HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
September 8, December 31,
2006 2005
ASSETS
Property and equipment, net
$10,685 $7,434
Assets held for sale
21 73
Due from managers
31 41
Investments in affiliates
151 41
Deferred financing costs, net
59 63
Furniture, fixtures and equipment
replacement fund 166
143
Other
199 157
Restricted cash
129 109
Cash and cash equivalents
223 184
Total assets
$11,664 $8,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes,
including $494 million and
$493
million, respectively, net of
discount,
of Exchangeable Senior Debentures $3,712
$3,050
Mortgage debt
2,038 1,823
Convertible
Subordinated Debentures
- 387
Other
89 110
Total debt
5,839 5,370
Accounts payable and accrued expenses
145 165
Other
223 148
Total liabilities
6,207 5,683
Interest of minority partners of Host
Hotels
& Resorts, L.P.
188 119
Interest of minority partners of other
consolidated partnerships
28 26
Stockholders' equity
Cumulative
redeemable preferred stock
(liquidation
preference $100 million
and
$250 million, respectively), 50
million
shares authorized; 4.0 million
shares
and 10.0 million shares issued and
outstanding,
respectively
97 241
Common stock,
par value $.01, 750 million
shares
authorized; 520.7 million
shares
and 361.0 million shares issued
and
outstanding, respectively
5 4
Additional
paid-in capital
5,665 3,080
Accumulated
other comprehensive income
17 15
Deficit
(543) (923)
Total stockholders' equity
5,241 2,417
Total liabilities and stockholders'
equity
$11,664 $8,245
(a) Our consolidated balance sheet
as of September 8, 2006 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 our most recent Annual Report on Form 10-K.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Revenues
Rooms
$736 $511 $1,977
$1,547
Food and beverage
303 223
935 763
Other
74 56
199 169
Total hotel sales 1,113
790 3,111 2,479
Rental income (b)
22 21
78 75
Total revenues 1,135
811 3,189 2,554
Expenses
Rooms
182 128
470 374
Food and beverage
244 184
690 574
Hotel departmental
expenses
303 234
794 684
Management fees
50 33
143 108
Other property-level
expenses (b)
91 67
243 199
Depreciation and
amortization
119 82
314 244
Corporate and other
expenses
21 16
62 45
Total operating costs
and expenses
1,010 744
2,716 2,228
Operating profit
125 67
473 326
Interest income
8 5
22 17
Interest expense
(100) (94)
(298) (317)
Net gains (loss) on property
transactions
1 -
3 77
Gain (loss) on foreign currency
and derivative contracts
- (1)
- 1
Minority interest expense
(1) -
(30) (12)
Equity in earnings (losses) of
affiliates
(3) -
(8) (1)
Income (loss) before income taxes
30 (23)
162 91
Benefit (provision) for income
taxes
4 15
(14) (23)
Income (loss) from continuing
operations
34 (8)
148 68
Income from discontinued
operations (c)
6 3
394 24
Net income (loss)
40 (5)
542 92
Less: Dividends on preferred
stock (2) (6)
(12) (21)
Issuance costs of redeemed
preferred stock (d)
- -
(6) (4)
Net income (loss) available to
common stockholders
$38 $(11)
$524 $67
Basic earnings (loss) per common
share:
Continuing
operations $.06
$(.04) $.28
$.12
Discontinued
operations .01
.01 .85
.07
Basic earnings (loss) per common
share
$.07 $(.03) $1.13
$.19
Diluted earnings (loss) per
common share:
Continuing
operations $.06
$(.04) $.28
$.12
Discontinued
operations .01
.01 .84
.07
Diluted earnings (loss) per
common share
$.07 $(.03) $1.12
$.19
(a) Our consolidated statements of
operations presented above have been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance with
GAAP have
been omitted. The consolidated statements of operations
should be
read in conjunction with the consolidated financial
statements
and notes thereto included in our most recent Annual Report
on Form 10-K.
(b) Rental income and expense are as
follows:
Quarter ended Year-to-date ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Rental income
Full-service
$4 $4
$24 $22
Limited service
and office
buildings
18 17
54 53
$22 $21
$78 $75
Rental and other expenses
(included in other property
level expenses)
Full-service
$2 $2
$5 $5
Limited service
and office
buildings
19 18
56 54
$21 $20
$61 $59
(c) Reflects the results of operations
and gain (loss) on sale, net of the
related income
tax, for six properties sold in 2006 and one hotel
classified
as held-for-sale as of September 8, 2006 and five
properties
sold in 2005.
(d) Represents the original issuance
costs associated with the redemption
of the Class
C preferred stock in the second quarter of 2006 and the
Class B preferred
stock in the second quarter of 2005.
HOST HOTELS & RESORTS, INC.
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter
ended
September 8,
September 9,
2006
2005
Income
Income
(loss) Shares Per (loss) Shares
Per
(Numer- (Denom- Share (Numer- (Denom- Share
ator) inator) Amount ator) inator) Amount
Net income (loss)
$40 520.5 $.08 $(5)
353.1 $(.01)
Dividends on preferred
stock
(2) - (.01)
(6) - (.02)
Basic earnings (loss)
available to common
stockholders (a)(b)
38 520.5 .07 (11)
353.1 (.03)
Assuming distribution
of
common shares granted
under the comprehensive
stock plan less
shares
assumed purchased
at
average market price
- 1.8
- -
- -
Assuming conversion of
minority OP units
issuable
- 2.3
- -
- -
Diluted earnings (loss)
available to
common stockholders (a)(b)
$38 524.6 $.07 $(11)
353.1 $(.03)
Year-to-date ended Year-to-date ended
September 8,
September 9,
2006
2005
Income
Income
(loss) Shares Per (loss) Shares
Per
(Numer- (Denom- Share (Numer- (Denom- Share
ator) inator) Amount ator) inator) Amount
Net income
$542 464.1 $1.17 $92
352.6 $.26
Dividends on preferred
stock
(12) - (.03)
(21) - (.06)
Issuance costs of redeemed
preferred stock
(c) (6)
- (.01) (4)
- (.01)
Basic earnings available to
common stockholders (a)(b)
524 464.1 1.13 67
352.6 .19
Assuming distribution
of
common shares granted
under the comprehensive
stock plan less
shares
assumed purchased
at
average market price
- 1.8 (.01)
- 2.4
-
Diluted earnings available to
common stockholders (a)(b)
$524 465.9 $1.12 $67
355.0 $.19
(a) Basic earnings (loss) per common
share is computed by dividing net
income (loss)
available to common stockholders 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
stockholders as adjusted for potentially dilutive
securities,
by the weighted average number of shares of common stock
outstanding
plus potentially dilutive securities. Dilutive securities
may include
shares granted under comprehensive stock plans, preferred
OP Units held
by minority partners, convertible debt securities and
other minority
interests that have the option to convert their limited
partnership
interests to common OP Units. No effect is shown for any
securities
that are anti-dilutive.
(b) Our results for certain periods
presented were significantly affected
by certain
transactions, which are detailed in the table entitled,
"Schedule
of Significant Transactions Affecting Earnings per Share and
Funds From
Operations per Diluted Share."
(c) Represents the original issuance
costs associated with the redemption
of the Company's
Class C preferred stock in the second quarter of 2006
and the Company's
Class B preferred stock in the second quarter of
2005.
HOST
HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of September 8, Quarter ended September 8,
2006
2006
Average
Average Occupancy
No. of No. of Daily
Percent
Properties Rooms Rate
-ages RevPAR
Pacific
21 11,485 $202.86
79.3% $160.87
Florida
10 6,435 151.13
68.6 103.66
Mid-Atlantic
8 5,865 208.66
81.1 169.17
DC Metro
13 5,335 171.29
71.5 122.51
North Central
12 4,906 155.29
77.7 120.64
South Central
7 4,126 132.06
67.3 88.85
Atlanta
8 3,069 185.00
66.8 123.57
New England
6 3,032 175.83
83.0 146.02
Mountain
6 2,210 104.06
68.9 71.74
International
5 1,953 153.27
71.5 109.61
All Regions
96 48,416 174.51
74.7 130.32
Quarter ended September 9, 2005
Percent
Change
Average Average
in
Daily Occupancy RevPAR
RevPAR
Rate Percentages
Pacific
$182.79 82.1%
$150.03 7.2%
Florida
141.14 68.7
97.00 6.9
Mid-Atlantic
191.93 78.3
150.29 12.6
DC Metro
161.21 76.0
122.52 -
North Central
139.46 76.4
106.59 13.2
South Central
119.24 70.9
84.53 5.1
Atlanta
163.11 65.1
106.12 16.4
New England
151.03 81.6
123.22 18.5
Mountain
90.43 70.9
64.14 11.8
International
134.49 74.4
100.00 9.6
All Regions
157.87 75.7
119.49 9.1
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
As of September 8, Year-to-date ended September 8,
2006
2006
No. of No. of Average
Average
Properties Rooms Daily
Occupancy
Rate Percentages RevPAR
Pacific
21 11,485 $201.15
76.4% $153.71
Florida
10 6,435 196.13
73.9 144.84
Mid-Atlantic
8 5,865 213.03
78.8 167.87
DC Metro
13 5,335 182.29
72.6 132.31
North Central
12 4,906 145.57
73.0 106.28
South Central
7 4,126 142.03
72.2 102.58
Atlanta
8 3,069 187.40
71.1 133.23
New England
6 3,032 168.18
77.1 129.70
Mountain
6 2,210 131.66
65.9 86.77
International
5 1,953 150.17
71.8 107.77
All Regions
96 48,416 181.74
74.3 135.00
Year-to-date ended September 9, 2005
Average
Percent
Average Occupancy
Change in
Daily Rate Percentages RevPAR
RevPAR
Pacific
$ 184.52 78.3%
$144.50 6.4%
Florida
181.72 74.6
135.50 6.9
Mid-Atlantic
193.70 78.5
152.04 10.4
DC Metro
169.99 77.3
131.46 0.7
North Central
134.40 68.2
91.63 16.0
South Central
130.50 74.2
96.89 5.9
Atlanta
167.30 67.4
112.68 18.2
New England
151.15 71.4
107.98 20.1
Mountain
117.88 66.1
77.92 11.4
International
131.45 72.2
94.95 13.5
All Regions
166.62 74.4
124.02 8.9
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Property Type (a)
As of September 8, Quarter ended September 8,
2006
2006
Average Average
No. of No. of Daily
Occupancy
Properties Rooms Rate
Percentages RevPAR
Urban
40 23,124 $185.84
78.4% $145.78
Suburban
29 11,139 143.37
68.6 98.35
Airport
16 7,328 127.12
73.7 93.72
Resort/Convention
11 6,825 230.30
72.9 167.82
All Types 96
48,416 174.51 74.7
130.32
Quarter ended September 9, 2005
Average Average
Percent
Daily Occupancy
Change in
Rate Percentages RevPAR
RevPAR
Urban
$166.23 78.0%
$129.67 12.4%
Suburban
132.15 71.1
93.94 4.7
Airport
115.45 78.5
90.63 3.4
Resort/Convention
215.63 72.4
156.22 7.4
All Types 157.87
75.7 119.49
9.1
As of September 8, Year-to-date ended
2006
September 8, 2006
Average Average
No. of No. of Daily
Occupancy
Properties Rooms Rate
Percentages RevPAR
Urban
40 23,124 $190.39
77.3% $147.15
Suburban
29 11,139 145.13
68.0 98.74
Airport
16 7,328 133.02
73.6 97.91
Resort/Convention
11 6,825 257.19
75.0 192.92
All Types 96 48,416
181.74 74.3
135.00
Year-to-date ended September 9, 2005
Average Average
Percent
Daily Occupancy
Change in
Rate Percentages RevPAR
RevPAR
Urban
$173.93 76.9%
$133.76 10.0%
Suburban
133.36 68.3
91.03 8.5
Airport
120.53 76.0
91.62 6.9
Resort/Convention
241.28 74.5
179.67 7.4
All Types 166.62
74.4 124.02
8.9
(a) See the notes to financial information
for a discussion of reporting
periods and
comparable hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year-to-date
ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Number of hotels
96 96
96 96
Number of rooms
48,416 48,416 48,416
48,416
Percent change in Comparable
Hotel RevPAR
9.1% -
8.9% -
Operating profit margin
under GAAP (b)
11.0% 8.3%
14.8% 12.8%
Comparable hotel adjusted
operating profit margin (c)
23.2% 21.0%
26.5% 24.3%
Comparable hotel sales
Room
$542 $497
$1,633 $1,500
Food and beverage
233 221
803 751
Other
58 56
176 173
Comparable hotel
sales (d)
833 774
2,612 2,424
Comparable hotel expenses
Room
132 125
386 362
Food and beverage
188 181
587 563
Other
36 37
104 108
Management
fees, ground
rent
and other costs 284
268 842
801
Comparable hotel
expenses (e)
640 611
1,919 1,834
Comparable hotel adjusted
operating profit
193 163
693 590
Non-comparable hotel
results, net (f)
73 3
158 26
Office buildings and limited
service properties, net (g)
(1) (1)
(2) (1)
Depreciation and
amortization
(119) (82)
(314) (244)
Corporate and other expenses
(21) (16)
(62) (45)
Operating profit
$125 $67
$473 $326
(a) See the 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 table above.
(d) The reconciliation of total revenues
per the consolidated statements
of operations
to the comparable hotel sales is as follows:
Quarter ended Year-to-date
ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Revenues per the
consolidated statements of
operations
$1,135 $811
$3,189 $2,554
Non-comparable hotel sales
(295) (31)
(567) (112)
Hotel sales for the property
for which we record rental
income, net
11 11
37 35
Rental income for office
buildings and limited
service hotels
(18) (17)
(54) (53)
Adjustment for hotel sales
for comparable hotels
to reflect Marriott's
fiscal year for
Marriott-managed hotels
- -
7 -
Comparable hotel sales $833
$774 $2,612 $2,424
(e) The reconciliation of operating
costs per the consolidated statements
of operations
to the comparable hotel expenses is as follows (in
millions):
Quarter ended Year-to-date
ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Operating costs and expenses
per the consolidated
statements of operations
$1,010 $744
$2,716 $2,228
Non-comparable hotel expenses
(220) (26)
(408) (87)
Hotel expenses for the property
for which we record rental
income
9 9
38 36
Rent expense for office
buildings and limited service
hotels
(19) (18)
(56) (54)
Adjustment for hotel expenses
for comparable hotels to
reflect Marriott's fiscal year
for Marriott-managed hotels
- -
5 -
Depreciation and amortization
(119) (82)
(314) (244)
Corporate and other expenses
(21) (16)
(62) (45)
Comparable
hotel expenses $640
$611 $1,919 $1,834
(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 statement of operations as
continuing
operations and (ii) the difference between the number of
days of operations
reflected in the comparable hotel results and the
number of
days of operations reflected in the consolidated statements
of operations.
(g) Represents rental income less rental
expense for limited service
properties
and office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per share amounts)
September 8, December 31,
2006 2005
Equity
Common shares
outstanding
520.7 361.0
Common shares
and minority held common OP
Units
outstanding
539.7 380.8
Preferred
OP Units outstanding
.02 .02
Class C Preferred
shares outstanding (a)
- 6.0
Class E Preferred
shares outstanding
4.0 4.0
Security pricing (per share price)
Common (b)
$22.66 $18.95
Class C Preferred
(a) (b)
$ - $25.25
Class E Preferred
(b)
$26.60 $26.75
Convertible
Preferred Securities (c)
$ - $61.02
Exchangeable
Senior Debentures (d)
$1,369.90 $1,163.70
Dividends declared per share for calendar
year
Common (e)
$.51 $.41
Class B Preferred
(f)
$ - $.87
Class C Preferred
(a)
$.86 $2.50
Class E Preferred
(e)
$1.66 $2.22
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per share amounts)
Debt
Series B senior notes, with a rate
of 7 7/8% due
August 2008 (g)
$ - $136
Series G senior notes, with a rate
of 9 1/4% due
October 2007 (h)
235 236
Series I senior notes, with a rate
of 9 1/2% due
January 2007 (i)
448 451
Series K senior notes, with a rate
of 7 1/8% due
November 2013
725 725
Series M senior notes, with a rate
of 7% due
August 2012
347 346
Series O senior notes, with a rate
of 6 3/8% due
March 2015
650 650
Series Q senior notes, with a rate
of 6 3/4% due
June 2016
800 -
Exchangeable Senior Debentures, with
a rate of
3.25% due April 2024
494 493
Senior notes, with an average rate
of 9.7%,
maturing through May 2012
13 13
Total senior notes
3,712 3,050
Mortgage debt (non-recourse) secured
by $3.4
billion of real estate assets,
with an average interest rate
of 7.5% and
7.8% at September 8, 2006 and
December 31, 2005, respectively,
maturing
through December 2023 (j)
2,038 1,823
Credit facility (k)
- 20
Convertible Subordinated Debentures,
with a rate
of 6 3/4% due December 2026
(c)
- 387
Other
89 90
Total debt
$5,839 $5,370
Percentage of fixed rate debt
87% 85%
Weighted average interest rate
7.2% 7.2%
Weighted average debt maturity
5.6 years 6.4 years
Quarter ended Year-to-date
ended
September 8, September 9, September 8, September 9,
2006 2005
2006 2005
Hotel Operating Statistics
for All Full
Service Properties
(l)
Average daily
rate $171.26 $155.59
$178.81 $164.46
Average occupancy
74.9% 74.5%
74.2% 73.7%
RevPAR
$128.31 $115.97 $132.72
$121.22
(a) On May 19, 2006, the Company redeemed,
at par, all of the shares of
its 10% Class
C Cumulative Redeemable Preferred stock for
approximately
$151 million, including accrued dividends.
(b) Share prices are the closing price
as reported by the New York Stock
Exchange.
(c) During the period of December 2005
through February 10, 2006, the
Company issued
30.8 million shares of its common stock to converting
holders of
its Convertible Preferred Securities. The remaining $2
million of
securities were redeemed for cash on April 5, 2006. Market
price for
December 31, 2005 is as quoted by Bloomberg L.P. and
reflects the
price of a single $50 security.
(d) Market price as quoted by Bloomberg
L.P. Amount reflects the price of
a single $1,000
debenture, which is exchangeable for common stock upon
the occurrence
of certain events.
(e) On September 15, 2006, the Company
declared a third quarter common
dividend of
$.20 per share and a third quarter preferred dividend of
$.5546875
per share for its Class E preferred stock.
(f) On May 20, 2005, the Company redeemed,
at par, all four million shares
of its 10%
Class B Cumulative Redeemable Preferred stock for
approximately
$101 million, including accrued dividends.
(g) The Company redeemed the outstanding
7 7/8% Series B senior notes on
May 15, 2006.
(h) Includes the fair value of interest
rate swap agreements of $(7)
million and
$(6) million as of September 8, 2006 and December 31,
2005, respectively.
(i) Includes the fair value of an interest
rate swap agreement of $(2)
million and
$1 million as of September 8, 2006 and December 31, 2005,
respectively.
(j) Includes the $135 million mortgage
(with a fair value of $133 million
at September
1, 2006) assumed in connection with the acquisition of
the Westin
Kierland Resort & Spa on September 1, 2006.
(k) The outstanding balance on the
Company's credit facility of $20
million as
of December 31, 2005 was repaid on January 13, 2006.
Currently,
the Company has $575 million of available capacity under
its credit
facility.
(l) The operating statistics reflect
all consolidated properties as of
September
8, 2006 and September 9, 2005, respectively. The operating
statistics
include the results of operations for six properties sold
as of September
8, 2006 and five properties sold in 2005 prior to
their disposition.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income
(Loss) Available to Common Stockholders
to Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
September 8, 2006 September 9, 2005
Per
Per
Share
Income Share Income
Amo-
(loss) Shares Amount (loss) Shares unt
Net income (loss) available to
common stockholders
$38 520.5 $.07 $(11) 353.1 $(.03)
Adjustments:
Gains on dispositions,
net of
taxes
(5) - (.01) -
- -
Amortization of deferred
gains
and other property
transactions,
net of taxes
(1) - -
(1) - -
Depreciation and amortization
119 - .23 85
- .24
Partnership adjustments
2 - -
1 - -
FFO of minority partners
of
Host LP (a)
(5) - (.01) (4)
- (.01)
Adjustments for dilutive
securities:
Assuming distribution
of
common shares granted
under the comprehensive
stock plan less
shares
assumed purchased
at
average market price
- 1.8 -
- 2.3 -
Assuming conversion of
Exchangeable Senior
Debentures
4 28.5 - 4
27.7 (.01)
FFO per diluted share (b) (c)
$152 550.8 $.28 $74 383.1 $.19
Year-to-date ended Year-to-date ended
September 8, 2006 September 9, 2005
Per
Per
Share
Income Share Income
Amo-
(loss) Shares Amount (loss) Shares unt
Net income available to common
stockholders
$524 464.1 $1.13 $67 352.6 $.19
Adjustments:
Gains on dispositions,
net of
taxes
(390) - (.84) (54)
- (.15)
Amortization of deferred
gains
and other property
transactions,
net of taxes
(3) - (.01) (5)
- (.02)
Depreciation and amortization
314 - .68
254 - .72
Partnership adjustments
24 - .05
9 - .03
FFO of minority partners
of
Host LP (a)
(18) - (.04) (15)
- (.04)
Adjustments for dilutive
securities:
Assuming distribution
of
common shares granted
under the comprehensive
stock plan less
shares
assumed purchased
at
average market price
- 1.8 -
- 2.4 (.01)
Assuming conversion of
Exchangeable Senior
Debentures
13 28.5 (.03) 13
27.7 (.02)
Assuming conversion of
Convertible Subordinated
Debentures
2 2.7 -
- - -
FFO per diluted share (b) (c)
$466 497.1 $.94 $269 382.7 $.70
(a) Represents FFO attributable to
the minority interests 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, preferred OP Units held by
minority partners,
convertible debt securities and other minority
interests
that have the option to convert their limited partnership
interest to
common OP Units. No effect is shown for securities if they
are anti-dilutive.
(c) FFO per diluted share for certain
periods presented was significantly
affected by
certain transactions, which are detailed in the table
entitled,
"Schedule of Significant Transactions Affecting Earnings per
Share and
Funds from Operations per Diluted Share."
HOST HOTELS & RESORTS, INC.
Schedule of Significant Transactions
Affecting Earnings per Share and
Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
September 8, 2006 September 9, 2005
Net Income
Net Income
(Loss) FFO
(Loss) FFO
Gain on hotel dispositions,
net of taxes
5 -
- -
Non-recurring Starwood
acquisition costs (a)
(4) (4)
- -
Total (b)
$ 1 $ (4)
$ - $ -
Per diluted share $ -
$ - $
- $ -
Year-to-date ended Year-to-date ended
September 8, 2006 September 9, 2005
Net Income
Net Income
(Loss) FFO
(Loss) FFO
Non-recurring Starwood
acquisition costs (a)
$ (17) $ (17)
$ - $ -
Senior notes redemptions and
debt prepayments (c)
(4) (4)
(34) (34)
Preferred stock redemptions (d)
(8) (8)
(4) (4)
Gain on CBM Joint Venture LLC
sale (e)
- -
42 -
Gain on hotel dispositions,
net of taxes
390 -
12 -
Minority interest income
(expense) (f)
(14) 1
(1) 2
Total (b)
$ 347 $ (28)
$ 15 $ (36)
Per diluted share $ .74
$ (.05) $ .04
$ (.09)
(a) Represents non-recurring costs
incurred in conjunction with the
acquisition
of the Starwood portfolio that are required to be expensed
under GAAP,
including start-up costs, bridge loan fees and expenses
and the Company's
portion of a foreign currency hedge loss by the
European joint
venture as the venture hedged a portion of its initial
investment
for the acquisition of six of its European hotels.
(b) Net income of Host LP was also
affected by the transactions discussed
above, with
the exception of the minority interest income (expense)
item discussed
in footnote (f). Accordingly, the total adjustments on
the net income
of Host LP were approximately $361 million and $16
million for
year-to-date 2006 and year-to-date 2005, respectively.
(c) Represents call premiums and the
acceleration of original issue
discounts
and deferred financing costs, as well as incremental
interest during
the call or prepayment notice period, included in
interest expense
in the consolidated statements of operations. We
recognized
these costs in conjunction with the prepayment or
refinancing
of senior notes and mortgages during certain periods
presented.
(d) Represents the original issuance
costs and the incremental dividends
during the
redemption notice period associated with the redemption of
the Class
C preferred stock in 2006 and the Class B preferred stock in
2005.
(e) Represents the gain, net of tax,
on the sale of 85% of our interest in
CBM Joint
Venture LLC.
(f) Represents the portion of the significant
transactions attributable to
minority partners
in Host LP.
HOST HOTELS & RESORTS, L.P.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per unit amounts)
Quarter ended Year-to-date ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Revenues
Rooms
$736 $511 $1,977
$1,547
Food and beverage
303 223
935 763
Other
74 56
199 169
Total hotel sales 1,113
790 3,111 2,479
Rental income
22 21
78 75
Total revenues
1,135 811
3,189 2,554
Expenses
Rooms
182 128
470 374
Food and beverage
244 184
690 574
Hotel departmental
expenses
303 234
794 684
Management fees
50 33
143 108
Other property-level
expenses
91 67
243 199
Depreciation and
amortization
119 82
314 244
Corporate and other
expenses
21 16
62 45
Total operating costs
and expenses
1,010 744
2,716 2,228
Operating profit
125 67
473 326
Interest income
8 5
22 17
Interest expense
(100) (94)
(298) (318)
Net gains (loss) on property
transactions
1 -
3 77
Gain (loss) on foreign currency
and derivative contracts
- (1)
- 1
Minority interest expense
- -
(7) (6)
Equity in earnings (losses) of
affiliates
(3) -
(8) (1)
Income (loss) before income taxes
31 (23)
185 96
Benefit (provision) for income
taxes
4 15
(14) (23)
Income (loss) from continuing
operations
35 (8)
171 73
Income from discontinued
operations (b)
6 3
394 24
Net income (loss)
41 (5)
565 97
Less: Distributions on preferred
units
(2) (6)
(12) (21)
Issuance costs of redeemed
preferred units (c)
- -
(6) (4)
Net income (loss) available to
common unitholders
$39 $(11) $547
$72
Basic earnings (loss) per
common unit:
Continuing
operations
$.06 $(.04) $.32
$.13
Discontinued
operations .01
.01 .81
.06
Basic earnings (loss) per
common unit
$.07 $(.03) $1.13
$.19
Diluted earnings (loss) per
common unit:
Continuing
operations
$.06 $(.04) $.32
$.13
Discontinued
operations .01
.01 .81
.06
Diluted earnings (loss) per
common unit
$.07 $(.03) $1.13
$.19
(a) Our consolidated statements of
operations presented above have been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance with
GAAP have
been omitted. When distinguishing between Host and Host LP,
the primary
difference is the partnership interests in Host LP held by
outside partners,
which is reflected as minority interest in our
consolidated
balance sheets and minority interest expense in our
consolidated
statements of operations. The consolidated statements of
operations
should be read in conjunction with the consolidated
financial
statements and notes thereto included in our most recent
Annual Report
on Form 10-K.
(b) Reflects the results of operations
and gain (loss) on sale, net of the
related income
tax, for six properties sold in 2006 and one hotel
classified
as held-for-sale as of September 8, 2006 and five
properties
sold in 2005.
(c) Represents the original issuance
costs associated with the redemption
of the Class
C preferred units in the second quarter of 2006 and the
Class B preferred
units in the second quarter of 2005.
Reconciliation of Net Income (loss) to EBITDA and
Adjusted EBITDA
(unaudited), in millions
Quarter ended Year-to-date ended
September September September September
8, 9,
8, 9,
2006 2005
2006 2005
Net income (loss)
$41 $(5)
$565 $97
Interest expense
100 94
298 318
Depreciation
and amortization 119
82 314
244
Income taxes
(4) (15)
14 23
Discontinued
operations (a) (1)
4 2
12
EBITDA
255 160
1,193 694
Gains on dispositions
(5) -
(392) (83)
Amortization
of deferred gains (1)
(1) (3)
(7)
Consolidated
partnership
adjustments:
Minority interest
expense
- -
7 6
Distributions to
minority partners
- -
(4) (3)
Equity investment
adjustments:
Equity in (earnings)
losses of affiliates
3 -
8 1
Distributions received
from equity investments 1
1 3
2
Adjusted EBITDA of Host LP
$253 $160
$812 $610
(a) Reflects the interest expense,
depreciation and amortization and
income taxes
included in discontinued operations.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders
to Funds From Operations per Diluted Share for Fourth Quarter 2006 Forecasts
(a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Fourth Quarter 2006 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net income available to common
stockholders
$165 521.0 $.32
Adjustments:
Depreciation
and amortization
164 -
.31
Gain on dispositions,
net of taxes
(27) -
(.05)
Partnership
adjustments
8 -
.02
FFO of minority
partners of Host LP (b) (11)
- (.02)
Adjustment for dilutive securities:
Assuming distribution
of common shares
granted
under the comprehensive stock plan
less
shares assumed purchased at
average
market price
- 1.8 (.01)
Assuming conversion
of Exchangeable
Senior
Debentures
6 28.8 (.02)
FFO per diluted share
$305 551.6 $.55
High-end of Range
Fourth Quarter 2006 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net income available to common
stockholders
$180 521.0 $.35
Adjustments:
Depreciation
and amortization
164 -
.31
Gain on dispositions,
net of taxes
(27) -
(.05)
Partnership
adjustments
8 -
.02
FFO of minority
partners of Host LP (b) (11)
- (.02)
Adjustment for dilutive securities:
Assuming distribution
of common shares
granted
under the comprehensive stock plan
less
shares assumed purchased at
average
market price
- 1.8 (.01)
Assuming conversion
of Exchangeable
Senior
Debentures
6 28.8 (.02)
FFO per diluted share
$320 551.6 $.58
HOST HOTELS & RESORTS, INC.
Reconciliation of
Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share for
Full Year 2006 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2006 Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to
common stockholders
$689 481.9
$1.43
Adjustments:
Depreciation and amortization
478 -
.99
Gain on dispositions, net of
taxes (420)
- (.87)
Partnership adjustments
33 -
.07
FFO of minority partners of
Host LP (b) (30)
- (.06)
Adjustment for dilutive securities:
Assuming distribution of common
shares
granted under the comprehensive
stock
plan less shares assumed
purchased at
average market price
- 1.8
(.01)
Assuming conversion of Exchangeable
Senior Debentures
19 28.8
(.05)
Assuming conversion of Convertible
Subordinated Debentures
2 1.9
-
FFO per diluted share
$771 514.4
$1.50
High-end of Range
Full Year 2006 Forecast
Income
Per Share
(Loss) Shares
Amount
Forecast net income available to
common stockholders
$704 481.9
$1.46
Adjustments:
Depreciation and amortization
478 -
.99
Gain on dispositions, net of
taxes (420)
- (.87)
Partnership adjustments
34 -
.07
FFO of minority partners of
Host LP (b) (30)
- (.06)
Adjustment for dilutive securities:
Assuming distribution of common
shares
granted under the comprehensive
stock
plan less shares assumed
purchased at
average market price
- 1.8
(.01)
Assuming conversion of Exchangeable
Senior Debentures
19 28.8
(.05)
Assuming conversion of Convertible
Subordinated Debentures
2 1.9
-
FFO per diluted share
$787 514.4
$1.53
(a) The fourth quarter and full year
2006 forecasts were based on the
following
assumptions (the comparable hotel guidance listed below does
not include
the Starwood portfolio):
* Comparable
hotel RevPAR will increase 7.0% to 8.0% for the fourth
quarter and 8.0% to 8.75% for the full year for the low and high
ends of the forecasted range, respectively.
* Comparable
hotel adjusted operating profit margins will increase 170
basis points and 200 basis points for the full year for the low and
high ends of the forecasted range, respectively.
* RevPAR growth
for the Starwood portfolio will be modestly higher
than the RevPAR for the Company's comparable hotels for full year
2006.
* Approximately
$820 million of debt and perpetual preferred stock has
been, or will be, refinanced. Charges, net of the minority interest
benefit, totaling approximately $6 million ($.01 of FFO per diluted
share effect) and $34 million ($.06 of FFO per diluted share)
related to costs associated with the debt and perpetual preferred
stock repayments and non-recurring costs related to the Starwood
acquisition will be incurred for the fourth quarter and full year
2006, respectively.
* Fully diluted
weighted average shares for FFO per diluted share will
be 551.6 million for the fourth quarter and 514.4 million for the
full year and for earnings per diluted share will be 551.6 million
for the fourth quarter and 483.7 million for the full year.
The amounts shown in these forecasts are based on these
and other assumptions, as well as management's estimate of operations for
2006. These forecasts are forward-looking and are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors which may cause actual transactions, 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 be materially different. Risks that may affect
these assumptions and forecasts include the following:
* the level
of RevPAR and margin growth may change significantly;
* 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
(losses) on dispositions;
* the level
of capital expenditures may change significantly, which
will directly affect the level of depreciation expense and net
income; and
* other risks
and uncertainties associated with our business described
herein and in the Company's filings with the SEC.
(b) Represents FFO attributable to
the minority interests in Host LP.
HOST HOTELS & RESORTS, INC.
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2006 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2006 Forecast
Low-end High-end
of range of range
Percent change in Comparable Hotel
RevPAR 8.0%
8.75%
Operating profit margin under GAAP
(b) 15.2%
15.5%
Comparable hotel adjusted operating
profit
margin (c)
26.5%
26.8%
Comparable hotel sales
Room
$2,355
$2,371
Other
1,438
1,442
Comparable
hotel sales (d)
3,793
3,813
Comparable hotel expenses
Rooms and other departmental
costs
1,561
1,564
Management fees, ground
rent and other costs 1,228
1,229
Comparable
hotel expenses (e)
2,789
2,793
Comparable hotel adjusted operating
profit 1,004
1,020
Non-comparable hotel results, net
300
300
Office buildings and limited service
properties, net
7
7
Depreciation and amortization
(479)
(479)
Corporate and other expenses
(86)
(86)
Operating
profit
$746
$762
(a) Forecasted comparable hotel results
include assumptions on the number
of hotels
that will be included in our comparable hotel set in 2006.
We have assumed
that 95 hotels will be classified as comparable as of
December 31,
2006. No assurances can be made as to the hotels that
will be in
the comparable hotel set for 2006. Also, see the notes
following
the table reconciling net income available to common
shareholders
to Funds From Operations per Diluted Share for
assumptions
relating to the full year 2006 forecasts.
(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. We forecasted an increase in margins
of 170 basis
points to 200 basis points over the comparable adjusted
operating
profit margin of 24.8%.
(d) The reconciliation of forecast
total revenues to the forecast
comparable
hotel sales is as follows (in millions):
Full Year 2006
Low-end High-end
of range of range
Revenues
$4,893 $4,901
Non-comparable hotel sales
(1,064) (1,052)
Hotel sales for the property for which
we
record rental income, net
52 52
Rental income for office buildings
and limited
service hotels
(88) (88)
Comparable hotel sales
$3,793 $3,813
(e) The reconciliation of forecast
operating costs and expenses to the
comparable
hotel expenses is as follows (in millions):
Full Year 2006
Low-end High-end
of range of range
Operating costs and expenses
$4,147 $4,139
Non-comparable hotel expenses
(764) (752)
Hotel expenses for the property for
which we
record rental income
52 52
Rent expense for office buildings
and limited
service hotels
(81) (81)
Depreciation and amortization
(479) (479)
Corporate and other expenses
(86) (86)
Comparable hotel expenses
$2,789 $2,793
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and
Adjusted EBITDA for Full Year 2006 Forecasts (a)
(unaudited, in millions)
Full Year 2006
Low-end High-end
of range of range
Net income
$739
$754
Interest expense
438
438
Depreciation and amortization
479
479
Income taxes
7
7
EBITDA
1,663
1,678
Gains on dispositions
(420)
(420)
Consolidated partnership adjustments:
Minority interest expense
8
8
Distributions to minority partners
(6)
(6)
Equity investment adjustments:
Equity in losses of affiliates
6
6
Distributions received from equity
investments 4
4
Adjusted EBITDA of Host LP
$1,255
$1,270
(a) The amounts shown in
these reconciliations are based on
management's estimate of operations for 2006. 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 condition, competition and
governmental actions will affect future transactions, results
performance and achievements. Although we believe the expectations
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 the full
year forecasts, we have utilized the same, previously detailed
assumptions as those utilized for the full year forecasts for Host
Hotels & Resorts, Inc. |