
$
(84)
|
|
|
Less:
Dividends on preferred stock
|
-
|
(2)
|
|
|
|
Net
loss available to common stockholders
|
(60)
|
(86)
|
|
|
|
Adjustments:
|
|
|
|
|
|
Amortization
of deferred gains and other property transactions, net of taxes
|
(1)
|
-
|
|
|
|
Depreciation
and amortization
|
141
|
137
|
|
|
|
Partnership
adjustments
|
(2)
|
(1)
|
|
|
|
FFO of
non-controlling interests of Host LP
|
(1)
|
(1)
|
|
|
|
Funds
From Operations
|
$
77
|
$
49
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
677.3
|
648.1
|
|
|
|
Assuming
issuance of common shares granted under the Comprehensive Stock Plan
|
1.7
|
0.6
|
|
|
|
Diluted
weighted average shares outstanding-FFO (a)(b)
|
679.0
|
648.7
|
|
|
|
FFO
per diluted share (a)(b)
|
$
.11
|
$
.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Earnings/loss per diluted share and FFO per diluted share are
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.
|
|
(b)
FFO per diluted share and earnings per diluted share were
affected by certain transactions, the effects of which are shown in the
table below (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Quarter
ended
|
|
|
|
March
25, 2011
|
March
26, 2010
|
|
|
|
Net
Income
|
|
Net
Income
|
|
|
|
|
(Loss)
|
FFO
|
(Loss)
|
FFO
|
|
|
|
|
|
|
|
|
|
Potential
loss on litigation (1)
|
$
-
|
$
-
|
$
(4)
|
$
(4)
|
|
|
Loss
on debt extinguishments (2)
|
-
|
-
|
(8)
|
(8)
|
|
|
Acquisition
costs (3)
|
(3)
|
(3)
|
-
|
-
|
|
|
Dilutive
effect of 2004 Debentures (4)
|
-
|
(2)
|
-
|
-
|
|
|
Loss
attributable to non-controlling interests (5)
|
-
|
-
|
1
|
1
|
|
|
Total
|
$
(3)
|
$
(5)
|
$
(11)
|
$
(11)
|
|
|
Diluted
shares (6)
|
677.3
|
700.2
|
648.1
|
648.7
|
|
|
Per
diluted share
|
$
(.01)
|
$
(.01)
|
$
(.01)
|
$ (.01)
|
|
|
|
|
|
|
|
|
(1)
Includes the accrual of a potential litigation loss in the first
quarter of 2010.
(2)
Represents costs a ssociated
with the redemption of the Series M Senior Notes.
(3)
Represents costs incurred related to successful acquisitions.
Previously, these costs would have been capitalized; however, under
accounting requirements effective January 1, 2009, these costs are
expensed in the period in which they are incurred.
(4)
Represents dilutive effect, if applicable, of the 2004 Debentures
after the effects of the significant items described above.
(5)
Represents the portion of the significant items attributable to
non-controlling partners in Host LP.
(6)
The first quarter 2011 includes 21.2 million shares for the
dilutive effect of the 2004 Debentures.
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Reconciliation
of Net Loss to EBITDA, Adjusted EBITDA and
|
|
Funds
From Operations per Diluted Share
|
|
for
Full Year 2011 Forecasts (a)
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
Net
income
|
$
8
|
$
42
|
|
Interest
expense
|
364
|
364
|
|
Depreciation
and amortization
|
625
|
625
|
|
Income
taxes
|
-
|
1
|
|
EBITDA
|
997
|
1,032
|
|
Acquisition
costs
|
4
|
4
|
|
Equity
investment adjustments:
|
|
|
|
Equity
in earnings of affiliates
|
(5)
|
(5)
|
|
Pro
rata Adjusted EBITDA of equity investments
|
31
|
31
|
|
Consolidated
partnership adjustments:
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(17)
|
(17)
|
|
Adjusted
EBITDA
|
$
1,010
|
$
1,045
|
|
|
|
|
|
|
Full
Year 2011 Forecast
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
Net
income
|
$
8
|
$
42
|
|
Less:
Net income attributable to non-controlling interests
|
(3)
|
(3)
|
|
Net
income available to common stockholders
|
5
|
39
|
|
Adjustments:
|
|
|
|
Depreciation
and amortization
|
624
|
624
|
|
Partnership
adjustments
|
6
|
6
|
|
FFO of
non-controlling interests of Host LP
|
(10)
|
(10)
|
|
Funds
From Operations
|
625
|
659
|
|
Adjustment
for dilutive securities:
|
|
|
|
Assuming
conversion of exchangeable senior debentures
|
32
|
32
|
|
Diluted
FFO
|
$
657
|
$
691
|
|
|
|
|
|
Weighted
average diluted shares - (EPS)
|
696.4
|
696.4
|
|
Weighted
average diluted shares- (FFO) (b)
|
744.3
|
744.3
|
|
Income
per diluted share
|
$
.01
|
$
.06
|
|
FFO
per diluted share
|
$
.88
|
$
.93
|
|
|
|
|
|
(a)
The full year 2011 forecasts were based on the below assumptions:
|
|
-
Comparable hotel RevPAR will increase 6% to 8% for the low and
high ends of the forecasted range, respectively.
|
|
-
Comparable hotel adjusted operating profit margins will increase
100 basis points to 140 basis points for the low and high ends of the
forecasted range, respectively.
|
|
-
We expect to complete acquisitions of $150 billion in the second
quarter.
|
|
-
We expect to spend approximately $230 million to $250 million on
ROI capital expenditures.
|
|
-
Costs associated with debt extinguishments and acquisition costs
will decrease earnings and FFO per share by $.02.
|
|
-
Interest expense includes approximately $45 million related to
non-cash interest expense for exchangeable senior debentures,
amortization of original issue discounts and deferred financing fees.
|
|
-
We expect to spend approximately $300 million to $325 million on
renewal and replacement expenditures in 2011.
|
|
Effective
January 1, 2011, the Company has modified its definition of Adjusted
EBITDA to exclude pursuit costs for completed acquisitions, and, as a
result, they no longer have an effect on Adjusted EBITDA, but continue
to be a deduction to FFO. For a discussion of additional items that may
affect forecasted results see Notes to the Financial Information.
|
|
(b)
The full year 2011 forecast FFO per diluted share includes 45.2
million shares for the dilution of the 2004 and 2009 Exchangeable
Senior Debentures.
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
Schedule
of Comparable Hotel Adjusted Operating Profit Margin
|
|
for
Full Year 2011 Forecasts (a)
|
|
(unaudited,
in millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
|
Operating
profit margin under GAAP (b)
|
7.1%
|
7.6%
|
|
Comparable
hotel adjusted operating profit margin (c)
|
22.4%
|
22.8%
|
|
|
|
|
|
Comparable
hotel sales
|
|
|
|
Room
|
$
2,712
|
$
2,763
|
|
Other
|
1,596
|
1,620
|
|
Comparable
hotel sales (d)
|
4,308
|
4,383
|
|
Comparable
hotel expenses
|
|
|
|
Rooms
and other departmental costs
|
1,866
|
1,901
|
|
Management
fees, ground rent and other costs
|
1,477
|
1,484
|
|
Comparable
hotel expenses (e)
|
3,343
|
3,385
|
|
Comparable
hotel adjusted operating profit
|
965
|
998
|
|
Non-comparable
hotel results, net
|
118
|
120
|
|
Hotels
leased from HPT and office buildings, net
|
(10)
|
(10)
|
|
Depreciation
and amortization
|
(625)
|
(625)
|
|
Corporate
and other expenses
|
(99)
|
(99)
|
|
Operating
profit
|
$
349
|
$
384
|
|
|
|
|
|
|
(a)
Forecasted comparable hotel results include 105 hotels that we
have assumed will be classified as comparable as of December 31, 2011.
No assurances can be made as to the hotels that will be in the
comparable hotel set for 2011. Also, see the notes to the
"Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Funds From
Operations per Diluted Share For Full Year 2011 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.
|
|
(d)
The reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions):
|
|
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
|
|
Revenues
|
$
4,946
|
$
5,031
|
|
|
Non-comparable
hotel sales
|
(470)
|
(480)
|
|
|
Revenues
for hotels leased from HPT and office buildings
|
(219)
|
(219)
|
|
|
Hotel
sales for the property for which we record rental income, net
|
51
|
51
|
|
|
Comparable
hotel sales
|
$
4,308
|
$
4,383
|
|
|
|
|
|
|
(e)
The reconciliation of forecast operating costs and expenses to
the comparable hotel expenses is as follows (in millions):
|
|
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
|
|
Operating
costs and expenses
|
$
4,597
|
$
4,647
|
|
|
Non-comparable
hotel and other expenses
|
(352)
|
(360)
|
|
|
Expenses
for hotels leased from HPT and office buildings
|
(229)
|
(229)
|
|
|
Hotel
expenses for the property for which we record rental income
|
51
|
51
|
|
|
Depreciation
and amortization
|
(625)
|
(625)
|
|
|
Corporate
and other expenses
|
(99)
|
(99)
|
|
|
Comparable
hotel expenses
|
$
3,343
|
$
3,385
|
|
|
|
|
|
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
FORECASTS
Our forecast of earnings per diluted share, FFO, 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 not be materially different. Risks that may affect these
assumptions and forecasts include the following: potential changes in
overall economic outlook make it inherently difficult to forecast the
level of RevPAR and margin growth; 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 amount and timing of transactions involving 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
annual report on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K filed 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. (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 first quarter of 2011 ended on
March 25, and the first quarter of 2010 ended on March 26. As
a result, the first quarter of 2011 included 84 days of operations,
while the first quarter of 2010 included 85 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 42% 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 will typically 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 2011 reflect 12
weeks of operations for the period from January 1, 2011 to
March 25, 2011 for our Marriott-managed hotels and results from
January 1, 2011 to February 28, 2011 for operations of all
other hotels which report results on a monthly basis.
- Hotel results for the first quarter of 2010 reflect 12
weeks of operations for the period from January 2, 2010 to
March 26, 2010 for our Marriott-managed hotels and results from
January 1, 2010 to February 28, 2010 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 associated margins) 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. Of the 122 hotels that we owned
on March 25, 2011, 107 have been classified as comparable hotels.
The operating results of the following hotels that we owned or leased
as of March 25, 2011 are excluded from comparable hotel results
for these periods:
- New York Helmsley Hotel (acquired in March
2011);
- Manchester Grand Hyatt San Diego (acquired in March 2011);
- The portfolio of seven hotels in New
Zealand (acquired in February 2011);
- JW Marriott, Rio de Janeiro
(acquired in September 2010);
- W New York, Union Square
(acquired in September 2010);
- Westin Chicago River North (acquired in August 2010);
- Le Meridien Piccadilly (acquired leasehold interest in July 2010);
- Sheraton Indianapolis Hotel & Suites (business
interruption due to significant renovations); and
- San Diego Marriott Marquis & Marina (business
interruption due to significant renovations).
The operating results of the two hotels we disposed of during
2010, as well as the 53 Courtyard by Marriott properties leased from
HPT, are 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 and 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 and FFO per Diluted Share
We present FFO and FFO per diluted share as non-GAAP measures
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, as adjusted for the effect of dilutive securities, divided by
the number of fully diluted shares outstanding during such period.
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.
- Acquisition Costs – Effective January 1, 2009, the
accounting treatment under GAAP for costs associated with completed
property acquisitions changed and these costs are now expensed in the
year incurred as opposed to capitalized as part of the acquisition.
Beginning in 2011, we have excluded the effect of these costs because
we believe it is not reflective of the ongoing performance of our
properties. This is consistent with the EBITDA calculation under the
prior GAAP accounting treatment which expensed these costs over time as
part of depreciation expense, which is 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.
|