| BETHESDA, Md., Feb. 21, 2007 - Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate investment trust,
today announced its results of operations for the fourth quarter and for
the year ended December 31, 2006.
-- Total revenue increased 41%, to $1,734 million,
for the fourth quarter
and nearly 30%, to $4,888 million,
for full year 2006, which includes
$366 million and $762 million
of revenues for the fourth quarter and
full year 2006, respectively,
for the Starwood portfolio acquired in
April 2006. Excluding the revenues
from the Starwood portfolio,
revenues increased 11.2% and 9.6%
for the fourth quarter and full year,
respectively.
-- Net income increased $122 million to $196 million
for the fourth
quarter and $572 million to $738
million for full year 2006. Earnings
per diluted share increased $.17
to $.36 for the fourth quarter and
$1.10 to $1.48 for full year 2006.
Net income includes a net gain
of $8 million, or $.01 per diluted
share, for the fourth quarter,
and $355 million, or $.73 per diluted
share, for the full year from
the following: gains on asset
dispositions, costs associated
with the refinancing of senior notes and
the redemption of preferred stock
and non-recurring costs associated
with the Starwood acquisition.
By comparison, for fourth quarter and
full year 2005, net income included
a net gain of $7 million, or $.02
per diluted share, and $21 million,
or $.06 per diluted share,
respectively, associated with
similar transactions in 2005. For further
detail, refer to the "Schedule
of Significant Transactions Affecting
Earnings per Share and Funds From
Operations per Diluted Share"
attached to this earnings release.
-- Funds from Operations (FFO) per diluted share
increased nearly 32%, to
$.58, for the fourth quarter and
33%, to $1.53, for full year 2006. FFO
per diluted share was reduced
by $.03 and $.09 for the fourth quarter
and full year 2006, respectively,
due to costs associated with
refinancing of senior notes, the
redemption of preferred stock and non-
recurring costs associated with
the Starwood acquisition. By
comparison, FFO per diluted share
was reduced by $.08 for full year
2005 due to costs associated with
similar transactions in 2005.
The Company also announced the following results for Host Hotels &
Resorts, L.P. through which it conducts all of its operations and holds
96.5% of the partnership interests:
-- Net income increased $128 million to $204 million
for the fourth
quarter and $596 million to $769
million for full year 2006. Net income
of Host LP was also affected by
certain transactions-See "Schedule of
Significant Transactions Affecting
Earnings per Share and Funds From
Operations Per Diluted Share."
-- Adjusted EBITDA, which is Earnings before Interest
Expense, Income
Taxes, Depreciation, Amortization
and other items, increased 50%, to
$471 million, for the fourth quarter
and nearly 39%, to $1,283 million,
for full year 2006 primarily due
to growth in EBITDA from the Company's
comparable hotel portfolio and
EBITDA generated by the Starwood
portfolio.
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted
operating profit margins (discussed below) are non-GAAP (generally accepted
accounting principles) financial measures within the meaning of the rules
of the Securities and Exchange Commission (SEC). See the discussion included
in this press release for information regarding these non-GAAP financial
measures.
Operating Results
Comparable hotel RevPAR for the fourth quarter of 2006 increased 8.1%
and comparable hotel adjusted operating profit margins increased 2.1 percentage
points. The fourth quarter increases were driven by a 9.5% increase in
average room rate, while occupancy declined 0.9 percentage points. Full
year 2006 comparable hotel RevPAR increased 8.5% and comparable hotel adjusted
operating profit margins increased 2.1 percentage points. The full year
2006 increases were comprised of a 9.2% increase in average room rate and
a slight decrease in occupancy.
Comparable hotel adjusted operating profit margins were positively affected
by the Company's food and beverage operations, which represent approximately
32% of the Company's revenues. Food and beverage revenue at the Company's
comparable hotels increased 6.0% and 6.6% for the fourth quarter and full
year 2006, respectively, with food and beverage margins increasing 2.3
percentage points and 2.1 percentage points for the fourth quarter and
full year 2006, respectively.
For the 27 Starwood hotels, which are not included in our comparable
hotel results, RevPAR increased 11.5% and 10.9% for the fourth quarter
and full year 2006, respectively.
Christopher J. Nassetta, president and chief executive officer, stated,
"We are very pleased with our operating results in 2006 and expect to continue
to benefit in 2007 from strong industry fundamentals."
Balance Sheet
The Company's balance sheet has significantly improved over the past
three years from the strong growth in operations, debt repayment and refinancing
efforts and the equity issued to acquire the Starwood portfolio. As a result,
the Company has the best interest coverage and debt to equity leverage
ratios in its history, which leaves it well-positioned for future growth.
During the fourth quarter, the Company redeemed its $450 million 9 1/2%
Series I senior notes and its $242 million of 9 1/4% Series G senior notes
through the issuance of $500 million of 6 7/8% Series R senior notes due
2014, a draw of $250 million from the Company's credit facility and available
cash. As of December 31, 2006, the Company had approximately $364 million
of cash and cash equivalents, approximately $133 million of which was utilized
in January to pay the fourth quarter common and preferred dividends.
During February 2007, the Company refinanced the 8.58% mortgage debt
on the Harbor Beach Marriott Resort and Spa with a non-amortizing, $134
million mortgage that bears interest at a rate of 5.55% and matures in
2014.
Asset Dispositions
During January 2007, the Company sold four non-core properties (the
Sheraton Milwaukee Brookfield Hotel, the Sheraton Providence Airport Hotel,
the Capitol Hill Suites and the Marriott Mountain Shadows Resort &
Golf Club) for approximately $119 million. A portion of the proceeds from
the asset sales were used to repay $75 million of the outstanding balance
on the Company's credit facility. The Company currently has $400 million
of availability under its credit facility.
2007 Outlook
The Company expects comparable hotel RevPAR to increase approximately
6.5% to 8.5% for the full year 2007 and at the lower end of this range
for the first quarter. For full year 2007, the Company also expects its
operating profit margins under GAAP to remain relatively unchanged and
its comparable hotel adjusted operating profit margins to increase approximately
100 basis points to 125 basis points. Based upon this guidance, the Company
estimates that full year 2007 guidance for Host Hotels & Resorts, Inc.
and Host Hotels & Resorts, L.P. would be as follows:
Host Hotels & Resorts, Inc.
-- earnings per diluted share should be approximately
$.26 to $.27 for the
first quarter and $1.05 to $1.13
for the full year;
-- net income should be approximately $138 million
to $145 million for the
first quarter and $573 million
to $619 million for the full year; and
-- FFO per diluted share should be approximately
$.27 to $.28 for the
first quarter and $1.80 to $1.88
for the full year.
Host Hotels & Resorts, L.P.
-- net income should be approximately $143 million
to $150 million for the
first quarter and $593 million
to $641 million for the full year; and
-- Adjusted EBITDA should be approximately $1,450
million to $1,490
million.
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
December 31,
2006 2005
ASSETS
Property and equipment, net
$10,584 $7,434
Assets held for sale
96
73
Due from managers
51
41
Investments in affiliates
160
41
Deferred financing costs, net
60
63
Furniture, fixtures and equipment
replacement fund
100
90
Other
199 157
Restricted cash
194 162
Cash and cash equivalents
364 184
Total assets
$11,808 $8,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes, including
$495 million and
$493 million, respectively,
net of discount,
of Exchangeable
Senior Debentures
$3,526 $3,050
Mortgage debt
2,014 1,823
Credit Facility
250
20
Convertible Subordinated
Debentures
-- 387
Other
88
90
Total debt
5,878 5,370
Accounts payable and accrued expenses
243 165
Other
252 148
Total liabilities
6,373 5,683
Interest of minority partners of
Host Hotels & Resorts, L.P.
185 119
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;
521.1 million shares
and 361.0 million shares
issued and outstanding,
respectively
5
4
Additional paid-in capital
5,680 3,080
Accumulated other comprehensive
income
25
15
Deficit
(585) (923)
Total stockholders'
equity
5,222 2,417
Total liabilities
and stockholders' equity $11,808
$8,245
(a) Our consolidated balance sheet
as of December 31, 2006 has been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance
with GAAP
have been omitted.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended December 31, Year ended December 31,
2006 2005
2006 2005
Revenues
Rooms
$1,035 $722
$2,989 $2,257
Food and beverage
553 398
1,479 1,155
Other
104 75
301 243
Total hotel
sales 1,692
1,195 4,769
3,655
Rental income (b)
42 35
119 111
Total revenues
1,734 1,230
4,888 3,766
Expenses
Rooms
243 172
707 543
Food and beverage
385 286
1,067 854
Hotel departmental
expenses
417 321
1,202 1,000
Management fees
86 59
228 166
Other property-level
expenses (b)
126 86
367 284
Depreciation and
amortization
148 112
459 355
Corporate and other
expenses
32 22
94 67
Gain on insurance
settlement
(13) (9)
(13) (9)
Total operating
costs
and
expenses 1,424
1,049 4,111
3,260
Operating profit
310 181
777 506
Interest income
11 4
33 21
Interest expense
(152) (126)
(450) (443)
Net gains (losses) on
property transactions
(2) 3
1 80
Gain on foreign currency
and derivative contracts
-- 1
-- 2
Minority interest expense
(11) (4)
(41) (16)
Equity in earnings (losses)
of affiliates
2 --
(6) (1)
Income before income taxes
158 59
314 149
Benefit (provision) for
income taxes
9 (1)
(5) (24)
Income from continuing
operations
167 58
309 125
Income from discontinued
operations (c)
29 16
429 41
Net income
196 74
738 166
Less: Dividends on
preferred stock
(2) (6)
(14) (27)
Issuance costs
of
redeemed
preferred
stock
(d)
-- --
(6) (4)
Net income available to
common stockholders
$194 $68
$718 $135
Basic earnings per
common share:
Continuing operations
$.32 $.15
$.60 $.26
Discontinued operations
.05 .04
.89 .12
Basic earnings per
common share
$.37 $.19
$1.49 $.38
Diluted earnings per
common share:
Continuing operations
$.31 $.15
$.60 $.26
Discontinued operations
.05 .04
.88 .12
Diluted earnings per
common share
$.36 $.19
$1.48 $.38
(a) Our consolidated statements of
operations presented above have been
prepared without
audit. Certain information and footnote disclosures
normally included
in financial statements presented in accordance
with GAAP
have been omitted.
(b) Rental income and expense are as
follows:
Quarter ended December 31, Year ended December 31,
2006 2005
2006 2005
Rental income
Full-service
$7 $5
$30 $27
Limited service and
office buildings
35 30
89 84
$42 $35
$119 $111
Rental and other
expenses (included in
other property level
expenses)
Full-service
$2 $2
$8 $7
Limited service and
office buildings
26 25
81 79
$28 $27
$89 $86
(c) Reflects the results of operations
and gain (loss) on sale, net of
the related
income tax, for seven properties sold in 2006 and four
hotels classified
as held for sale as of December 31, 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 per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
December 31, 2006 December 31, 2005
Per
Per
Income Share Income
Share
(loss) Shares Amount (loss) Shares Amount
Net income
$196 520.9 $.38 $74 353.8 $.21
Dividends on preferred stock
(2) - (.01) (6)
- (.02)
Basic earnings available to common
stockholders (a)(b)
194 520.9 .37 68 353.8
.19
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average
market price
- 2.0 -
- 2.4 -
Assuming conversion of minority OP
units issuable
- - -
- 2.1 -
Assuming conversion of Exchangeable
Senior Debentures
6 29.0 (.01) -
- -
Diluted earnings available to
common stockholders (a)(b)
$200 551.9 $.36 $68 358.3 $.19
Year ended
Year ended
December 31, 2006 December 31, 2005
Per
Per
Income Share Income
Share
(loss) Shares Amount (loss) Shares Amount
Net income
$738 481.8 $1.53 $166 353.0 $.47
Dividends on preferred stock
(14) - (.03) (27)
- (.08)
Issuance costs of redeemed
preferred stock (c)
(6) - (.01) (4)
- (.01)
Basic earnings available to common
stockholders (a)(b)
718 481.8 1.49 135 353.0
.38
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at
average market price
- 2.0 (.01) -
2.5 -
Diluted earnings available to
common stockholders (a)(b)
$718 483.8 $1.48 $135 355.5 $.38
(a) Basic earnings per common
share is computed by dividing net income
available
to common stockholders by the weighted average number of
shares
of common stock outstanding. Diluted earnings per common share
is computed
by dividing net income 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 December 31, 2006 Quarter ended December
31, 2006
No. No.
Average Average
of of
Daily Occupancy
Properties Rooms
Rate Percentages RevPAR
Pacific
21 11,485
$203.18 70.5%
$143.32
Florida
10 6,435
183.67 64.3
118.15
Mid-Atlantic
8 5,865
258.25 82.4
212.76
DC Metro
13 5,335
192.45 70.1
134.84
North Central
12 4,906
167.42 70.3
117.71
South Central
7 4,125
150.95 70.2
105.98
Atlanta
7 2,625
192.33 68.9
132.43
New England
6 3,032
174.32 76.4
133.20
Mountain
6 2,210
135.00 64.8
87.45
International
5 1,953
154.70 72.6
112.31
All Regions
95 47,971
191.84 71.1
136.45
Quarter ended December 31, 2005
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages
RevPAR RevPAR
Pacific
$185.13 71.8%
$132.96 7.8%
Florida
167.47 65.8
110.21 7.2
Mid-Atlantic
236.98 79.4
188.20 13.1
DC Metro
180.64 74.5
134.53 .2
North Central
147.25 70.7
104.18 13.0
South Central
132.94 73.8
98.06 8.1
Atlanta
182.70 71.8
131.18 1.0
New England
164.58 75.9
124.98 6.6
Mountain
124.64 60.3
75.15 16.4
International
140.10 72.0
100.87 11.3
All Regions
175.27 72.0
126.21 8.1
As of December 31, 2006 Year
ended December 31, 2006
No. No.
Average Average
of of
Daily Occupancy
Properties Rooms
Rate Percentages RevPAR
Pacific
21 11,485
$201.76 74.6% $150.44
Florida
10 6,435
192.58 70.9
136.47
Mid-Atlantic
8 5,865 227.45
79.9 181.76
DC Metro
13 5,335
185.39 71.8
133.10
North Central
12 4,906
152.28 72.2
109.89
South Central
7 4,125
144.72 71.6
103.63
Atlanta
7 2,625
188.61 70.5
132.97
New England
6 3,032
170.11 76.9
130.81
Mountain
6 2,210
132.71 65.5
86.98
International
5 1,953
151.61 72.0
109.21
All Regions
95 47,971
184.77 73.3
135.46
Year ended December 31, 2005
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages
RevPAR RevPAR
Pacific
$184.70 76.3%
$140.87 6.8%
Florida
177.63 71.8
127.57 7.0
Mid-Atlantic
207.20 78.8
163.22 11.4
DC Metro
173.23 76.4
132.41 .5
North Central
138.55 69.0
95.58 15.0
South Central
131.25 74.1
97.25 6.6
Atlanta
171.69 69.4
119.13 11.6
New England
155.57 72.9
113.35 15.4
Mountain
119.89 64.3
77.04 12.9
International
134.18 72.2
96.83 12.8
All Regions
169.23 73.7
124.80 8.5
Comparable Hotels by Property Type (a)
As of December 31, 2006 Quarter ended December
31, 2006
No. No.
Average Average
of of
Daily Occupancy
Properties Rooms
Rate Percentages RevPAR
Urban
39 22,680
$212.51 75.4%
$160.22
Suburban
29 11,138
147.76 65.8
97.24
Airport
16 7,328
140.52 71.8
100.92
Resort/Convention 11
6,825 243.71
65.0 158.29
All Types
95 47,971
191.84 71.1
136.45
Quarter ended December 31, 2005
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages
RevPAR RevPAR
Urban
$193.41 75.4%
$145.90 9.8%
Suburban
137.69 66.3
91.31 6.5
Airport
126.61 75.6
95.72 5.4
Resort/Convention
225.44 66.2
149.25 6.1
All Types
175.27 72.0
126.21 8.1
As of December 31, 2006 Year ended
December 31, 2006
No. No.
Average Average
of of
Daily Occupancy
Properties Rooms
Rate Percentages RevPAR
Urban
39 22,680
$197.20 76.8%
$151.43
Suburban
29 11,138
145.94 67.3
98.27
Airport
16 7,328
135.31 73.1
98.85
Resort/Convention 11
6,825 253.31
71.8 181.91
All Types
95 47,971
184.77 73.3
135.46
Year ended December 31, 2005
Percent
Average Average
Change
Daily Occupancy
in
Rate Percentages
RevPAR RevPAR
Urban
$179.94 76.6%
$137.90 9.8%
Suburban
134.69 67.7
91.12 7.8
Airport
122.41 75.9
92.89 6.4
Resort/Convention
236.64 71.8
170.00 7.0
All Types
169.23 73.7
124.80 8.5
(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 ended
December 31, December 31,
2006 2005 2006
2005
Number of hotels
95 95
95 95
Number of rooms
47,971 47,971 47,971 47,971
Percent change in Comparable Hotel
RevPAR
8.1%
8.5%
Operating profit margin under GAAP
(b) 17.9% 14.7% 15.9%
13.4%
Comparable hotel adjusted operating
profit margin (c)
27.6% 25.5% 26.9%
24.8%
Comparable hotel sales
Room
$748 $692 $2,367 $2,181
Food and beverage
411 388 1,206
1,132
Other
80 75
255 246
Comparable
hotel sales (d)
1,239 1,155 3,828
3,559
Comparable hotel expenses
Room
173 165 555
524
Food and beverage
284 277 864
835
Other
47 48
150 155
Management fees, ground
rent and other
costs
393 370 1,228
1,163
Comparable
hotel expenses (e)
897 860 2,797
2,677
Comparable hotel adjusted operating
profit
342 295 1,031
882
Non-comparable hotel results, net
(f) 131
6 286
32
Comparable hotels classified as held
for sale, net
(2) -
(5) -
Office buildings and limited service
properties, net (g)
9 5
8 5
Depreciation and amortization
(148) (112) (459)
(355)
Corporate and other expenses
(32) (22) (94)
(67)
Gain on insurance settlement for non-
comparable hotels
10 9
10 9
Operating profit
$310 $181 $777
$506
(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 (in
millions):
Quarter ended Year ended
December 31, December 31,
2006 2005 2006
2005
Revenues
per the consolidated
statements of operations
$1,734 $1,230 $4,888 $3,766
Revenues
of hotels held for sale 8
- 20
2
Non-comparable
hotel sales
(470) (53) (1,037) (167)
Hotel
sales for the property for
which we record rental income,
net
16 15
53 49
Rental
income for office
buildings and limited service
hotels
(35) (30) (89)
(84)
Adjustment
for hotel sales for
comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels
(14) (7) (7)
(7)
Comparable hotel sales
$1,239 $1,155 $3,828 $3,559
(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 ended
December 31, December 31,
2006 2005 2006
2005
Operating
costs and expenses
per the consolidated
statements of operations
$1,424 $1,049 $4,111 $3,260
Operating
cost of hotels
held for sale
6 -
15 2
Non-comparable
hotel
expenses
(342) (48) (753)
(137)
Hotel
expenses for the
property for which we
record rental income
15 14
53 49
Rent
expense for office
buildings and limited
service hotels
(26) (25) (81)
(79)
Adjustment
for hotel
expenses for comparable
hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels
(10) (5) (5)
(5)
Depreciation
and amortization (148)
(112) (459) (355)
Corporate
and other expenses
(32) (22) (94)
(67)
Gain
on insurance settlement
for non-comparable hotels
10 9
10 9
Comparable hotel expenses
$897 $860 $2,797 $2,677
(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 and hotel statistics)
December 31,
2006 2005
Equity
Common shares outstanding
521.1 361.0
Common shares and minority
held
common OP
Units outstanding 539.9
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)
$24.55 $18.95
Class C Preferred (a)
(b)
$- $25.25
Class E Preferred (b)
$26.59 $26.75
Convertible Preferred
Securities (c)
$- $61.02
Exchangeable Senior Debentures
(d)
$1,473.30 $1,163.70
Dividends declared per share for
calendar year
Common (e)
$.76 $.41
Class B Preferred (f)
$- $.87
Class C Preferred (a)
$.86 $2.50
Class E Preferred (e)
$2.22 $2.22
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)
- 236
Series I senior notes, with a
rate of 9 1/2% due January 2007
(i)
- 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 -
Series R senior notes with a
rate of 6 7/8% due November
2014
(j)
496 -
Exchangeable Senior Debentures,
with a rate of 3.25% due April
2024
495 493
Senior notes, with an average
rate of 9.7%, maturing through
May 2012
13 13
Total senior notes
3,526 3,050
Mortgage debt (non-recourse)
secured by $3.3 billion of real
estate assets, with an average
interest rate of 7.5% and 7.8%
at December 31, 2006 and
2005,
respectively, maturing through
December 2023
2,014 1,823
Credit Facility (k)
250 20
Convertible Subordinated
Debentures, with a rate of 6
3/4%
due December 2026 (c)
- 387
Other
88 90
Total debt
$5,878 $5,370
Percentage of fixed rate debt
94% 85%
Weighted average interest rate
6.8% 7.2%
Weighted average debt maturity
5.9 years 6.4 years
Quarter ended Year ended
December 31, December 31,
2006 2005
2006 2005
Hotel Operating Statistics for
All Full-Service Properties
(l)
Average daily rate
$190.33 $174.90 $182.56 $167.64
Average occupancy
70.9% 70.1% 73.1%
72.6%
RevPAR
$134.97 $122.61 $133.48 $121.66
(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 Deutsche
Bank Securities, Inc. and Bloomberg
L.P. as of
December 31, 2006 and December 31, 2005, respectively.
Amount reflects
the price of a single $1,000 debenture, which is
exchangeable
for common stock upon the occurrence of certain events.
(e) On December 12, 2006, the Company
declared a fourth quarter common
dividend of
$.25 per share and a fourth 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) The Company redeemed the outstanding
9 1/4% Series G senior notes and
the related
interest rate swap agreements in December 2006. The fair
value of the
interest rate swap agreements was $(6) million as of
December 31,
2005.
(i) The Company redeemed the outstanding
9 1/2% Series I senior notes and
the related
interest rate swap agreement in December 2006. The fair
value of the
interest rate swap agreement was $1 million as of
December 31,
2005.
(j) The Series R senior notes were
exchanged for Series S senior notes in
February 2007.
The terms were substantially identical except the new
series are
registered under the Securities Act of 1933 and are,
therefore,
freely transferable by the holders.
(k) On January 17, 2007, the company
repaid $75 million of the $250
million balance
on the Company's credit facility that was outstanding
at December
31, 2006. Currently, the Company has $400 million of
available
capacity under its credit facility.
(l) The operating statistics reflect
all consolidated properties as of
December 31,
2006 and 2005, respectively. The operating statistics
include the
results of operations for seven properties sold in 2006
and five properties
sold in 2005 prior to their disposition.
HOST HOTELS & RESORTS, INC.
Reconciliation
of Net Income Available to Common Stockholders
to Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
December 31, 2006 December 31, 2005
Per
Per
Share
Share
Income Shares Amount Income Shares Amount
Net income available to common
stockholders
$194 520.9 $.37 $68 353.8 $.19
Adjustments:
Gains on dispositions, net of
taxes (26) - (.05) (7)
- (.02)
Amortization of deferred gains
and
other property transactions,
net of
taxes
2 - .01 (2)
- -
Depreciation and amortization
148 - .28 117
- .33
Partnership adjustments
10 - .02
2 - -
FFO of minority partners of
Host LP (12) - (.02) (10)
- (.02)
Adjustments for dilutive securities:
Assuming distribution of common
shares granted under the
comprehensive stock plan
less
shares assumed purchased
at average
market price
- 2.0 (.01) -
2.4 (.01)
Assuming conversion of Exchangeable
Senior Debentures
6 29.0 (.02) 6 28.1
(.02)
Assuming conversion of Convertible
Subordinated Debentures
- - -
10 30.7 (.01)
FFO per diluted share (a) (b)
$322 551.9 $.58 $184 415.0 $.44
Year ended
Year ended
December 31, 2006 December 31, 2005
Per
Per
Share
Share
Income Shares Amount Income Shares Amount
Net income available to common
stockholders
$718 481.8 $1.49 $135 353.0 $.38
Adjustments:
Gains on dispositions, net of
taxes
(416) - (.87) (60)
- (.17)
Amortization of deferred gains
and
other property transactions,
net
of taxes
(1) - -
(8) - (.02)
Depreciation and amortization
462 - .96 371
- 1.05
Partnership adjustments
34 - .07
10 - .03
FFO of minority partners of
Host
LP
(30) - (.06) (24)
- (.07)
Adjustments for dilutive
securities:
Assuming distribution
of common
shares granted under
the
comprehensive stock
plan less
shares assumed purchased
at
average market price
- 2.0 (.01) -
2.5 (.01)
Assuming conversion of
Exchangeable Senior
Debentures 19 29.0 (.05)
19 28.1 (.04)
Assuming conversion of
Convertible
Subordinated Debentures
2 1.9 -
32 30.9 -
FFO per diluted share (a) (b)
$788 514.7 $1.53 $475 414.5 $1.15
(a) 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.
(b) 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
December 31, 2006 December 31, 2005
Net Income
Net Income
(Loss) FFO
(Loss) FFO
Senior notes redemptions and
debt prepayments (a)
$(18) $(18)
$- $-
Gain on hotel dispositions, net
of taxes
26 -
7 -
Minority interest income
(expense) (b)
- 1
- -
Total (c)
$8 $(17)
$7 $-
Per diluted share
$.01 $(.03) $.02
$-
Year ended
Year ended
December 31, 2006 December 31, 2005
Net Income
Net Income
(Loss) FFO
(Loss) FFO
Non-recurring Starwood
acquisition costs (d)
$(17) $(17)
$- $-
Senior notes redemptions and
debt prepayments (a)
(22) (22)
(34) (34)
Preferred stock redemptions (e)
(8) (8)
(4) (4)
Gain on CBM Joint Venture LLC
sale (f)
- -
41 -
Gain on hotel dispositions, net
of taxes
416 -
19 -
Minority interest income
(expense) (b)
(14) 2
(1) 2
Total (c)
$355 $(45)
$21 $(36)
Per diluted share
$.73 $(.09) $.06
$(.08)
(a) Represents call premiums,
the acceleration of original issue
discounts
and deferred financing costs, the termination costs of
interest
rate swaps, 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.
(b) Represents the portion of
the significant transactions attributable
to minority
partners in Host LP.
(c) Net income of Host LP was
also affected by the transactions discussed
above,
with the exception of the minority interest expense item
discussed
in footnote (b). Accordingly, the total adjustments on the
net
income of Host LP were approximately $8 million and $7 million
for
the fourth quarter 2006 and 2005, respectively, and $369 million
and
$22 million for full year 2006 and 2005, respectively.
(d) 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.
(e) 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 the second quarter of 2006 and the
Class
B preferred stock in the second quarter of 2005.
(f) Represents the gain, net
of tax, on the sale of 85% of our interest
in CBM
Joint Venture LLC.
HOST HOTELS & RESORTS, L.P.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per unit amounts)
Quarter ended Year ended
December 31, December 31,
2006 2005 2006
2005
Revenues
Rooms
$1,035 $722 $2,989 $2,257
Food and beverage
553 398 1,479
1,155
Other
104 75 301
243
Total hotel sales
1,692 1,195 4,769 3,655
Rental income
42 35 119
111
Total revenues
1,734 1,230 4,888 3,766
Expenses
Rooms
243 172 707
543
Food and beverage
385 286 1,067
854
Hotel departmental expenses
417 321 1,202
1,000
Management fees
86 59 228
166
Other property-level expenses
126 86 367
284
Depreciation and amortization
148 112 459
355
Corporate and other expenses
32 22
94 67
Gain on insurance settlement
(13) (9) (13)
(9)
Total operating
costs and expenses 1,424 1,049
4,111 3,260
Operating profit
310 181 777
506
Interest income
11 4
33 21
Interest expense
(152) (126) (450) (444)
Net gains (losses) on property
transactions
(2) 3
1 80
Gain on foreign currency and
derivative contracts
- 1
- 2
Minority interest expense
(3) (1) (10)
(7)
Equity in earnings (losses) of
affiliates
2 -
(6) (1)
Income before income taxes
166 62 345
157
Benefit (provision) for income taxes
9 (2) (5)
(25)
Income from continuing operations
175 60 340
132
Income from discontinued operations
(b) 29 16
429 41
Net income
204 76 769
173
Less: Distributions on preferred units
(2) (6) (14)
(27)
Issuance costs
of redeemed preferred
units
(c)
- -
(6) (4)
Net income available to common
unitholders
$202 $70 $749
$142
Basic earnings per common unit:
Continuing operations
$.32 $.15 $.64
$.27
Discontinued operations
.05 .04 .86
.11
Basic earnings per common unit
$.37 $.19 $1.50
$.38
Diluted earnings per common unit:
Continuing operations
$.31 $.15 $.64
$.27
Discontinued operations
.05 .04 .85
.11
Diluted earnings per common unit
$.36 $.19 $1.49
$.38
(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 Host's
consolidated balance sheets and minority interest expense
in Host's
consolidated statements of operations.
(b) Reflects the results of operations
and gain (loss) on sale, net of
the
related income tax, for seven properties sold in 2006, four
hotels
classified as held-for-sale as of December 31, 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.
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended Year ended
December 31, December 31,
2006 2005 2006
2005
Net income
$204 $76 $769
$173
Interest expense
152 126 450
444
Depreciation and amortization
148 112 459
355
Income taxes
(9) 2
5 25
Discontinued operations (a)
1 6
7 19
EBITDA
496 322 1,690
1,016
Gains on dispositions
(26) (6) (418)
(89)
Amortization of deferred gains
2 (2)
(1) (9)
Consolidated partnership adjustments:
Minority interest expense
3 1
10 7
Distributions to minority
partners (3) (1)
(7) (4)
Equity investment adjustments:
Equity in (earnings) losses
of
affiliates
(2) -
6 1
Distributions received
from equity
investments
1 -
3 2
Adjusted EBITDA of Host LP
$471 $314 $1,283
$924
(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 First Quarter
2007 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
First Quarter 2007 Forecast
Per Share
Income Shares Amount
Forecast net income available to
common stockholders (b)
$136 521.8
$.26
Adjustments:
Depreciation and amortization
132 -
.25
Gain on dispositions, net of
taxes (127)
- (.24)
Partnership adjustments
8 -
.02
FFO of minority partners of
Host LP (5)
- (.01)
Adjustment for dilutive securities:
Assuming distribution of common
shares
granted under the comprehensive
stock
plan less shares assumed
purchased
at average market price
- 2.0
-
Assuming conversion of Exchangeable
Senior Debentures
4 29.0
(.01)
FFO per diluted share
$148 552.8
$.27
High-end of Range
First Quarter 2007 Forecast
Per Share
Income Shares Amount
Forecast net income available to
common stockholders (b)
$143 521.8
$.27
Adjustments:
Depreciation and amortization
132 -
.25
Gain on dispositions, net of
taxes (127)
- (.24)
Partnership adjustments
8 -
.02
FFO of minority partners of
Host LP (5)
- (.01)
Adjustment for dilutive securities:
Assuming distribution of common
share
granted under the comprehensive
stock
plan less shares assumed
purchased at
average market price
- 2.0
-
Assuming conversion of Exchangeable
Senior Debentures
4 29.0
(.01)
FFO per diluted share
$155 552.8
$.28
HOST HOTELS & RESORTS, INC.
Reconciliation
of Net Income Available to Common Stockholders to
Funds From Operations per Diluted
Share for Full Year 2007 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2007 Forecast
Per Share
Income Shares
Amount
Forecast net income available to
common stockholders (b)
$564 522.4
$1.08
Adjustments:
Depreciation and amortization
573 -
1.10
Gain on dispositions, net of
taxes (157)
- (.30)
Partnership adjustments
34 -
.06
FFO of minority partners of
Host LP (34)
- (.06)
Adjustment for dilutive securities:
Assuming distribution of common
shares granted under the
comprehensive stock plan
less
shares assumed purchased
at average
market price
- 2.0
(.01)
Assuming conversion of Exchangeable
Senior Debentures
19 30.1
(.07)
FFO per diluted share
$999 554.5
$1.80
High-end of Range
Full Year 2007 Forecast
Per Share
Income Shares
Amount
Forecast net income available to
common stockholders (b)
$610 522.4
$1.17
Adjustments:
Depreciation and amortization
573 -
1.10
Gain on dispositions, net of
taxes (157)
- (.30)
Partnership adjustments
36 -
.07
FFO of minority partners of
Host LP (36)
- (.07)
Adjustment for dilutive securities:
Assuming distribution of common
shares granted under the
comprehensive stock plan
less
shares assumed purchased
at average
market price
- 2.0
(.01)
Assuming conversion of Exchangeable
Senior Debentures
19 30.1
(.08)
FFO per diluted share
$1,045 554.5
$1.88
(a) The first quarter and full
year 2007 forecasts were based on the
following
assumptions:
--
Comparable hotel RevPAR will increase 6.5% to 8.5% for the full
year for the low and high ends of the forecasted range,
respectively, and at the lower end of this range for the first
quarter.
--
Comparable hotel adjusted operating profit margins will
increase 100 basis points and 125 basis points for the full
year for the low and high ends of the forecasted range,
respectively.
--
Approximately $400 million of acquisitions will be made during
2007.
--
We expect to have incremental dispositions of approximately $400
million of hotels beyond the $120 million of hotels already sold
in the first quarter of 2007.
--
We expect to spend approximately $640 million on capital
expenditures during 2007, including approximately $310 million
for maintenance capital expenditures. The remainder of the
expenditures will be for return on investment/repositioning
projects.
--
Fully diluted weighted average shares for both FFO per diluted
share and earnings per diluted share will be 554.5 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
2007.
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) The per share amount reflects
basic earnings per share which is
calculated
by dividing net income available to common stockholders by
the
weighted average number of shares of common stock outstanding.
For
the Company's full year 2007 forecast of diluted earnings per
share,
the weighted average share count must be adjusted to include
the
effect of potentially dilutive securities, including our
Exchangeable
Senior Debentures. Accordingly, the full year forecast
of diluted
earnings per share is $1.05 and $1.13 for the low and high
end
of the range, respectively. These securities are anti-dilutive
for
the first quarter forecast and, therefore, no effect is shown.
HOST HOTELS & RESORTS, INC.
Schedule of
Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2007 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2007 Forecast
Low-end High-end
of range of range
Percent change in Comparable Hotel
RevPAR 6.5%
8.5%
Operating profit margin under GAAP
(b) 15.7%
16.1%
Comparable hotel adjusted operating
profit margin (c)
27.9%
28.2%
Comparable hotel sales
Room
$2,567
$2,615
Other
1,554
1,583
Comparable hotel
sales (d)
4,121
4,198
Comparable hotel expenses
Rooms and other departmental
costs
1,660
1,694
Management fees, ground rent
and other costs 1,309
1,320
Comparable hotel
expenses (e)
2,969
3,014
Comparable hotel adjusted operating
profit 1,152
1,184
Non-comparable hotel results, net
347
353
Office buildings and limited service
properties, net
7
7
Depreciation and amortization
(574)
(574)
Corporate and other expenses
(79)
(79)
Operating profit
$853
$891
(a) Forecasted comparable hotel
results include assumptions on the number
of hotels
that will be included in our comparable hotel set in 2007.
We have
assumed that 96 hotels will be classified as comparable as of
December
31, 2007. No assurances can be made as to the hotels that
will
be in the comparable hotel set for 2007. 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 2007 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. For the 96 hotels that we
assume
will be classified as comparable as of December 31, 2007, we
forecasted
an increase in margins of 100 basis points to 125 basis
points
over the comparable adjusted operating profit margin of 26.9%
for
2006. The 2006 operating profit margin for these 96 hotels has
been
reduced by 15 basis points to conform to an accounting change
for
banquet service charges made in 2007 by one of our managers for
certain
hotels. Beginning in 2007, banquet service charges that are
not
paid out to employees will be included in food and beverage
revenues
instead of reducing salary and wage costs.
(d) The reconciliation of forecast
total revenues to the forecast
comparable
hotel sales is as follows (in millions):
Full Year 2007
Low-end High-end
of range of range
Revenues
$5,423
$5,524
Non-comparable hotel sales
(1,259) (1,284)
Hotel sales for the property for which
we record rental income, net
52
53
Rental income for office buildings and
limited service hotels
(95)
(95)
Comparable hotel sales
$4,121
$4,198
(e) The reconciliation of forecast
operating costs and expenses to the
comparable
hotel expenses is as follows (in millions):
Full Year 2007
Low-end High-end
of range of range
Operating costs and expenses
$4,570
$4,633
Non-comparable hotel expenses
(912)
(931)
Hotel expenses for the property for which
we record rental income
52
53
Rent expense for office buildings and
limited service hotels
(88)
(88)
Depreciation and amortization
(574)
(574)
Corporate and other expenses
(79)
(79)
Comparable hotel expenses
$2,969
$3,014
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
for Full Year 2007 Forecasts (a)
(unaudited, in millions)
Full Year 2007
Low-end High-end
of range of range
Net income
$593
$641
Interest expense
409
409
Depreciation and amortization
574
574
Income taxes
20
12
EBITDA
1,596
1,636
Gains on dispositions
(157)
(157)
Consolidated partnership adjustments:
Minority interest expense
9
9
Distributions to minority
partners
(8)
(8)
Equity investment adjustments:
Equity in losses of affiliates
2
2
Distributions received
from equity investments 8
8
Adjusted EBITDA of Host LP
$1,450
$1,490
(a) The amounts shown in these
reconciliations are based on management's
estimate
of operations for 2007. 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. |
ADD: /FIRST AND FINAL ADD -- DCW004 -- Host Hotels & Resorts, Inc.
Earnings/
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are
based on results of our hotels reported to us by our hotel managers. Our
hotel managers use different reporting periods. Marriott International,
Inc., or Marriott, 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 Starwood and Hyatt,
report results on a monthly basis. Additionally, Host, as a REIT, is required
by tax laws to report results on a calendar year. As a result, we elected
to adopt the reporting periods used by Marriott except that our fiscal
year always ends on December 31 to comply with REIT rules. Our first three
quarters of operations end on the same day as Marriott but our fourth quarter
ends on December 31 and our full year results, as reported in our statement
of operations, always includes the same number of days as the calendar
year.
Two consequences of the reporting cycle we have adopted are: (1) quarterly
start dates will usually differ between years, except for the first quarter
which always commences on January 1, and (2) our first and fourth quarters
of operations and year-to-date operations may not include the same number
of days as reflected in prior years. For example, the third quarter of
2006 ended on September 8, and the third quarter of 2005 ended on September
9, though both quarters reflect twelve weeks of operations. In contrast,
the fourth quarter results for 2006 reflect 114 days of operations, while
our fourth quarter results for 2005 reflect 113 days of operations.
While the reporting calendar we adopted is more closely aligned with
the reporting calendar used by the manager of a majority of our properties,
one final consequence of our calendar is we are unable to report the month
of operations that ends after our fiscal quarter-end until the following
quarter because our hotel managers using a monthly reporting period do
not make mid- month results available to us. Hence, the month of operation
that ends after our fiscal quarter-end is included in our quarterly results
of operations in the following quarter for those hotel managers (covering
approximately 40% of our hotels). As a result, our quarterly results of
operations include results from hotel managers reporting results on a monthly
basis as follows: first quarter (January, February), second quarter (March
to May), third quarter (June to August) and fourth quarter (September to
December). While this does not affect full-year results, it does affect
the reporting of quarterly results.
Reporting Periods for Hotel Operating Statistics and Comparable Hotel
Results
In contrast to the reporting periods for our consolidated statement
of operations, our hotel operating statistics (i.e., RevPAR, average daily
rate and average occupancy) and our comparable hotel results are always
reported based on the reporting cycle used by Marriott for our Marriott-managed
hotels. This facilitates year-to-year comparisons, as each reporting period
will be comprised of the same number of days of operations as in the prior
year (except in the case of fourth quarters comprised of seventeen weeks
(such as fiscal year 2002) versus sixteen weeks). This means, however,
that the reporting periods we use for hotel operating statistics and our
comparable hotels results may differ slightly from the reporting periods
used for our statements of operations for the first and fourth quarters
and the full year. Results from hotel managers reporting on a monthly basis
are included in our operating statistics and comparable hotels results
consistent with their reporting in our consolidated statement of operations
herein:
-- Hotel results for the fourth quarter of 2006 reflect
16 weeks of
operations for the period from
September 9, 2006 to December 29, 2006
for our Marriott-managed hotels
and results from September 1, 2006 to
December 31, 2006 for operations
of all other hotels which report
results on a monthly basis.
-- Hotel results for the fourth quarter of 2005 reflect
16 weeks of
operations for the period from
September 10, 2005 to December 30, 2005
for our Marriott-managed hotels
and results from September 1, 2005 to
December 31, 2005 for operations
of all other hotels which report
results on a monthly basis.
-- Hotel results for full year 2006 reflect 52 weeks
of operations for the
period from December 31, 2006
to December 29, 2006 for our Marriott-
managed hotels and results from
January 1, 2006 to December 31, 2006
for operations of all other hotels
which report results on a monthly
basis.
-- Hotel results for full year 2005 reflect 52 weeks
of operations for the
period from January 1, 2005 to
December 30, 2005 for our Marriott-
managed hotels and 365 days of
operations for the period from January
1, 2005 to December 31, 2005 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,
adjusted operating profit and adjusted operating profit margin) for the
periods included in this report on a comparable hotel basis. 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 during the reporting periods being compared. Of the 128
hotels that we owned as of December 31, 2006, 95 hotels have been classified
as comparable hotels. The operating results of the following hotels that
we owned as of December 31, 2006 are excluded from comparable hotel results
for these periods:
-- Marriott Mountain Shadows Resort and Golf Club
(closed September 2004
and sold in the first quarter
of 2007);
-- The Westin Kierland Resort & Spa (acquired
in September 2006);
-- The 27 hotels acquired from Starwood on April
10, 2006 that we
currently consolidate as of December
31, 2006 (three of which were sold
in the first quarter of 2007);
-- Newport Beach Marriott Hotel & Spa (major
renovation completed December
2005);
-- Hyatt Regency Washington on Capitol Hill, Washington,
D.C. (acquired in
September 2005);
-- Atlanta Marriott Marquis (major renovation started
in August 2005); and
-- New Orleans Marriott (property damage and business
interruption from
Hurricane Katrina in August 2005).
In addition, the operating results of the 12 hotels we disposed of in
2006 and 2005 are also not included in comparable hotel results for the
periods presented herein. Moreover, because these statistics and operating
results are for our hotel properties, they exclude results for our non-hotel
properties and other real estate investments.
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 per diluted share
of Host, (ii) EBITDA of Host LP, (iii) Adjusted EBITDA of Host LP and (iv)
Comparable Hotel Operating Results of Host. 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 (losses) from sales of real estate,
the cumulative effect of changes in accounting principles, real estate-related
depreciation and amortization and adjustments for unconsolidated partnerships
and joint ventures. We present FFO on a per share basis after making adjustments
for the effects of dilutive securities and 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 lesser significance in evaluating current performance,
we believe such measures 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
As of February 20, 2006, Host owns approximately 96.5% of the partnership
interest of Host LP and is its sole general partner. We conduct all of
our operations through Host LP, and Host LP is the obligor on our senior
notes and on our credit facility. Historically, management has 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. In
addition, the Adjusted EBITDA of Host LP is presented because we believe
it is a relevant measure in calculating certain credit ratios, since Host
LP is the owner of all of our hotels and is the obligor on our debt noted
above. 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 -- We exclude
the effect of gains and
losses recorded on the disposition
of assets in our consolidated
statement of operations 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 disposed
assets 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 our actual performance
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 (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 stockholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our hotels, such as hotel revenues,
expenses and adjusted operating 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 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, 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.
About Host Hotels & Resorts
Host Hotels & Resorts, Inc. is the largest lodging
real estate investment trust and one of the largest owners of luxury and
upper upscale hotels. As of February 21, 2007, the Company owns 124 properties
with approximately 66,000 rooms, and also holds a minority interest in
a joint venture that owns seven hotels in Europe with approximately 2,700
rooms. 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®,
The Luxury Collection®, Hyatt®, Fairmont®, Four Seasons®,
Hilton® and Swissotel®* in the operation of properties in over
50 major markets worldwide. For additional information, please visit the
Company's website at http://www.hosthotels.com.
Note: This press release contains forward-looking statements
within the meaning of federal securities regulations. These forward-looking
statements are identified by their use of terms and phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan," "predict,"
"project," "will," "continue" and other similar terms and phrases, including
references to assumption and forecasts of future results. Forward-looking
statements are not guarantees of future performance and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results to differ materially from those anticipated at the time the forward-
looking statements are made. These risks include, but are not limited to:
national and local economic and business conditions, including the potential
for terrorist attacks, that will affect occupancy rates at our hotels and
the demand for hotel products and services; operating risks associated
with the hotel business; risks associated with the level of our indebtedness
and our ability to meet covenants in our debt agreements; relationships
with property managers; our ability to maintain our properties in a first-class
manner, including meeting capital expenditure requirements; our ability
to compete effectively in areas such as access, location, quality of accommodations
and room rate structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices, construction procedures
and costs; our ability to complete pending acquisitions and dispositions;
and our ability to continue to satisfy complex rules in order for us to
qualify as a Real Estate Investment Trust for federal income tax purposes
and other risks and uncertainties associated with our business described
in the Company's filings with the SEC. Although the Company believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that the expectations
will be attained or that any deviation will not be material. All information
in this release is as of February 20, 2007, 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.
Host Hotels & Resorts, Inc., herein referred to as
"we" or "Host," is a self-managed and self-administered real estate investment
trust (REIT). We own properties and conduct our operations through an umbrella
partnership REIT (UPREIT) structure, in which substantially all of our
properties and assets are held by Host Hotels & Resorts, 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 and Host LP, the primary difference
is approximately 3.5% of the partnership interests in Host LP held by outside
partners as of February 20, 2007, which is reflected as minority interest
in our consolidated balance sheets and minority interest expense in our
consolidated statements of operations. Readers are encouraged to find further
detail regarding our organizational structure in our annual report on Form
10-K.
For information on our reporting periods and non-GAAP
financial measures (including Adjusted EBITDA, FFO per diluted share and
comparable hotel adjusted operating profit margin) which we believe is
useful to investors, see the Notes to the Financial Information included
in this release. |
