BETHESDA, Md.,
May 3, 2013 -- Host Hotels
& Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate
investment trust ("REIT"), today announced results of operations for
the first quarter ended March 31, 2013. On an "As Adjusted" basis, as
described herein, the improvements in the Company's results were driven
by a 5.1% increase in comparable hotel RevPAR and strong performances
at its luxury and resort and conference center properties.
As of January 1, 2013, the Company
adopted calendar quarter reporting periods, compared to 2012 where the
Company reported based on the fiscal quarters that had been used by
Marriott International. Accordingly, the Company's revenues, net
income, Adjusted EBITDA, diluted earnings (loss) per share and NAREIT
and Adjusted FFO per diluted share quarterly results for 2013 are not
comparable to the historical quarterly results of 2012 due to the
change in periods. To enable investors to better evaluate its
performance, the Company has presented 2012 RevPAR and certain
historical results on a calendar quarter basis (the "2012 As Adjusted"
results). The 2012 As Adjusted first quarter results include (i) an
adjustment to add the operations from March 24, 2012 through March 31,
2012 for the Company's Marriott-managed hotels and (ii) an adjustment
to add the March operations for its hotels managed by Ritz-Carlton,
Hyatt, Starwood and other managers who report on a calendar basis, as
the Company's historical first quarter results only included January
and February operations for these properties. Accordingly, the
following discussion of operating performance will include a comparison
between the three months of operations ended March
31 for both years, which management believes is an important
supplemental measure of the Company's performance. For further
discussion of the 2012 As Adjusted results, see the Notes to the
Financial Information included in this release.
Operating
Results
(in
millions, except per share and hotel statistics)
|
|
|
Quarter ended
|
|
|
As
Adjusted
|
|
As
Reported
|
|
|
March
31,
|
March
31,
|
|
March
23,
|
|
|
2013
|
2012
(a)
|
%
Change (b)
|
2012 (c)
|
%
Change
|
Total
owned hotel revenues
|
$ 1,238
|
$ 1,183
|
4.6%
|
$ 892
|
38.8%
|
Comparable
hotel revenues (a)
|
1,165
|
1,135
|
2.6%
|
N/M
|
N/M
|
Comparable
hotel RevPAR
|
142.87
|
135.98
|
5.1%
|
N/M
|
N/M
|
Net
income
|
60
|
59
|
1.7%
|
—
|
N/M
|
Adjusted
EBITDA (a)
|
283
|
257
|
10.1%
|
176
|
60.8%
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
$ .08
|
$ .07
|
14.3%
|
$ —
|
N/M
|
NAREIT
FFO per diluted share (a)
|
.29
|
.24
|
20.8%
|
.14
|
107.1%
|
Adjusted
FFO per diluted share (a)
|
.28
|
.24
|
16.7%
|
.14
|
100.0%
|
__________
|
|
N/M=Not
Meaningful
|
|
|
|
(a)
|
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"). In
addition, the presentation of 2012 As Adjusted results, including total
owned hotel revenues and net income, are also non-GAAP financial
measures. See the Notes to Financial Information 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 and information on how the 2012 As Adjusted
results were calculated.
|
(b)
|
The
March 31, 2012 As Adjusted results include one additional day of
operations in February compared to March 31, 2013 due to the 2012 leap
year.
|
(c)
|
Historical
operating results for the first quarter 2012 as filed with the SEC on
April 25, 2012.
|
The Company's owned hotel revenues
increased 4.6% for the first quarter of 2013 compared to the 2012 As
Adjusted results due to the strong performance of its comparable
properties, as well as incremental revenues of $21 million from the
Grand Hyatt Washington, which was acquired in July of 2012. The
increase in comparable hotel RevPAR as adjusted was primarily driven by
strong improvements in average room rates. For the first quarter,
average room rates improved 4.0%, while occupancy improved 0.7
percentage points to 72.3%. The improvements in revenues led to solid
margin growth as comparable hotel adjusted operating profit margins
increased 85 basis points for the first quarter compared to 2012 As
Adjusted.
During the first quarter of 2013, the
Company recognized a previously deferred gain of approximately $11
million related to the 2005 eminent domain claim by the State of Georgia for 2.9 acres of land at
the Atlanta Marriott Perimeter Center for highway expansion. The
Company received the cash in 2007 but could not recognize the gain
until certain requirements were completed. The gain has been included
in NAREIT FFO per diluted share, which is consistent with the treatment
of gains recognized on the disposition of undepreciated assets.
However, due to the significant passage of time since receipt of the
proceeds, the Company has excluded the gain from its Adjusted FFO per
diluted share and Adjusted EBITDA for the quarter.
INVESTMENTS
- REDEVELOPMENT AND RETURN ON INVESTMENT EXPENDITURES -
The Company invested approximately $21 million during the first quarter
of 2013 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. Projects completed
during the first quarter included the development of a pavilion at the
JW Marriott Desert Springs Resort & Spa and the conversion of a
former restaurant into meeting space at the Westin New York Grand
Central. The Company expects ROI investments for 2013 of approximately
$90 million to $100 million.
- CAPITAL EXPENDITURES AT OUR RECENT ACQUISITIONS –
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. The Company spent
approximately $15 million during the first quarter of 2013 on
properties acquired in 2012 and 2011 and expects to invest between $40
million and $50 million for 2013. During the first quarter, the Company
completed the renovation of all 888 guest rooms at the Grand Hyatt
Washington and continued work on the guestrooms renovation in the
second tower of the Manchester Grand Hyatt San Diego.
- RENEWAL AND REPLACEMENT EXPENDITURES - The
Company invested approximately $87 million in renewal and replacement
expenditures during the first quarter. These expenditures are designed
to ensure that the high-quality standards of both the Company and its
operators are maintained. During the quarter, major renewal and
replacement projects included rooms renovations at the Philadelphia
Airport Marriott, the San Francisco Marriott Marquis and the San Diego
Marriott Mission Valley, as well as the renovation of almost 40,000
square feet of meeting and public space at The Ritz-Carlton, Tysons
Corner and over 36,000 square feet of meeting space at the Westin
Denver Downtown. The Company expects that renewal and replacement
expenditures for 2013 will total approximately $270 million to $290
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. In early
April, the Company sold approximately four acres of excess land
adjacent to its Newport Beach Marriott Resort and Spa to a luxury home
builder for $24 million. The land, which had previously been used for
tennis courts, has been approved for the development and sale of 79
luxury condominiums. The Company recognized a gain of approximately $21
million, which will be included in net income, Adjusted EBITDA and
Adjusted FFO in the second quarter of this year.
BALANCE SHEET
During the quarter, the Company issued
its first investment grade senior notes in a $400 million offering of
10-year bonds at an interest rate of 3.75%, which is 100 basis points
lower than any non-convertible bond coupon in the history of the
Company. The bonds mature in October of 2023. The proceeds of the
offering, along with available cash, will be used to redeem on May 15,
the $400 million of 9% Series T senior notes due 2017 at 104.5%, which
reflects an $18 million call premium. The annual interest savings are
$21 million per year. The Company also called the remaining $175
million of 2004 exchangeable debentures for redemption and holders of
approximately $174 million of the debentures elected to exchange their
debentures for shares of the Company's common stock totaling
approximately 11.7 million shares, rather than receive the cash
redemption proceeds, while the remaining $1 million of debentures were
redeemed for cash. These shares have been included in our dilutive
share count when determining our full year NAREIT and Adjusted FFO per
diluted share for the past few years.
Subsequent to the end of the quarter,
the Company repaid the 4.75%, $246 million mortgage loan on the Orlando
World Center Marriott with available cash. The Company also called $200
million of its 6.75% Series Q senior notes due 2016 at 101.125%, which
reflects a $2 million call premium. The redemption will be funded
through a $150 million draw on the revolver portion of its credit
facility and with available cash. After adjusting for these
transactions, including the redemption of the Series T senior notes,
the Company will have approximately $380 million of cash and cash
equivalents, $692 million of available capacity under its credit
facility and approximately $4.8 billion
of debt. In addition, after adjusting for the above transactions, the
Company's weighted average debt maturity is 5.8 years and its annual
cash interest expense will be approximately $230 million.
Also, during the quarter, the Company
issued 6.1 million shares of common stock, at an average price of $16.78 per share, for net proceeds of
approximately $102 million. These issuances were made in
"at-the-market" offerings pursuant to Sales Agency Financing Agreements
with BNY Mellon Capital Markets, LLC and Scotia Capital (USA) Inc. There is approximately $198
million of issuance capacity remaining under the current agreements.
DIVIDEND
On April 15, 2013, the Company paid a
regular quarterly cash dividend of $0.10
per share on its common stock 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 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 250 basis points to 350 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 60 basis points to 120 basis points.
Based upon these parameters, the
Company estimates that its 2013 guidance is as follows:
- earnings per diluted share should range from approximately $.31 to $.39;
- net income should range from $238 million to $298 million;
- NAREIT FFO per diluted share should range from
approximately $1.22 to $1.30;
- Adjusted FFO per diluted share should range from
approximately $1.25 to $1.33; and
- Adjusted EBITDA should be approximately $1,275 million to $1,335
million.
See the 2013 Forecast Schedules and the
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.
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
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 May 3,
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 1.3% of the partnership interests in Host LP held by
outside partners as of March 31, 2013, 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.
Effective January 1, 2013, we report
quarterly operating results on a calendar cycle, which is not
comparable to the quarterly reporting method used in 2012. For
additional information on the change in reporting periods, comparable
hotel measures and non-GAAP financial measures which we believe is
useful to investors, see the Notes to Financial Information included in
this release.
HOST
HOTELS & RESORTS, INC.
Condensed
Consolidated Balance Sheets (a)
(in
millions, except shares and per share amounts)
|
|
|
March
31,
|
December
31,
|
|
2013
|
2012
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
Property
and equipment, net
|
$
11,284
|
$
11,588
|
Due
from managers
|
96
|
80
|
Advances
to and investments in affiliates
|
337
|
347
|
Deferred
financing costs, net
|
53
|
53
|
Furniture,
fixtures and equipment replacement fund
|
157
|
154
|
Other
|
300
|
319
|
Restricted
cash
|
35
|
36
|
Cash
and cash equivalents
|
1,075
|
417
|
Total
assets
|
$ 13,337
|
$ 12,994
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
Debt
|
|
|
Senior notes, including $359 million and $531 million, respectively,
net of
discount, of Exchangeable Senior Debentures
|
$ 3,798
|
$ 3,569
|
Credit facility, including the $500 million term loan
|
658
|
763
|
Mortgage debt
|
992
|
993
|
Other
|
86
|
86
|
Total
debt
|
5,534
|
5,411
|
Accounts
payable and accrued expenses
|
165
|
194
|
Other
|
353
|
372
|
Total
liabilities
|
6,052
|
5,977
|
|
|
|
Non-controlling
interests—Host Hotels & Resorts, L.P
|
175
|
158
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders' equity:
|
|
|
Common stock, par value $.01, 1,050 million shares authorized; 742.8
million
shares and 724.6 million shares issued and outstanding, respectively
|
7
|
7
|
Additional paid-in capital
|
8,303
|
8,040
|
Accumulated other comprehensive income
|
14
|
12
|
Deficit
|
(1,253)
|
(1,234)
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
7,071
|
6,825
|
Non-controlling
interests—other consolidated partnerships
|
39
|
34
|
Total
equity
|
7,110
|
6,859
|
Total
liabilities, non-controlling interests and equity
|
$ 13,337
|
$ 12,994
|
__________
|
(a)
|
Our
condensed consolidated balance sheet as of March 31, 2013 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
|
|
March
31,
|
March
23,
|
|
2013
|
2012
|
Revenues
|
|
|
Rooms
|
$ 781
|
$ 553
|
Food
and beverage
|
379
|
282
|
Other
|
78
|
57
|
Owned
hotel revenues
|
1,238
|
892
|
Other
revenues
|
17
|
60
|
Total
revenues
|
1,255
|
952
|
Expenses
|
|
|
Rooms
|
221
|
160
|
Food
and beverage
|
281
|
208
|
Other
departmental and support expenses
|
316
|
242
|
Management fees
|
48
|
33
|
Other
property-level expenses
|
96
|
122
|
Depreciation and amortization
|
177
|
149
|
Corporate and other expenses
|
26
|
22
|
Total
operating costs and expenses
|
1,165
|
936
|
Operating
profit
|
90
|
16
|
Interest
income
|
1
|
4
|
Interest
expense (b)
|
(76)
|
(86)
|
Net
gains on property transactions and other
|
12
|
1
|
Gain
(loss) on foreign currency transactions and derivatives
|
2
|
(1)
|
Equity
in losses of affiliates
|
(2)
|
(2)
|
Income
(loss) before income taxes
|
27
|
(68)
|
Benefit
for income taxes
|
7
|
13
|
Income
(loss) from continuing operations
|
34
|
(55)
|
Income
from discontinued operations, net of tax
|
26
|
55
|
Net
income
|
60
|
—
|
Less:
Net income attributable to non-controlling interests
|
(4)
|
(2)
|
Net
income (loss) attributable to Host Inc.
|
$ 56
|
$ (2)
|
Basic
and diluted earnings (loss) per common share:
|
|
|
Continuing operations
|
$ .04
|
$ (.08)
|
Discontinued operations
|
.04
|
.08
|
Basic
and diluted earnings per common share
|
$ .08
|
$ —
|
__________
|
(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 non-cash charges of $4 million and $5 million related
to the exchangeable senior debentures for 2013 and 2012, respectively.
|
HOST
HOTELS & RESORTS, INC.
Earnings
(Loss) per Common Share
(unaudited,
in millions, except per share amounts)
|
|
|
Quarter
ended
|
|
March
31,
|
March
23,
|
|
2013
|
2012
|
Net
income
|
$ 60
|
$ —
|
Less:
Net income attributable to non-controlling interests
|
(4)
|
(2)
|
Net
income (loss) attributable to Host Inc
|
$ 56
|
$ (2)
|
Diluted
income (loss) attributable to Host Inc
|
$ 56
|
$ (2)
|
|
|
|
Basic
weighted average shares outstanding
|
728.2
|
707.5
|
Diluted
weighted average common shares outstanding (a)
|
738.6
|
707.5
|
Basic
and diluted earnings (loss) per common share
|
$ .08
|
$ —
|
__________
|
(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
Adjusted
|
|
|
As
of March 31, 2013
|
Quarter
ended March 31, 2013
|
Quarter
ended March 31, 2012
|
|
|
|
|
|
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
|
27
|
16,884
|
$
197.12
|
74.2%
|
$
146.33
|
$
191.26
|
75.7%
|
$
144.72
|
1.1%
|
Mid-Atlantic
|
11
|
8,638
|
219.60
|
75.6
|
166.07
|
214.66
|
71.7
|
153.83
|
8.0
|
South
Central
|
9
|
5,695
|
170.72
|
75.7
|
129.29
|
156.69
|
75.2
|
117.81
|
9.7
|
D.C.
Metro
|
12
|
5,418
|
201.84
|
67.1
|
135.41
|
198.51
|
66.5
|
132.04
|
2.6
|
North
Central
|
11
|
4,782
|
141.36
|
61.6
|
87.09
|
138.36
|
64.6
|
89.38
|
(2.6)
|
Florida
|
8
|
3,680
|
283.54
|
84.5
|
239.48
|
258.41
|
80.7
|
208.60
|
14.8
|
New
England
|
6
|
3,672
|
160.83
|
64.4
|
103.56
|
156.77
|
58.6
|
91.82
|
12.8
|
Mountain
|
7
|
2,885
|
197.25
|
67.9
|
133.96
|
191.07
|
68.1
|
130.11
|
3.0
|
Atlanta
|
6
|
2,183
|
176.23
|
70.8
|
124.82
|
171.78
|
68.5
|
117.65
|
6.1
|
Asia-Pacific
|
6
|
1,255
|
163.69
|
83.8
|
137.13
|
158.25
|
82.0
|
129.73
|
5.7
|
Canada
|
3
|
1,219
|
178.00
|
64.3
|
114.45
|
172.97
|
61.9
|
107.03
|
6.9
|
Latin
America
|
4
|
1,075
|
241.89
|
67.3
|
162.81
|
240.65
|
72.4
|
174.12
|
(6.5)
|
All
Regions
|
110
|
57,386
|
197.57
|
72.3
|
142.87
|
189.94
|
71.6
|
135.98
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Adjusted
|
|
|
As
of March 31, 2013
|
Quarter
ended March 31, 2013
|
Quarter
ended March 31, 2012
|
|
|
|
|
|
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
|
57
|
35,294
|
$
198.58
|
72.3%
|
$
143.49
|
$
194.81
|
71.2%
|
$
138.77
|
3.4%
|
Suburban
|
29
|
10,568
|
161.50
|
66.4
|
107.17
|
151.08
|
67.5
|
101.91
|
5.2
|
Resort/Conference
|
13
|
6,356
|
294.56
|
79.6
|
234.57
|
273.88
|
76.7
|
210.15
|
11.6
|
Airport
|
11
|
5,168
|
130.35
|
75.8
|
98.86
|
125.20
|
76.2
|
95.36
|
3.7
|
All
Types
|
110
|
57,386
|
197.57
|
72.3
|
142.87
|
189.94
|
71.6
|
135.98
|
5.1
|
Hotel
Operating Statistics for All Properties (b)
|
|
|
Quarter
ended
|
|
|
As
Adjusted
|
|
March
31,
|
March
31,
|
|
2013
|
2012
|
Average
room rate
|
$
196.57
|
$
186.65
|
Average
occupancy
|
72.0%
|
71.1%
|
RevPAR
|
$
141.45
|
$
132.67
|
__________
|
(a)
|
See
the Notes to Financial Information for a discussion of reporting
periods and the calculation of comparable hotel operating statistics.
|
(b)
|
The
operating statistics reflect all consolidated properties as of March
31, 2013 and March 31, 2012, 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
|
|
|
|
As
Adjusted
|
|
|
March
31,
|
March
31,
|
|
|
2013
|
2012
(b)
|
Number
of hotels
|
110
|
110
|
Number
of rooms
|
57,386
|
57,386
|
Percent
change in comparable hotel RevPAR
|
5.1%
|
—
|
Operating
profit margin (c)
|
7.2%
|
6.6%
|
Comparable
hotel adjusted operating profit margin (c)
|
23.4%
|
22.55%
|
Comparable
hotel revenues
|
|
|
Room
|
$ 738
|
$ 710
|
Food
and beverage
|
352
|
354
|
Other
|
75
|
71
|
Comparable hotel revenues (d)
|
1,165
|
1,135
|
Comparable
hotel expenses
|
|
|
Room
|
206
|
197
|
Food
and beverage
|
260
|
259
|
Other
|
40
|
39
|
Management fees, ground rent and other costs
|
386
|
384
|
Comparable hotel expenses (e)
|
892
|
879
|
Comparable
hotel adjusted operating profit
|
273
|
256
|
Non-comparable
hotel results, net (f)
|
20
|
16
|
Loss
for hotels leased from HPT (g)
|
—
|
(4)
|
Depreciation
and amortization
|
(177)
|
(161)
|
Corporate
and other expenses
|
(26)
|
(24)
|
Operating
profit
|
$ 90
|
83
|
Less:
Estimated operating profit adjustments for the calendar period (b)
|
|
(67)
|
Operating
profit for the period January 1, 2012 through March 23, 2012 (as
reported)
|
|
$ 16
|
__________
|
(a)
|
See
the Notes to Financial Information for discussion of non-GAAP measures,
reporting periods and the calculation of comparable hotel results.
|
(b)
|
Comparable
hotel results and statistics for March 31, 2012 are based on 2012 As
Adjusted results. Adjustments for the calendar period reflect estimated
operations for eight days from March 24, 2012 through March 31, 2012
for our Marriott-branded properties and the month of March 2012 results
for the remainder of the portfolio, which were previously reported in
second quarter 2012 results. Additionally, the 2012 As Adjusted March
31 results include one additional day of operations in February
compared to March 31, 2013 due to the 2012 leap year. See the Notes to
Financial Information for further discussion and information on how the
2012 As Adjusted results were calculated.
|
(c)
|
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, or
amounts As Adjusted. Comparable margins are calculated using amounts
presented in the above table.
|
(d)
|
The
reconciliation of total revenues per the consolidated statements of
operations to the comparable hotel revenues is as follows:
|
|
|
|
|
|
Quarter
ended
|
|
|
|
As
Adjusted
|
|
|
March
31,
|
March
31,
|
|
|
2013
|
2012
(b)
|
|
Revenues
per the consolidated statements of operations:
|
|
|
|
For
the period January 1, 2012 through March 23, 2012 (as reported)
|
|
$ 952
|
|
Revenue
adjustment for the calendar period (b)
|
|
297
|
|
For
the quarter ended
|
$ 1,255
|
1,249
|
|
Non-comparable
hotel revenues
|
(104)
|
(75)
|
|
Hotel
revenues for which we record rental income, net
|
14
|
14
|
|
Revenues
for hotels leased from HPT (g)
|
—
|
(53)
|
|
Comparable hotel revenues
|
$ 1,165
|
$ 1,135
|
HOST
HOTELS & RESORTS, INC.
Comparable
Hotel Operating Data
Schedule
of Comparable Hotel Results
(unaudited,
in millions, except hotel statistics)
|
|
|
|
(e)
|
The
reconciliation of operating costs per the consolidated statements of
operations to the comparable hotel expenses is as follows:
|
|
|
|
|
|
|
Quarter
ended
|
|
|
|
|
As
Adjusted
|
|
|
|
March
31,
|
March
31,
|
|
|
|
2013
|
2012
(b)
|
|
|
Operating
costs and expenses per the consolidated statements of operations:
|
|
|
|
|
For
the period January 1, 2012 through March 23, 2012 (as reported)
|
|
$ 936
|
|
|
Operating
costs and expenses adjustment for the calendar period (b)
|
|
230
|
|
|
For
the quarter ended
|
$ 1,165
|
1,166
|
|
|
Non-comparable
hotel expenses
|
(84)
|
(59)
|
|
|
Hotel
expenses for which we record rental income
|
14
|
14
|
|
|
Expense
for hotels leased from HPT (g)
|
—
|
(57)
|
|
|
Depreciation
and amortization
|
(177)
|
(161)
|
|
|
Corporate
and other expenses
|
(26)
|
(24)
|
|
|
Comparable hotel expenses
|
$ 892
|
$ 879
|
|
|
|
|
|
(f)
|
Non-comparable
hotel results, net, includes the following items: (i) the results of
operations of our non-comparable hotels whose operations are included
in our consolidated statements of operations as continuing operations,
(ii) gains on property insurance settlements and (iii) the results of
our office buildings.
|
(g)
|
The
leases terminated on December 31, 2012.
|
HOST
HOTELS & RESORTS, INC.
Other
Financial Data
(unaudited,
in millions, except per share amounts)
|
|
|
March
31,
|
December
31,
|
|
2013
|
2012
|
Equity
|
|
|
Common
shares outstanding
|
742.8
|
724.6
|
Common
shares outstanding assuming conversion of non-controlling interest
OP
Units (a)
|
752.8
|
734.7
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
Security
pricing
|
|
|
Common
(b)
|
$ 17.49
|
$ 15.67
|
3¼%
Exchangeable Senior Debentures (c)
|
$ —
|
$
1,152.8
|
2½%
Exchangeable Senior Debentures (c)
|
$
1,397.3
|
$
1,309.2
|
|
|
|
Dividends
declared per share for calendar year
|
|
|
Common
|
$ .10
|
$ .30
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
March
31,
|
December
31,
|
Senior
debt
|
Rate
|
Maturity
date
|
2013
|
2012
|
Series
Q (d)
|
6¾%
|
6/2016
|
$ 550
|
$ 550
|
Series
T (e)
|
9%
|
5/2017
|
392
|
391
|
Series
V
|
6%
|
11/2020
|
500
|
500
|
Series
X
|
5⅞%
|
6/2019
|
497
|
497
|
Series
Z
|
6%
|
10/2021
|
300
|
300
|
Series
B
|
5¼%
|
3/2022
|
350
|
350
|
Series
C
|
4¾%
|
3/2023
|
450
|
450
|
Series
D (e)
|
3¾%
|
10/2023
|
400
|
—
|
Exchangeable
senior debentures
|
3¼%
|
4/2024
|
—
|
175
|
Exchangeable
senior debentures (f)
|
2½%
|
10/2029
|
359
|
356
|
Credit
facility term loan
|
2.0%
|
7/2017
|
500
|
500
|
Credit
facility revolver (g)
|
2.9%
|
11/2015
|
158
|
263
|
|
|
|
4,456
|
4,332
|
Mortgage
debt and other
|
|
|
|
|
Mortgage
debt (non-recourse) (h)
|
3.3-8.5%
|
7/2013-11/2016
|
992
|
993
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
86
|
86
|
Total
debt (i)(j)
|
|
|
5,534
|
$ 5,411
|
Subsequent
Debt Transactions
|
|
|
Anticipated
redemption - 6¾% Series Q Senior Notes (d)
|
(200)
|
|
Anticipated
draw on the credit facility revolver (d)
|
150
|
|
Anticipated
redemption - 9% Series T Senior Notes (e)
|
(400)
|
|
May 1,
2013 repayment of Orlando World Center Marriott mortgage (h)
|
(246)
|
|
Total
Debt: as adjusted for subsequent debt transactions
|
$ 4,838
|
|
|
|
|
Percentage
of fixed rate debt
|
80%
|
78%
|
Weighted
average interest rate
|
5.5%
|
5.4%
|
Weighted
average debt maturity
|
5.4
years
|
5.1
years
|
__________
|
(a)
|
Each
OP Unit is redeemable for cash or, at our option, for 1.021494 common
shares of Host Inc. At March 31, 2013 and December 31, 2012, there were
9.8 million and 9.9 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)
|
On May
2, 2013, we called $200 million of 6.75% Series Q senior notes due
2016. The redemption will be funded through a $150 million draw on the
revolver portion of the credit facility and with available cash.
|
(e)
|
The
net proceeds from the issuance of the Series D senior notes, together
with available cash, will be used to redeem, on May 15, 2013, the $400
million of 9% Series T senior notes due 2017.
|
(f)
|
At
March 31, 2013, 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 us to
repurchase the 2009 Debentures for cash.
|
(g)
|
The
interest rate shown is the weighted average rate of the outstanding
credit facility at March 31, 2013.
|
(h)
|
On May
1, 2013, we repaid the 4.75% $246 million mortgage loan on the Orlando
World Center Marriott with available cash.
|
(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 March 31, 2013, our
non-controlling partners' share of consolidated debt is $67 million and
our share of debt in unconsolidated investments is $456 million.
|
(j)
|
Total
debt as of March 31, 2013 and December 31, 2012 includes net discounts
of $46 million and $48 million, respectively.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income to
EBITDA
and Adjusted EBITDA (a)
(unaudited,
in millions)
|
|
|
Quarter
ended
|
|
|
As
Adjusted
|
As
Reported
|
|
March
31,
|
March
31,
|
March
23,
|
|
2013
|
2012
(a)
|
2012
|
Net
income (b)(e)
|
$ 60
|
$ 59
|
$ —
|
Interest expense
|
76
|
94
|
86
|
Depreciation and amortization
|
177
|
161
|
149
|
Income taxes
|
(7)
|
(11)
|
(13)
|
Discontinued operations (c)
|
3
|
5
|
4
|
EBITDA
|
309
|
308
|
226
|
Gain
on dispositions (d)
|
(19)
|
(48)
|
(48)
|
Recognition of deferred gain on land condemnation (e)
|
(11)
|
—
|
—
|
Amortization of deferred gains
|
—
|
(1)
|
(1)
|
Equity investment adjustments:
|
|
|
|
Equity in (earnings) losses of affiliates
|
2
|
(1)
|
2
|
Pro
rata Adjusted EBITDA of equity investments
|
8
|
5
|
2
|
Consolidated partnership adjustments:
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling
partners in other consolidated partnerships
|
(6)
|
(6)
|
(5)
|
Adjusted
EBITDA
|
$ 283
|
$ 257
|
$ 176
|
__________
|
(a)
|
See
the Notes to Financial Information for discussion of non-GAAP measures,
reporting periods and information on the calculation of As Adjusted
quarterly results.
|
(b)
|
The
difference of $59 million in net income between the As Adjusted quarter
ended March 31, 2012 and as reported quarter ended March 23, 2012
reflects estimated net income from March 24, 2012 through March 31,
2012 for our Marriott-managed hotels, and the March 2012 operations for
the remainder of the portfolio, which previously were reported in
second quarter 2012 results.
|
(c)
|
Reflects
the interest expense, depreciation and amortization and incomes taxes
included in discontinued operations.
|
(d)
|
Reflects
the gain recorded on the sale of one hotel in 2013 and 2012,
respectively.
|
(e)
|
During
the first quarter of 2013, the Company recognized a deferred gain of
approximately $11 million related to the eminent domain claim by the
State of Georgia for 2.9 acres of land at the Atlanta Marriott
Perimeter Center for highway expansion, for which we received cash
proceeds in 2007. The Company has included the gain in NAREIT FFO per
diluted share, which is consistent with the treatment of gains
recognized on the disposition of undepreciated assets. However, due to
the significant passage of time since we received the proceeds, the
Company has excluded the gain from its Adjusted FFO per diluted share
and Adjusted EBITDA for the quarter.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income to NAREIT and
Adjusted
Funds From Operations per Diluted Shares (a)
(unaudited, in millions, except per share amounts)
|
|
|
Quarter
ended
|
|
|
As
Adjusted
|
As
Reported
|
|
March
31,
|
March
31,
|
March
23,
|
|
2013
|
2012
(a)
|
2012
|
Net
income (b)
|
$ 60
|
$ 59
|
$ —
|
Less:
Net income attributable to non-controlling interests
|
(4)
|
(4)
|
(2)
|
Net
income (loss) attributable to Host Inc.
|
56
|
55
|
(2)
|
Adjustments:
|
|
|
|
Gain
on dispositions, net of taxes (c)
|
(19)
|
(48)
|
(48)
|
Amortization of deferred gains and other property transactions,
net
of taxes
|
—
|
(1)
|
(1)
|
Depreciation and amortization
|
176
|
165
|
153
|
Partnership adjustments
|
8
|
4
|
—
|
FFO
of non-controlling interests of Host LP
|
(3)
|
(2)
|
(1)
|
NAREIT
FFO
|
218
|
173
|
101
|
Adjustments
to NAREIT FFO:
|
|
|
|
Acquisition costs (d)
|
—
|
1
|
—
|
Recognition of deferred gain on land condemnation (e)
|
(11)
|
—
|
—
|
Adjusted
FFO
|
$ 207
|
$ 174
|
$ 101
|
|
|
|
|
For
calculation on a per share basis:
|
|
|
|
|
|
|
|
Adjustments
for dilutive securities (f):
|
|
|
|
Assuming conversion of Exchangeable Senior Debentures
|
$ 7
|
$ 7
|
$ 1
|
Diluted
NAREIT FFO
|
$ 225
|
$ 180
|
$ 102
|
Diluted
Adjusted FFO
|
$ 214
|
$ 181
|
$ 102
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
738.6
|
708.4
|
707.5
|
Assuming issuance of common shares granted under the
Comprehensive Stock Plan
|
—
|
0.7
|
0.7
|
Assuming conversion of Exchangeable Senior Debentures
|
29.1
|
40.2
|
11.5
|
Diluted
weighted average shares outstanding – NAREIT FFO
and Adjusted FFO
|
767.7
|
749.3
|
719.7
|
NAREIT
FFO per diluted share
|
$ .29
|
$ .24
|
$ .14
|
Adjusted
FFO per diluted share
|
$ .28
|
$ .24
|
$ .14
|
__________
|
(a)
|
See
Notes to the Financial Information for discussion of non-GAAP measures,
reporting periods and information on the calculation of As Adjusted
quarterly results.
|
(b)
|
The
difference of $59 million in net income between the As Adjusted quarter
ended March 31, 2012 and as reported quarter ended March 23, 2012
reflects estimated net income from March 24, 2012 through March 31,
2012 for our Marriott-managed hotels, and the March 2012 operations for
the remainder of the portfolio, which previously were reported in
second quarter 2012 results.
|
(c)
|
Reflects
the gain on the sale of one hotel in 2013 and 2012, respectively.
|
(d)
|
Includes
approximately $1 million for the quarter ended March 31, 2012, related
to our share of acquisition costs incurred by unconsolidated joint
ventures.
|
(e)
|
The
Company has excluded from Adjusted FFO the recognition of deferred gain
on the land condemnation at the Atlanta Marriott Perimeter Center.
Please see note (e) to the Reconciliation of Net Income to EBITDA and
Adjusted EBITDA for further discussion.
|
(f)
|
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.
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income to EBITDA, Adjusted EBITDA and
NAREIT
and Adjusted Funds From Operations per Diluted Shares for 2013
Forecasts (a)
(unaudited,
in millions, except per share amounts)
|
|
|
Full
Year 2013
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Net
income
|
$ 238
|
$ 298
|
Interest expense
|
310
|
310
|
Depreciation and amortization
|
708
|
708
|
Income taxes
|
20
|
20
|
Discontinued operations
|
3
|
3
|
EBITDA
|
1,279
|
1,339
|
Gain
on dispositions
|
(19)
|
(19)
|
Recognition of deferred gain on land condemnation
|
(11)
|
(11)
|
Equity investment adjustments:
|
|
|
Equity in earnings of affiliates
|
(7)
|
(7)
|
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
|
(18)
|
(18)
|
Adjusted
EBITDA
|
$ 1,275
|
$ 1,335
|
|
|
|
|
Full
Year 2013
|
|
Low-end
of
range
|
High-end
of
range
|
Net
income
|
$ 238
|
$ 298
|
Less:
Net income attributable to non-controlling interests
|
(9)
|
(9)
|
Net
income attributable to Host Inc.
|
229
|
289
|
Adjustments:
|
|
|
Gain
on dispositions
|
(19)
|
(19)
|
Depreciation and amortization
|
706
|
706
|
Partnership adjustments
|
22
|
24
|
FFO
of non-controlling interests of Host LP
|
(13)
|
(13)
|
NAREIT
FFO
|
925
|
987
|
Adjustments:
|
|
|
Loss
on debt extinguishments
|
36
|
36
|
Recognition of deferred gain on land condemnation
|
(11)
|
(11)
|
Adjusted
FFO
|
950
|
1,012
|
Adjustment
for dilutive securities:
|
|
|
Assuming conversion of Exchangeable Senior Debentures
|
26
|
26
|
Diluted
NAREIT FFO
|
951
|
1,013
|
Diluted
Adjusted FFO
|
$ 976
|
$ 1,038
|
|
|
|
Weighted
average diluted shares – EPS
|
745.8
|
745.8
|
Weighted
average diluted shares – NAREIT and Adjusted FFO (b)
|
778.3
|
778.3
|
Earnings
per diluted share
|
$ .31
|
$ .39
|
NAREIT
FFO per diluted share
|
$ 1.22
|
$ 1.30
|
Adjusted
FFO per diluted share
|
$ 1.25
|
$ 1.33
|
__________
|
(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 60 basis points to 120 basis points for the low and high
ends of the forecasted range, respectively.
- Interest expense includes approximately $36 million
related to the loss on debt extinguishments and $26 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
the Notes to Financial Information.
|
|
|
(b)
|
The
NAREIT and Adjusted FFO per diluted share include 33 million shares for
the dilution of exchangeable senior debentures.
|
HOST
HOTELS & RESORTS, INC.
Schedule
of Comparable Hotel Adjusted Operating Profit Margin
for
2013 Forecasts (a)
(unaudited,
in millions, except hotel statistics)
|
|
|
2013
|
|
Low-end
|
High-end
|
|
of
range
|
of
range
|
Operating
profit margin under GAAP (b)
|
9.6%
|
10.6%
|
Comparable
hotel adjusted operating profit margin (c)
|
24.9%
|
25.5%
|
|
|
|
Comparable
hotel sales
|
|
|
Room
|
$ 3,117
|
$ 3,176
|
Food
and beverage
|
1,361
|
1,388
|
Other
|
274
|
280
|
Comparable hotel sales (d)
|
4,752
|
4,844
|
Comparable
hotel expenses
|
|
|
Rooms, food and beverage and other departmental costs
|
1,983
|
2,012
|
Management fees, ground rent and other costs
|
1,587
|
1,597
|
Comparable hotel expenses (e)
|
3,570
|
3,609
|
Comparable
hotel adjusted operating profit
|
1,182
|
1,235
|
Non-comparable
hotel results, net
|
130
|
137
|
Depreciation
and amortization
|
(708)
|
(708)
|
Corporate
and other expenses
|
(102)
|
(102)
|
Operating profit
|
$ 502
|
$ 562
|
|
|
|
|
|
__________
|
(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 the 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
|
$ 5,226
|
$ 5,327
|
|
Non-comparable
hotel revenues
|
(526)
|
(535)
|
|
Hotel
revenues for which we record rental income, net
|
52
|
52
|
|
Comparable hotel sales
|
$ 4,752
|
$ 4,844
|
|
|
(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
|
$ 4,724
|
$ 4,765
|
|
Non-comparable
hotel and other expenses
|
(396)
|
(398)
|
|
Hotel
expenses for which we record rental income
|
52
|
52
|
|
Depreciation
and amortization
|
(708)
|
(708)
|
|
Corporate
and other expenses
|
(102)
|
(102)
|
|
Comparable hotel expenses
|
$ 3,570
|
$ 3,609
|
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, we report
quarterly operating results on a calendar cycle, which is now
consistent with all of our hotel managers and the majority of companies
in the lodging industry. Historically, our annual financial statements
have been reported on a calendar basis and are unaffected by this
change. However, our quarterly operating results have been reported
based on a 52-53 week fiscal calendar used by Marriott International,
Inc. ("Marriott"), the manager of approximately 50% of our properties.
For 2013, Marriott converted to reporting results based on a 12-month
calendar year. During 2012, Marriott 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 weeks for the fourth quarter
of the year for its Marriott-managed hotels. Accordingly, our first
three quarters of operations in 2012 ended on March 23, June 15 and
September 7. In contrast, managers of our other hotels, such as
Ritz-Carlton, Hyatt, and Starwood, reported results on a monthly basis.
During 2012, we did not report the month of operations that ended after
our fiscal quarter until the following quarter for those hotels using a
monthly reporting period because these hotel managers did not make
mid-month results available to us. Accordingly, the month of operations
that ended after our fiscal quarter was included in our quarterly
results of operations in the following quarter for those calendar
reporting hotel managers. 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).
We will not restate the previously
filed 2012 quarterly financial statements prepared in accordance with
GAAP because certain property-level operating expenses for our
Marriott-managed properties necessary to restate operations are
unavailable on a daily basis. Because we rely on our operators for the
hotel operating results used in our financial statements, the
unavailability of this information on a calendar quarter basis for 2012
made restating our financial statements in accordance with GAAP
unfeasible. Accordingly, the corresponding 2012 quarterly historical
operating results are not comparable to our 2013 quarterly results.
However, to enable investors to better
evaluate our performance over comparable periods, we have presented
certain 2012 quarterly results and operating statistics on a calendar
year basis of reporting, which we will refer to as "2012 As Adjusted"
results. The financial information for the 2012 As Adjusted quarter
presented herein was calculated based on our actual reported operating
results for the quarter ended March 23, 2012
period adjusted as follows:
- For our 59 hotels operated by Marriott that have
traditionally reported operations on the basis of a 52-53 week fiscal
calendar (that included operations through March
23, 2012 for the first quarter), our 2012 As Adjusted results
reflect the $60 million of revenue for
these hotels for the eight days from March 24,
2012 through March 31, 2012
(based on daily revenue information provided by Marriott) that
previously were included in our results of operations for the second
quarter 2012.
- Because Marriott is not able to provide us with operating
expenses for our Marriott-operated hotels for the same March 24, 2012
through March 31, 2012 period, our 2012 As Adjusted results reflect
approximately $43 million of operating expenses that we have estimated
were incurred for our Marriott-operated hotels for the period. We
derived these estimates based on an internally developed allocation
methodology based on historical expenses provided by Marriott
consistent with its prior 52-53 week reporting calendar.
- For our 58 hotels operated by managers other than Marriott
(including those by Ritz-Carlton, Hyatt and Starwood), that have
traditionally reported operations on a calendar month basis, our 2012
As Adjusted results reflect the $231 million of revenues and $167 million of operating expenses for these
non-Marriott hotels for the full calendar month of March 2012 that previously were included in
our results of operations for the second quarter 2012.
- For all other income statement line items presented for the
2012 As Adjusted quarter, including depreciation, interest income and
expense and other corporate costs, as well as those utilized in the
reconciliations for our non-GAAP measures, our 2012 As Adjusted results
reflect such amounts for the full calendar quarter ended March 31, 2012 based on historical
information.
COMPARABLE HOTEL OPERATING STATISTICS
To facilitate a quarter-to-quarter
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 118 hotels that we owned on
March 31, 2013, 110 have been classified as comparable hotels. The
operating results of the following hotels that we owned as of March 31,
2013 are excluded from comparable hotel results for these periods:
- Grand Hyatt Washington
(acquired in July 2012);
- The Westin New York Grand Central (business interruption
due to re-branding of the hotel and extensive renovations, which
included renovation of 774 guest rooms, lobby, public and meeting
spaces, fitness center, restaurant and bar);
- Two hotels in Christchurch, New
Zealand (business interruption due to closure of the hotels
following an earthquake in 2011 and the subsequent extensive
renovations);
- Orlando World Center Marriott (business interruption due to
extensive renovations, which include 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);
- Chicago Marriott O'Hare (business interruption due to
extensive renovations, which included renovating every aspect of the
hotel and shutting down over 200 rooms); and
- 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).
The operating results of four hotels
disposed of in 2013 and 2012 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 measures and presents why we believe they are useful supplemental
measures of our performance.
To facilitate comparison against a
comparable period in 2012, we are presenting our above non-GAAP
financial measures for the quarter ended March
31, 2013 and for the 2012 As Adjusted quarter. We also present
Adjusted EBITDA, NAREIT FFO per diluted share and Adjusted FFO per
diluted share for our "as reported" quarter ended March 23, 2012. In addition, we present our
Total Owned Hotel Revenue and Net Income for the 2012 As Adjusted
quarter. Because the presentation of these line items on an "As
Adjusted" basis is not in accordance with GAAP, they also constitute
non-GAAP financial measures. We present these measures because we
believe that doing so provides investors and management with useful
supplemental information for evaluating the period-to-period
performance of our hotels. These results are, however, based on
estimates. Our internal allocation methodology used to develop these
estimates is based on assumptions, some of which may be inaccurate. For
this reason, while management believes presentation of these
supplemental measures is beneficial, investors are cautioned from
placing undue reliance on the 2012 As Adjusted results and should
consider these results together with the presentation of GAAP revenues,
net income and expenses.
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.
In unusual circumstances, we may also
adjust NAREIT FFO for gains or losses that management believes are not
representative of the Company's current operating performance. For
example, in the first quarter of 2013, management excluded the $11
million gain from the eminent domain claim for land adjacent to the
Atlanta Marriott Perimeter Center for which we received the cash
proceeds in 2007, but, pending the resolution of certain contingencies,
was not recognized until 2013. Typically, gains from the disposition of
non-depreciable property are included in the determination of NAREIT
and Adjusted FFO.
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.
In unusual circumstances, we may also
adjust EBITDA for gains or losses that management believes are not
representative of the Company's current operating performance. For
example, in the first quarter of 2013, management excluded the $11
million gain from the eminent domain claim for land adjacent to the
Atlanta Marriott Perimeter Center for which we received the cash
proceeds in 2007, but, pending the resolution of certain contingencies,
was not recognized until 2013. Typically, gains from the disposition of
non-depreciable property are included in the determination of Adjusted
EBITDA.
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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