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BETHESDA, Md., July 20, 2011-- Host Hotels & Resorts,
Inc. (NYSE: HST), the nation's largest lodging real estate
investment trust (REIT), today announced results of operations for the
second quarter ended June 17, 2011.
Highlights
- Comparable hotel RevPAR increased 6.7% for the quarter and
6.1% for year-to-date 2011.
- The Company recently entered into agreements to acquire
both the 888-room Grand Hyatt Washington,
D.C. and, through its European joint venture, the 396-room
Pullman Bercy, Paris. Upon the
completion of these transactions, the Company will have invested in
2011 nearly $1.7 billion in 12
properties in Paris, Washington, D.C., New
York City, San Diego, Melbourne, Australia and in four cities
across New Zealand.
Operating Results
- Hotel revenues for owned hotels were $1.235
billion, an increase of $150 million, or 14%, for the second quarter of
2011 and were $2.081 billion, an
increase of $204 million, or 11%, for year-to-date 2011. Total revenue
increased $184 million, or 17%, for the quarter and $264 million, or 14% for year-to-date 2011.
A portion of the increase in total revenues was due to the
revenues generated by the 14 hotels acquired since July 2010, as well as the inclusion of
property-level revenues for 53 leased, select-service hotels for which
the Company previously recorded rental income. Total revenues increased
$128 million and $175 million, for the second quarter and year-to-date,
respectively, as a result of these transactions.
- Net income was $64 million, or $.09
per diluted share, for the second quarter of 2011 compared to net
income of $20 million, or $.02 per
diluted share, for the second quarter of 2010. For year-to-date 2011,
net income was $4 million, compared to a net loss of $64 million, or $.11 per diluted share, for year-to-date 2010.
The Company's operating results include transactions, such as
losses on debt extinguishments, litigation costs, acquisition costs and
non-cash impairment charges that can affect earnings and FFO per
diluted share. The net effect of these items was a decrease to earnings
per diluted share of $.01 for the second
quarter of 2011 and 2010, and $.02 for
year-to-date 2011 and 2010.
- Funds From Operations ("FFO") was $210 million, or $.30 per diluted share, for the second quarter
of 2011 compared to $151 million, or $.23
per diluted share, for the second quarter of 2010. FFO was $287
million, or $.41 per diluted share, and
$200 million, or $.31 per diluted share,
for year-to-date 2011 and 2010, respectively. The net effect of the
above transactions affecting operating results also decreased FFO per
diluted share by $.01 for the second
quarter of 2011, with no per share effect on the second quarter of
2010, and $.02 for year-to-date 2011 and
2010.
- Adjusted EBITDA, which is Earnings before Interest Expense,
Income Taxes, Depreciation, Amortization and other items, increased 25%
to $313 million for the quarter and 22% to $457
million for year-to-date 2011.
For further detail of the transactions affecting net income,
earnings per diluted share, FFO and FFO per diluted share, refer to the
notes to the "Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
FFO per Diluted Share." Adjusted EBITDA, FFO, 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 increased 6.7% for the second quarter,
as a result of the improvement of average room rate of 5.0%, combined
with an increase in occupancy of 1.1 percentage points. For
year-to-date 2011, comparable hotel RevPAR increased 6.1%, with the
majority of the increase driven by rate improvement. Comparable hotel
adjusted operating profit margins increased 115 basis points and 65
basis points for the second quarter and year-to-date 2011,
respectively. During the quarter, eleven of the Company's comparable
hotels were undergoing significant renovation projects, including two
of the Company's larger properties, the Sheraton New York Hotel &
Towers and the Philadelphia Marriott Downtown.
ACQUISITIONS
As previously announced, on April 29, 2011, the Company
invested AUD45 million ($48 million) to
acquire a 75% common voting interest and a preferred interest in the
entity that owns the 364-room Hilton Melbourne South Wharf. The Company
assumed an existing AUD80 million ($86 million)
mortgage loan in connection with the acquisition.
On July 14, 2011, the Company
reached an agreement to acquire the 888-room Grand Hyatt Washington, D.C. for $442
million, which may include the assumption of a $166 million mortgage loan. The Grand Hyatt,
which includes over 43,000 square feet of meeting space, is centrally
located in the nation’s capital with easy access to historic monuments
and the convention center. The transaction is expected to be completed
in September and is subject to customary closing conditions.
EUROPEAN JOINT VENTURE
On June 27, 2011, the Company signed an amendment to the
partnership agreement to expand its investment in the European joint
venture through the establishment of a new fund (the "Euro JV Fund
II"). The new fund has a target size of euro 450 million of new equity
and a target investment of approximately euro 1
billion after taking into account leverage. Each of the current
partners in the European joint venture owns a 33.3% limited partner
interest in the Euro JV Fund II, while an affiliate of the Company owns
a 0.1% general partner interest. On June 28, 2011, as part of the
expansion, the Company transferred the Le Meridien Piccadilly to the
Euro JV Fund II for a transfer price of 64 million pounds Sterling,
including the assumption of the 32 million pounds mortgage loan. Cash
received in the transfer was used to repay 25 million pounds ($41
million) outstanding under the Company's credit facility.
On July 6, 2011, the Euro JV
Fund II reached an agreement to acquire the 396-room Pullman Bercy in Paris for approximately euro 96 million. With a strong location in Paris' growing business district of Bercy,
the hotel provides a first-class meeting platform with 19,400 square
feet of meeting space. The Euro JV Fund II has agreed to invest an
additional euro 9 million for the
renovation of the rooms and public space at the hotel and Accor will
continue to operate the hotel under the Pullman brand. The transaction
is subject to a waiver by the city of Paris
of its right to purchase the hotel, as well as other customary closing
conditions, and is expected to close in September.
RETURN ON INVESTMENT EXPENDITURES
The Company invested $75 million and $121 million in return on
investment (ROI) projects during the second quarter and year-to-date of
2011, respectively. These projects are designed to increase cash flow
and improve profitability by capitalizing on changing market conditions
and the favorable locations of the Company's properties. Major ROI
projects substantially completed during the second quarter include: the
first phase of our re-development project at the 1,756-room Sheraton
New York Hotel & Towers and the expansion and renovation of 21,000
square feet of meeting space at the St. Regis Hotel, Houston. The Company expects that its
investment in ROI expenditures for 2011 will total approximately $220
million to $240 million.
RENEWAL AND REPLACEMENT EXPENDITURES
The Company also spent approximately $71 million and $119
million in the second quarter and year-to-date of 2011, respectively,
for renewal and replacement expenditures designed to ensure that the
high-quality standards of both the Company and its operators are
maintained. Major renewal and replacement projects substantially
completed during the second quarter include phase one of the renovation
at the New York Marriott Marquis, which included 991 of its guest
rooms, and the renovation of the meeting space and the 1,200 rooms in
the main tower of the Philadelphia Marriott Downtown. The Company
expects that renewal and replacement expenditures for 2011 will total
approximately $320 million to $345 million.
BALANCE SHEET
During the second quarter of 2011, the Company issued
approximately 11 million shares of common stock at an average price of $17.29 per share, for net proceeds of
approximately $189 million. These sales were made in "at-the-market"
offerings pursuant to an April 2011
Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC,
which had an initial aggregate offering price of $400
million. There is approximately $209 million of issuance
capacity remaining under the agreement.
On May 11, 2011 and May 25, 2011, the Company issued $425
million and $75 million, respectively, of 5 7/8% Series W senior notes
maturing in 2019, for net proceeds of $489
million. Proceeds from the Series W senior notes were used to
redeem the remaining $250 million 7 1/8% Series K senior notes due
November of 2013 and to repay $50 million
outstanding under the credit facility.
On May 27, 2011, the Company
gave notice of its intent to redeem $150 million of the outstanding
$325 million 3.25% Exchangeable Senior Debentures. Subsequent to the
end of the second quarter, holders of approximately $134 million of the
debentures elected to exchange their debentures for shares of the
Company's common stock totaling approximately 8.8 million shares,
rather than receive the cash redemption proceeds, while the remaining
$16 million of debentures were redeemed for cash.
As of June 17, 2011, the Company had approximately $634
million of cash and cash equivalents. Subsequent to the contribution of
the Le Meridien Piccadilly to the Euro JV Fund II, and the partial
redemption of the 3.25% Exchangeable Senior Debentures, the Company has
total debt outstanding of $5.6 billion
and approximately $479 million of available capacity under its credit
facility.
DIVIDEND
On June 15, 2011, the Company's board of directors authorized
a regular quarterly cash dividend of $0.03
per share on its common stock. The dividend was paid on July 15, 2011
to stockholders of record on June 30, 2011. Based on the current
guidance for 2011, the Company intends to declare, subject to approval
by the Company's board of directors, an aggregate annual dividend for
2011 of between $0.14 and $0.15 per
share.
2011 OUTLOOK
The Company anticipates that for 2011:
- Comparable hotel RevPAR will increase 6.0% to 7.5%;
- Operating profit margins under GAAP would increase
approximately 150 basis points to 200 basis points; and
- Comparable hotel adjusted operating profit margins will
increase approximately 90 basis points to 120 basis points.
Based upon these parameters, the Company estimates that its
full year 2011 guidance is as follows:
- earnings (loss) per diluted share should range from
approximately $(.04) to $.00;
- net income (loss) should range from $(25) million to $4
million;
- FFO per diluted share should be approximately $.87 to $.91 (including the effect of a
reduction of $.03 due to debt
extinguishment costs, pursuit costs for completed acquisitions and
non-cash impairments); and
- Adjusted EBITDA should be approximately $1,020 million to $1,050
million.
See the 2011 Forecast Schedules and Notes to Financial
Information for other assumptions used in the forecasts and items that
may affect forecasted results.
ABOUT HOST HOTELS & RESORTS
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune
500 company and is the largest lodging real estate investment trust and
one of the largest owners of luxury and upper-upscale hotels. The
Company currently owns 106 properties in the
United States and 16 international properties totaling
approximately 65,000 rooms. The Company also holds non-controlling
interests in a joint venture in Europe
that owns 12 hotels with approximately 3,800 rooms and a joint venture
in India that is developing seven
hotels in three cities with approximately 1,800 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®, Le Meridien®, The Luxury Collection®,
Hyatt®, Fairmont®, Four Seasons®, Hilton®,
Swissotel®, ibis®, Pullman® and Novotel®* in the
operation of properties in over 50 major markets worldwide. For
additional information, please visit the Company's website at www.hosthotels.com.
Note: This press release contains forward-looking
statements within the meaning of federal securities regulations. These
forward-looking statements include forecast results and are identified
by their use of terms and phrases such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "should," "plan,"
"predict," "project," "will," "continue" and other similar terms and
phrases, including references to 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 effect on travel of
potential 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 acquisitions and
dispositions; the risk that the Company's board of directors will
determine to pay dividends at a rate different than currently
anticipated and our ability to continue to satisfy complex rules in
order for us to remain a REIT for federal income tax purposes and other
risks and uncertainties associated with our business described in the
Company's annual report on Form 10K, quarterly reports on Form
10-Q and current reports on Form 8-K filed with the SEC. The completion
of the acquisitions of the Pullman Bercy, Paris
and the Grand Hyatt Washington, D.C.
are subject to numerous closing conditions and there can be no
assurances that the transactions will be completed. These closing
conditions include, but are not limited to: the accuracy of the
representations and warranties and compliance with covenants, the
absence of material events or conditions, other customary closing
conditions and with respect to the acquisition of the Pullman Burcy, Paris, a waiver by the city of Paris of its right to purchase the hotel.
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 July 20, 2011, and the Company
undertakes no obligation to update any forward-looking statement to
conform the statement to actual results or changes in the Company's
expectations.
* This press release contains registered trademarks that are
the exclusive property of their respective owners. None of the owners
of these trademarks has any responsibility or liability for any
information contained in this press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein referred to as "we" or
"Host," is a self-managed and self-administered real estate investment
trust (REIT) that owns hotel properties. We conduct our operations as
an umbrella partnership REIT through an operating partnership, Host
Hotels & Resorts, L.P. (Host LP), of which we are the sole general
partner. When distinguishing between Host and Host LP, the primary
difference is approximately 1.5% of the partnership interests in Host
LP held by outside partners as of June 17, 2011, which is
non-controlling interests in Host LP in our consolidated balance sheets
and is included in net income/loss attributable to non-controlling
interests in our consolidated statements of operations. Readers are
encouraged to find further detail regarding our organizational
structure in our annual report on Form 10K.
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.
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HOST
HOTELS & RESORTS, INC.
|
|
|
Consolidated
Balance Sheets (a)
|
|
|
(in
millions, except shares and per share amounts)
|
|
|
|
|
|
|
June
17,
|
December
31,
|
|
|
2011
|
2010
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Property
and equipment, net
|
$
11,635
|
$
10,514
|
|
|
Assets
held for sale
|
6
|
-
|
|
|
Due
from managers
|
67
|
45
|
|
|
Investments
in affiliates
|
178
|
148
|
|
|
Deferred
financing costs, net
|
45
|
44
|
|
|
Furniture,
fixtures and equipment replacement fund
|
172
|
152
|
|
|
Other
|
331
|
354
|
|
|
Restricted
cash
|
35
|
41
|
|
|
Cash
and cash equivalents
|
634
|
1,113
|
|
|
Total
assets
|
$
13,103
|
$
12,411
|
|
|
|
|
|
|
LIABILITIES,
NON-CONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
Senior
notes, including $1,170 million and $1,156 million, respectively, net
of discount, of Exchangeable Senior Debentures
|
$ 4,510
|
$ 4,249
|
|
|
Credit
facility
|
162
|
58
|
|
|
Mortgage
debt
|
1,068
|
1,025
|
|
|
Other
|
148
|
145
|
|
|
Total
debt
|
5,888
|
5,477
|
|
|
Accounts
payable and accrued expenses
|
178
|
208
|
|
|
Other
|
209
|
203
|
|
|
Total
liabilities
|
6,275
|
5,888
|
|
|
|
|
|
|
Non-controlling
interests-Host Hotels & Resorts, L.P.
|
174
|
191
|
|
|
|
|
|
|
Host
Hotels & Resorts, Inc. stockholders’ equity:
|
|
|
|
|
Common
stock, par value $.01, 1,050 million shares authorized; 693.7 million
shares and 675.6 million shares issued and outstanding, respectively
|
7
|
7
|
|
|
Additional
paid-in capital
|
7,566
|
7,236
|
|
|
Accumulated
other comprehensive income
|
40
|
25
|
|
|
Deficit
|
(999)
|
(965)
|
|
|
Total
equity of Host Hotels & Resorts, Inc. stockholders
|
6,614
|
6,303
|
|
|
Non-controlling
interests-other consolidated partnerships
|
40
|
29
|
|
|
Total
equity
|
6,654
|
6,332
|
|
|
Total
liabilities, non-controlling interests and equity
|
$
13,103
|
$
12,411
|
|
|
|
|
|
|
(a)
Our consolidated balance sheet
as of June 17, 2011 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
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Revenues
|
|
|
|
|
|
|
Rooms
|
$ 780
|
$ 671
|
$ 1,302
|
$ 1,154
|
|
|
Food
and beverage
|
380
|
342
|
650
|
595
|
|
|
Other
|
75
|
72
|
129
|
128
|
|
|
Total
hotel revenues for owned hotels
|
1,235
|
1,085
|
2,081
|
1,877
|
|
|
Other
revenues (b)
|
61
|
27
|
117
|
57
|
|
|
Total
revenues
|
1,296
|
1,112
|
2,198
|
1,934
|
|
|
Expenses
|
|
|
|
|
|
|
Rooms
|
206
|
178
|
356
|
318
|
|
|
Food
and beverage
|
268
|
240
|
469
|
427
|
|
|
Other
departmental and support expenses
|
309
|
278
|
547
|
500
|
|
|
Management
fees
|
53
|
47
|
85
|
75
|
|
|
Other
property-level expenses (b)
|
137
|
96
|
254
|
181
|
|
|
Depreciation
and amortization
|
149
|
139
|
290
|
275
|
|
|
Corporate
and other expenses
|
22
|
24
|
47
|
49
|
|
|
Total
operating costs and expenses
|
1,144
|
1,002
|
2,048
|
1,825
|
|
|
Operating
profit
|
152
|
110
|
150
|
109
|
|
|
Interest
income
|
5
|
1
|
9
|
2
|
|
|
Interest
expense (c)
|
(89)
|
(82)
|
(171)
|
(179)
|
|
|
Net
gains on property transactions and other
|
2
|
-
|
3
|
-
|
|
|
Gain
(loss) on foreign currency transactions and derivatives
|
1
|
(3)
|
2
|
(5)
|
|
|
Equity
in earnings (losses) of affiliates
|
4
|
-
|
2
|
(5)
|
|
|
Income
(loss) before income taxes
|
75
|
26
|
(5)
|
(78)
|
|
|
Benefit
(provision) for income taxes
|
(8)
|
(6)
|
13
|
16
|
|
|
Income
(loss) from continuing operations
|
67
|
20
|
8
|
(62)
|
|
|
Income
(loss) from discontinued operations
|
(3)
|
-
|
(4)
|
(2)
|
|
|
Net
income (loss)
|
64
|
20
|
4
|
(64)
|
|
|
Less:
Net income attributable to non-controlling interests
|
(2)
|
(1)
|
(2)
|
(1)
|
|
|
Net
income (loss) attributable to Host Hotels & Resorts, Inc.
|
62
|
19
|
2
|
(65)
|
|
|
Less:
Dividends on preferred stock
|
-
|
(2)
|
-
|
(4)
|
|
|
Issuance
costs of redeemed preferred stock
|
-
|
(4)
|
-
|
(4)
|
|
|
Net
income (loss) available to common stockholders
|
$ 62
|
$ 13
|
$ 2
|
$ (73)
|
|
|
Basic
and diluted earnings (loss) per common share:
|
|
|
|
|
|
|
Continuing
operations
|
$ .10
|
$ .02
|
$ .01
|
$ (.11)
|
|
|
Discontinued
operations
|
(.01)
|
-
|
(.01)
|
-
|
|
|
Basic
and diluted earnings (loss) per common share
|
$ .09
|
$ .02
|
$ -
|
$ (.11)
|
|
|
|
|
|
|
|
|
(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) On
July 6, 2010, we terminated the subleases for the hotels that we lease
from Hospitality Properties Trust ("HPT"). As a result of the
transaction, we now record the gross hotel revenues and expenses of
these hotels as opposed to rental income earned under the subleases;
however, we are still subject to the rental expense due to HPT.
Therefore, other revenue for the second quarter and year-to-date of
2011 includes $52 million and $97 million, respectively, related to
these properties (which represents the associated hotel sales) compared
to $19 million and $37 million in the second quarter and year-to-date
of 2010, respectively, (which represents the associated rental income).
Similarly, other property-level expenses for the second quarter and
year-to-date of 2011 includes $53 million and $104 million,
respectively, related to these properties (which represents
property-level expenses, as well as the rental expense due to HPT)
compared to $19 million and $38 million of rental expense in the second
quarter and year-to-date of 2010, respectively.
|
|
|
(c)
Interest expense includes the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Non-cash
interest for exchangeable debentures
|
$ 7
|
$ 7
|
$ 15
|
$ 15
|
|
|
Debt
extinguishment costs
|
5
|
-
|
5
|
8
|
|
|
Total
|
$ 12
|
$ 7
|
$ 20
|
$ 23
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
Earnings
per Common Share
(unaudited,
in millions, except per share amounts)
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Net
income (loss)
|
$ 64
|
$ 20
|
$ 4
|
$ (64)
|
|
|
Net
income attributable to non-controlling interests
|
(2)
|
(1)
|
(2)
|
(1)
|
|
|
Dividends
on preferred stock
|
-
|
(2)
|
-
|
(4)
|
|
|
Issuance
costs of redeemed preferred stock (a)
|
-
|
(4)
|
-
|
(4)
|
|
|
Income
(loss) available to common stockholders
|
62
|
13
|
2
|
(73)
|
|
|
Diluted
income (loss) available to common stockholders
|
$ 62
|
$ 13
|
$ 2
|
$ (73)
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
685.7
|
652.5
|
681.5
|
650.3
|
|
|
Diluted
weighted average shares outstanding (b)
|
687.1
|
654.1
|
683.0
|
650.3
|
|
|
Basic
and diluted income (loss) per share (c)
|
$ .09
|
$ .02
|
$ -
|
$ (.11)
|
|
|
|
|
|
|
|
|
(a)
Represents the original issuance costs associated with the Class E
preferred stock, which were redeemed during the second quarter of 2010.
|
|
|
(b)
Dilutive securities may include shares granted under comprehensive
stock plans, preferred OP Units held by minority partners, exchangeable
debt securities and other non-controlling interests that have the
option to convert their limited partnership interests to common OP
Units. No effect is shown for any securities that are anti-dilutive.
|
|
|
(c)
See notes to the "Reconciliation of Net Income (Loss) to EBITDA,
Adjusted EBITDA and FFO per Diluted Share" for information on
significant items affecting diluted earnings per common share.
|
|
|
|
|
|
|
|
HOST HOTELS & RESORTS, INC.
|
|
|
|
|
|
|
Comparable
Hotel Operating Data
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
Hotels by Region (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 17, 2011
|
Quarter
ended June 17, 2011
|
Quarter
ended June 18, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
|
Pacific
|
26
|
14,581
|
$
170.03
|
77.2%
|
$131.27
|
$
159.99
|
72.9%
|
$116.56
|
12.6%
|
|
|
Mid-Atlantic
|
10
|
8,331
|
238.51
|
79.4
|
189.50
|
217.46
|
85.1
|
185.01
|
2.4
|
|
|
South
Central
|
9
|
5,687
|
160.12
|
70.2
|
112.47
|
150.15
|
69.8
|
104.87
|
7.2
|
|
|
Florida
|
9
|
5,677
|
202.98
|
77.0
|
156.36
|
196.28
|
74.3
|
145.78
|
7.3
|
|
|
DC
Metro
|
12
|
5,416
|
212.78
|
82.4
|
175.42
|
204.93
|
83.6
|
171.23
|
2.4
|
|
|
North
Central
|
12
|
5,337
|
142.35
|
70.9
|
100.95
|
134.95
|
70.6
|
95.23
|
6.0
|
|
|
Atlanta
|
8
|
4,246
|
152.55
|
65.1
|
99.36
|
149.39
|
62.3
|
93.12
|
6.7
|
|
|
New
England
|
7
|
3,924
|
180.18
|
75.9
|
136.76
|
183.14
|
74.7
|
136.85
|
(0.1)
|
|
|
Mountain
|
7
|
2,889
|
168.95
|
70.6
|
119.24
|
157.64
|
69.4
|
109.41
|
9.0
|
|
|
International
|
7
|
2,473
|
173.47
|
71.6
|
124.17
|
163.71
|
65.2
|
106.66
|
16.4
|
|
|
All
Regions
|
107
|
58,561
|
184.31
|
75.2
|
138.66
|
175.47
|
74.1
|
130.00
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 17, 2011
|
Year-to-date
ended June 17, 2011
|
Year-to-date
ended June 18, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
|
Pacific
|
26
|
14,581
|
$
171.76
|
74.2%
|
$127.52
|
$
160.27
|
69.7%
|
$111.69
|
14.2%
|
|
|
Mid-Atlantic
|
10
|
8,331
|
223.48
|
72.6
|
162.27
|
206.84
|
78.5
|
162.41
|
(0.1)
|
|
|
South
Central
|
9
|
5,687
|
156.68
|
71.6
|
112.17
|
149.00
|
70.5
|
104.98
|
6.8
|
|
|
Florida
|
9
|
5,677
|
205.04
|
78.2
|
160.31
|
201.98
|
75.5
|
152.54
|
5.1
|
|
|
DC
Metro
|
12
|
5,416
|
204.84
|
73.8
|
151.24
|
197.24
|
75.1
|
148.03
|
2.2
|
|
|
North
Central
|
12
|
5,337
|
133.26
|
62.3
|
83.00
|
126.13
|
62.6
|
79.01
|
5.1
|
|
|
Atlanta
|
8
|
4,246
|
153.19
|
65.4
|
100.14
|
151.45
|
64.1
|
97.13
|
3.1
|
|
|
New
England
|
7
|
3,924
|
168.07
|
65.4
|
109.99
|
168.24
|
64.2
|
108.05
|
1.8
|
|
|
Mountain
|
7
|
2,889
|
173.66
|
67.6
|
117.37
|
160.65
|
67.5
|
108.46
|
8.2
|
|
|
International
|
7
|
2,473
|
170.48
|
67.3
|
114.67
|
155.88
|
64.4
|
100.43
|
14.2
|
|
|
All
Regions
|
107
|
58,561
|
180.02
|
71.2
|
128.12
|
171.56
|
70.4
|
120.71
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable
Hotels by Property Type (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 17, 2011
|
Quarter
ended June 17, 2011
|
Quarter
ended June 18, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
|
Urban
|
51
|
32,559
|
$
196.80
|
76.8%
|
$151.15
|
$
187.40
|
76.6%
|
$143.62
|
5.2%
|
|
|
Suburban
|
29
|
10,964
|
146.91
|
69.8
|
102.52
|
140.44
|
67.3
|
94.53
|
8.5
|
|
|
Resort/Conference
|
13
|
8,082
|
234.26
|
74.5
|
174.46
|
219.46
|
72.8
|
159.82
|
9.2
|
|
|
Airport
|
14
|
6,956
|
121.23
|
77.2
|
93.63
|
115.49
|
74.2
|
85.67
|
9.3
|
|
|
All
Types
|
107
|
58,561
|
184.31
|
75.2
|
138.66
|
175.47
|
74.1
|
130.00
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 17, 2011
|
Year-to-date
ended June 17, 2011
|
Year-to-date
ended June 18, 2010
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Percent
|
|
|
No. of
|
No. of
|
Average
|
Occupancy
|
|
Average
|
Occupancy
|
|
Change
in
|
|
|
Properties
|
Rooms
|
Room
Rate
|
Percentages
|
RevPAR
|
Room
Rate
|
Percentages
|
RevPAR
|
RevPAR
|
|
|
Urban
|
51
|
32,559
|
$
190.31
|
71.5%
|
$136.07
|
$
181.38
|
71.7%
|
$130.05
|
4.6%
|
|
|
Suburban
|
29
|
10,964
|
145.83
|
66.9
|
97.53
|
138.48
|
65.4
|
90.53
|
7.7
|
|
|
Resort/Conference
|
13
|
8,082
|
233.63
|
73.9
|
172.69
|
222.45
|
71.3
|
158.54
|
8.9
|
|
|
Airport
|
14
|
6,956
|
121.89
|
73.3
|
89.31
|
116.20
|
71.0
|
82.53
|
8.2
|
|
|
All
Types
|
107
|
58,561
|
180.02
|
71.2
|
128.12
|
171.56
|
70.4
|
120.71
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
|
|
|
|
|
|
Number
of hotels
|
107
|
107
|
107
|
107
|
|
|
Number
of rooms
|
58,561
|
58,561
|
58,561
|
58,561
|
|
|
Percent
change in comparable hotel RevPAR
|
6.7%
|
-
|
6.1%
|
-
|
|
|
Operating
profit margin under GAAP (b)
|
11.7%
|
9.9%
|
6.8%
|
5.6%
|
|
|
Comparable
hotel adjusted operating profit margin (b)
|
25.75%
|
24.60%
|
23.10%
|
22.45%
|
|
|
|
|
|
|
|
|
Comparable
hotel sales
|
|
|
|
|
|
|
Room
|
$ 707
|
$ 663
|
$ 1,212
|
$ 1,142
|
|
|
Food
and beverage
|
359
|
343
|
627
|
597
|
|
|
Other
|
71
|
71
|
124
|
127
|
|
|
Comparable
hotel sales (c)
|
1,137
|
1,077
|
1,963
|
1,866
|
|
|
Comparable
hotel expenses
|
|
|
|
|
|
|
Room
|
187
|
176
|
331
|
314
|
|
|
Food
and beverage
|
252
|
240
|
451
|
427
|
|
|
Other
|
40
|
39
|
70
|
69
|
|
|
Management
fees, ground rent and other costs
|
365
|
357
|
658
|
637
|
|
|
Comparable
hotel expenses (d)
|
844
|
812
|
1,510
|
1,447
|
|
|
Comparable
hotel adjusted operating profit
|
293
|
265
|
453
|
419
|
|
|
Non-comparable
hotel results, net (e)
|
30
|
8
|
39
|
13
|
|
|
Income
(loss) from hotels leased from HPT and office buildings
|
-
|
-
|
(5)
|
1
|
|
|
Depreciation
and amortization
|
(149)
|
(139)
|
(290)
|
(275)
|
|
|
Corporate
and other expenses
|
(22)
|
(24)
|
(47)
|
(49)
|
|
|
Operating
profit
|
$ 152
|
$ 110
|
$ 150
|
$ 109
|
|
|
|
|
|
|
|
|
(a)
See the Notes to the Financial Information for discussion of non-GAAP
measures, reporting periods and comparable hotel results.
|
|
|
(b)
Operating profit margins are calculated by dividing the applicable
operating profit by the related revenue amount. GAAP margins are
calculated using amounts presented in the consolidated statement of
operations. Comparable margins are calculated using amounts presented
in the above table.
|
|
|
(c)
The reconciliation of total revenues per the consolidated statements of
operations to the comparable hotel sales is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Revenues
per the consolidated statements of operations
|
$ 1,296
|
$ 1,112
|
$ 2,198
|
$ 1,934
|
|
|
Non-comparable
hotel sales
|
(121)
|
(29)
|
(164)
|
(52)
|
|
|
Hotel
sales for comparable hotels classified as held-for-sale
|
2
|
2
|
3
|
3
|
|
|
Hotel
sales for the property for which we record rental income, net
|
13
|
12
|
26
|
25
|
|
|
Revenues
for hotels leased from HPT and office buildings
|
(53)
|
(20)
|
(100)
|
(39)
|
|
|
Adjustment
for hotel sales for comparable hotels to reflect Marriott’s fiscal year
for Marriott-managed hotels
|
-
|
-
|
-
|
(5)
|
|
|
Comparable
hotel sales
|
$ 1,137
|
$ 1,077
|
$ 1,963
|
$ 1,866
|
|
|
|
|
|
|
|
|
|
(d)
The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows:
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Operating
costs and expenses per the consolidated statements of operations
|
$ 1,144
|
$ 1,002
|
$ 2,048
|
$ 1,825
|
|
|
Non-comparable
hotel expenses
|
(91)
|
(21)
|
(125)
|
(39)
|
|
|
Hotel
expense for comparable hotels classified as held-for-sale
|
2
|
2
|
3
|
3
|
|
|
Hotel
expenses for the property for which we record rental income
|
13
|
12
|
26
|
25
|
|
|
Expense
for hotels leased from HPT and office buildings
|
(53)
|
(20)
|
(105)
|
(38)
|
|
|
Adjustment
for hotel expenses for comparable hotels to reflect Marriott’s fiscal
year for Marriott-managed hotels
|
-
|
-
|
-
|
(5)
|
|
|
Depreciation
and amortization
|
(149)
|
(139)
|
(290)
|
(275)
|
|
|
Corporate
and other expenses
|
(22)
|
(24)
|
(47)
|
(49)
|
|
|
Comparable
hotel expenses
|
$ 844
|
$ 812
|
$ 1,510
|
$ 1,447
|
|
|
|
|
|
|
|
|
|
(e)
Non-comparable hotel results, net, includes
the results of operations of our non-comparable hotels whose operations
are included in our consolidated statements of operations as continuing
operations and the difference between the number of days of operations
reflected in the comparable hotel results and the number of days of
operations reflected in the consolidated statements of operations.
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
|
Other
Financial and Operating Data
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
June
17,
|
December
31,
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common
shares outstanding
|
693.7
|
675.6
|
|
|
Common
shares outstanding assuming conversion of non-controlling interest OP
Units (a)
|
704.5
|
686.3
|
|
|
Preferred
OP Units outstanding
|
.02
|
.02
|
|
|
|
|
|
|
|
|
Security
pricing
|
|
|
|
|
|
|
Common
(b)
|
$ 16.09
|
$ 17.87
|
|
|
3 1/4%
Exchangeable Senior Debentures (c)
|
$
1,072.2
|
$
1,179.4
|
|
|
2 5/8%
Exchangeable Senior Debentures (c)
|
$
1,002.7
|
$ 991.9
|
|
|
2 1/2%
Exchangeable Senior Debentures (c)
|
$
1,305.9
|
$
1,416.6
|
|
|
|
|
|
|
|
|
Dividends
declared per share for calendar year
|
|
|
|
|
Common
(d)
|
|
|
$ .05
|
$ .04
|
|
|
Class
E Preferred (e)
|
|
|
$ -
|
$ .95
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
notes
|
Rate
|
Maturity
date
|
|
|
|
|
Series
K
|
7 1/8%
|
11/2013
|
$ -
|
$ 250
|
|
|
Series
O
|
6 3/8%
|
3/2015
|
650
|
650
|
|
|
Series
Q
|
6 3/4%
|
6/2016
|
800
|
800
|
|
|
Series
S
|
6 7/8%
|
11/2014
|
498
|
498
|
|
|
Series
T
|
9%
|
5/2017
|
389
|
388
|
|
|
Series
V
|
6%
|
11/2020
|
500
|
500
|
|
|
Series
W (f)
|
5 7/8%
|
6/2019
|
496
|
-
|
|
|
Exchangeable
senior debentures (g)(m)
|
3 1/4%
|
4/2024
|
325
|
325
|
|
|
Exchangeable
senior debentures (g)
|
2 5/8%
|
4/2027
|
511
|
502
|
|
|
Exchangeable
senior debentures (g)
|
2 1/2%
|
10/2029
|
334
|
329
|
|
|
Senior
notes
|
10%
|
5/2012
|
7
|
7
|
|
|
Credit
facility (h)
|
1.9%
|
9/2011
|
162
|
58
|
|
|
|
|
4,672
|
4,307
|
|
|
Mortgage
debt and other
|
|
|
|
|
|
|
Mortgage
debt (non-recourse) (i)
|
2.0-10.8%
|
1/2012-12/2023
|
1,068
|
1,025
|
|
|
Other
|
7.0-7.8%
|
10/2014-12/2017
|
148
|
145
|
|
|
Total
debt (j)(k)
|
|
|
$ 5,888
|
$ 5,477
|
|
|
|
|
|
|
|
|
Percentage
of fixed rate debt
|
|
|
89%
|
90%
|
|
|
Weighted
average interest rate
|
|
|
6.2%
|
6.2%
|
|
|
Weighted
average debt maturity
|
|
|
4.3
years
|
4.4
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Hotel
Operating Statistics for All Properties (l)
|
|
|
|
|
|
|
Average
daily rate
|
$
186.20
|
$
175.33
|
$
182.01
|
$
171.55
|
|
|
Average
occupancy
|
75.3%
|
73.6%
|
71.2%
|
69.8%
|
|
|
RevPAR
|
$
140.28
|
$
129.01
|
$
129.67
|
$
119.76
|
|
|
|
|
|
|
|
|
(a)
Each OP Unit is redeemable for cash or, at the option of the Company,
1.021494 common shares of Host. At June 17, 2011 and December 31, 2010,
there were 10.6 million and 10.5 million common OP Units, respectively,
held by non-controlling interests that were redeemable into 10.8
million and 10.7 million shares, respectively, of Host common stock.
|
|
|
(b)
Share prices are the closing price as reported by the New York Stock
Exchange.
|
|
|
(c)
Amount reflects market price of a single $1,000 debenture as quoted by
Bloomberg L.P.
|
|
|
(d) On
June 15, 2011, the Company declared a second quarter common cash
dividend of $0.03 per share.
|
|
|
(e) On
June 18, 2010, the Company redeemed its 8 7/8% Class E cumulative
redeemable preferred stock at a redemption price of $25.00 per share,
plus accrued dividends.
|
|
|
(f)
Reflects the $425 million and $75 million of 5 7/8% Series W senior
notes issued on May 11, 2011 and May 25, 2011, respectively, net of
original issue discounts totaling $4 million.
|
|
|
(g)
The principal balance outstanding of the 2 5/8% Exchangeable Senior
Debentures due 2027 (the "2007 Debentures") and the 2 1/2% Exchangeable
Senior Debentures due 2029 (the "2009 Debentures") is $526 million and
$400 million, respectively. The discounts related to these exchangeable
debentures are amortized through the first date at which the holders
can require Host to repurchase the exchangeable debentures for cash
(April 2012 for the 2007 Debentures and October 2015 for the 2009
Debentures). The discount related to the 3 1/4% Exchangeable Senior
Debentures due 2024 (the "2004 Debentures") has been fully amortized as
of December 31, 2010.
|
|
|
(h)
The interest rate shown is the weighted average rate of the outstanding
credit facility at June 17, 2011. At June 17, 2011, we had $438 million
of available capacity under the revolver portion of the credit
facility. On June 27, 2011, in conjunction with the transfer of the Le
Meridien Piccadilly to the Euro JV Fund II, we repaid 25 million pounds
($41 million) of the credit facility increasing the capacity to $479
million.
|
|
|
(i)
Mortgage debt is secured by real estate assets with an undepreciated
book value of $1.7 billion and has a weighted average interest rate of
5.2% at both June 17, 2011 and December 31, 2010, maturing through
December 2023. The book value of the assets securing mortgage debt does
not represent the current fair value of the assets.
|
|
|
(j) In
accordance with GAAP, total debt includes the debt of entities that we
consolidate, but do not own 100% of the entity, and excludes the debt
of entities that we do not consolidate, but have a non-controlling
ownership interest and record our investment therein under the equity
method of accounting. As of June 17, 2011, our non-controlling
partners’ share of consolidated debt is $67 million and our share of
debt in unconsolidated investments is $357 million.
|
|
|
(k)
Total debt as of June 17, 2011 and December 31, 2010 includes net
discounts of $81 million and $95 million, respectively. Subsequent to
the contribution of the Le Meridien Piccadilly to the Euro JV Fund II,
the repayment of the credit facility detailed in (h) above, and the
partial redemption of the 2004 Debentures, the Company has $5.6 billion
of total debt outstanding.
|
|
|
(l)
The operating statistics reflect all consolidated properties as of June
17, 2011 and June 18, 2010, respectively. The operating statistics
include the results of operations through their date of disposition for
two properties disposed of in 2010.
|
|
|
(m) On
May 27, 2011, the Company gave notice of its intent to redeem $150
million of the outstanding $325 million 3.25% Exchangeable Senior
Debentures. Subsequent to the end of the second quarter, holders of
approximately $134 million of the debentures elected to exchange their
debentures for shares of the Company’s common stock totaling
approximately 8.8 million shares, while the remaining $16 million of
debentures were redeemed for cash.
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
Reconciliation
of Net Income (Loss) to EBITDA, Adjusted EBITDA
and
Funds From Operations per Diluted Share
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Net
income (loss)
|
$ 64
|
$ 20
|
$ 4
|
$ (64)
|
|
|
Interest
expense
|
89
|
82
|
171
|
179
|
|
|
Depreciation
and amortization
|
149
|
139
|
290
|
275
|
|
|
Income
taxes
|
8
|
6
|
(13)
|
(16)
|
|
|
Adjustments
for discontinued operations (a)
|
-
|
-
|
1
|
(1)
|
|
|
EBITDA
|
310
|
247
|
453
|
373
|
|
|
Acquisition
costs
|
1
|
-
|
4
|
-
|
|
|
Losses
on dispositions
|
-
|
1
|
-
|
1
|
|
|
Non-cash
impairment charges
|
3
|
-
|
3
|
-
|
|
|
Amortization
of deferred gains
|
(2)
|
-
|
(3)
|
-
|
|
|
Equity
investment adjustments:
|
|
|
|
|
|
|
Equity
in (earnings) losses of affiliates
|
(4)
|
-
|
(2)
|
5
|
|
|
Pro
rata EBITDA of equity investments
|
9
|
6
|
11
|
6
|
|
|
Consolidated
partnership adjustments:
|
|
|
|
|
|
|
Pro
rata EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(4)
|
(4)
|
(9)
|
(9)
|
|
|
Adjusted
EBITDA
|
$ 313
|
$ 250
|
$ 457
|
$ 376
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Year-to-date
ended
|
|
|
June
17,
|
June
18,
|
June
17,
|
June
18,
|
|
|
2011
|
2010
|
2011
|
2010
|
|
|
Net
income (loss)
|
$ 64
|
$ 20
|
$ 4
|
$ (64)
|
|
|
Less:
Net income attributable to non-controlling interests
|
(2)
|
(1)
|
(2)
|
(1)
|
|
|
Dividends
on preferred stock
|
-
|
(2)
|
-
|
(4)
|
|
|
Issuance
costs of redeemed preferred stock
|
-
|
(4)
|
-
|
(4)
|
|
|
Net
income (loss) available to common stockholders
|
62
|
13
|
2
|
(73)
|
|
|
Adjustments:
|
|
|
|
|
|
|
Losses
on dispositions, net of taxes
|
-
|
1
|
-
|
1
|
|
|
Amortization
of deferred gains and other property transactions, net of taxes
|
(2)
|
-
|
(3)
|
-
|
|
|
Depreciation
and amortization
|
149
|
138
|
290
|
275
|
|
|
Partnership
adjustments
|
4
|
2
|
3
|
1
|
|
|
FFO of
non-controlling interests of Host LP
|
(3)
|
(3)
|
(5)
|
(4)
|
|
|
Funds
From Operations
|
210
|
151
|
287
|
200
|
|
|
Adjustments
for dilutive securities:
|
|
|
|
|
|
|
Assuming
conversion of 2004 Exchangeable Senior Debentures
|
3
|
3
|
5
|
-
|
|
|
Assuming
conversion of 2009 Exchangeable Senior Debentures
|
5
|
5
|
11
|
-
|
|
|
Diluted
FFO
|
$ 218
|
$ 159
|
$ 303
|
$ 200
|
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding-EPS
|
687.1
|
654.1
|
683.0
|
650.3
|
|
|
Assuming
issuance of common shares granted under the Comprehensive Stock Plan
|
-
|
-
|
-
|
1.3
|
|
|
Assuming
conversion of 2004 Exchangeable Senior Debentures
|
21.3
|
21.2
|
21.2
|
-
|
|
|
Assuming
conversion of 2009 Exchangeable Senior Debentures
|
28.4
|
28.4
|
28.4
|
-
|
|
|
Diluted
weighted average shares outstanding- FFO
(a)(b)
|
736.8
|
703.7
|
732.6
|
651.6
|
|
|
FFO
per diluted share
(b)(c)
|
$ .30
|
$ .23
|
$ .41
|
$ .31
|
|
|
|
|
|
|
|
|
(a)
Reflects the interest expense, depreciation and amortization and income
taxes included in discontinued operations.
|
|
|
(b)
Earnings/loss per diluted share and FFO per diluted share are adjusted
for the effects of dilutive securities. Dilutive securities may include
shares granted under comprehensive stock plans, preferred OP Units held
by non-controlling partners, exchangeable debt securities and other
non-controlling interests that have the option to convert their limited
partnership interest to common OP Units. No effect is shown for
securities if they are anti-dilutive.
|
|
|
(c)
FFO per diluted share and earnings per diluted share were affected by
certain transactions, the effects of which are shown in the table below
(in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
Quarter
ended
|
|
|
|
|
June
17, 2011
|
June
18, 2010
|
|
|
|
|
Net
Income
|
|
Net
Income
|
|
|
|
|
|
(Loss)
|
FFO
|
(Loss)
|
FFO
|
|
|
Loss
on debt extinguishments (1)
|
$ (5)
|
$ (5)
|
$ -
|
$ -
|
|
|
Acquisition
costs (2)
|
(1)
|
(1)
|
-
|
-
|
|
|
Non-cash
impairment charges
|
(3)
|
(3)
|
-
|
-
|
|
|
Loss
on dispositions, net of tax
|
-
|
-
|
(1)
|
-
|
|
|
Preferred
stock redemption
|
-
|
-
|
(4)
|
(4)
|
|
|
Total
|
$ (9)
|
$ (9)
|
$ (5)
|
$ (4)
|
|
|
Diluted
shares
|
687.1
|
736.8
|
654.1
|
703.7
|
|
|
Per
diluted share
|
$ (.01)
|
$ (.01)
|
$ (.01)
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date
ended
|
Year-to-date
ended
|
|
|
|
|
June
17, 2011
|
June
18, 2010
|
|
|
|
|
Net
Income
|
|
Net
Income
|
|
|
|
|
|
(Loss)
|
FFO
|
(Loss)
|
FFO
|
|
|
Loss
on debt extinguishments (1)
|
$ (5)
|
$ (5)
|
$ (8)
|
$ (8)
|
|
|
Acquisition
costs (2)
|
(4)
|
(4)
|
-
|
-
|
|
|
Non-cash
impairment charges
|
(3)
|
(3)
|
-
|
-
|
|
|
Preferred
stock redemption (3)
|
-
|
-
|
(4)
|
(4)
|
|
|
Potential
loss on litigation (4)
|
-
|
-
|
(4)
|
(4)
|
|
|
Loss
on dispositions, net of tax
|
-
|
-
|
(1)
|
-
|
|
|
Loss
attributable to non-controlling interests (5)
|
-
|
-
|
1
|
1
|
|
|
Total
|
$ (12)
|
$ (12)
|
$ (16)
|
$ (15)
|
|
|
Diluted
shares
|
683.0
|
732.6
|
650.3
|
651.6
|
|
|
Per
diluted share
|
$ (.02)
|
$ (.02)
|
$ (.02)
|
$ (.02)
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents costs associated with the redemption of the Series K Senior
Notes in 2011 and the Series M Senior Notes in 2010.
|
|
|
(2)
Represents costs incurred related to successful acquisitions.
Previously, these costs would have been capitalized; however, under
accounting requirements effective January 1, 2009, these costs are
expensed in the period in which they are incurred.
|
|
|
(3)
Represents the original issuance costs of Class E preferred stock,
which were redeemed on June 18, 2010.
|
|
|
(4)
Includes the accrual of a potential litigation loss in the first
quarter of 2010.
|
|
|
(5)
Represents the portion of the significant items attributable to
non-controlling partners in Host LP.
|
|
|
|
|
|
|
|
|
|
HOST
HOTELS & RESORTS, INC.
|
|
|
Reconciliation
of Net Income (Loss) to EBITDA, Adjusted EBITDA and
|
|
|
Funds
From Operations per Diluted Share
|
|
|
for
Full Year 2011 Forecasts (a)
|
|
|
(unaudited,
in millions, except per share amounts)
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
|
Net
income (loss)
|
$ (25)
|
$ 4
|
|
|
Interest
expense
|
374
|
374
|
|
|
Depreciation
and amortization
|
646
|
646
|
|
|
Income
taxes
|
(3)
|
(2)
|
|
|
EBITDA
|
992
|
1,022
|
|
|
Acquisition
costs
|
12
|
12
|
|
|
Non-cash
impairment charges
|
3
|
3
|
|
|
Amortization
of deferred gains
|
(4)
|
(4)
|
|
|
Equity
investment adjustments:
|
|
|
|
|
Equity
in earnings of affiliates
|
1
|
1
|
|
|
Pro
rata Adjusted EBITDA of equity investments
|
33
|
33
|
|
|
Consolidated
partnership adjustments:
|
|
|
|
|
Pro
rata Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships
|
(17)
|
(17)
|
|
|
Adjusted
EBITDA
|
$ 1,020
|
$ 1,050
|
|
|
|
|
|
|
Full
Year 2011 Forecast
|
|
|
Low-end
|
High-end
|
|
|
of
range
|
of
range
|
|
|
Net
income (loss)
|
$ (25)
|
$ 4
|
|
|
Less:
Net income attributable to non-controlling interests
|
(2)
|
(2)
|
|
|
Net
income (loss) available to common stockholders
|
(27)
|
2
|
|
|
Adjustments:
|
|
|
|
|
Depreciation
and amortization
|
645
|
645
|
|
|
Amortization
of deferred gains
|
(4)
|
(4)
|
|
|
Partnership
adjustments
|
8
|
9
|
|
|
FFO of
non-controlling interests of Host LP
|
(9)
|
(10)
|
|
|
Funds
From Operations
|
613
|
642
|
|
|
Adjustment
for dilutive securities:
|
|
|
|
|
Assuming
conversion of exchangeable senior debentures
|
31
|
31
|
|
|
Diluted
FFO
|
$ 644
|
$ 673
|
|
|
|
|
|
|
Weighted
average diluted shares - EPS
|
697.7
|
697.7
|
|
|
Weighted
average diluted shares- FFO (b)
|
741.5
|
741.5
|
|
|
Income
(loss) per diluted share
|
$ (.04)
|
$ -
|
|
|
FFO
per diluted share
|
$ .87
|
$ .91
|
|
|
|
|
|
|
|
|
(a)
The full year 2011 forecasts were based on the below assumptions:
|
|
|
-
Comparable hotel RevPAR will increase 6.0% to 7.5% for the low and high
ends of the forecasted range, respectively.
|
|
|
-
Comparable hotel adjusted operating profit margins will increase 90
basis points to 120 basis points for the low and high ends of the
forecasted range, respectively.
|
|
|
- We
expect to complete the acquisition of the Grand Hyatt Washington, D.C.
|
|
|
- We
expect to spend approximately $220 million to $240 million on ROI
capital expenditures.
|
|
|
-
Costs associated with debt extinguishments, acquisition costs and
non-cash impairment charges will decrease earnings and FFO per share by
$.03.
|
|
|
-
Interest expense includes approximately $45 million related to non-cash
interest expense for exchangeable senior debentures, amortization of
original issue discounts and deferred financing fees.
|
|
|
- We
expect to spend approximately $320 million to $345 million on renewal
and replacement expenditures in 2011.
|
|
|
Effective January 1, 2011, the Company has modified its definition of
Adjusted EBITDA to exclude pursuit costs for completed acquisitions,
and, as a result, they no longer have an effect on Adjusted EBITDA, but
continue to be a deduction to FFO. For a discussion of additional items
that may affect forecasted results see Notes to the Financial
Information.
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(b)
The full year 2011 forecast FFO per diluted share includes 42.4 million
shares for the dilution of the 2004 and 2009 Exchangeable Senior
Debentures.
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HOST
HOTELS & RESORTS, INC.
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Schedule
of Comparable Hotel Adjusted Operating Profit Margin
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for
Full Year 2011 Forecasts (a)
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(unaudited,
in millions, except hotel statistics)
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|
|
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Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
|
|
Operating
profit margin under GAAP (b)
|
6.5%
|
7.0%
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|
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Comparable
hotel adjusted operating profit margin (c)
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22.3%
|
22.6%
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|
|
|
|
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Comparable
hotel sales
|
|
|
|
|
Room
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$ 2,706
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$ 2,744
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|
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Other
|
1,585
|
1,604
|
|
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Comparable
hotel sales (d)
|
4,291
|
4,348
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|
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Comparable
hotel expenses
|
|
|
|
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Rooms
and other departmental costs
|
1,865
|
1,890
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|
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Management
fees, ground rent and other costs
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1,469
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1,475
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|
|
Comparable
hotel expenses (e)
|
3,334
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3,365
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Comparable
hotel adjusted operating profit
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957
|
983
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Non-comparable
hotel results, net
|
131
|
136
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Hotels
leased from HPT and office buildings, net
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(10)
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(10)
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Depreciation
and amortization
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(646)
|
(646)
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Corporate
and other expenses
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(107)
|
(107)
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Operating
profit
|
$ 325
|
$ 356
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(a)
Forecasted comparable hotel results include 104 hotels that we have
assumed will be classified as comparable as of December 31, 2011. No
assurances can be made as to the hotels that will be in the comparable
hotel set for 2011. Also, see the notes to the "Reconciliation of Net
Income (Loss) to EBITDA, Adjusted EBITDA and Funds From Operations per
Diluted Share For Full Year 2011 Forecasts" for other forecast
assumptions.
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(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.
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(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.
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(d)
The reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions):
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|
|
|
|
|
|
|
|
Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
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|
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Revenues
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$ 4,986
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$ 5,051
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Non-comparable
hotel sales
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(528)
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(536)
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Revenues
for hotels leased from HPT and office buildings
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(218)
|
(218)
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Hotel
sales for the property for which we record rental income, net
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51
|
51
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Comparable
hotel sales
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$ 4,291
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$ 4,348
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|
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(e)
The reconciliation of forecast operating costs and expenses to the
comparable hotel expenses is as follows (in millions):
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|
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Full
Year 2011
|
|
|
|
Low-end
|
High-end
|
|
|
|
of
range
|
of
range
|
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|
Operating
costs and expenses
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$ 4,661
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$ 4,695
|
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Non-comparable
hotel and other expenses
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(397)
|
(400)
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Expenses
for hotels leased from HPT and office buildings
|
(228)
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(228)
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|
|
Hotel
expenses for the property for which we record rental income
|
51
|
51
|
|
|
Depreciation
and amortization
|
(646)
|
(646)
|
|
|
Corporate
and other expenses
|
(107)
|
(107)
|
|
|
Comparable
hotel expenses
|
$ 3,334
|
$ 3,365
|
|
|
|
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HOST HOTELS & RESORTS, INC.
Notes to Financial Information
FORECASTS
Our forecast of earnings per diluted share, FFO, FFO per
diluted share, EBITDA, Adjusted EBITDA and comparable hotel adjusted
operating profit margins are forward-looking statements and are not
guarantees of future performance and involve known and unknown risks,
uncertainties and other factors which may cause actual results and
performance to differ materially from those expressed or implied by
these forecasts. Although we believe the expectations reflected in the
forecasts are based upon reasonable assumptions, we can give no
assurance that the expectations will be attained or that the results
will not be materially different. Risks that may affect these
assumptions and forecasts include the following: potential changes in
overall economic outlook make it inherently difficult to forecast the
level of RevPAR and margin growth; the amount and timing of
acquisitions and dispositions of hotel properties is an estimate that
can substantially affect financial results, including such items as net
income, depreciation and gains on dispositions; the level of capital
expenditures may change significantly, which will directly affect the
level of depreciation expense and net income; the amount and timing of
debt payments may change significantly based on market conditions,
which will directly affect the level of interest expense and net
income; the amount and timing of transactions involving shares of our
common stock may change based on market conditions; and other risks and
uncertainties associated with our business described herein and in our
annual report on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K filed with the SEC.
REPORTING PERIODS FOR STATEMENT OF OPERATIONS
The results we report in our consolidated statements of
operations are based on results of our hotels reported to us by our
hotel managers. Our hotel managers use different reporting periods.
Marriott International, Inc. (Marriott), the manager of 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
consolidated 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 second quarter of 2011 ended on June 17, and the second
quarter of 2010 ended on June 18, though both quarters reflect twelve
weeks of operations. In contrast, the July 17,
2011 year-to-date operations included 168 days of operations,
while the June 18, 2010 year-to-date
operations included 169 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 42% 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
2008) versus sixteen weeks). This means, however, that the reporting
periods we use for hotel operating statistics and our comparable hotels
results will typically 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 second quarter of 2011 reflect 12
weeks of operations for the period from March 26, 2011 to June 17, 2010
for our Marriott-managed hotels and results from March 1, 2011 to May
31, 2011 for operations of all other hotels which report results on a
monthly basis.
- Hotel results for the second quarter of 2010 reflect 12
weeks of operations for the period from March 27, 2010 to June 18, 2010 for our Marriott-managed hotels
and results from March 1, 2010 to May 31, 2010 for operations of all
other hotels which report results on a monthly basis.
- Hotel results for year-to-date 2010 reflect 24 weeks of
operations for the period from January 1, 2011 to June 17, 2011 for our
Marriott-managed hotels and results from January 1, 2011 to May 31,
2011 for operations of all other hotels which report results on a
monthly basis.
- Hotel results for year-to-date 2010 reflect 24 weeks of
operations for the period from January 2, 2010 to June 18, 2010 for our
Marriott-managed hotels and results from January 1, 2010 to May 31,
2010 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 associated margins) 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 123 hotels that we owned on June 17, 2011, 107
have been classified as comparable hotels. The operating results of the
following hotels that we owned or leased as of June 17, 2011 are
excluded from comparable hotel results for these periods:
- Hilton Melbourne South Wharf (acquired in April 2011);
- New York Helmsley Hotel (acquired in March
2011);
- Manchester Grand Hyatt San Diego (acquired in March 2011);
- The portfolio of seven hotels in New
Zealand (acquired in February 2011);
- JW Marriott, Rio de Janeiro
(acquired in September 2010);
- W New York, Union Square
(acquired in September 2010);
- Westin Chicago River North (acquired in August 2010);
- Le Meridien Piccadilly (acquired leasehold interest in July 2010);
- Sheraton Indianapolis Hotel & Suites (business
interruption due to significant renovations); and
- San Diego Marriott Marquis & Marina (business
interruption due to significant renovations).
The operating results of the two hotels we disposed of during
2010, as well as the 53 Courtyard by Marriott properties leased from
HPT, are 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 and FFO per diluted share, (ii) EBITDA, (iii) Adjusted EBITDA
and (iv) Comparable Hotel Operating Results. The following discussion
defines these terms and presents why we believe they are useful
supplemental measures of our performance.
FFO and FFO per Diluted Share
We present FFO and FFO per diluted share as non-GAAP measures
of our performance in addition to our earnings per share (calculated in
accordance with GAAP). We calculate FFO per diluted share for a given
operating period as our FFO (defined as set forth below) for such
period, as adjusted for the effect of dilutive securities, divided by
the number of fully diluted shares outstanding during such period.
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
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 and is a relevant measure in calculating certain credit
ratios. We adjust EBITDA for the following items, which may occur in
any period, and refer to this measure as Adjusted EBITDA:
- Real Estate Transactions – We exclude the effect of gains
and losses, including the amortization of deferred gains, recorded on
the disposition of assets and property insurance gains in our
consolidated statement of operations because we believe that including
them in Adjusted EBITDA is not consistent with reflecting the ongoing
performance of our 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).
- 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 it includes our pro rata portion of depreciation, amortization
and interest expense. We include our pro rata share of the Adjusted
EBITDA of our equity investments as we believe this more accurately
reflects the performance of our investment. The pro rata Adjusted
EBITDA of equity investments is defined as the EBITDA of our equity
investments adjusted for any gains or losses on property transactions
multiplied by our percentage ownership in the partnership or joint
venture.
- Consolidated Partnership Adjustments – We deduct the
non-controlling partners' pro rata share of the Adjusted EBITDA of our
consolidated partnerships as this reflects the non-controlling owners'
interest in the EBITDA of our consolidated partnerships. The pro rata
Adjusted EBITDA of non-controlling partners is defined as the EBITDA of
our consolidated partnerships adjusted for any gains or losses on
property transactions multiplied by the non-controlling partners'
positions in the partnership or joint venture.
- 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 Adjusted
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.
- Acquisition Costs – Effective January 1, 2009, the
accounting treatment under GAAP for costs associated with completed
property acquisitions changed and these costs are now expensed in the
year incurred as opposed to capitalized as part of the acquisition.
Beginning in 2011, we have excluded the effect of these costs because
we believe it is not reflective of the ongoing performance of our
properties. This is consistent with the EBITDA calculation under the
prior GAAP accounting treatment which expensed these costs over time as
part of depreciation expense, which is 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, adjusted operating profit (and the related
margin) and food and beverage adjusted profit (and the related margin),
on a comparable hotel, or "same store," basis as supplemental
information for investors. Our comparable hotel results present
operating results for hotels owned during the entirety of the periods
being compared without giving effect to any acquisitions or
dispositions, significant property damage or large scale capital
improvements incurred during these periods. We present these comparable
hotel operating results by eliminating corporate-level costs and
expenses related to our capital structure, as well as depreciation and
amortization. We eliminate corporate-level costs and expenses to arrive
at property-level results because we believe property-level results
provide investors with supplemental information into the ongoing
operating performance of our hotels. We eliminate depreciation and
amortization because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based on
historical cost accounting for real estate assets, implicitly assume
that the value of real estate assets diminishes predictably over time.
As noted earlier, because real estate values have historically risen or
fallen with market conditions, many 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.
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