BETHESDA, Md., Oct. 10, 2012 -- Host Hotels &
Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate
investment trust ("REIT"), today announced results of operations for
the third quarter ended September 7, 2012.
Operating Results
(in millions, except per share and hotel statistics)
|
Quarter
ended
|
|
Year-to-date ended
|
|
|
September
7,
|
September
9,
|
Percent
|
September
7,
|
September
9,
|
Percent
|
|
2012
|
2011
|
Change
|
2012
|
2011
|
Change
|
Total
revenues
|
$ 1,204
|
$ 1,131
|
6.5%
|
$ 3,555
|
$ 3,306
|
7.5%
|
Comparable
hotel revenues*
|
1,010
|
947
|
6.7%
|
2,999
|
2,821
|
6.3%
|
Comparable
hotel RevPAR
|
142.82
|
132.75
|
7.6%
|
141.34
|
132.43
|
6.7%
|
Net
income (loss)
|
(36)
|
(35)
|
(2.9)%
|
48
|
(32)
|
N/M
|
Adjusted
EBITDA*
|
241
|
212
|
13.7%
|
764
|
669
|
14.2%
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
$ (.05)
|
$ (.05)
|
—
|
$ .06
|
$ (.05)
|
N/M
|
NAREIT
FFO per diluted share*
|
.17
|
.16
|
6.3%
|
.64
|
.58
|
10.3%
|
Adjusted
FFO per diluted share*
|
.21
|
.16
|
31.3%
|
.69
|
.60
|
15.0%
|
N/M=Not Meaningful
* NAREIT Funds From Operations ("FFO") per diluted share,
Adjusted FFO per diluted share (which excludes debt extinguishment
costs and other expenses), Adjusted EBITDA (which is earnings before
interest, taxes, depreciation, amortization and other items) and
comparable hotel operating results (including comparable hotel revenues
and comparable hotel adjusted operating profit margins) are non-GAAP
(U.S. 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
on why the Company believes these supplemental measures are useful,
reconciliations to the applicable GAAP measure and the limitations on
their use.
The increase in total revenues for the third quarter and
year-to-date 2012 reflect the improved performance of the Company's
owned hotels as comparable hotel RevPAR increased 7.6% and 6.7% and
comparable food and beverage revenues increased 4.5% and 5.4% for the
third quarter and year-to-date, respectively. In addition, year-to-date
2012 revenues benefited from the results of the ten hotels (nearly
4,000 rooms) that were acquired during 2011 and the acquisition of the
Grand Hyatt Washington, D.C. on July
16, 2012. These acquisitions increased revenues by an incremental $61
million year-to-date.
The increase in comparable hotel RevPAR was primarily driven
by improvements in average room rates coupled with continued occupancy
growth. For the third quarter and year-to-date, average room rates
improved 4.7% and 3.9%, respectively, while occupancy improved 2.1
percentage points to 78.4% and 2.0 percentage points to 75.4%,
respectively. The improvements in revenues led to strong margin growth
as comparable hotel adjusted operating profit margins increased 285
basis points and 170 basis points for the third quarter and
year-to-date 2012, respectively.
Investments
- Redevelopment and Return on Investment Expenditures -
The Company invested approximately $24
million and $122 million in the third quarter and year-to-date
2012, respectively, in redevelopment and return on investment ("ROI")
expenditures. 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. Three properties
where we recently completed extensive redevelopment work, the Atlanta
Marriott Perimeter Center, the Chicago Marriott O'Hare and the Sheraton
Indianapolis, have performed exceptionally well. On average, RevPAR
increased 38% for both the quarter and year-to-date 2012 when compared
to the pre-construction period in 2010. Due to the significant capital
expenditures affecting nearly every aspect of these properties
including, in the case of the Sheraton Indianapolis, the conversion of
one hotel tower into apartments, these properties are excluded from our
comparable results. The Company expects investment in ROI expenditures
for 2012 will total approximately $165 million to $175 million.
- Acquisition Expenditures – In conjunction
with the acquisition of a property, the Company prepares capital and
operational improvement plans designed to maximize profitability and
enhance the guest experience. On October 1, 2012,
the Company converted the former New York Helmsley Hotel (which was
acquired in March 2011) to the Westin New York Grand Central, with the
grand opening scheduled later this month. The hotel is only the second
Westin-branded property in the city and the conversion included a
complete renovation of all 774 guest rooms, the ballroom and meeting
space, fitness center, lobby and public areas, as well as the
development of a new bar and restaurant. The Company spent
approximately $25 million and $89 million on acquisition projects in
the third quarter and year-to-date, respectively, and expects to invest
between $125 million and $135 million for 2012.
- Renewal and Replacement Expenditures - The
Company invested approximately $66 million and $245 million in renewal
and replacement expenditures during the third quarter and year-to-date
2012, respectively. These expenditures are designed to ensure that the
high-quality standards of both the Company and its operators are
maintained. During the quarter, we completed the renovation of the 834
rooms at the Hyatt Regency Washington and 45,000 square feet of meeting
space at the New York Marriott Marquis. The Company expects that
renewal and replacement expenditures for 2012 will total approximately
$330 million to $340 million.
Value Enhancement Projects
In addition to the investments described above, the Company
looks to enhance the value of its portfolio by identifying and
executing strategies designed to maximize the highest and best use of
all aspects of its properties. On July 30, 2012,
the Company leased the retail and signage components of the New York
Marriott Marquis Times Square to Vornado Realty Trust ("Vornado").
Vornado will redevelop and expand the existing retail space, including
converting the below-grade parking garage into high-end retail space
and creating six-story, block front, LED signage spanning over 300
linear feet at an estimated cost of $140 million. As a result of the
agreement, the annual base rental income is now well in excess of the
previous rental income for the leased space. Furthermore, once Vornado
completes the planned redevelopment, the Company has the potential to
realize significant additional incentive rental income. The lease has a
20-year term with options that, upon exercise, would require title to
the retail space to be conveyed to Vornado for a sales price based on
future cash flows in the year of sale.
Balance Sheet
The Company continued to execute its strategy of extending its
debt maturities and lowering its overall cost of debt. Year-to-date,
the Company has issued $1.5 billion of
debt, with a weighted average interest rate of 3.7%, and used the
proceeds, along with available cash, to repay $1.8
billion of debt with a weighted average interest rate of 6.6%. As a
result of these transactions, the Company has decreased its weighted
average interest rate by approximately 80 basis points, to 5.5%, and
lengthened its weighted average debt maturity to 5.4 years.
During the quarter, the Company entered into a $500 million term loan through an amendment to
its credit facility. The term loan has a five-year maturity and a
floating interest rate of LIBOR plus 180 basis points, approximately
2.0%, based on the Company's leverage level at September
7, 2012. Additionally, the Company issued $450
million of 4¾% Series C senior notes due 2023 at the
lowest interest rate for senior notes in the Company's history. The
proceeds from these issuances were used to redeem the remaining $650 million of 6⅜% Series O senior notes due
2015 and $150 million of 6¾%
Series Q senior notes due 2016 and for general corporate purposes.
As of September 7, 2012, the
Company had $254 million of cash and cash equivalents and $751 million of available capacity under its
credit facility.
European Joint Venture
On July 26, 2012, the second
fund of the Company's joint venture in Europe
("Euro JV Fund II"), in which the Company holds a 33.4% interest,
acquired the 192-room Le Meridien Grand Hotel in Nuremberg, Germany, for approximately €30 million ($37
million). The Company contributed approximately €10 million ($13
million) to the Euro JV Fund II in connection with this acquisition.
Dividend
On September 17, 2012, the Company's board of directors
authorized a regular quarterly cash dividend of $.08
per share on its common stock. The dividend is payable on October 15,
2012 to stockholders of record on September 28, 2012. The amount of any
future dividend is dependent on the Company's taxable income and will
be determined by the Company's Board of Directors.
2012 Outlook
The Company anticipates that for 2012:
- Comparable hotel RevPAR will increase 6.25% to 7.0%;
- Total revenues under GAAP would increase 7.2% to 7.7%;
- Total comparable hotel revenues would increase 5.4% to
6.0%;
- Operating profit margins under GAAP would increase
approximately 160 basis points to 190 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 135 basis points to 150 basis points.
Based upon these parameters, the Company estimates that its
2012 guidance is as follows:
- earnings per diluted share should range from approximately $.15 to $.17;
- net income should range from $109 million to $126 million;
- NAREIT FFO per diluted share should be approximately $1.01 to $1.04;
- Adjusted FFO per diluted share should be approximately $1.06 to $1.09; and
- Adjusted EBITDA should be approximately $1,155 million to $1,175
million.
See the 2012 Forecast Schedules and Notes to Financial
Information for other assumptions used in the forecasts and items that
may affect forecasted results.
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 104 properties in the
United States and 16 properties internationally totaling
approximately 65,000 rooms. The Company also holds non-controlling
interests in a joint venture in Europe
that owns 14 hotels with approximately 4,400 rooms and a joint venture
in Asia that owns one hotel with
approximately 300 rooms in Australia
and a minority interest in seven hotels with approximately 1,750 rooms
in India, two in Bangalore and five that are in various
stages of development in two cities. 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®, Pullman®, 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; our ability to complete the term loan on the basis of
commitments currently received, which is subject to various closing
conditions, including the accuracy of representations and warranties;
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 October 10, 2012,
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 Inc.," 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 Inc. and
Host LP, the primary difference is approximately 1.4% of the
partnership interests in Host LP held by outside partners as of
September 7, 2012, which is non-controlling interests in Host LP in our
consolidated balance sheets and is included in net income 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 10‑K.
For information on our reporting periods and non-GAAP
financial measures (including Adjusted EBITDA, NAREIT and Adjusted 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.
Condensed
Consolidated Balance Sheets (a)
(in
millions, except shares and per share amounts)
|
|
September 7,
|
December
31,
|
|
2012
|
2011
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
Property
and equipment, net
|
$
11,731
|
$
11,383
|
Due
from managers
|
98
|
37
|
Advances
to and investments in affiliates
|
227
|
197
|
Deferred
financing costs, net
|
57
|
55
|
Furniture,
fixtures and equipment replacement fund
|
184
|
166
|
Other
|
456
|
368
|
Restricted
cash
|
35
|
36
|
Cash
and cash equivalents
|
254
|
826
|
Total
assets
|
$
13,042
|
$
13,068
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
Debt
|
|
|
Senior notes, including $528 million and $902 million, respectively,
net of
discount, of Exchangeable Senior Debentures
|
$ 3,666
|
$ 4,543
|
Credit facility, including the $500 million term loan
|
749
|
117
|
Mortgage debt
|
994
|
1,006
|
Other
|
86
|
87
|
Total
debt
|
5,495
|
5,753
|
Accounts
payable and accrued expenses
|
105
|
175
|
Other
|
341
|
269
|
Total
liabilities
|
5,941
|
6,197
|
|
|
|
Non-controlling
interests—Host Hotels & Resorts, L.P
|
167
|
158
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders' equity:
|
|
|
Common stock, par value $.01, 1,050 million shares authorized; 723.0
million
shares and 705.1 million shares issued and outstanding, respectively
|
7
|
7
|
Additional paid-in capital
|
8,008
|
7,750
|
Accumulated other comprehensive income (loss)
|
9
|
(1)
|
Deficit
|
(1,126)
|
(1,079)
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
6,898
|
6,677
|
Non-controlling
interests—other consolidated partnerships
|
36
|
36
|
Total
equity
|
6,934
|
6,713
|
Total
liabilities, non-controlling interests and equity
|
$
13,042
|
$
13,068
|
____________
|
|
(a)
|
Our
condensed consolidated balance sheet as of September 7, 2012 has been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted.
|
HOST
HOTELS & RESORTS, INC.
Condensed
Consolidated Statements of Operations (a)
(unaudited,
in millions, except per share amounts)
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Revenues
|
|
|
|
|
Rooms
|
$ 776
|
$ 724
|
$ 2,171
|
$ 2,012
|
Food
and beverage
|
295
|
283
|
989
|
925
|
Other
|
68
|
67
|
206
|
195
|
Owned
hotel revenues
|
1,139
|
1,074
|
3,366
|
3,132
|
Other
revenues
|
65
|
57
|
189
|
174
|
Total
revenues
|
1,204
|
1,131
|
3,555
|
3,306
|
Expenses
|
|
|
|
|
Rooms
|
216
|
204
|
594
|
555
|
Food
and beverage
|
244
|
234
|
738
|
698
|
Other
departmental and support expenses
|
305
|
301
|
871
|
841
|
Management fees
|
45
|
41
|
135
|
125
|
Other
property-level expenses
|
138
|
138
|
405
|
391
|
Depreciation and amortization
|
160
|
147
|
472
|
435
|
Corporate and other expenses
|
31
|
12
|
74
|
58
|
Total
operating costs and expenses
|
1,139
|
1,077
|
3,289
|
3,103
|
Operating
profit
|
65
|
54
|
266
|
203
|
Interest
income
|
4
|
5
|
11
|
15
|
Interest
expense (b)
|
(93)
|
(87)
|
(272)
|
(259)
|
Net
gains on property transactions and other
|
1
|
3
|
3
|
6
|
Loss
on foreign currency transactions and derivatives
|
(1)
|
(2)
|
(2)
|
—
|
Equity
in earnings (losses) of affiliates
|
(1)
|
(5)
|
2
|
(3)
|
Income
(loss) before income taxes
|
(25)
|
(32)
|
8
|
(38)
|
Benefit
(provision) for income taxes
|
(11)
|
(3)
|
(10)
|
9
|
Loss
from continuing operations
|
(36)
|
(35)
|
(2)
|
(29)
|
Income
(loss) from discontinued operations, net of tax
|
—
|
—
|
50
|
(3)
|
Net
income (loss)
|
(36)
|
(35)
|
48
|
(32)
|
Less:
Net (income) loss attributable to non-controlling
interests
|
2
|
2
|
(2)
|
—
|
Net
income (loss) attributable to Host Inc.
|
$ (34)
|
$ (33)
|
$ 46
|
$ (32)
|
Basic
and diluted earnings (loss) per common
share:
|
|
|
|
|
Continuing operations
|
$ (.05)
|
$ (.05)
|
$ (.01)
|
$ (.04)
|
Discontinued operations
|
—
|
—
|
.07
|
(.01)
|
Basic
and diluted earnings (loss) per common share
|
$ (.05)
|
$ (.05)
|
$ .06
|
$ (.05)
|
____________
|
(a)
|
Our
condensed 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)
|
Interest
expense includes the following items:
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Non-cash
interest for exchangeable debentures
|
$ 3
|
$ 7
|
$ 12
|
$ 22
|
Debt
extinguishment costs
|
14
|
4
|
27
|
8
|
Total
|
$ 17
|
$ 11
|
$ 39
|
$ 30
|
HOST
HOTELS & RESORTS, INC.
Earnings
(Loss) per Common Share
(unaudited,
in millions, except per share amounts)
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss)
|
$ (36)
|
$ (35)
|
$ 48
|
$ (32)
|
Net
(income) loss attributable to non-controlling
interests
|
2
|
2
|
(2)
|
—
|
Earnings
(loss) attributable to Host Inc
|
$ (34)
|
$ (33)
|
$ 46
|
$ (32)
|
Diluted
earnings (loss) attributable to Host Inc
|
$ (34)
|
$ (33)
|
$ 46
|
$ (32)
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
721.3
|
702.1
|
715.7
|
688.4
|
Diluted
weighted average common shares
outstanding (a)
|
721.3
|
702.1
|
715.7
|
688.4
|
Basic
and diluted earnings (loss) per common
share
|
$ (.05)
|
$ (.05)
|
$ .06
|
$ (.05)
|
____________
|
(a)
|
Dilutive
securities may include shares granted under comprehensive stock plans,
preferred operating partnership units ("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 were anti-dilutive for the period.
|
HOST
HOTELS & RESORTS, INC.
Comparable
Hotel Operating Data (a)
|
|
As of
September 7, 2012
|
Quarter ended September 7, 2012
|
Quarter ended September 9, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
Region
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Pacific
|
25
|
13,896
|
$
184.53
|
83.7%
|
$
154.42
|
$
172.83
|
82.3%
|
$
142.23
|
8.6%
|
Mid-Atlantic
|
11
|
8,634
|
234.91
|
86.5
|
203.22
|
230.63
|
82.4
|
190.05
|
6.9
|
South
Central
|
9
|
5,695
|
132.64
|
71.0
|
94.22
|
132.65
|
66.0
|
87.59
|
7.6
|
Florida
|
8
|
3,680
|
176.19
|
71.3
|
125.57
|
156.67
|
67.3
|
105.44
|
19.1
|
D.C.
Metro
|
12
|
5,416
|
177.00
|
76.5
|
135.34
|
174.81
|
77.9
|
136.13
|
(0.6)
|
North
Central
|
11
|
4,782
|
163.06
|
80.6
|
131.34
|
157.96
|
80.6
|
127.32
|
3.2
|
New
England
|
6
|
3,672
|
191.36
|
86.6
|
165.81
|
170.55
|
84.3
|
143.77
|
15.3
|
Atlanta
|
7
|
3,846
|
154.04
|
67.6
|
104.17
|
151.93
|
65.7
|
99.80
|
4.4
|
Mountain
|
7
|
2,885
|
129.88
|
64.7
|
84.03
|
129.30
|
63.8
|
82.45
|
1.9
|
Canada
|
4
|
1,643
|
167.12
|
69.6
|
116.36
|
166.70
|
66.2
|
110.40
|
5.4
|
Latin
America
|
4
|
1,075
|
230.02
|
69.5
|
159.96
|
197.66
|
66.3
|
130.97
|
22.1
|
All
Regions
|
104
|
55,224
|
182.06
|
78.4
|
142.82
|
173.92
|
76.3
|
132.75
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 7, 2012
|
Year-to-date
ended September 7, 2012
|
Year-to-date
ended September 9, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
Region
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Pacific
|
25
|
13,896
|
$
183.29
|
79.0%
|
$
144.72
|
$
173.54
|
77.1%
|
$
133.73
|
8.2%
|
Mid-Atlantic
|
11
|
8,634
|
235.07
|
80.5
|
189.24
|
229.03
|
76.4
|
174.92
|
8.2
|
South
Central
|
9
|
5,695
|
149.43
|
73.1
|
109.17
|
149.05
|
69.7
|
103.93
|
5.0
|
Florida
|
8
|
3,680
|
218.13
|
76.7
|
167.24
|
201.05
|
75.7
|
152.23
|
9.9
|
D.C.
Metro
|
12
|
5,416
|
193.39
|
74.5
|
144.08
|
193.97
|
75.2
|
145.95
|
(1.3)
|
North
Central
|
11
|
4,782
|
154.63
|
73.0
|
112.95
|
148.19
|
71.8
|
106.42
|
6.1
|
New
England
|
6
|
3,672
|
185.79
|
74.8
|
139.05
|
170.96
|
72.8
|
124.41
|
11.8
|
Atlanta
|
7
|
3,846
|
158.00
|
69.0
|
108.95
|
155.66
|
66.1
|
102.88
|
5.9
|
Mountain
|
7
|
2,885
|
161.67
|
67.1
|
108.48
|
158.47
|
66.2
|
104.95
|
3.4
|
Canada
|
4
|
1,643
|
167.66
|
67.2
|
112.61
|
167.87
|
67.4
|
113.08
|
(0.4)
|
Latin
America
|
4
|
1,075
|
232.78
|
71.0
|
165.33
|
208.94
|
68.8
|
143.74
|
15.0
|
All
Regions
|
104
|
55,224
|
187.48
|
75.4
|
141.34
|
180.41
|
73.4
|
132.43
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 7, 2012
|
Quarter
ended September 7, 2012
|
Quarter
ended September 9, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Property
Type
|
|
|
|
|
|
|
|
|
|
Urban
|
53
|
33,228
|
$
195.05
|
81.1%
|
$
158.17
|
$
186.91
|
79.1%
|
$
147.76
|
7.0%
|
Suburban
|
27
|
10,321
|
149.26
|
74.3
|
110.90
|
143.34
|
72.7
|
104.18
|
6.5
|
Resort/Conference
|
12
|
6,083
|
221.47
|
67.2
|
148.89
|
206.83
|
65.0
|
134.42
|
10.8
|
Airport
|
12
|
5,592
|
123.55
|
82.7
|
102.22
|
117.13
|
79.3
|
92.91
|
10.0
|
All
Types
|
104
|
55,224
|
182.06
|
78.4
|
142.82
|
173.92
|
76.3
|
132.75
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 7, 2012
|
Year-to-date
ended September 7, 2012
|
Year-to-date
ended September 9, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Property
Type
|
|
|
|
|
|
|
|
|
|
Urban
|
53
|
33,228
|
$
197.72
|
76.6%
|
$
151.47
|
$
190.99
|
74.5%
|
$
142.30
|
6.4%
|
Suburban
|
27
|
10,321
|
150.96
|
71.0
|
107.20
|
146.19
|
69.4
|
101.40
|
5.7
|
Resort/Conference
|
12
|
6,083
|
252.54
|
72.4
|
182.82
|
238.72
|
70.5
|
168.41
|
8.6
|
Airport
|
12
|
5,592
|
125.67
|
79.5
|
99.88
|
119.78
|
77.4
|
92.73
|
7.7
|
All
Types
|
104
|
55,224
|
187.48
|
75.4
|
141.34
|
180.41
|
73.4
|
132.43
|
6.7
|
____________
|
(a)
|
See
the Notes to Financial Information for a discussion of reporting
periods and comparable hotel results.
|
Hotel
Operating Statistics for All Properties (a)
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Average
room rate
|
$
180.52
|
$
171.84
|
$
185.76
|
$
178.24
|
Average
occupancy
|
77.5%
|
75.9%
|
74.9%
|
72.9%
|
RevPAR
|
$
139.97
|
$
130.43
|
$
139.13
|
$
129.94
|
____________
|
(a)
|
The
operating statistics reflect all consolidated properties as of
September 7, 2012 and September 9, 2011, respectively, and include the
results of operations of properties sold or transferred during the year
through the date of their disposition.
|
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
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Number
of hotels
|
104
|
104
|
104
|
104
|
Number
of rooms
|
55,224
|
55,224
|
55,224
|
55,224
|
Percent
change in comparable hotel RevPAR
|
7.6%
|
—
|
6.7%
|
—
|
Operating
profit margin under GAAP (b)
|
5.4%
|
4.8%
|
7.5%
|
6.1%
|
Comparable
hotel adjusted operating profit margin (b)
|
22.2%
|
19.35%
|
23.6%
|
21.9%
|
Comparable
hotel revenues
|
|
|
|
|
Room
|
$ 689
|
$ 640
|
$ 1,940
|
$ 1,814
|
Food
and beverage
|
260
|
248
|
877
|
832
|
Other
|
61
|
59
|
182
|
175
|
Comparable hotel revenues (c)
|
1,010
|
947
|
2,999
|
2,821
|
Comparable
hotel expenses
|
|
|
|
|
Room
|
190
|
179
|
526
|
498
|
Food
and beverage
|
216
|
207
|
659
|
631
|
Other
|
36
|
36
|
103
|
102
|
Management fees, ground rent and other costs
|
344
|
342
|
1,004
|
973
|
Comparable hotel expenses (d)
|
786
|
764
|
2,292
|
2,204
|
Comparable
hotel adjusted o perating profit
|
224
|
183
|
707
|
617
|
Non-comparable
hotel results, net (e)
|
30
|
31
|
105
|
86
|
Income
(loss) from hotels leased from HPT
|
2
|
(1)
|
—
|
(7)
|
Depreciation
and amortization
|
(160)
|
(147)
|
(472)
|
(435)
|
Corporate
and other expenses
|
(31)
|
(12)
|
(74)
|
(58)
|
Operating
profit
|
$ 65
|
$ 54
|
$ 266
|
$ 203
|
____________
|
(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 condensed consolidated statements of
operations. Comparable margins are calculated using amounts presented
in the above table.
|
(c)
|
The
reconciliation of total revenues per the condensed consolidated
statements of operations to the comparable hotel revenues is as follows:
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Revenues
per the consolidated statements of
operations
|
$ 1,204
|
$ 1,131
|
$ 3,555
|
$ 3,306
|
Non-comparable
hotel revenues
|
(147)
|
(142)
|
(430)
|
(371)
|
Hotel
revenues for which we record rental income,
net
|
11
|
11
|
37
|
36
|
Revenues
for hotels leased from HPT
|
(58)
|
(53)
|
(163)
|
(150)
|
Comparable hotel revenues
|
$ 1,010
|
$ 947
|
$ 2,999
|
$ 2,821
|
(d)
|
The
reconciliation of operating costs per the condensed consolidated
statements of operations to the comparable hotel expenses is as
follows:
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Operating
costs and expenses per the consolidated
statements of operations
|
$ 1,139
|
$ 1,077
|
$ 3,289
|
$ 3,103
|
Non-comparable
hotel expenses
|
(117)
|
(111)
|
(325)
|
(286)
|
Hotel
expenses for which we record rental income
|
11
|
11
|
37
|
37
|
Expense
for hotels leased from HPT
|
(56)
|
(54)
|
(163)
|
(157)
|
Depreciation
and amortization
|
(160)
|
(147)
|
(472)
|
(435)
|
Corporate
and other expenses
|
(31)
|
(12)
|
(74)
|
(58)
|
Comparable hotel expenses
|
$ 786
|
$ 764
|
$ 2,292
|
$ 2,204
|
(e)
|
Non-comparable
hotel results, net, includes the following items: (i) the results of
operations of our non-comparable hotels whose operations are included
in our condensed consolidated statements of operations as continuing
operations, (ii) gains on property insurance settlements, (iii) the
results of our office buildings and (iv) 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 Data
(unaudited,
in millions, except per share amounts)
|
|
September
7,
|
December
31,
|
|
2012
|
2011
|
Equity
|
|
|
Common
shares outstanding
|
723.0
|
705.1
|
Common
shares outstanding assuming conversion of non-controlling interest
OP
Units (a)
|
733.3
|
715.8
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
Security
pricing
|
|
|
Common
(b)
|
$ 16.30
|
$ 14.77
|
3 1/4%
Exchangeable Senior Debentures (c)
|
$
1,132.1
|
$
1,084.0
|
2 5/8%
Exchangeable Senior Debentures (c)
|
$
1,001.6
|
$
1,002.6
|
2 1/2%
Exchangeable Senior Debentures (c)
|
$
1,342.6
|
$
1,242.6
|
|
|
|
Dividends
declared per share for calendar year
|
|
|
Common
|
$ .21
|
$ .14
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
September
7,
|
December
31,
|
Senior
debt
|
Rate
|
Maturity
date
|
2012
|
2011
|
Series
O
|
6 3/8%
|
3/2015
|
$ —
|
$ 650
|
Series
Q
|
6 3/4%
|
6/2016
|
650
|
800
|
Series
S
|
6 7/8%
|
11/2014
|
—
|
498
|
Series
T
|
9%
|
5/2017
|
391
|
390
|
Series
V
|
6%
|
11/2020
|
500
|
500
|
Series
X
|
5 7/8%
|
6/2019
|
497
|
496
|
Series
Z (d)
|
6%
|
10/2021
|
300
|
300
|
Series
A (e)
|
5 1/4%
|
3/2022
|
350
|
—
|
Series
C
|
4 3/4%
|
3/2023
|
450
|
—
|
Exchangeable
senior debentures (f)
|
3 1/4%
|
4/2024
|
175
|
175
|
Exchangeable
senior debentures
|
2 5/8%
|
4/2027
|
2
|
385
|
Exchangeable
senior debentures (g)
|
2 1/2%
|
10/2029
|
351
|
342
|
Senior
notes
|
10%
|
5/2012
|
—
|
7
|
Credit
facility term loan
|
2.0%
|
7/2017
|
500
|
—
|
Credit
facility revolver (h)
|
2.7%
|
11/2015
|
249
|
117
|
|
|
|
4,415
|
4,660
|
Mortgage
debt and other
|
|
|
|
|
Mortgage
debt (non-recourse)
|
3.3-8.5%
|
7/2013-12/2023
|
994
|
1,006
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
86
|
87
|
Total
debt (i)(j)
|
|
|
$ 5,495
|
$ 5,753
|
|
|
|
|
|
Percentage
of fixed rate debt
|
78%
|
90%
|
Weighted
average interest rate
|
5.5%
|
6.3%
|
Weighted
average debt maturity
|
5.4
years
|
4.4
years
|
____________
|
(a)
|
Each
OP Unit is redeemable for cash or, at the option of the Company, for
1.021494 common shares of Host Inc. At September 7, 2012 and December
31, 2011, there were 10.0 million and 10.5 million common OP Units,
respectively, held by non-controlling interests.
|
(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)
|
The 6%
Series Y senior notes were exchanged for 6% Series Z senior notes in
June 2012.
|
(e)
|
The 5
1/4% Series A senior notes were exchanged for 5 1/4% Series B senior
notes in October 2012.
|
(f)
|
Holders
of the 3 1/4% Exchangeable Senior Debentures due 2024 (the "2004
Debentures") can require the Company to repurchase the exchangeable
debentures for cash in April 2014.
|
(g)
|
At
September 7, 2012, the principal balance outstanding of the 2 1/2%
Exchangeable Senior Debentures due 2029 (the "2009 Debentures") is $400
million. The discount related to these debentures is amortized through
October 2015, the first date at which holders can require the Company
to repurchase the 2009 Debentures for cash.
|
(h)
|
The
interest rate shown is the weighted average rate of the outstanding
credit facility at September 7, 2012.
|
(i)
|
In
accordance with GAAP, total debt includes the debt of entities that we
consolidate, but of which we do not own 100%, and excludes the debt of
entities that we do not consolidate, but of which we have a
non-controlling ownership interest and record our investment therein
under the equity method of accounting. As of September 7, 2012, our
non-controlling partners' share of consolidated debt is $67 million and
our share of debt in unconsolidated investments is $321 million.
|
(j)
|
Total
debt as of September 7, 2012 and December 31, 2011 includes net
discounts of $51 million and $63 million, respectively.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income (Loss) to
EBITDA
and Adjusted EBITDA
(unaudited,
in millions)
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss)
|
$ (36)
|
$ (35)
|
$ 48
|
$ (32)
|
Interest expense
|
93
|
87
|
272
|
259
|
Depreciation and amortization
|
160
|
147
|
472
|
435
|
Income taxes
|
11
|
3
|
10
|
(9)
|
Discontinued operations (a)
|
—
|
2
|
—
|
4
|
EBITDA
|
228
|
204
|
802
|
657
|
Gain
on dispositions (b)
|
—
|
—
|
(48)
|
—
|
Acquisition costs
|
6
|
—
|
6
|
4
|
Non-cash impairment charges
|
—
|
—
|
—
|
3
|
Amortization of deferred gains
|
(1)
|
(3)
|
(3)
|
(6)
|
Equity investment adjustments:
|
|
|
|
|
Equity in (earnings) losses of affiliates
|
1
|
5
|
(2)
|
3
|
Pro
rata Adjusted EBITDA of equity investments
|
9
|
8
|
21
|
19
|
Consolidated partnership adjustments:
|
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-
controlling partners in other consolidated
partnerships
|
(2)
|
(2)
|
(12)
|
(11)
|
Adjusted
EBITDA
|
$ 241
|
$ 212
|
$ 764
|
$ 669
|
____________
|
(a)
|
Reflects
the interest expense, depreciation and amortization and income taxes
included in discontinued operations.
|
(b)
|
Reflects
the gain recorded on the sale of the San Francisco Airport Marriott in
the first quarter 2012.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income (Loss) to
NAREIT
and Adjusted Funds From Operations per Diluted Share
(unaudited,
in millions, except per share amounts)
|
|
Quarter
ended
|
Year-to-date
ended
|
|
September
7,
|
September
9,
|
September
7,
|
September
9,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss)
|
$ (36)
|
$ (35)
|
$ 48
|
$ (32)
|
Less:
Net (income) loss attributable to non-controlling
interests
|
2
|
2
|
(2)
|
—
|
Net
income (loss) attributable to Host Inc
|
(34)
|
(33)
|
46
|
(32)
|
Adjustments:
|
|
|
|
|
Gain
on dispositions, net of taxes
|
—
|
—
|
(48)
|
—
|
Amortization of deferred gains and other property
transactions, net of taxes
|
(1)
|
(3)
|
(3)
|
(6)
|
Depreciation and amortization
|
160
|
149
|
471
|
439
|
Non-cash impairment charges
|
—
|
—
|
—
|
3
|
Partnership adjustments
|
3
|
1
|
7
|
4
|
FFO
of non-controlling interests of Host LP
|
(2)
|
(2)
|
(7)
|
(6)
|
NAREIT
FFO
|
126
|
112
|
466
|
402
|
Adjustments
to NAREIT FFO:
|
|
|
|
|
Loss
on debt extinguishments (a)
|
18
|
5
|
32
|
10
|
Acquisition costs
|
6
|
—
|
8
|
4
|
Loss
attributable to non-controlling interests (b)
|
—
|
—
|
(1)
|
—
|
Adjusted
FFO
|
$ 150
|
$ 117
|
$ 505
|
$ 416
|
|
|
|
|
|
For
calculation on a per diluted basis:
|
|
|
|
|
|
|
|
|
|
Adjustments
for dilutive securities (c):
|
|
|
|
|
Assuming conversion of Exchangeable Senior
Debentures
|
$ 1
|
$ 1
|
$ 21
|
$ 6
|
NAREIT
FFO
|
$ 127
|
$ 113
|
$ 487
|
$ 408
|
|
|
|
|
|
Adjustments
for dilutive securities (c):
|
|
|
|
|
Assuming conversion of Exchangeable Senior
Debentures
|
$ 7
|
$ 1
|
$ 21
|
$ 23
|
Adjusted
FFO
|
$ 157
|
$ 118
|
$ 526
|
$ 439
|
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
721.3
|
702.1
|
715.7
|
688.4
|
Assuming
issuance of common shares granted under
the
Comprehensive Stock Plan
|
1.1
|
1.5
|
1.2
|
1.6
|
Assuming conversion of Exchangeable Senior
Debentures
|
11.7
|
11.5
|
40.4
|
18.3
|
Diluted
weighted average shares outstanding –
NAREIT
FFO
|
734.1
|
715.1
|
757.3
|
708.3
|
Assuming conversion of Exchangeable Senior
Debentures
|
28.8
|
0.6
|
—
|
28.4
|
Diluted
weighted average shares outstanding –
Adjusted FFO
|
762.9
|
715.7
|
757.3
|
736.7
|
NAREIT
FFO per diluted share (c)
|
$ .17
|
$ .16
|
$ .64
|
$ .58
|
Adjusted
FFO per diluted share (c)
|
$ .21
|
$ .16
|
$ .69
|
$ .60
|
____________
|
(a)
|
Represents
costs primarily associated with the redemption of the Series S, O and Q
senior notes in 2012 and the Series K senior notes and 2007 Debentures
in 2011.
|
(b)
|
Represents
the portion of the adjustments to NAREIT FFO attributable to
non-controlling partners in Host LP.
|
(c)
|
Earnings/loss
per diluted share and NAREIT FFO and Adjusted 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 interests to common OP units. No effect is
shown for securities if they are anti-dilutive. For the periods
presented, NAREIT FFO and Adjusted FFO have been adjusted to reflect
the impact on our earnings of treating our outstanding exchangeable
debentures as having been exchanged for shares of Host Inc. common
stock at the beginning of the period presented.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and NAREIT and
Adjusted
Funds From Operations per Diluted Share for 2012 Forecasts (a)
(unaudited,
in millions, except per share amounts)
|
|
2012
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Net
income
|
$ 109
|
$ 126
|
Interest expense
|
372
|
372
|
Depreciation and amortization
|
687
|
687
|
Income taxes
|
20
|
23
|
Discontinued operations
|
2
|
2
|
EBITDA
|
1,190
|
1,210
|
Gain
on dispositions
|
(48)
|
(48)
|
Acquisition costs
|
6
|
6
|
Amortization of deferred gains
|
(5)
|
(5)
|
Equity investment adjustments:
|
|
|
Equity in earnings of affiliates
|
(4)
|
(4)
|
Pro
rata Adjusted EBITDA of equity investments
|
32
|
32
|
Consolidated partnership adjustments:
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(16)
|
(16)
|
Adjusted
EBITDA
|
$ 1,155
|
$ 1,175
|
|
|
|
|
2012
|
|
Low-end
of
range
|
High-end
of
range
|
Net
income
|
$ 109
|
$ 126
|
Less:
Net income attributable to non-controlling interests
|
(3)
|
(3)
|
Net
income attributable to Host Inc.
|
106
|
123
|
Adjustments:
|
|
|
Gain
on dispositions
|
(48)
|
(48)
|
Depreciation and amortization
|
685
|
685
|
Amortization of deferred gains
|
(5)
|
(5)
|
Partnership adjustments
|
13
|
14
|
FFO
of non-controlling interests of Host LP
|
(11)
|
(11)
|
NAREIT
FFO
|
740
|
758
|
Adjustments:
|
|
|
Acquisition costs
|
8
|
8
|
Loss
on debt extinguishments
|
32
|
32
|
Loss
attributable to non-controlling interests
|
(1)
|
(1)
|
Adjusted
FFO
|
779
|
797
|
Adjustment
for dilutive securities:
|
|
|
Assuming conversion of Exchangeable Senior Debentures
|
31
|
31
|
Diluted
Adjusted FFO
|
$ 810
|
$ 828
|
|
|
|
Weighted
average diluted shares – EPS
|
718.9
|
718.9
|
Weighted
average diluted shares – NAREIT and Adjusted FFO (b)
|
760.6
|
760.6
|
Earnings
per diluted share
|
$ .15
|
$ .17
|
NAREIT
FFO per diluted share
|
$ 1.01
|
$ 1.04
|
Adjusted
FFO per diluted share
|
$ 1.06
|
$ 1.09
|
____________
|
(a)
|
The
forecasts were based on the below assumptions:
|
-
|
Comparable hotel RevPAR will increase 6.25% to 7.0% for the low and
high ends of the forecasted range,
respectively.
|
-
|
Comparable hotel adjusted operating profit margins will increase 135
basis points to 150 basis points for
the
low and high ends of the forecasted range, respectively.
|
-
|
Interest expense includes approximately $33 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 $165 million to $175 million on
ROI/redevelopment capital expenditures,
approximately $125 million to $135 million on acquisition expenditures
and approximately $330 million to
$340
million on renewal and replacement expenditures.
|
-
|
We
expect to complete the sale of $300 million to $400 million of
properties during the fourth quarter.
However, due to uncertainty
around the completion and timing of these transactions, we have not
adjusted
the
forecast for any use of proceeds, gains on sale or adjusted the
number of comparable properties.
|
|
For a
discussion of additional items that may affect forecasted results, see
Notes to the Financial Information.
|
(b)
|
The
Adjusted FFO per diluted share includes 41 million shares for the
dilution of exchangeable senior debentures.
|
HOST
HOTELS & RESORTS, INC.
Schedule
of Comparable Hotel Adjusted Operating Profit Margin
for
2012 Forecasts (a)
(unaudited,
in millions, except hotel statistics)
|
|
2012
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Operating
profit margin under GAAP (b)
|
8.2%
|
8.5%
|
Comparable
hotel adjusted operating profit margin (c)
|
23.85%
|
24.0%
|
|
|
|
Comparable
hotel sales
|
|
|
Room
|
$ 2,858
|
$ 2,879
|
Other
|
1,590
|
1,594
|
Comparable hotel sales (d)
|
4,448
|
4,473
|
Comparable
hotel expenses
|
|
|
Rooms
and other departmental costs
|
1,902
|
1,912
|
Management fees, ground rent and other costs
|
1,485
|
1,488
|
Comparable hotel expenses (e)
|
3,387
|
3,400
|
Comparable
hotel adjusted operating profit
|
1,061
|
1,073
|
Non-comparable
hotel results, net
|
171
|
178
|
Loss
from hotels leased from HPT
|
(5)
|
(5)
|
Depreciation
and amortization
|
(687)
|
(687)
|
Corporate
and other expenses
|
(105)
|
(105)
|
Operating profit
|
$ 435
|
$ 454
|
____________
|
(a)
|
Forecast
comparable hotel results include 104 hotels that we have assumed will
be classified as comparable as of December 31, 2012. See "Comparable
Hotel Operating Statistics" in Notes to Financial Information. No
assurances can be made as to the hotels that will be in the comparable
hotel set for 2012. Also, see the notes to the "Reconciliation of Net
Income to EBITDA, Adjusted EBITDA and NAREIT and Adjusted Funds From
Operations per Diluted Share for 2012 Forecasts" for other forecast
assumptions and further discussion of our comparable hotel set.
|
(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):
|
|
2012
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Revenues
|
$ 5,300
|
$ 5,333
|
Non-comparable
hotel revenues
|
(672)
|
(680)
|
Revenues
for hotels leased from HPT
|
(231)
|
(231)
|
Hotel
revenues for which we record rental income, net
|
51
|
51
|
Comparable hotel sales
|
$ 4,448
|
$ 4,473
|
|
|
(e)
|
The
reconciliation of forecast operating costs and expenses to the
comparable hotel expenses is as follows (in millions):
|
|
2012
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Operating
costs and expenses
|
$ 4,865
|
$ 4,879
|
Non-comparable
hotel and other expenses
|
(502)
|
(503)
|
Expenses
for hotels leased from HPT
|
(236)
|
(236)
|
Hotel
expenses for which we record rental income
|
52
|
52
|
Depreciation
and amortization
|
(687)
|
(687)
|
Corporate
and other expenses
|
(105)
|
(105)
|
Comparable hotel expenses
|
$ 3,387
|
$ 3,400
|
HOST HOTELS & RESORTS,
INC.
Notes to Financial Information
Forecasts
Our forecast of earnings per diluted share, NAREIT and
Adjusted 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 approximately
55% 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 Inc., 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 third quarter of 2012 ended on September 7, and the third
quarter of 2011 ended on September 9, though both quarters reflect
twelve weeks of operations. In contrast, the September 7, 2012
year-to-date operations included 251 days of operations, while the
September 9, 2011 year-to-date operations included 252 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 45% 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.
Change in Reporting Periods
Marriott has announced that beginning January 1, 2013, it will
convert from a 52-53 week fiscal year to a 12-month calendar year. As a
result, we will adopt a calendar quarter reporting cycle in the first
quarter of 2013. The conversion will allow us to eliminate the
quarterly reporting variance discussed above.
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 third quarter of 2012 reflect 12
weeks of operations for the period from June 16, 2012 to September 7,
2012 for our Marriott-managed hotels and results from June 1, 2012 to
August 31, 2012 for operations of all other hotels which report results
on a monthly basis.
- Hotel results for the third quarter of 2011 reflect 12
weeks of operations for the period from June 18, 2011 to September 9,
2011 for our Marriott-managed hotels and results from June 1, 2011 to
August 31, 2011 for operations of all other hotels which report results
on a monthly basis.
- Hotel results for year-to-date 2012 reflect 36 weeks of
operations for the period from December 31, 2011 to September 7, 2012
for our Marriott-managed hotels and results from January 1, 2012 to
August 31, 2012 for operations of all other hotels which report results
on a monthly basis.
- Hotel results for year-to-date 2011 reflect 36 weeks of
operations for the period from January 1, 2011 to September 9, 2011 for
our Marriott-managed hotels and results from January 1, 2011 to August
31, 2011 for operations of all other hotels which report results on a
monthly basis.
Comparable Hotel Operating Statistics
To facilitate a year-to-year comparison of our operations, 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. Because these
statistics and operating results are for our hotel properties, they
exclude results for our non-hotel properties and other real estate
investments. 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 (as
further defined below) during the reporting periods being compared.
The hotel business is capital-intensive and renovations are a
regular part of the business. Generally, hotels under renovation remain
comparable hotels. A large scale capital project that would cause a
hotel to be excluded from our comparable hotel set is an extensive
renovation of several core aspects of the hotel, such as rooms, meeting
space, lobby, bars, restaurants and other public spaces. Both
quantitative and qualitative factors are taken into consideration in
determining if the renovation would cause a hotel to be removed from
the comparable hotel set, including unusual or exceptional
circumstances such as: a reduction or increase in room count,
rebranding, a significant alteration of the business operations, or the
closing of the hotel during the renovation.
We do not include an acquired hotel in our comparable hotel
set until the operating results for that hotel have been included in
our consolidated results for one full calendar year. For example, we
acquired the Westin Chicago River North in August of 2010. The hotel
was not included in our comparable hotels until January
1, 2012. Hotels that we sell are excluded from the comparable
hotel set once the transaction has closed. Similarly, hotels are
excluded from our comparable hotel set from the date that they sustain
substantial property damage or business interruption or commence a
large-scale capital project. In each case, these hotels are returned to
the comparable hotel set when the operations of the hotel have been
included in our consolidated results for one full calendar year after
completion of the repair of the property damage or cessation of the
business interruption, or the completion of large-scale capital
projects, as applicable.
Of the 120 hotels that we owned on September 7, 2012, 104 have
been classified as comparable hotels. The operating results of the
following hotels that we owned as of September 7, 2012 are excluded
from comparable hotel results for these periods:
- Grand Hyatt Washington,
D.C. (acquired in July 2012);
- Hilton Melbourne South Wharf (acquired in April 2011);
- 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);
- Orlando World Center Marriott Resort & Convention
Center (business interruption due to a large-scale capital project,
which includes façade restoration, the shutdown of the main pool
and a complete restoration and enhancement of the hotel, including new
water slides and activity areas, new pool dining facilities and the
renovation of one tower of guestrooms, meeting space and restaurants);
- Atlanta Marriott Perimeter Center (business interruption
due to extensive renovations, which included renovation of the guest
rooms, lobby, bar and restaurant and the demolition of one tower of the
hotel, reducing the room count at the hotel);
- Chicago Marriott O'Hare (business interruption due to
extensive renovations, which included renovating every aspect of the
hotel and shutting down over 200 rooms);
- Sheraton Indianapolis Hotel at Keystone Crossing (business
interruption due to extensive renovations, which included the
conversion of one tower of the hotel into apartments, reducing the room
count, and the renovation of the remaining guest rooms, lobby, bar and
meeting space); and
- San Diego Marriott Marquis & Marina (business
interruption due to extensive renovations, which included the
renovation of every aspect of the hotel and required the entire hotel
to be closed for a period of time).
The operating results of (i) three hotels that we have
disposed of in 2012 and 2011, (ii) the Le Meridien Piccadilly, which
was transferred to the European joint venture in 2011, and (iii) the 53
Courtyard by Marriott properties leased from HPT, are not included in
comparable hotel results for the periods presented herein.
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 (both NAREIT and Adjusted), (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.
NAREIT FFO and NAREIT FFO per Diluted Share
We present NAREIT FFO and NAREIT 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 NAREIT FFO per
diluted share as our NAREIT FFO (defined as set forth below) for a
given operating period, as adjusted for the effect of dilutive
securities, divided by the number of fully diluted shares outstanding
during such period, in accordance with NAREIT guidelines. NAREIT
defines FFO as net income (calculated in accordance with GAAP)
excluding gains and losses from sales of real estate, the cumulative
effect of changes in accounting principles, real estate-related
depreciation, amortization and impairments and adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect our pro rata FFO of those entities on the same basis.
We believe that NAREIT FFO per diluted share is a useful
supplemental measure of our operating performance and that the
presentation of NAREIT 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, impairments and gains and losses from sales
of depreciable real estate, all of which are based on historical cost
accounting and which may be of lesser significance in evaluating
current performance, we believe that such measures can facilitate
comparisons of operating performance between periods and with other
REITs, even though NAREIT 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 FFO metric in order to promote an
industry-wide measure of REIT operating performance.
Adjusted FFO per Diluted Share
We also present Adjusted FFO per diluted share when evaluating
our performance because management believes that the exclusion of
certain additional items described below provides useful supplemental
information to investors regarding our ongoing operating performance.
Management historically has made the adjustments detailed below in
evaluating our performance, in our annual budget process and for our
compensation programs. We believe that the presentation of Adjusted FFO
per diluted share, when combined with both the primary GAAP
presentation of earnings per share and FFO per diluted share as defined
by NAREIT, provides useful supplemental information that is beneficial
to an investor's complete understanding of our operating performance.
We adjust NAREIT FFO per diluted share for the following items, which
may occur in any period, and refer to this measure as Adjusted FFO per
diluted share:
- Gains and Losses on the Extinguishment of Debt – We exclude
the effect of finance charges and premiums associated with the
extinguishment of debt, including the acceleration of deferred
financing costs associated with the original issuance of the debt being
redeemed or retired. We also exclude the gains on debt repurchases and
the original issuance costs associated with the retirement of preferred
stock. We believe that these items are not reflective of our ongoing
finance costs.
- Acquisition Costs – Under GAAP, costs associated with
completed property acquisitions are expensed in the year incurred. We
exclude the effect of these costs because we believe they are not
reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We exclude the effect of
gains or losses associated with litigation recorded under GAAP that we
consider outside the ordinary course of business. We believe that
including these items is not consistent with our ongoing 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 after removing the impact of the Company's capital
structure (primarily interest expense) and its asset base (primarily
depreciation and amortization). Management also believes the use of
EBITDA 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 and Adjusted FFO per diluted share, is widely used by
management in the annual budget process and for our compensation
programs.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating
the performance of Host Inc. and Host LP because we believe that the
exclusion of certain additional 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.
Adjusted EBITDA also 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 or acquisition of depreciable 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 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 value
often does not reflect the market value of real estate assets as noted
above.
- Equity Investment Adjustments – We exclude the equity in
earnings (losses) of affiliates as presented in our consolidated
statement of operations because it includes our pro rata portion of the
depreciation, amortization and interest expense related to such
investments, which are excluded from EBITDA. We include our pro rata
share of the Adjusted EBITDA of our equity investments as we believe
this reflects more accurately the performance of our investments. 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 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'
percentage ownership in the partnership or joint venture.
- Cumulative Effect of a Change in Accounting Principle –
Infrequently, the Financial Accounting Standards Board 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,
which are based off of historical cost accounting values, are similar
to gains and losses on dispositions and depreciation expense, both of
which are excluded from EBITDA.
- Acquisition Costs – Under GAAP, costs associated with
completed property acquisitions are expensed in the year incurred. We
exclude the effect of these costs because we believe they are not
reflective of the ongoing performance of the company.
Limitations on the Use of NAREIT FFO per Diluted Share,
Adjusted FFO per Diluted Share, EBITDA and Adjusted EBITDA
We calculate NAREIT 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 do not 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. We also
calculate Adjusted FFO per diluted share, which is not in accordance
with NAREIT guidance and may not be comparable to measures calculated
by other 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, NAREIT
FFO per diluted share and Adjusted 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, NAREIT FFO
per diluted share, Adjusted 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, NAREIT FFO per diluted
share and Adjusted FFO per diluted share do 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 real estate industry investors have
considered presentation of historical cost accounting for operating
results 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.
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