HOST MARRIOTT CORPORATION
Introductory Notes to Financial Information
The Company
Host Marriott Corporation, herein referred to as "we"
or "Host Marriott," is a self-managed and self-administered real estate
investment trust (REIT) that owns primarily hotel properties. We conduct
our operations as an umbrella partnership REIT through an operating partnership,
Host Marriott, L.P., or Host LP, of which we are the sole general partner.
For each share of our common stock, Host LP has issued to us one unit of
operating partnership interest, or OP Unit. When distinguishing between
Host Marriott and Host LP, the primary difference is the 7% of the partnership
interests in Host LP held by outside partners as of April 27, 2004, which
is reflected as minority interest in our balance sheets and minority interest
expense in our statements of operations. Readers are encouraged to find
further detail regarding our organizational structure in our annual report
on Form 10-K.
Reporting Periods for Hotel Operating Statistics and
Comparable Hotel Results
The results we report are based on results of our hotels
reported to us by our hotel managers. Our hotel managers use different
reporting periods. Marriott International, Inc., the manager of the majority
of our properties, uses a fiscal year ending on the Friday closest to December
31 and reports twelve weeks of operations for the first three quarters
and sixteen or seventeen weeks for the fourth quarter of the year for its
Marriott-managed hotels. In contrast, other managers of our hotels, such
as Hyatt, report results on a monthly basis. Host Marriott, as a REIT,
is required by tax laws to report results on a calendar year. As a result,
we elected to adopt the reporting periods used by Marriott International
modified so that our fiscal year always ends on December 31 to comply with
REIT rules. Our first three quarters of operations end on the same day
as Marriott International but our fourth quarter ends on December 31.
Two consequences of the reporting cycle we have adopted
are: (1) quarterly start dates will usually differ between years, except
for the first quarter which always commences on January 1, and (2) our
first and fourth quarters of operations and year-to-date operations may
not include the same number of days as reflected in prior years. For example,
the first quarter of 2004 ended on March 26 and the first quarter of 2003
ended on March 28. As a result, during the first quarter of 2004 we included
86 days of operations, including February 29, 2004, while for first quarter
2003, we included 87 days of operations.
In addition, for results reported by hotel managers using
a monthly reporting period (approximately one-fourth of our full-service
hotels), the month of operation that ends after our fiscal quarter-end
is included in our results of operations in the following fiscal quarter.
For these hotels, operations for the entire month of March are reported
in our second fiscal quarter. Accordingly, our 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). The
first quarter of 2004 includes 60 days of operations for our monthly hotels
compared to 59 days of operations for the first quarter of 2003 as February
included 29 days in 2004.
In contrast to the reporting periods for our consolidated
statements of operations, our hotel operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and our comparable hotel results
(comparable hotel revenues, expenses and adjusted operating profit) are
always reported based on the reporting cycle used by Marriott International
for our Marriott-managed hotels. This facilitates year-to-year comparisons,
as each reporting period will be comprised of the same number of days of
operations as in the prior year (except in the case of certain of our fourth
quarters which are comprised of seventeen weeks, such as fiscal year 2002).
This means, however, that the reporting periods we use for hotel operating
statistics may differ slightly from the reporting periods used for our
consolidated statements of operations for the first and fourth quarters
and the full year. For the hotel operating statistics and comparable hotel
results reported herein:
-
Hotel results for the first quarter of 2004 reflect 12 weeks
of operations for the period from January 3, 2004 to March 26, 2004 for
our Marriott-managed hotels and results from January 1, 2004 to February
29, 2004 for operations of all other hotels which report results on a monthly
basis.
-
Hotel results for the first quarter of 2003 reflect 12 weeks
of operations for the period from January 4, 2003 to March 28, 2003 for
our Marriott-managed hotels and results from January 1, 2003 to February
28, 2003 for operations of all other hotels which report results on a monthly
basis.
Comparable Hotel Operating Statistics
We present certain operating statistics (i.e., RevPAR,
average daily rate and average occupancy) and operating results (revenues,
expenses and adjusted operating profit) for the periods included in this
report on a comparable hotel basis. We define our comparable hotels as
full-service 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 undergone large-scale capital projects during the reporting periods
being compared. For 2004 and 2003, we consider 108 of our portfolio of
111 full-service hotels owned on March 26, 2004 to be comparable hotels.
The operating results of the following three hotels that we owned as of
March 26, 2004 are excluded from comparable hotel results for these periods:
-
the Hyatt Regency Maui Resort and Spa (acquired in November
2003);
-
the JW Marriott, Washington, D.C. (consolidated in our financial
statements beginning in the second quarter of 2003); and
-
the Memphis Marriott (construction of a 200-room expansion
started in 2003).
In addition, the operating results of the six hotels we disposed
of in the first quarter of 2004 and the eight hotels we disposed of in
2003 are also not included in comparable hotel results for the periods
presented herein. Moreover, because these statistics and operating results
are for our full- service hotel properties, they exclude results for our
non-hotel properties and leased limited-service hotels.
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 generally accepted
accounting principles, or GAAP, within the meaning of applicable SEC rules.
They are as follows: (i) Funds From Operations (FFO) per diluted share,
(ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating
Results. The following discussion defines these terms and presents why
we believe they are useful supplemental measures of our performance.
FFO per Diluted Share
We present FFO per diluted share as a non-GAAP measure
of our performance in addition to our earnings per share (calculated in
accordance with GAAP). We calculate FFO per diluted share for a given operating
period as our FFO (defined as set forth below) for such period divided
by the number of fully diluted shares outstanding during such period. The
National Association of Real Estate Investment Trusts (NAREIT) defines
FFO as net income (calculated in accordance with GAAP) excluding gains
(or losses) from sales of real estate, the cumulative effect of changes
in accounting principles, real estate-related depreciation and amortization
and after adjustments for unconsolidated partnerships and joint ventures.
We present FFO on a per share basis after making adjustments for the effects
of dilutive securities, including the payment of preferred stock dividends,
in accordance with NAREIT guidelines.
We believe that FFO per diluted share is a useful supplemental
measure of our operating performance and that the presentation of FFO per
diluted share, when combined with the primary GAAP presentation of earnings
per share, provides beneficial information to investors. By excluding the
effect of real estate depreciation, amortization and gains and losses from
sales of real estate, all of which are based on historical cost accounting
and which may be of limited significance in evaluating current performance,
we believe that such measure can facilitate comparisons of operating performance
between periods and with other REITs, even though FFO per diluted share
does not represent an amount that accrues directly to holders of our common
stock. Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminishes predictably over time.
As noted by NAREIT in its April 2002 "White Paper on Funds From Operations,"
since real estate values have historically risen or fallen with market
conditions, many industry investors have considered presentation of operating
results for real estate companies that use historical cost accounting to
be insufficient by themselves. For these reasons, NAREIT adopted the definition
of FFO in order to promote an industry-wide measure of REIT operating performance.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation
and Amortization (EBITDA) is a commonly used measure of performance in
many industries. Management believes EBITDA provides useful information
to investors regarding our results of operations because it helps us and
our investors evaluate the ongoing operating performance of our properties
and facilitates comparisons between us and other lodging REITs, hotel owners
who are not REITs and other capital-intensive companies. Management uses
EBITDA to evaluate property-level results and as one measure in determining
the value of acquisitions and dispositions and, like FFO per diluted share,
it is widely used by management in the annual budget process.
Adjusted EBITDA
Management has historically adjusted EBITDA when evaluating
our performance because we believe that the exclusion of certain additional
recurring and non-recurring items described below provides useful supplemental
information to investors regarding our ongoing operating performance and
that the presentation of Adjusted EBITDA, when combined with the primary
GAAP presentation of net income, is beneficial to an investor's complete
understanding of our operating performance. We adjust EBITDA for the following
items, which may occur in any period, and refer to this measure as Adjusted
EBITDA:
* Gains and Losses on Dispositions
and Related Debt Extinguishments -- We exclude the effect of gains and
losses recorded on the disposition of assets in our consolidated statement
of operations and the related debt extinguishments because we believe that
including them in EBITDA is not consistent with reflecting the ongoing
performance of our remaining assets. In addition, material gains or losses
from the depreciated value of the assets disposed of and the related debt
extinguishments could be less important to investors given that the depreciated
asset often does not reflect the market value of real estate assets (as
noted above for FFO).
* Consolidated Partnership Adjustments
-- We exclude the minority interest in the income or loss of our consolidated
partnerships as presented in our consolidated statement of operations because
we believe that including these amounts in EBITDA does not reflect the
effect of the minority interest position on our performance because these
amounts include our minority partners' pro-rata portion of depreciation,
amortization and interest expense. However, we believe that the cash
distributions paid to minority partners are a more relevant measure of
the effect of our minority partners' interest on our performance, and we
have deducted these cash distributions from Adjusted EBITDA.
* Equity Investment Adjustments --
We exclude the equity in earnings (losses) of unconsolidated investments
in partnerships and joint ventures as presented in our consolidated statement
of operations because our percentage interest in the earnings (losses)
does not reflect the impact of our minority interest position on our performance
and these amounts include our pro-rata portion of depreciation, amortization
and interest expense. However, we believe that cash distributions
we receive are a more relevant measure of the performance of our investment
and, therefore, we include the cash distributed to us from these investments
in the calculation of Adjusted EBITDA.
* Cumulative effect of a change in
accounting principle -- Infrequently, the Financial Accounting Standards
Board (FASB) promulgates new accounting standards that require the consolidated
statement of operations to reflect the cumulative effect of a change in
accounting principle. We exclude these one-time adjustments because
they do not reflect actual performance of the company for that period.
* Impairment Losses -- We exclude
the effect of impairment losses recorded because we believe that including
them in EBITDA is not consistent with reflecting the ongoing performance
of our remaining assets. In addition, we believe that impairment
charges are similar to gains and losses on dispositions and depreciation
expense, both of which are also excluded from EBITDA.
Limitations on the Use of FFO per Diluted Share, EBITDA
and Adjusted EBITDA
We calculate FFO per diluted share in accordance with
standards established by NAREIT, which may not be comparable to measures
calculated by other companies who do not use the NAREIT definition of FFO
or calculate FFO per diluted share in accordance with NAREIT guidance.
In addition, although FFO per diluted share is a useful measure when comparing
our results to other REITs, it may not be helpful to investors when comparing
us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also not
be comparable to measures calculated by other companies. This information
should not be considered as an alternative to net income, operating profit,
cash from operations or any other operating performance measure calculated
in accordance with GAAP. Cash expenditures for various long-term assets
(such as renewal and replacement capital expenditures), interest expense
(for EBITDA and Adjusted EBITDA purposes only) and other items have been
and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA
and FFO per diluted share presentations. Management compensates for these
limitations by separately considering the impact of these excluded items
to the extent they are material to operating decisions or assessments of
our operating performance. Our consolidated statement of operations and
cash flows include interest expense, capital expenditures, and other excluded
items, all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures. Additionally,
FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered
as a measure of our liquidity or indicative of funds available to fund
our cash needs, including our ability to make cash distributions. In addition,
FFO per diluted share does not measure, and should not be used as a measure
of, amounts that accrue directly to shareholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our full-service
hotels, such as hotel revenues, expenses and adjusted operating profit,
on a comparable hotel, or "same store," basis as supplemental information
for investor's information. Our comparable hotel results present operating
results for full-service 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 and the effectiveness
of management in running our business on a property-level basis. We eliminate
depreciation and amortization because, even though depreciation and amortization
are property-level expenses, these non-cash expenses, which are based on
historical cost accounting for real estate assets, implicitly assume that
the value of real estate assets diminishes predictably over time. As noted
earlier, because real estate values have historically risen or fallen with
market conditions, many industry investors have considered presentation
of operating results for real estate companies that use historical cost
accounting to be insufficient by themselves.
As a result of the elimination of corporate-level costs
and expenses and depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses or operating
profit 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 the ongoing performance
of the Company, 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.
HOST MARRIOTT CORPORATION
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
March 26, December 31,
2004 2003
ASSETS
Property and equipment, net
$ 7,020 $ 7,085
Assets held for sale
-- 73
Notes and other receivables
54 54
Due from managers
79 62
Investments in affiliates (c)
86 74
Other
383 364
Restricted cash
598 116
Cash and cash equivalents
526 764
Total assets
$ 8,746 $ 8,592
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Senior notes,
including $490 million,
net
of discount, of Exchangeable
Senior
Debentures (b)
$ 3,459 $ 3,180
Mortgage debt
2,109 2,205
Exchangeable
Subordinated Debentures (c)
492 --
Other
100 101
Total debt
6,160 5,486
Accounts payable and accrued expenses
121 108
Liabilities associated with assets
held for sale
-
2
Other
151 166
Total liabilities
6,432 5,762
Interest of minority partners of
Host Marriott L.P.
124 130
Interest of minority partners of other
consolidated partnerships
94 89
Company-obligated mandatorily redeemable
exchangeable preferred securities
of a
subsidiary whose sole assets
are exchangeable
subordinated debentures due
2026
("Exchangeable Preferred Securities")
(c)
-- 475
Shareholders' equity
Cumulative
redeemable preferred stock
(liquidation
preference $354 million),
50 million
shares authorized; 14.1
million
shares issued and outstanding
339 339
Common stock,
par value $.01, 750 million
shares
authorized; 321.6 million shares
and
320.3 million shares issued and
outstanding,
respectively
3
3
Additional
paid-in capital
2,619 2,617
Accumulated
other comprehensive income
26 28
Deficit
(891) (851)
Total shareholders' equity
2,096 2,136
Total liabilities and
shareholders' equity
$ 8,746 $ 8,592
(a) Our consolidated balance sheet
as of March 26, 2004 has been prepared without audit. Certain information
and footnote disclosures normally included in financial statements presented
in accordance with GAAP have been omitted. The consolidated balance
sheets should be read in conjunction with the consolidated financial statements
and notes thereto included in the Annual Report on Form 10-K.
(b) Amount includes $494 million in
7 7/8% Series B senior notes redeemed on April 15, 2004.
(c) We adopted Financial Interpretation
No. 46 "Consolidation of Variable Interest Entities" (FIN 46) in 2003.
Under FIN 46, our limited purpose trust subsidiary that was formed to issue
trust-preferred securities (the Exchangeable Preferred Securities Trust)
was accounted for on a consolidated basis as of December 31, 2003 since
we were the primary beneficiary under FIN 46.
In December
2003, the FASB issued a revision to FIN 46, which we refer
to as FIN
46R. Under FIN 46R, we are not the primary beneficiary and
we are required
to deconsolidate the accounts of the Exchangeable
Preferred
Securities Trust. We adopted the provisions of FIN 46R on
January 1,
2004. As a result, we recorded the $492 million in
debentures
(the Exchangeable Subordinated Debentures) issued by the
Exchangeable
Preferred Securities Trust and eliminated the $475
million of
Exchangeable Preferred Securities that were previously
classified
in the mezzanine section of our consolidated balance sheet.
The difference
of $17 million is our investment in the Exchangeable
Preferred
Securities Trust, which is included in "Investments in
affiliates"
on our consolidated balance sheet. Additionally, we
classified
the related dividend payment of approximately $7 million as
interest expense.
We elected not to restate prior periods and the
adoption of
FIN 46R had no effect on our net loss, loss per diluted
share or financial
covenants under our senior notes indenture.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended
March 26, March 28,
2004 2003
Revenues
Rooms
$ 473 $
452
Food and beverage
257 242
Other
50 52
Total hotel sales
780 746
Rental income
(b)
29 27
Other income
-
2
Total revenues
809 775
Expenses
Rooms
119 111
Food and beverage
190 180
Hotel departmental
expenses
216 206
Management
fees
32 32
Other property-level
expenses (b)
69 70
Depreciation
and amortization
83 84
Corporate
expenses
13 13
Total expenses
722 696
Operating profit
87 79
Interest income
3
3
Interest expense, including interest
expense
for the Exchangeable Subordinated
Debentures in 2004 (c)
(118) (110)
Net gains on property transactions
1
1
Minority interest income (expense)
(3) 1
Equity in losses of affiliates
(5) (6)
Dividends on Exchangeable Preferred
Securities (c)
-- (7)
Loss before income taxes
(35) (39)
Benefit from income taxes
3
4
Loss from continuing operations
(32) (35)
Income from discontinued operations
(d)
1
1
Net loss
(31) (34)
Less: dividends on preferred
stock
(9) (9)
Net loss available to common shareholders
$ (40) $ (43)
Basic and diluted loss per common share
$ (.12) $ (.16)
(a) Our consolidated statements of
operations for the quarter ended March 26, 2004 and March 28, 2003 have
been prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted. The consolidated statements of operations
should be read in conjunction with the consolidated financial statements
and notes thereto included in our Annual Report on Form 10-K.
(b) Rental income and expense are
as follows:
Quarter ended
March 26, March 28,
2004
2003
Rental income
Full-service
$ 12
$ 10
Limited service and office buildings
17
17
$ 29
$ 27
Rental and other
expenses (included
in other property-level
expenses)
Full-service
$ 2
$ 1
Limited service and office buildings
18
17
$ 20
$ 18
(c) See discussion of new accounting
standard in footnote (b) to the consolidated balance sheet. Interest
expense for the first quarter of 2004 also includes approximately $12 million
for the payment of call premiums and the acceleration of deferred financing
costs on debt redemptions and repayments.
(d) Reflects the results of operations
and gain (loss) on sale, net of the related income tax, for six properties
sold in the first quarter of 2004 and eight properties sold in 2003.
HOST MARRIOTT CORPORATION
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended March 26, 2004
Income (loss) Shares
Per Share
(Numerator) (Denominator) Amount
Net loss
$ (31) 321.0
$ (.09)
Dividends on preferred
stock (9)
-- (.03)
Basic and diluted loss available
to common shareholders
per share (a)
$ (40) 321.0
$ (.12)
Quarter ended March 28, 2003
Income (loss) Shares
Per Share
(Numerator) (Denominator) Amount
Net loss
$ (34) 264.3
$ (.13)
Dividends on preferred
stock (9)
-- (.03)
Basic and diluted loss available
to common shareholders
per share (a)
$ (43) 264.3
$ (.16)
(a) Basic earnings (loss) per common
share is computed by dividing net income (loss) available to common shareholders
by the weighted average number of shares of common stock outstanding.
Diluted earnings (loss) per common share is computed by dividing net income
(loss) available to common shareholders as adjusted for potentially dilutive
securities, by the weighted average number of shares of common stock outstanding
plus other potentially dilutive securities. Dilutive securities may
include shares granted under comprehensive stock plans, those preferred
OP Units held by minority partners, other minority interests that have
the option to convert their limited partnership interests to common OP
Units and the Exchangeable Subordinated Debentures. No effect is
shown for any securities that are anti-dilutive.
HOST MARRIOTT CORPORATION
Comparable Hotel Operating Data
Comparable Hotels by Region (a)
(unaudited)
As of March 26, 2004 Quarter ended
March 26, 2004
Average
No. of No. of Average
Occupancy
Properties Rooms Daily Rate
Percentages RevPAR
Pacific
21 11,302 $
152.68 72.3% $ 110.44
Florida
12 7,337
184.38 79.2
145.95
Atlanta
13 5,940
142.25 69.7
99.15
Mid-Atlantic
10 6,721
173.34 70.6
122.46
South Central
8 5,307
137.73 77.9
107.24
North Central
13 4,923
111.85 60.9
68.13
DC Metro
11 4,296
152.26 67.3
102.53
Mountain
8 3,313
117.43 65.5
76.91
International
5 1,952
115.85 70.1
81.18
New England
7 3,413
126.08 60.6
76.43
All Regions
108 54,504
149.41 70.7
105.63
Comparable Hotels by Region (a)
Quarter ended March 28, 2003
Average
Percent
Average Occupancy
Change in
Daily Rate Percentages
RevPAR RevPAR
Pacific
$ 158.47 66.3%
$ 105.06 5.1%
Florida
182.14 76.8
139.84 4.4
Atlanta
143.84 69.0
99.25 (0.1)
Mid-Atlantic
169.71 69.7
118.27 3.5
South Central
139.93 79.2
110.85 (3.3)
North Central
113.44 59.6
67.60 0.8
DC Metro
142.84 66.3
94.75 8.2
Mountain
115.19 65.1
75.00 2.6
International
105.45 67.4
71.05 14.3
New England
129.98 60.6
78.82 (3.0)
All Regions
149.18 68.8
102.58 3.0
(a) See the introductory notes to financial
information for a discussion of reporting periods and comparable hotel
results.
HOST MARRIOTT CORPORATION
Hotel Operational Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except per share amounts)
Quarter ended
March 26, March 28,
2004 2003
Number of hotels
108 108
Number of rooms
54,504 54,504
Percent change in Comparable Hotel
RevPAR 3.0%
--
Operating profit margin under GAAP
(b) 10.75%
10.19%
Comparable hotel adjusted operating
profit margin (c)
22.59% 23.16%
Comparable hotel sales
Room
$ 458 $
444
Food and beverage
250 238
Other
49
52
Comparable
hotel sales (d)
757 734
Comparable hotel expenses
Room
114 108
Food and beverage
182 175
Other
31
30
Management fees, ground
rent and other costs 259
251
Comparable
hotel expenses (e)
586 564
Comparable Hotel Adjusted Operating
Profit 171
170
Non-comparable hotel results,
net (f)
13
4
Office building and limited
service
properties, net
(g)
(1) --
Other income
--
2
Depreciation and amortization
(83) (84)
Corporate expenses
(13) (13)
Operating Profit
$ 87 $
79
(a) See the introductory notes to the
financial information for discussion of non-GAAP measures, reporting periods
and comparable hotel results.
(b) Operating profit margin under
GAAP is calculated as the operating profit divided by the total revenues
per the consolidated statements of operations.
(c) Comparable hotel adjusted operating
profit margin is calculated as the comparable hotel adjusted operating
profit divided by the comparable hotel sales per the schedule above.
(d) The reconciliation of total revenues
per the consolidated statements
of operations
to the comparable hotel sales is as follows (in
millions):
Quarter ended
March 26, March 28,
2004 2003
Revenues per the consolidated
statements of operations
$ 809 $
775
Non-comparable hotel sales
(35) (16)
Hotel sales for the property for which
we
record rental income, net
11 12
Rental income for office buildings
and
limited service hotels
(17) (17)
Other income
-- (2)
Adjustment for hotel sales for comparable
hotels to reflect Marriott's
fiscal
year for Marriott-managed hotels
(11) (18)
Comparable
hotel sales
$ 757 $
734
(e) The reconciliation of operating
costs per the consolidated statements of operations to the comparable hotel
expenses is as follows (in millions):
Quarter ended
March 26, March 28,
2004 2003
Operating costs and expenses per the
consolidated statements of operations
$ 722 $
696
Non-comparable hotel expenses
(26) (18)
Hotel expenses for the property for
which we record rental income
14 15
Rent expense for office buildings
and
limited service hotels
(18) (17)
Adjustment for hotel expenses for
comparable
hotels to reflect Marriott's
fiscal year
for Marriott-managed hotels
(10) (15)
Depreciation and amortization
(83) (84)
Corporate expenses
(13) (13)
Comparable
hotel expenses
$ 586 $
564
(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 and (ii) the difference between comparable
hotel adjusted operating profit, which reflects 84 days of operations,
and the operating results included in the consolidated statements of operations,
which reflects 86 days and 87 days, respectively.
(g) Represents rental income less
rental expense for limited service properties and office buildings.
For detail, see footnote (b) to the consolidated statements of operations.
HOST MARRIOTT CORPORATION
Other Financial and Operating Data
(unaudited, in millions, except per share)
March 26, December 31,
2004 2003
Equity
Common shares outstanding
321.6 320.3
Common shares and minority
held common
OP Units outstanding
344.6 343.8
Preferred OP Units outstanding
.02 .02
Class A Preferred shares
outstanding
4.1 4.1
Class B Preferred shares
outstanding
4.0 4.0
Class C Preferred shares
outstanding
6.0 6.0
Class D Preferred shares
outstanding
.03 .03
Security pricing
Common (a)
$ 12.26 $ 12.32
Class A Preferred
(a)
$ 27.09 $ 26.74
Class B Preferred
(a)
$ 26.72 $ 27.00
Class C Preferred
(a)
$ 27.99 $ 27.26
Exchangeable
Preferred Securities (b) $ 50.69
$ 51.00
Exchangeable
Senior Debentures (c) $
997.50 $ --
Dividends per share
Common
$ -- $
--
Class A Preferred
$ .625 $ 2.50
Class B Preferred
$ .625 $ 2.50
Class C Preferred
$ .625 $ 2.50
Class D Preferred
$ .625 $ 1.88
Debt
Percentage of fixed rate
debt
86% 85%
Weighted average interest
rate (d)
7.1% 7.7%
Weighted average debt
maturity (d)
6.8 years 5.5 years
Credit facility, outstanding
balance
(capacity of $250
million)
$ -- $
--
Other Financial Data
Construction in progress
$ 75 $
56
Quarter Ended
March 26, March 24,
2004 2003
Hotel Operating Statistics for All
Full-Service Properties
Average Daily Rate
$ 150.41 $ 145.90
Average Occupancy
70.8% 68.7%
RevPAR
$ 106.42 $ 100.20
(a) Share prices are the closing price
on the consolidated balance sheet date, as reported by the New York Stock
Exchange, for the common and preferred stock.
(b) Market price as of March 26, 2004
as quoted by Bloomberg L.P. As of March 26, 2004, we have reclassified
these securities to debt on our consolidated balance sheet. See footnote
(b) to the consolidated balance sheet.
(c) Market price as of March 26, 2004
as quoted by Bloomberg L.P. Quoted price reflects the price of a
single $1,000 debenture, which is exchangeable for common stock upon the
incurrence of certain events.
(d) Amounts include the Exchangeable
Subordinated Debentures in 2004. See footnote (b) to the consolidated
balance sheet. Excluding the Exchangeable Subordinated Debentures,
our weighted average interest rate was 7.1% and our weighted average debt
maturity was 5.4 years.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income
(Loss) Available to Common Shareholders
to Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended
Quarter ended
March 26, 2004
March 28, 2003
Income Per Share
Income Per Share
(loss) Shares Amount (loss) Shares
Amount
Net loss available to
common shareholders $
(40) 321.0 $ (.12) $ (43)
264.3 $ (.16)
Adjustments:
Gains on
dispositions, net
(2) --
-- (1)
-- --
Depreciation and
amortization
83 --
.25 88
-- .33
Partnership
adjustments
5 --
.02 2
-- .01
FFO of minority
partners of Host
LP (a)
(3) -- (.01)
(5) -- (.02)
Adjustments for
dilutive securities:
Assuming distribution
of common shares
granted under the
comprehensive stock
plan less shares
assumed purchased
at average market
price
-- 3.3 (.01)
-- 2.5 (.01)
Assuming conversion
of Exchangeable
Subordinated
Debentures
-- --
-- --
-- --
Assuming conversion
of minority OP
Units issuable
-- --
-- --
-- --
FFO per diluted
share (b)(c)
$ 43 324.3 $ .13
$ 41 266.8 $ .15
(a) Represents FFO attributable to
the minority interest in Host LP.
(b) FFO per diluted share in accordance
with NAREIT is adjusted for the effects of dilutive securities. Dilutive
securities may include shares granted under comprehensive stock plans,
those preferred OP Units held by minority partners, other minority interests
that have the option to convert their limited partnership interest to common
OP Units and the Exchangeable Subordinated Debentures. No effect
is shown for securities if they are anti-dilutive.
(c) Amount includes a reduction of
approximately $12 million, or $.04 of FFO per diluted share, related to
charges for call premiums and the acceleration of deferred financing costs
related to the repayment of debt.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) to EBITDA
and Adjusted EBITDA
(unaudited, in millions)
Quarter ended
March 26, March 28,
2004
2003
Net loss
$ (31) $
(34)
Interest expense (a)
118
110
Dividends on Exchangeable
Preferred
Securities (a)
--
7
Depreciation and amortization
83
84
Income taxes
(3)
(4)
Discontinued operations
(b)
--
5
EBITDA (c)
167
168
Gains and losses on dispositions
and
related debt extinguishments
(2)
(1)
Consolidated partnership
adjustments:
Minority interest
(income) expense
3
(1)
Distributions
to minority interest
partners
of Host LP and other
minority
partners
(1)
(1)
Equity investment adjustments:
Equity in
losses of affiliates
5
6
Distributions
received from equity
investments
--
1
Adjusted EBITDA(c)
$ 172 $
172
(a) Interest expense in 2004 includes
approximately $7 million previously classified as dividends on Exchangeable
Preferred Securities. See footnote (b) to the consolidated balance
sheets for further detail.
(b) Reflects the interest expense,
depreciation and amortization and income taxes included in discontinued
operations.
(c) See the introductory notes to
the financial information for discussion of non-GAAP measures.
HOST MARRIOTT CORPORATION
Reconciliation of Net Loss Available to Common Shareholders
to Funds From Operations per Diluted Share for Second Quarter 2004 Forecasts
(a)
# (unaudited, in millions, except per share amounts)
Low-end of Range
Second Quarter 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available to common
shareholders $ (26)
321.7 $ (.08)
Adjustments:
Depreciation and amortization
83 --
.26
Gain on dispositions,
net
(1) --
--
Partnership adjustments
4 --
.01
FFO of minority partners
of
Host LP (b)
(4) --
(.01)
Adjustment for dilutive
securities: (c)
Assuming distribution
of common
shares granted under
the
comprehensive stock
plan less
shares assumed purchased
at
average market price
-- 3.3
(.01)
FFO per diluted share (d)
$ 56 325.0
$ .17
High-end of Range
Second Quarter 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available to common
shareholders $ (18)
321.7 $ (.06)
Adjustments:
Depreciation and amortization
83 --
.26
Gain on dispositions,
net
(1) --
--
Partnership adjustments
5 --
.01
FFO of minority partners
of
Host LP (b)
(5) --
(.01)
Adjustment for dilutive
securities: (c)
Assuming distribution
of common
shares granted under
the
comprehensive stock
plan less
shares assumed purchased
at
average market price
-- 3.3
--
FFO per diluted share (d)
$ 64 325.0
$ .20
See the notes following the table reconciling
net loss to EBITDA and
Adjusted EBITDA for full year 2004
forecasts.
HOST MARRIOTT CORPORATION
Reconciliation
of Net Loss Available to Common Shareholders to
Funds From Operations per Diluted Share
for Full Year 2004 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available to common
shareholders $ (87) 323.3
$ (.27)
Adjustments:
Depreciation and amortization
359 --
1.11
Gain on dispositions,
net
(81) --
(.25)
Partnership adjustments
22 --
.06
FFO of minority partners
of
Host LP (b)
(14) --
(.04)
Adjustment for dilutive
securities: (c)
Assuming distribution
of common
shares granted under
the
comprehensive stock
plan less
shares assumed purchased
at
average market price
-- 3.3
--
FFO per diluted share (d)
$ 199 326.6
$ .61
High-end of Range
Full Year 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available to common
shareholders $ (56)
323.3 $(.17)
Adjustments:
Depreciation and amortization
359 --
1.11
Gain on dispositions,
net
(81) --
(.25)
Partnership adjustments
24 --
.07
FFO of minority partners
of
Host LP (b)
(16) --
(.05)
Adjustment for dilutive
securities: (c)
Assuming distribution
of common
shares granted under
the
comprehensive stock
plan less
shares assumed purchased
at
average market price
-- 3.3
--
FFO per diluted share (d)
$ 230 326.6
$ .71
See the notes following the table reconciling
net loss to EBITDA and
Adjusted EBITDA for full year 2004
forecasts.
HOST MARRIOTT CORPORATION
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
for Full Year 2004 Forecasts (a)
(unaudited, in millions)
Full Year 2004
Low-end High-end
of Range of Range
Net Loss
$ (52) $
(21)
Interest expense (e)
480
480
Depreciation and amortization
361
361
Income taxes
(6)
(4)
EBITDA
783
816
Gains (losses) on dispositions
(81)
(81)
Consolidated partnership
adjustments:
Minority interest
(income) expense
3
3
Distributions
to minority interest
partners
of Host LP and other minority
partners
(2)
(3)
Equity investment adjustments:
Equity in
losses of affiliates
20
18
Distributions
received from
equity
investments
2
2
Adjusted EBITDA
$725
$755
(a) The amounts shown in these reconciliations
are based on management's estimate of operations for 2004. These
tables are forward-looking and as such contain assumptions by management
based on known and unknown risks, uncertainties and other factors which
may cause the actual transactions, results, performance or achievements
to be materially different from any future transactions, results, performance
or achievements expressed or implied by this table. General economic
conditions, competition and governmental actions will affect future transactions,
results, performance and achievements. Although we believe the expectations
reflected in this reconciliation are based upon reasonable assumptions,
we can give no assurance that the expectations will be attained or that
any deviations will not be material.
For purposes
of preparing the full year and second quarter 2004
forecasts,
we have made the following assumptions:
* RevPAR will
increase between 4% and 6% for the full year and increase between 5% and
7% for the second quarter for the low and high ends of the forecasted ranges,
respectively.
* Comparable
hotel adjusted operating profit margins will remain unchanged and increase
50 basis points for the full year and will decrease 10 basis points and
increase 30 basis points for the second quarter for the low and high ends
of the forecasted ranges, respectively.
* $450 million
of hotels will be sold during 2004.
* $400 million
of acquisitions will be made during 2004.
* $700 million
of debt will be redeemed or repaid for the full year ($300 million of which
was redeemed or repaid in the first quarter and $65 million of which was
redeemed in the second quarter) with the proceeds from asset sales and
the World Trade Center settlement. In addition, $494 million of debt
was repaid with the net proceeds from the issuance of the Exchangeable
Senior Debentures, as well as available cash in the second quarter.
Charges totaling $54 million, or $.16 of FFO per diluted share, in call
premiums and the acceleration of deferred financing costs associated with
the debt repayments will be incurred in the full year and $30 million,
or $.09 of FFO per diluted share, in the second quarter.
* Fully diluted
shares will be 326.6 million and 325.0 million for the full year and second
quarter, respectively.
(b) Represents FFO attributable to
the minority interests in Host LP.
(c) These shares are dilutive for
purposes of the FFO per diluted share calculation, yet are anti-dilutive
for the purposes of the earnings per share calculation. This is due
to the net loss that is forecasted for 2004 compared to net earnings for
FFO for the year.
(d) FFO per diluted share in accordance
with NAREIT is adjusted for the effects of dilutive securities. Dilutive
securities may include shares granted under comprehensive stock plans,
those preferred OP Units held by minority partners, other minority interests
that have the option to convert their limited partnership interest to common
OP Units and the Exchangeable Preferred Securities. No effect is
shown for securities if they are anti-dilutive.
(e) Interest expense in 2004 includes
amounts previously classified as dividends on Exchangeable Preferred Securities.
See footnote (b) to the consolidated balance sheets for further detail. |