BETHESDA, Md., Feb. 21, 2013 -- Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate investment
trust ("REIT"), today announced results of operations for the fourth
quarter and full year ended December 31, 2012.
Operating
Results
(in
millions, except per share and hotel statistics)
|
|
|
|
|
|
|
Quarter
ended December 31,
|
Percent
|
Year
ended December 31,
|
Percent
|
|
2012
|
2011
|
Change
|
2012
|
2011
|
Change
|
Total
revenues
|
$ 1,746
|
$ 1,634
|
6.9%
|
$ 5,286
|
$ 4,924
|
7.4%
|
Comparable
hotel revenues*
|
1,445
|
1,390
|
3.9%
|
4,428
|
4,195
|
5.5%
|
Comparable
hotel RevPAR
|
144.09
|
136.25
|
5.8%
|
142.48
|
133.87
|
6.4%
|
Net
income (loss)
|
15
|
16
|
(6.3)%
|
63
|
(16)
|
N/M
|
Adjusted
EBITDA*
|
426
|
349
|
22.1%
|
1,190
|
1,018
|
16.9%
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
$ .02
|
$ .02
|
—
|
$ .08
|
$ (.02)
|
N/M
|
NAREIT
FFO per diluted share*
|
.40
|
.31
|
29.0%
|
1.04
|
.89
|
16.9%
|
Adjusted
FFO per diluted share*
|
.40
|
.32
|
25.0%
|
1.10
|
.92
|
19.6%
|
|
|
|
|
|
|
|
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 fourth quarter and full
year 2012 reflect the improved performance of the Company's owned
hotels as comparable hotel RevPAR increased 5.8% and 6.4% for the
fourth quarter and full year 2012, respectively. In addition, full year
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 on July 16, 2012. These acquisitions increased
revenues by an incremental $99 million for full year 2012.
The increase in comparable hotel RevPAR primarily was driven
by improvements in average room rates, coupled with continued occupancy
growth. For the fourth quarter and full year 2012, average room rates
improved 2.8% and 3.6%, respectively, while occupancy improved 2.0
percentage points both for the quarter and full year to 72.6% and
74.5%, respectively. The improvements in revenues led to strong margin
growth as comparable hotel adjusted operating profit margins increased
80 basis points and 140 basis points for the fourth quarter and full
year 2012, respectively.
Investments
- Redevelopment and Return on Investment Expenditures -
The Company invested approximately $22 million and $144
million in the fourth quarter and full year 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 with recently
completed extensive redevelopment work, the Atlanta Marriott Perimeter
Center, the Chicago Marriott O'Hare and the Sheraton Indianapolis, have
performed exceptionally well, as RevPAR increased an average of 41% for
full year 2012 compared to the pre-construction period in 2010. Due to
the significant capital expenditures affecting nearly every aspect of
these properties, the operations are excluded from comparable hotel
results. The Company expects investment in redevelopment and ROI
expenditures for 2013 will range from $90 million to $100 million.
- Acquisition Expenditures – In conjunction
with the acquisition of a property, the Company prepares capital and
operational improvement plans that are designed to maximize
profitability and enhance the guest experience. During the fourth
quarter 2012, the Company completed the renovation of almost 750
guestrooms and opened the new concierge lounge in the Harbor Tower of
the Manchester Grand Hyatt San Diego. The Company also began a $23 million renovation to all 888 rooms of the
Grand Hyatt Washington. The Company spent approximately $39 million and
$128 million for the fourth quarter and full year 2012, respectively,
on acquisition projects and expects to invest between $40 million and
$50 million for 2013.
- Renewal and Replacement Expenditures - The
Company invested approximately $121 million and $366 million for the
fourth quarter and full year 2012, respectively, in renewal and
replacement expenditures. These expenditures are designed to ensure
that the high-quality standards of both the Company and its operators
are maintained. Major renewal and replacement projects completed during
the fourth quarter included 459 rooms at the Washington Marriott at
Metro Center, the 504-room North Tower of the Orlando World Center
Marriott and 130,000 square feet of meeting space at The Westin
Kierland Resort & Spa. The Company expects that renewal and
replacement expenditures for 2013 will total approximately $270 million
to $290 million. At the mid-point of the Company's guidance, the 2013
renewal and replacement expenditures represent over a 20% decrease when
compared to 2012.
Value Enhancement Projects
On November 9, 2012 the Company
entered into a joint venture with Hyatt Residential Group (the "Maui
JV") to develop, sell and operate a 131-unit vacation ownership project
in Maui, Hawaii adjacent to the
Company's Hyatt Regency Maui Resort & Spa. The Company contributed
a combination of land and cash to the Maui JV in exchange for a 67%
membership interest and recognized a gain on the sale of land of $8 million. In addition to any profits from
the sale of timeshare units, the Company also expects to benefit from
synergies created with the existing hotel. Construction has begun and
the project is expected to open in late 2014.
Dispositions
On January 11, 2013, the Company sold the 1,663-room Atlanta
Marriott Marquis, including the furniture, fixtures & equipment
("FF&E") replacement fund, for a sale price of $293 million and
will recognize a gain on the sale of approximately $21 million in the
first quarter 2013. On November 15, 2012, the Company sold its 94.8%
interest in the 424-room Toronto Airport Marriott for proceeds of
approximately CAD32 million ($32
million).
Balance Sheet
During 2012, the Company 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 $1.9 billion of debt with a weighted average
interest rate of 6.7%. This included the fourth quarter redemption of
$100 million of 6¾% Series Q senior notes due 2016. As a result
of these transactions, the Company has decreased its weighted average
interest rate by approximately 90 basis points, to 5.4%, and lengthened
its weighted average debt maturity at year end to 5.1 years. As of
December 31, 2012, the Company had $417 million of cash and cash
equivalents and $737 million of available capacity under its credit
facility. After adjusting for the sales proceeds from the Atlanta
Marriott Marquis, the January dividend payment, and a $100 million
credit facility repayment, the Company currently has over $530 million
of cash and $837 million of credit facility capacity. For 2013, the
only debt maturities are $277 million of mortgage loans secured by two
properties.
European Joint Venture
Hotel RevPAR for the Company's joint venture in Europe increased 2.0% for the fourth
quarter and 2.9% for full year 2012 on a constant Euro basis for the 11
properties in the joint venture with comparable results. The full-year
growth was driven by an increase in average room rate of 3.3%, offset
by a slight decline in occupancy. On November 30, 2012, the joint
venture acquired a portfolio of five hotels consisting of 1,733 rooms
in Paris and Amsterdam for approximately €440 million
($572 million) and the payment of an additional €10 million ($13
million) for the FF&E replacement fund. The acquisition was
financed, in part, through the issuance of a €250 million ($325 million) mortgage loan by the joint
venture. The Company's equity contribution of approximately €70 million
($90 million) to the joint venture in connection with this acquisition
was funded with proceeds from the repayment by the seller of a €62
million ($80 million) note receivable that the Company had initially
purchased at a discount of 38% in 2010, along with available cash.
Dividend
On November 29, 2012, the Company's Board of Directors
authorized a regular quarterly cash dividend of $.09
per share on its common stock. The dividend was paid on January 15,
2013 to stockholders of record on December 31, 2012. On February 19,
2013, the Board of Directors authorized a regular quarterly cash
dividend of $.10 per share on its common
stock. The dividend will be paid on April 15, 2013 to stockholders of
record on March 28, 2013. 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.
2013 Outlook
The Company anticipates that for 2013:
- Comparable hotel RevPAR will increase 5.0% to 7.0%;
- Total rooms revenues under GAAP will increase 6.7% to 8.7%;
- Total owned hotel revenues under GAAP will increase 5.4% to
7.5%;
- Total comparable hotel revenues will increase 3.8% to 5.8%;
- Operating profit margins under GAAP will increase
approximately 270 basis points to 360 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 50 basis points to 110 basis points.
Based upon these parameters, the Company estimates that its
2013 guidance is as follows:
- earnings per diluted share should range from approximately $.29 to $.36;
- net income should range from $217 million to $276 million;
- NAREIT and Adjusted FFO per diluted share should be
approximately $1.19 to $1.27; and
- Adjusted EBITDA should be approximately $1,250 million to $1,310
million.
See the 2013 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 103 properties in the
United States and 15 properties internationally totaling
approximately 62,500 rooms. The Company also holds non-controlling
interests in a joint venture in Europe
that owns 19 hotels with approximately 6,100 rooms and a joint venture
in Asia that owns one hotel in Australia and a minority interest in two
hotels in India and five hotels that
are in various stages of development in India.
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.
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 assumptions 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: changes in national
and local economic and business conditions that will affect occupancy
rates at our hotels and the demand for hotel products and services; the
impact of geopolitical developments outside the U.S. on lodging demand;
volatility in global financial and credit markets; operating risks
associated with the hotel business; risks and limitations in our
operating flexibility associated with the level of our indebtedness and
our ability to meet covenants in our debt agreements; risks associated
with our relationships with property managers and joint venture
partners; our ability to maintain our properties in a first-class
manner, including meeting capital expenditure requirements; the effects
of hotel renovations on our hotel occupancy and financial results; our
ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures; risks associated
with our ability to complete acquisitions and dispositions and develop
new properties and the risks that acquisitions and new developments may
not perform in accordance with our expectations; 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 February 21, 2013,
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
December 31, 2012, which is presented as 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 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.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
|
|
|
|
|
December
31,
|
December
31,
|
|
2012
|
2011
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
Property
and equipment, net
|
$
11,588
|
$
11,383
|
Due
from managers
|
80
|
37
|
Advances
to and investments in affiliates
|
347
|
197
|
Deferred
financing costs, net
|
53
|
55
|
Furniture,
fixtures and equipment replacement fund
|
154
|
166
|
Other
|
319
|
390
|
Restricted
cash
|
36
|
36
|
Cash
and cash equivalents
|
417
|
826
|
Total
assets
|
$ 12,994
|
$ 13,090
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
Debt
|
|
|
Senior notes, including $531 million and $902 million, respectively,
net of
discount, of Exchangeable Senior Debentures
|
$ 3,569
|
$ 4,543
|
Credit
facility, including the $500 million term loan
|
763
|
117
|
Mortgage
debt
|
993
|
1,006
|
Other
|
86
|
87
|
Total
debt
|
5,411
|
5,753
|
Accounts
payable and accrued expenses
|
194
|
175
|
Other
|
372
|
291
|
Total
liabilities
|
5,977
|
6,219
|
|
|
|
Non-controlling
interests—Host Hotels & Resorts, L.P
|
158
|
158
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders' equity:
|
|
|
Common stock, par value $.01, 1,050 million shares authorized; 724.6
million
shares and 705.1 million shares issued and outstanding, respectively
|
7
|
7
|
Additional paid-in capital
|
8,040
|
7,750
|
Accumulated other comprehensive income (loss)
|
12
|
(1)
|
Deficit
|
(1,234)
|
(1,079)
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
6,825
|
6,677
|
Non-controlling
interests—other consolidated partnerships
|
34
|
36
|
Total
equity
|
6,859
|
6,713
|
Total
liabilities, non-controlling interests and equity
|
$ 12,994
|
$ 13,090
|
|
|
|
|
|
|
(a)
Our consolidated balance sheet as of December 31, 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
Consolidated
Statements of Operations (a)
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
Quarter
ended December 31,
|
Year ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Revenues
|
|
|
|
|
Rooms
|
$ 1,058
|
$ 973
|
$ 3,219
|
$ 2,975
|
Food
and beverage
|
511
|
485
|
1,494
|
1,404
|
Other
|
94
|
98
|
300
|
292
|
Owned
hotel revenues
|
1,663
|
1,556
|
5,013
|
4,671
|
Other
revenues
|
83
|
78
|
273
|
253
|
Total
revenues
|
1,746
|
1,634
|
5,286
|
4,924
|
Expenses
|
|
|
|
|
Rooms
|
284
|
264
|
875
|
816
|
Food
and beverage
|
371
|
351
|
1,105
|
1,044
|
Other
departmental and support expenses
|
415
|
403
|
1,282
|
1,240
|
Management fees
|
72
|
63
|
207
|
187
|
Other
property-level expenses
|
183
|
175
|
587
|
564
|
Depreciation and amortization (b)
|
281
|
205
|
751
|
638
|
Corporate and other expenses
|
34
|
53
|
107
|
111
|
Gain
on insurance settlements
|
(11)
|
(2)
|
(11)
|
(2)
|
Total
operating costs and expenses
|
1,629
|
1,512
|
4,903
|
4,598
|
Operating
profit
|
117
|
122
|
383
|
326
|
Interest
income
|
12
|
5
|
23
|
20
|
Interest
expense (c)
|
(101)
|
(112)
|
(373)
|
(371)
|
Net
gains on property transactions and other
|
9
|
1
|
13
|
7
|
Gain
(loss) on foreign currency transactions and derivatives
|
(1)
|
4
|
(4)
|
3
|
Equity
in earnings of affiliates
|
—
|
7
|
2
|
4
|
Income
(loss) before income taxes
|
36
|
27
|
44
|
(11)
|
Benefit
(provision) for income taxes
|
(22)
|
(8)
|
(31)
|
1
|
Income
(loss) from continuing operations
|
14
|
19
|
13
|
(10)
|
Income
(loss) from discontinued operations, net of tax
|
1
|
(3)
|
50
|
(6)
|
Net
income (loss)
|
15
|
16
|
63
|
(16)
|
Less:
Net (income) loss attributable to non-controlling interests
|
—
|
1
|
(2)
|
1
|
Net
income (loss) attributable to Host Inc.
|
$ 15
|
$ 17
|
$ 61
|
$ (15)
|
Basic
and diluted earnings (loss) per common share:
|
|
|
|
|
Continuing operations
|
$ .02
|
$ .03
|
$ .01
|
$ (.01)
|
Discontinued operations
|
—
|
(.01)
|
.07
|
(.01)
|
Basic
and diluted earnings (loss) per common share
|
$ .02
|
$ .02
|
$ .08
|
$ (.02)
|
|
|
|
|
|
(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)
Depreciation and amortization expense for the fourth quarter and year
ended December 31, 2012 includes a $60 million impairment charge
related to the Westin Mission Hills Resort & Spa.
|
|
|
|
|
|
(c)
Interest expense includes the following items:
|
|
Quarter
ended December 31,
|
Year ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Non-cash
interest for exchangeable debentures
|
$ 5
|
$ 9
|
$ 17
|
$ 31
|
Debt
extinguishment costs
|
3
|
1
|
30
|
9
|
Total
|
$ 8
|
$ 10
|
$ 47
|
$ 40
|
HOST
HOTELS & RESORTS, INC.
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
|
|
|
|
|
Quarter
ended December 31,
|
Year ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss)
|
$ 15
|
$ 16
|
$ 63
|
$ (16)
|
Net
(income) loss attributable to non-controlling
interests
|
—
|
1
|
(2)
|
1
|
Earnings
(loss) available to common stockholders
|
$ 15
|
$ 17
|
$ 61
|
$ (15)
|
Diluted
earnings (loss) available to common
stockholders
|
$ 15
|
$ 17
|
$ 61
|
$ (15)
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
723.9
|
703.2
|
718.2
|
693.0
|
Diluted
weighted average common shares
outstanding (a)
|
725.1
|
705.1
|
719.6
|
693.0
|
Basic
and diluted earnings (loss) per common
share
|
$ .02
|
$ .02
|
$ .08
|
$ (.02)
|
|
|
|
|
|
|
|
(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 December 31, 2012
|
Quarter
ended December 31, 2012
|
Quarter
ended December 31, 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
|
$
184.64
|
74.9%
|
$
138.35
|
$
175.37
|
71.1%
|
$
124.71
|
10.9%
|
Mid-Atlantic
|
11
|
8,638
|
283.31
|
83.2
|
235.67
|
281.18
|
82.5
|
231.84
|
1.7
|
South
Central
|
9
|
5,695
|
148.68
|
68.6
|
101.95
|
145.04
|
65.9
|
95.61
|
6.6
|
D.C.
Metro
|
12
|
5,416
|
196.04
|
68.3
|
133.92
|
195.65
|
71.3
|
139.49
|
(4.0)
|
North
Central
|
11
|
4,782
|
168.04
|
72.2
|
121.38
|
161.35
|
70.8
|
114.16
|
6.3
|
Atlanta
|
7
|
3,846
|
166.86
|
66.3
|
110.68
|
161.05
|
62.8
|
101.11
|
9.5
|
Florida
|
8
|
3,680
|
192.60
|
67.1
|
129.21
|
186.10
|
63.0
|
117.26
|
10.2
|
New
England
|
6
|
3,672
|
196.81
|
72.6
|
142.90
|
181.55
|
71.5
|
129.89
|
10.0
|
Mountain
|
7
|
2,885
|
159.47
|
62.0
|
98.94
|
156.60
|
62.3
|
97.58
|
1.4
|
Canada
|
3
|
1,219
|
181.48
|
71.2
|
129.21
|
176.89
|
66.2
|
117.12
|
10.3
|
Latin
America
|
4
|
1,075
|
230.98
|
71.4
|
164.96
|
226.97
|
65.9
|
149.58
|
10.3
|
All
Regions
|
103
|
54,804
|
198.53
|
72.6
|
144.09
|
193.04
|
70.6
|
136.25
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2012
|
Year
ended December 31, 2012
|
Year
ended December 31, 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
|
$
183.71
|
77.7%
|
$
142.68
|
$
174.10
|
75.2%
|
$
130.84
|
9.1%
|
Mid-Atlantic
|
11
|
8,638
|
250.77
|
81.4
|
204.02
|
246.54
|
78.3
|
193.07
|
5.7
|
South
Central
|
9
|
5,695
|
149.21
|
71.7
|
106.94
|
147.86
|
68.6
|
101.36
|
5.5
|
D.C.
Metro
|
12
|
5,416
|
194.18
|
72.5
|
140.86
|
194.48
|
74.0
|
143.90
|
(2.1)
|
North
Central
|
11
|
4,782
|
158.90
|
72.8
|
115.66
|
152.39
|
71.5
|
108.91
|
6.2
|
Atlanta
|
7
|
3,846
|
160.74
|
68.1
|
109.50
|
157.31
|
65.0
|
102.32
|
7.0
|
Florida
|
8
|
3,680
|
210.74
|
73.6
|
155.16
|
196.88
|
71.7
|
141.11
|
10.0
|
New
England
|
6
|
3,672
|
189.28
|
74.1
|
140.30
|
174.35
|
72.4
|
126.19
|
11.2
|
Mountain
|
7
|
2,885
|
161.01
|
65.5
|
105.42
|
157.90
|
65.0
|
102.59
|
2.8
|
Canada
|
3
|
1,219
|
179.54
|
68.3
|
122.68
|
177.23
|
67.5
|
119.66
|
2.5
|
Latin
America
|
4
|
1,075
|
232.18
|
71.2
|
165.21
|
214.79
|
67.8
|
145.69
|
13.4
|
All
Regions
|
103
|
54,804
|
191.15
|
74.5
|
142.48
|
184.52
|
72.5
|
133.87
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2012
|
Quarter
ended December 31, 2012
|
Quarter
ended December 31, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
Property
Type
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Urban
|
53
|
33,232
|
$
216.49
|
74.5%
|
$
161.20
|
$
211.96
|
73.0%
|
$
154.80
|
4.1%
|
Suburban
|
27
|
10,321
|
154.03
|
67.8
|
104.47
|
146.08
|
65.5
|
95.66
|
9.2
|
Resort/Conference
|
12
|
6,083
|
233.12
|
65.1
|
151.71
|
223.58
|
62.5
|
139.71
|
8.6
|
Airport
|
11
|
5,168
|
129.75
|
78.9
|
102.37
|
123.45
|
74.6
|
92.07
|
11.2
|
All
Types
|
103
|
54,804
|
198.53
|
72.6
|
144.09
|
193.04
|
70.6
|
136.25
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2012
|
Year
ended December 31, 2012
|
Year
ended December 31, 2011
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
Property
Type
|
Properties
|
Rooms
|
Room
Rate
|
Percentage
|
RevPAR
|
Room
Rate
|
Percentage
|
RevPAR
|
RevPAR
|
Urban
|
53
|
33,232
|
$
203.60
|
75.9%
|
$
154.58
|
$
197.61
|
74.0%
|
$
146.30
|
5.7%
|
Suburban
|
27
|
10,321
|
151.90
|
70.0
|
106.34
|
146.16
|
68.1
|
99.59
|
6.8
|
Resort/Conference
|
12
|
6,083
|
246.68
|
70.0
|
172.74
|
234.20
|
67.9
|
159.09
|
8.6
|
Airport
|
11
|
5,168
|
126.41
|
80.0
|
101.09
|
119.95
|
77.2
|
92.62
|
9.1
|
All
Types
|
103
|
54,804
|
191.15
|
74.5
|
142.48
|
184.52
|
72.5
|
133.87
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 December 31,
|
Year
ended December 31,
|
|
|
|
|
|
|
2012
|
2011
|
2012
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
room rate
|
$197.20
|
$189.96
|
$189.32
|
$181.88
|
|
|
|
|
Average
occupancy
|
71.8%
|
69.7%
|
73.9%
|
71.9%
|
|
|
|
|
RevPAR
|
$141.56
|
$132.31
|
$139.90
|
$130.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The
operating statistics reflect all consolidated properties as of December
31, 2012 and December 31, 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 December 31,
|
Year
ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
|
|
|
|
|
Number
of hotels
|
103
|
103
|
103
|
103
|
Number
of rooms
|
54,804
|
54,804
|
54,804
|
54,804
|
Percent
change in comparable hotel RevPAR
|
5.8%
|
-
|
6.4%
|
-
|
Operating
profit margin under GAAP (b)
|
6.7%
|
7.5%
|
7.2%
|
6.6%
|
Comparable
hotel adjusted operating profit margin (b)
|
24.6%
|
23.8%
|
24.0%
|
22.6%
|
Comparable
hotel revenues
|
|
|
|
|
Room
|
$ 918
|
$ 868
|
$ 2,849
|
$ 2,672
|
Food
and beverage
|
443
|
438
|
1,314
|
1,264
|
Other
|
84
|
84
|
265
|
259
|
Comparable
hotel revenues (c)
|
1,445
|
1,390
|
4,428
|
4,195
|
Comparable
hotel expenses
|
|
|
|
|
Room
|
246
|
234
|
768
|
728
|
Food
and beverage
|
321
|
315
|
977
|
943
|
Other
|
47
|
48
|
149
|
149
|
Management
fees, ground rent and other costs
|
475
|
462
|
1,473
|
1,429
|
Comparable
hotel expenses (d)
|
1,089
|
1,059
|
3,367
|
3,249
|
Comparable
hotel adjusted operating profit
|
356
|
331
|
1,061
|
946
|
Non-comparable
hotel results, net (e)
|
79
|
48
|
183
|
135
|
Income
(loss) from hotels leased from HPT
|
(3)
|
1
|
(3)
|
(6)
|
Depreciation
and amortization
|
(281)
|
(205)
|
(751)
|
(638)
|
Corporate
and other expenses
|
(34)
|
(53)
|
(107)
|
(111)
|
Operating
profit
|
$ 117
|
$ 122
|
$ 383
|
$ 326
|
|
|
|
|
|
|
|
(a)
|
See
the Notes to the Financial Information for discussion of non-GAAP
measures, reporting periods and comparable hotel results.
|
(b)
|
Operating
profit margins are calculated by dividing the applicable operating
profit by the related revenue amount. GAAP margins are calculated using
amounts presented in the consolidated statements 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 revenues is as follows:
|
|
|
|
|
|
|
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Revenues
per the consolidated statements of operations
|
$ 1,746
|
$ 1,634
|
$ 5,286
|
$ 4,924
|
Non-comparable
hotel revenues
|
(245)
|
(188)
|
(677)
|
(559)
|
Hotel
revenues for which we record rental income, net
|
14
|
14
|
51
|
51
|
Revenues
for hotels leased from HPT
|
(70)
|
(70)
|
(232)
|
(221)
|
Comparable
hotel revenues
|
$ 1,445
|
$ 1,390
|
$ 4,428
|
$ 4,195
|
|
|
|
|
|
|
|
(d)
|
The
reconciliation of operating costs per the consolidated statements of
operations to the comparable hotel expenses is as follows:
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Operating
costs and expenses per the consolidated statements of operations
|
$ 1,629
|
$ 1,512
|
$ 4,903
|
$ 4,598
|
Non-comparable
hotel expenses
|
(166)
|
(140)
|
(494)
|
(424)
|
Hotel
expenses for which we record rental income
|
14
|
14
|
51
|
51
|
Expense
for hotels leased from HPT
|
(73)
|
(69)
|
(235)
|
(227)
|
Depreciation
and amortization
|
(281)
|
(205)
|
(751)
|
(638)
|
Corporate
and other expenses
|
(34)
|
(53)
|
(107)
|
(111)
|
Comparable
hotel expenses
|
$ 1,089
|
$ 1,059
|
$ 3,367
|
$ 3,249
|
|
|
|
|
|
|
|
(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 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
|
|
|
|
|
2012
|
2011
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Common
shares outstanding
|
724.6
|
705.1
|
Common
shares outstanding assuming conversion of non-controlling interest OP
Units (a)
|
734.7
|
715.8
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
|
|
|
|
Security
pricing
|
|
|
|
|
Common
(b)
|
$ 15.67
|
$ 14.77
|
3¼%
Exchangeable Senior Debentures (c)
|
$
1,152.8
|
$
1,084.0
|
2½%
Exchangeable Senior Debentures (c)
|
$
1,309.2
|
$
1,242.6
|
|
|
|
|
|
|
|
Dividends
declared per share for calendar year
|
$ .30
|
$ .14
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
Senior
debt
|
Rate
|
Maturity
date
|
2012
|
2011
|
Series
O
|
6⅜%
|
3/2015
|
$ -
|
$ 650
|
Series
Q
|
6¾%
|
6/2016
|
550
|
800
|
Series
S
|
6⅞%
|
11/2014
|
-
|
498
|
Series
T
|
9%
|
5/2017
|
391
|
390
|
Series
V
|
6%
|
11/2020
|
500
|
500
|
Series
X
|
5⅞%
|
6/2019
|
497
|
496
|
Series
Z
|
6%
|
10/2021
|
300
|
300
|
Series
B (d)
|
5¼%
|
3/2022
|
350
|
-
|
Series
C
|
4¾%
|
3/2023
|
450
|
-
|
Exchangeable
senior debentures (e)
|
3¼%
|
4/2024
|
175
|
175
|
Exchangeable
senior debentures
|
2⅝%
|
4/2027
|
-
|
385
|
Exchangeable
senior debentures (f)
|
2½%
|
10/2029
|
356
|
342
|
Senior
notes
|
10%
|
5/2012
|
-
|
7
|
Credit
facility term loan
|
2.0%
|
7/2017
|
500
|
-
|
Credit
facility revolver (g)
|
2.6%
|
11/2015
|
263
|
117
|
|
|
|
|
|
4,332
|
4,660
|
Mortgage
debt and other
|
|
|
|
|
Mortgage
debt (non-recourse)
|
3.3-8.5%
|
7/2013-11/2016
|
993
|
1,006
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
86
|
87
|
Total
debt (h)(i)
|
|
|
$ 5,411
|
$ 5,753
|
|
|
|
|
|
|
|
Percentage
of fixed rate debt
|
|
|
78%
|
90%
|
Weighted
average interest rate
|
|
|
5.4%
|
6.3%
|
Weighted
average debt maturity
|
|
|
5.1
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 December 31, 2012 and 2011,
there were 9.9 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
5¼% Series A senior notes were exchanged for 5¼% Series B
senior notes in October 2012.
|
(e)
|
Holders
of the 3¼% Exchangeable Senior Debentures due 2024 (the "2004
Debentures") can require the Company to repurchase the exchangeable
debentures for cash in April 2014.
|
(f)
|
At
December 31, 2012, the principal balance outstanding of the 2½%
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.
|
(g)
|
The
interest rate shown is the weighted average rate of the outstanding
credit facility at December 31, 2012.
|
(h)
|
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 December 31, 2012, our
non-controlling partners' share of consolidated debt is $67 million and
our share of debt in unconsolidated investments is $461 million.
|
(i)
|
Total
debt as of December 31, 2012 and December 31, 2011 includes net
discounts of $48 million and $63 million, respectively.
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA
(unaudited, in millions)
|
|
|
|
|
Quarter
ended December 31,
|
Year
ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss) (a)
|
$ 15
|
$ 16
|
$ 63
|
$ (16)
|
Interest expense
|
101
|
112
|
373
|
371
|
Depreciation and amortization
|
221
|
205
|
691
|
638
|
Income taxes
|
22
|
8
|
31
|
(1)
|
Discontinued operations (b)
|
—
|
3
|
3
|
9
|
EBITDA
(a)
|
359
|
344
|
1,161
|
1,001
|
Gain
on dispositions (c)
|
—
|
—
|
(48)
|
—
|
Acquisition costs
|
—
|
—
|
7
|
5
|
Gain
on property insurance settlement
|
(2)
|
—
|
(2)
|
—
|
Non-cash impairment charges
|
60
|
5
|
60
|
8
|
Amortization of deferred gains
|
(1)
|
(1)
|
(4)
|
(7)
|
Equity investment adjustments:
|
|
|
|
|
Equity in earnings of affiliates
|
—
|
(7)
|
(2)
|
(4)
|
Pro
rata Adjusted EBITDA of equity investments
|
14
|
11
|
34
|
29
|
Consolidated partnership adjustments:
|
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-
controlling partners in consolidated partnerships
|
(4)
|
(3)
|
(16)
|
(14)
|
Adjusted
EBITDA (a)
|
$ 426
|
$ 349
|
$ 1,190
|
$ 1,018
|
|
|
|
|
|
|
|
|
(a)
Net income (loss), EBITDA, Adjusted EBITDA and FFO include the
following significant transactions:
- A gain of $8 million for both the fourth quarter
and full year 2012 for the sale of land to the Maui JV;
- Business interruption proceeds of $9 million
recorded in the fourth quarter of 2012; and
- Interest income of $11 million and $20 million for
the fourth quarter and full year 2012, respectively, on our mortgage
loan investment, which was paid in full in November 2012, compared to
$5 million and $17 million for the fourth quarter and full year 2011,
respectively.
|
|
(b)
Reflects the interest expense, depreciation and amortization and income
taxes included in discontinued operations.
|
|
|
|
|
|
(c)
Reflects the gain on the sale of three hotels in 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 December 31,
|
Year
ended December 31,
|
|
2012
|
2011
|
2012
|
2011
|
Net
income (loss)
|
$ 15
|
$ 16
|
$ 63
|
$ (16)
|
Less:
Net (income) loss attributable to non-controlling interests
|
-
|
1
|
(2)
|
1
|
Net
income (loss) attributable to Host Inc.
|
15
|
17
|
61
|
(15)
|
Adjustments:
|
|
|
|
|
Gain
on dispositions, net of taxes (a)
|
-
|
-
|
(48)
|
-
|
Gain
on property insurance settlement
|
(2)
|
-
|
(2)
|
-
|
Amortization
of deferred gains and other property transactions, net of taxes
|
(1)
|
(1)
|
(4)
|
(7)
|
Depreciation
and amortization
|
220
|
207
|
691
|
645
|
Non-cash
impairment charges
|
60
|
5
|
60
|
8
|
Partnership
adjustments
|
5
|
(1)
|
12
|
4
|
FFO of
non-controlling interests of Host LP
|
(4)
|
(3)
|
(11)
|
(9)
|
NAREIT
FFO (b)
|
293
|
224
|
759
|
626
|
Adjustments
to NAREIT FFO:
|
|
|
|
|
Loss
on debt extinguishments (c)
|
3
|
1
|
35
|
10
|
Acquisition
costs (d)
|
2
|
3
|
10
|
8
|
Litigation
losses
|
-
|
5
|
-
|
5
|
Loss
attributable to non-controlling interests (e)
|
-
|
-
|
(1)
|
-
|
Adjusted
FFO
|
$ 298
|
$ 233
|
$ 803
|
$ 649
|
|
|
|
|
|
|
|
For
calculation on a per diluted share basis:
|
|
|
|
|
|
|
|
|
|
Adjustments
for dilutive securities (f):
|
|
|
|
|
Assuming
conversion of Exchangeable Senior Debentures
|
$ 10
|
$ 9
|
$ 31
|
$ 30
|
Assuming
deduction of interest - redeemed/exchanged 2004 Debentures
|
-
|
-
|
-
|
2
|
NAREIT
FFO
|
$ 303
|
$ 233
|
$ 790
|
$ 658
|
Adjusted
FFO
|
$ 308
|
$ 242
|
$ 834
|
$ 681
|
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
725.1
|
705.1
|
719.6
|
693.0
|
Assuming
issuance of common shares granted under the Comprehensive Stock Plan
|
-
|
-
|
-
|
2.0
|
Assuming
conversion of Exchangeable Senior Debentures
|
40.7
|
39.8
|
40.4
|
39.8
|
Weighted
average outstanding shares- redeemed/exchanged 2004 Debentures
|
-
|
-
|
-
|
4.7
|
Diluted
weighted average shares outstanding NAREIT FFO and
Adjusted FFO
|
765.8
|
744.9
|
760.0
|
739.5
|
NAREIT
FFO per diluted share
|
$ .40
|
$ .31
|
$ 1.04
|
$ .89
|
Adjusted
FFO per diluted share
|
$ .40
|
$ .32
|
$ 1.10
|
$ .92
|
|
|
|
|
|
|
|
(a) Reflects
the gain on the sale of three hotels in 2012.
|
(b) See
note (a) to "Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA" for significant transactions affecting FFO.
|
(c) Represents
costs associated with the redemption of the Series S, Series O and
Series Q notes in 2012 and the Series K senior notes and 2007
Debentures in 2011.
|
(d) Includes
approximately $2 million for the quarter ended December 31, 2012 and $3
million for each of the years ended December 31, 2012 and 2011 and the
quarter ended December 31, 2011 related to our share of acquisition
costs incurred by unconsolidated joint ventures.
|
(e) Represents
the portion of the adjustments to NAREIT FFO attributable to
non-controlling partners of Host L.P.
|
(f) Earnings/loss
per diluted share, 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.
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and
NAREIT and
Adjusted Funds From Operations per Diluted Share for
Full Year 2013 Forecasts (a)
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
Net
income
|
$ 217
|
$ 276
|
Interest
expense
|
310
|
310
|
Depreciation
and amortization
|
706
|
706
|
Income
taxes
|
18
|
19
|
EBITDA
|
1,251
|
1,311
|
Gain
on dispositions
|
(21)
|
(21)
|
Equity
investment adjustments:
|
|
|
Equity
in earnings of affiliates
|
(14)
|
(14)
|
Pro
rata Adjusted EBITDA of equity investments
|
51
|
51
|
Consolidated
partnership adjustments:
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(17)
|
(17)
|
Adjusted
EBITDA
|
$ 1,250
|
$ 1,310
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Net
income
|
$ 217
|
$ 276
|
Less:
Net income attributable to non-controlling interests
|
(5)
|
(6)
|
Net
income attributable to Host Inc.
|
212
|
270
|
Adjustments:
|
|
|
Gain
on dispositions
|
(21)
|
(21)
|
Depreciation
and amortization
|
703
|
703
|
Partnership
adjustments
|
14
|
16
|
FFO of
non-controlling interests of Host LP
|
(12)
|
(13)
|
NAREIT
and Adjusted FFO
|
896
|
955
|
Adjustment
for dilutive securities:
|
|
|
Assuming
conversion of Exchangeable Senior Debentures
|
29
|
29
|
Diluted
NAREIT and Adjusted FFO
|
$ 925
|
$ 984
|
|
|
|
Weighted
average diluted shares EPS
|
740.1
|
740.1
|
Weighted
average diluted shares NAREIT and Adjusted FFO (b)
|
775.0
|
775.0
|
Earnings
per diluted share
|
$ .29
|
$ .36
|
NAREIT
FFO per diluted share
|
$ 1.19
|
$ 1.27
|
Adjusted
FFO per diluted share
|
$ 1.19
|
$ 1.27
|
|
|
|
|
|
(a) The
forecasts were based on the below assumptions:
|
- Comparable hotel RevPAR will increase 5.0% to 7.0%
for the low and high ends of the forecasted range, respectively.
- Comparable hotel adjusted operating profit margins
will increase 50 basis points to 110 basis points for the low and high
ends of the forecasted range, respectively.
- Interest expense includes approximately $27
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 $130 million to
$150 million on ROI/redevelopment and acquisition capital expenditures
and approximately $270 million to $290 million on renewal and
replacement expenditures.
- Due to uncertainty related to the completion and
timing of any potential acquisitions and dispositions, we have not
adjusted the forecast for any use of proceeds, gains on sale,
acquisition costs or adjusted the number of comparable properties.
Additionally, we expect to spend approximately $50 million on new
development projects in 2013.
|
For a
discussion of additional items that may affect forecasted results, see
Notes to the Financial Information.
|
(b) The
NAREIT and Adjusted FFO per diluted share include 35 million shares for
the dilution of two series of exchangeable senior debentures. We have
assumed that we will call for redemption the 2004 Debentures in 2013
and expect that holders will opt to exchange them for shares (totaling
approximately 12 million shares), if our stock price exceeds the
exchange price (currently $14.83 per share).
|
|
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
Schedule
of Comparable Hotel Adjusted Operating Profit Margin
|
for
Full Year 2013 Forecasts (a)
|
(unaudited,
in millions, except hotel statistics)
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
Operating
profit margin under GAAP (b)
|
9.8%
|
10.7%
|
Comparable
hotel adjusted operating profit margin (c)
|
24.7%
|
25.3%
|
|
|
|
Comparable
hotel sales
|
|
|
Room
|
$ 3,117
|
$ 3,177
|
Other
|
1,635
|
1,665
|
Comparable
hotel sales (d)
|
4,752
|
4,842
|
Comparable
hotel expenses
|
|
|
Rooms
and other departmental costs
|
1,985
|
2,012
|
Management
fees, ground rent and other costs
|
1,591
|
1,603
|
Comparable
hotel expenses (e)
|
3,576
|
3,615
|
Comparable
hotel adjusted operating profit
|
1,176
|
1,227
|
Non-comparable
hotel results, net
|
139
|
147
|
Depreciation
and amortization
|
(706)
|
(706)
|
Corporate
and other expenses
|
(98)
|
(98)
|
Operating
profit
|
$ 511
|
$ 570
|
|
|
|
|
|
(a) Forecast
comparable hotel results include 109 hotels that we have assumed will
be classified as comparable as of December 31, 2013. 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 2013. 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 Full Year 2013 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):
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
Revenues
|
$ 5,225
|
$ 5,324
|
Non-comparable
hotel revenues
|
(526)
|
(535)
|
Hotel
revenues for which we record rental income, net
|
53
|
53
|
Comparable
hotel sales
|
$ 4,752
|
$ 4,842
|
|
|
|
|
|
(e) The
reconciliation of forecast operating costs and expenses to the
comparable hotel expenses is as follows (in millions):
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
Operating
costs and expenses
|
$ 4,714
|
$ 4,754
|
Non-comparable
hotel and other expenses
|
(387)
|
(388)
|
Hotel
expenses for which we record rental income
|
53
|
53
|
Depreciation
and amortization
|
(706)
|
(706)
|
Corporate
and other expenses
|
(98)
|
(98)
|
Comparable
hotel expenses
|
$ 3,576
|
$ 3,615
|
|
|
|
|
|
|
|
|
|
|
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
Effective January 1, 2013, Marriott announced that it will
convert from a 52-53 week fiscal year to a 12-month calendar year.
While our annual financial statements have always been reported on a
calendar basis and are unaffected by this change, our quarterly results
have not been on a 3-month calendar quarter basis (as they followed
Marriott's fiscal calendar). However, beginning with the first quarter
of 2013, we will report annual and quarterly operating results on a
calendar reporting cycle, which is consistent with the majority of
companies in the lodging industry. We will not restate any previously
reported quarterly financial statements to conform to the new
presentation. Accordingly, investors may find the following discussion
useful when evaluating quarterly operations in 2013 with prior year
quarterly results for both financial statement presentation and hotel
operating statistics and comparable hotel results.
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
53% of our properties, prior to January 1, 2013 used a fiscal year
ending on the Friday closest to December 31 and reported 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. We elected to adopt the
reporting periods used by Marriott except that our fiscal year always
ended on December 31 to comply with REIT tax laws. 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 historically
presented 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 fourth
quarter results for 2012 reflect 115 days of operations, while our
fourth quarter results for 2011 reflect 113 days of operations.
While the quarterly reporting calendar we historically
presented is more closely aligned with the reporting calendar used by
Marriott, 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 47% of our
hotels). As a result, our 2012 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 did affect
the reporting of quarterly results for years prior to 2013.
Reporting Periods for Hotel Operating Statistics and
Comparable Hotel Results
In contrast to the reporting periods for our consolidated
statement of operations, our fourth quarter and full year 2012 hotel
operating statistics (i.e., RevPAR, average daily rate and average
occupancy) and our fourth quarter and full year 2012 comparable hotel
results are always reported based on the reporting cycle used by
Marriott for our Marriott-managed hotels in those periods. 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 used for hotel operating statistics and
our comparable hotels results for fourth quarter and full year 2012
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 fourth quarter of 2012 reflect 16
weeks of operations for the period from September 8, 2012 to December
28, 2012 for our Marriott-managed hotels and results from September 1,
2012 to December 31, 2012 for operations of all other hotels which
report results on a monthly basis.
- Hotel results for the fourth quarter of 2011 reflect 16
weeks of operations for the period from September 10, 2011 to December
30, 2011 for our Marriott-managed hotels and results from September 1,
2011 to December 31, 2011 for operations of all other hotels which
report results on a monthly basis.
- Hotel results for full year 2012 reflect 52 weeks of
operations for the period from December 31, 2011 to December 28, 2012
for our Marriott-managed hotels and results from January 1, 2012 to
December 31, 2012 for operations of all other hotels which report
results on a monthly basis.
- Hotel results for full year 2011 reflect 52 weeks of
operations for the period from January 1, 2011 to December 30, 2011 for
our Marriott-managed hotels and results from January 1, 2011 to
December 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 119 hotels that we owned on December 31, 2012, 103 have
been classified as comparable hotels. The operating results of the
following hotels that we owned as of December 31, 2012 are excluded
from comparable hotel results for these periods:
- Grand Hyatt Washington
(acquired in July 2012);
- Hilton Melbourne South Wharf (acquired in April 2011);
- The Westin New York Grand Central (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 (business interruption due to
extensive renovations, which include facade 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);
- 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) four 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, which lease
terminated on December 31, 2012, are not
included in comparable hotel results for the periods presented herein.
For purpose of our 2013 forecast, we have assumed that for
full year 2013 we will have 109 comparable hotels as from those listed
above we will begin including seven of the ten hotels we acquired in
2011 (The Westin New York Grand Central that was rebranded in 2012 and
our two hotels in Christchurch, New Zealand
that experienced an earthquake in 2011 will continue to be excluded
from our comparable hotel set). We also will exclude from comparable
hotel results the results of the Atlanta Marriott Marquis, which was
sold in the first quarter of 2013.
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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