Host Hotels & Resorts, Inc. (ticker: HST, exchange: New York Stock Exchange (.N))
News Release -
23-Jul-2003
Host Marriott Reports Results of Operations for Second Quarter 2003BETHESDA, Md., Jul 23, 2003 /PRNewswire-FirstCall via COMTEX/ -- Host Marriott Corporation
(NYSE: HMT), the nation's largest lodging real estate investment trust (REIT),
today announced results of operations for the second quarter of 2003. The
second quarter results reflect a difficult operating environment due to the
effects of the war in Iraq, the outbreak of severe acute respiratory syndrome
(SARS), and the generally weak economy, that has resulted in reduced group and
business travel. Second quarter results include the following:
* Total revenue was $874 million and $1,679 million, respectively, for the
second quarter and year-to-date 2003 as compared to $917 million and
$1,704 million, respectively, for the same periods of 2002.
* Net income (loss) was $(14) million and $(48) million, respectively, for
the second quarter and year-to-date 2003 as compared to $24 million and
$25 million, respectively, for the second quarter and year-to-date 2002.
* The Company's diluted loss per share was $.09 and $.25, respectively,
for the second quarter and year-to-date 2003 as compared to diluted
earnings per share of $.06 and $.03, respectively, for the same periods
of 2002.
* Funds From Operations (as defined by NAREIT), or FFO per diluted share,
was $.22 and $.37, respectively, for the second quarter and year-to-date
2003 as compared to $.35 and $.58 per diluted share, respectively, for
the second quarter and year-to-date 2002.
* Adjusted EBITDA, which is Earnings before Interest, Income Taxes,
Depreciation, Amortization and other items, was $193 million and $365
million, respectively, for the second quarter and year-to-date 2003
versus $233 million and $428 million, respectively, for the same periods
of 2002.
FFO per diluted share and Adjusted EBITDA are non-GAAP financial measures
within the meaning of the Securities and Exchange Commission, or SEC, rules.
Due to the recent guidance on non-GAAP financial measures issued by the SEC,
the Company adopted the NAREIT definition of FFO per diluted share and is now
reporting Earnings Before Interest, Income Taxes, Depreciation and
Amortization, or EBITDA, as well as Adjusted EBITDA. See the discussion below
in the "Non-GAAP Financial Measures" section of this press release.
Operating Results
Comparable RevPAR for the second quarter declined 8.2% as a result of a
3.5% reduction in average room rate and an occupancy decline of 3.6 percentage
points compared to the same period in 2002. Year-to-date comparable RevPAR
declined 7.0% with a decline in room rate of 3.0% and a decrease in occupancy
of 3.0 percentage points compared to the same period in 2002.
Christopher J. Nassetta, president and chief executive officer, stated,
"Despite the challenging operating environment, our results were generally in
line with our expectations. While visibility is limited, we believe that the
second half of the year will be modestly weaker than we originally
anticipated. We are, however, cautiously optimistic that 2004 will be a solid
year for the lodging industry and for our portfolio."
Asset Sales
On July 18, 2003, the Company closed on the sale of the Norfolk Waterside
Marriott, the Palm Beach Gardens Marriott and the Oklahoma City Waterford
Marriott hotels for $71 million. The Company expects the proceeds will be
used primarily to retire existing debt.
"We are pleased with the sale of these hotels and are continuing to pursue
additional asset sales in conjunction with the Company's strategy of recycling
capital by disposing of non-core assets," said James F. Risoleo, executive
vice president, acquisitions and development.
Balance Sheet
As of June 20, 2003, the Company had $312 million in cash on hand and $250
million of availability under its credit facility. The Company does not
believe that it will need to borrow under the credit facility in 2003.
During June 2003, the Company acquired the remaining outside interests in
the 772-room J.W. Marriott, Washington, D.C. for approximately $3 million and
began to consolidate the partnership in the second quarter. The Company
currently intends to refinance the existing $95 million mortgage debt on the
property, which matures in December 2003, with floating rate debt.
W. Edward Walter, executive vice president and chief financial officer,
stated, "We continue to focus on liquidity and improving our balance sheet in
order to maximize our flexibility to be able to address any uncertainties and
to take advantage of opportunities as they arise."
2003 Outlook
The Company's updated guidance for RevPAR for full year 2003 is for a
decline of approximately 3% to 5% and a third quarter RevPAR decrease of
approximately 2.5% to 4.0%. Based upon this guidance, the Company estimates
the following:
* Diluted loss per share should be approximately $.69 to $.60 for the full
year and approximately $.29 to $.27 for the third quarter;
* Net loss should be approximately $148 million to $124 million for the
full year and approximately $68 million to $63 million for the third
quarter;
* FFO per diluted share (as defined by NAREIT) should be approximately
$.62 to $.70 for the full year and approximately $.00 to $.02 for the
third quarter; the Company's previous full year forecast included $.04
of FFO per diluted share for the income tax benefit related to the
purchase of our leases, which has been excluded from this estimate. See
discussion of FFO per diluted share below in the "Non-GAAP Financial
Measures" section of this press release;
* Adjusted EBITDA should be approximately $725 million to $750 million for
the full year. The Company's previous full year forecast of EBITDA
included approximately $15 million of adjustments primarily related to
non-cash stock compensation expense, fair market value adjustments for
hedge instruments and foreign currency adjustments, which has been
excluded from this estimate. See discussion below in the "Non-GAAP
Financial Measures" section of this press release for further detail.
Although the Company has more than adequate liquidity, based upon the
current forecast, it is unlikely that the Company will pay a fourth quarter
2003 dividend on its preferred shares due to limitations in the Company's
senior notes indenture and credit facility, both of which restrict the
Company's ability to pay dividends when the Company's EBITDA to interest
coverage ratio (as defined in our senior notes indenture) is below 2.0 to 1.0.
The Company does not expect to pay a common dividend in 2003.
This press release contains forward-looking statements within the meaning
of federal securities regulations. 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 that will affect occupancy rates at our
hotels and the demand for hotel products and services; threats of terrorism
that affect travel patterns and demand for hotels; 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; and our ability to continue to satisfy
complex rules in order for us to qualify as a REIT for federal income tax
purposes. For further information regarding risks and uncertainties associated
with our business, please refer to the Company's filings with the Securities
and Exchange Commission. 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 22, 2003 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.
Host Marriott is a Fortune 500 lodging real estate company which currently
owns or holds controlling interests in 120 upscale and luxury hotel properties
primarily operated under premium brands, such as Marriott, Ritz-Carlton,
Hyatt, Four Seasons, Swissotel and Hilton. For further information, please
visit the Company's website at www.hostmarriott.com.
*** Tables to Follow***
The Company
Host Marriott Corporation, herein referred to as we or Host Marriott, is
primarily the owner of hotel properties. We operate as a self-managed and
self-administered real estate investment trust, or REIT. We conduct our
operations as an umbrella partnership REIT through an operating partnership,
Host Marriott, L.P., or Host LP, of which we are the sole general partner. For
each share of our common stock, Host LP has issued to us one unit of operating
partnership interest, or OP Unit. When distinguishing between Host Marriott
and Host LP, the primary difference is the 10% partnership interests of Host
LP held by outside partners as of June 20, 2003, which is reflected as
minority interest in our balance sheet and minority interest expense in our
statement of operations. Readers are encouraged to find further detail
regarding our organizational structure in our annual report on Form 10-K.
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
different from measures calculated and presented in accordance with generally
accepted accounting principles, or GAAP, within the meaning of applicable
Securities and Exchange Commission, or SEC, rules that we believe are useful
to investors. They are as follows: (i) Funds From Operations per diluted
share, (ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel-Level
Results. The following discussion defines these terms and presents why we
believe they are useful measures of our performance.
FFO per Diluted Share
The National Association of Real Estate Investment Trusts, or NAREIT,
defines Funds From Operations, or FFO, as net income (computed in accordance
with GAAP) excluding gains (or losses) from sales of real estate and real
estate-related depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. FFO is presented on a per
share basis after making adjustments for the effects of dilutive securities.
We use FFO per diluted share as a measure of our performance because
historical cost accounting for real estate assets implicitly assumes that the
value of real estate assets diminishes predictably over time. However, because
real estate values have historically risen or fallen with market conditions,
most industry investors have considered presentation of operating results for
real estate companies that use historical cost accounting to be misleading or
uninformative. NAREIT adopted the definition of FFO in order to promote an
industry-wide standard measure of REIT operating performance that would not
have historical cost accounting treatments associated with net income under
GAAP. We believe that the presentation of FFO per diluted share provides
useful information to investors regarding our financial condition and results
of operations because it is a better measure of our operating performance. In
addition, it facilitates comparisons between us and other REITs, including
when making investment decisions. FFO per diluted share is also used by the
Compensation Policy Committee of the Board of Directors to establish criteria
for performance-based compensation. In previous periods, we presented the
financial measure "Comparative FFO," which represented FFO per diluted share
determined in accordance with NAREIT adjusted for contingent rent and
significant non-recurring items such as the repurchase of our leasehold
interests in 2000 and 2001 and the resolution of prior year tax matters in
2002. However, based on recent guidance provided by the SEC, we have elected
to conform to the NAREIT definition of FFO. Accordingly, we have reconciled
our Comparative FFO disclosures to FFO per diluted share using the NAREIT
definition for prior years as set forth later in this press release.
EBITDA
Earnings Before Interest, Income Taxes, Depreciation and Amortization, or
EBITDA, is a commonly used measure of performance in many industries which
management believes provides useful information to investors regarding our
results of operations. EBITDA helps us and our investors evaluate the ongoing
operating performance of our properties and facilitates comparisons between us
and other lodging REITs and hotel owners. Management uses EBITDA to provide a
baseline when evaluating property-level results. Management also uses EBITDA
as one measure in determining the value of acquisitions and dispositions and,
like FFO per diluted share, it is widely used by management in the annual
budget process.
Adjusted EBITDA
Management has historically adjusted EBITDA when evaluating our
performance because we believe that the exclusion of certain recurring items
described below is necessary to provide the most accurate measure of the
performance of our investment portfolio and to more fully reflect the ongoing
value of the company as a whole. Due to recent guidance provided by the SEC,
we now do not reflect such items when calculating EBITDA but, instead, adjust
for these items and refer to this measure as Adjusted EBITDA. Adjusted EBITDA
for the second quarter 2003 reflects EBITDA adjusted for the following items:
* Gains and Losses on Dispositions and Related Debt Extinguishments - We
exclude the effect of the gains and losses recorded on the disposition
of assets and the related debt extinguishments because we believe that
including them in EBITDA is not consistent with reflecting the ongoing
performance of our remaining assets. In addition, material gains or
losses from the depreciated value of the assets disposed of, and the
related debt extinguishments could be less important to investors, given
that the depreciated asset often does not reflect the market value of
real estate assets (as noted above for FFO).
* Consolidated Partnership Adjustments - We exclude the minority interest
in the income or loss of our consolidated partnerships because we
believe that including them in EBITDA does not reflect the impact of the
minority interest position on our performance because these amounts
effectively include our minority partners' pro-rata portion of
depreciation, amortization and interest expense, which are excluded from
EBITDA. However, we believe the cash distributions paid to minority
partners is a more relevant measure, and have included the effect of
these cash distributions in the calculation of Adjusted EBITDA.
* Equity Investment Adjustments - We exclude the equity in earnings
(losses) of unconsolidated investments in partnerships and joint
ventures because our percentage in the earnings (losses) does not
reflect the impact of our minority interest position on our performance
and these amounts effectively include our pro-rata portion of
depreciation, amortization and interest expense, which are excluded from
EBITDA. 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.
In previous periods, we also adjusted EBITDA for non-cash items such as
stock compensation expense and fair market value adjustments to hedge
instruments and foreign currency. Due to recent guidance provided by the SEC,
we have modified our calculation to exclude these adjustments and,
accordingly, we have reconciled our historical EBITDA disclosures for prior
years to EBITDA and to Adjusted EBITDA as set forth later in this press
release.
Limitations on the Use of Non-GAAP Measures
FFO per diluted share, EBITDA and Adjusted EBITDA, as presented, may 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 prescribed by
GAAP. Cash expenditures for various long-term assets, 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. 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 should not be used
as a measure of amounts that accrue directly to shareholders' benefit.
However, our consolidated statement of operations and cash flows includes
disclosure of our interest expense, capital expenditures and other items, all
of which should be considered when evaluating our performance, as well as the
usefulness of our non-GAAP financial measures.
Comparable Hotel-Level Results
We define our comparable hotels as consolidated hotel properties that are
owned or leased by us and for which we reported operating results throughout
the reporting periods being compared. We exclude from our comparable operating
results hotels that have been acquired or sold during 2003 or 2002, or that
have had substantial property damage or that have undergone large-scale
capital projects. Comparable hotel-level results does not present operating
results for our non-hotel properties or the results of our leased limited
service hotels. As of June 20, 2003, we consider 119, of our portfolio of 123
hotels, to be comparable properties for the periods presented. The hotels
whose operating results that are excluded from comparable hotel-level results
for the periods presented are the New York Financial Center Marriott
(substantially damaged in the September 11, 2001 terrorist attacks and re-
opened in January 2002), the Boston Marriott Copley Place (acquired in June
2002), The Ritz-Carlton, Naples Golf Resort (opened in January 2002) and the
JW Marriott, Washington, D.C. (consolidated in the second quarter of 2003).
The comparable hotel-level results include the results of the Norfolk
Waterside Marriott, the Waterford Marriott Oklahoma City and the Palm Beach
Gardens Marriott, which were sold on July 18, 2003 and will be considered non-
comparable for our third quarter 2003 reporting.
Our operating results for our comparable hotels include hotel-level
operating profit and the related hotel-level operating profit margin for these
properties. We believe that the comparable hotel-level results help us and our
investors evaluate the ongoing operating performance of our properties and
facilitate comparisons with other REITs and hotel owners. Management uses
these measures to establish a baseline to assess property-level results,
including when we acquire or sell assets. While these measures are based on
GAAP, costs such as depreciation and amortization, income taxes, interest
expense, corporate expenses and other corporate items have been incurred by us
and are not reflected in this presentation. In addition, we adjust the
revenues and expenses at these properties so that the results reflect
comparable reporting periods discussed below. We believe that excluding these
items provides the most accurate measure of the performance of our comparable
properties. As a result, the comparable hotel-level results do not represent
our total revenues, expenses or operating profit and these hotel-level results
should not be used to evaluate the performance of the Company as a whole.
However, our consolidated statement of operations includes such amounts, all
of which should be considered when evaluating our performance, as well as the
usefulness of our non-GAAP measures.
Reporting Period
We receive the results of operations of our hotels from our managers based
on their reporting cycles, which are either monthly or every four weeks. As a
REIT, we are required by tax laws to report results on a calendar year ended
December 31. However, our quarterly results reflect the reporting cycle that
is used by Marriott International, Inc., the manager of the majority of our
properties, whose year ends on the Friday closest to December 31 and which
reflect twelve weeks of operations for the first three quarters of the year
and sixteen or seventeen weeks for the fourth quarter of the year. Our results
are also adjusted to reflect a fiscal calendar year that has a January 1
starting date and a December 31 ending date. In any given quarter, quarter-
over-quarter results could have different starting and/or ending dates. For
example, the second quarter of 2003 ended on June 20 and the second quarter of
2002 ended on June 14, though both quarters reflect twelve weeks of
operations. In addition, because our starting and ending dates may not match
Marriott International's starting and ending dates, our first and fourth
quarters of each year and year-to-date periods may not have the same number of
days as was reflected in a prior year. For example, our consolidated financial
statements as of June 20, 2003 reflect 171 days, while our year-to-date
results as of June 14, 2002 reflect 165 days.
Approximately one-fourth of our full-service hotels are operated by
managers other than Marriott International, and report revenues on a monthly
basis versus our four week period, the accompanying consolidated financial
statements reflect three months of operations for the second quarter (March,
April and May), but five months of operations year-to-date (January through
May). Results in the third quarter will reflect three months of operations and
fourth quarter results will reflect four months of operations for these
hotels.
Hotel Operating Statistics
Our reported hotel operating statistics (i.e., RevPAR, average daily rate
and average occupancy) for the quarters ended June 20, 2003 and June 14, 2002
reflect results for the twelve week periods from March 29, 2003 to June 20,
2003 and March 23, 2002 to June 14, 2002, respectively, for our Marriott-
managed hotels and results for March, April and May for operations of all
other hotels which report results on a monthly basis.
Our reported hotel operating statistics for year-to-date June 20, 2003 and
year-to-date June 14, 2002 reflect results for the twenty four week periods
(or 168 days) from January 4, 2003 to June 20, 2003 and December 29, 2001 to
June 14, 2002, respectively, for our Marriott-managed hotels and results for
January through May for operations of all other hotels which report results on
a monthly basis.
HOST MARRIOTT CORPORATION
Consolidated Balance Sheets (a)
(unaudited, in millions, except share amounts)
June 20, December 31,
2003 2002
ASSETS
Property and equipment, net $ 7,063 $ 7,031
Notes and other receivables 55 53
Due from managers 98 82
Investments in affiliates 88 133
Other assets 505 523
Restricted cash 130 133
Cash and cash equivalents 312 361
$ 8,251 $ 8,316
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Senior notes $ 3,249 $ 3,247
Mortgage debt 2,335 2,289
Other 102 102
5,686 5,638
Accounts payable and accrued expenses 112 118
Other liabilities 202 252
Total liabilities 6,000 6,008
Minority interest 214 223
Company-obligated mandatorily
redeemable convertible preferred
securities of a subsidiary whose
sole assets are convertible
subordinated debentures due 2026
("Convertible Preferred Securities") 475 475
Shareholders' equity
Cumulative redeemable preferred stock
(liquidation preference $354
million), 50 million shares
authorized; 14.1 million shares
issued and outstanding 339 339
Common stock, par value $.01, 750
million shares authorized; 265.0
million shares and 263.7 million
shares issued and outstanding,
respectively 3 3
Additional paid-in capital 2,106 2,100
Accumulated other comprehensive
income (loss) 10 (2)
Accumulated deficit (896) (830)
Total shareholders' equity 1,562 1,610
$ 8,251 $ 8,316
(a) Our consolidated balance sheet as of June 20, 2003 has been prepared
without audit. Certain information and footnote disclosures normally
included in financial statements presented in accordance with GAAP
have been omitted. The consolidated balance sheets should be read in
conjunction with the consolidated financial statements and notes
thereto included in the annual report on Form 10-K for the year ended
December 31, 2002.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Revenues
Rooms $ 512 $ 541 $ 984 $1,005
Food and beverage 281 288 533 530
Other 57 64 109 119
Total hotel sales 850 893 1,626 1,654
Rental income (b) 24 24 51 50
Other income - - 2 -
Total revenues 874 917 1,679 1,704
Operating Costs and Expenses
Rooms 123 129 239 239
Food and beverage 202 204 389 379
Hotel departmental expenses 230 225 445 420
Management fees 37 44 70 80
Other property-level expenses (b) 78 71 149 133
Depreciation and amortization 86 84 174 167
Corporate and other expenses 13 12 27 29
Total Operating costs and expenses 769 769 1,493 1,447
Operating profit 105 148 186 257
Minority interest income (expense) 1 (6) 2 (11)
Interest income 2 4 5 7
Interest expense (107) (106) (218) (211)
Net gains on property transactions 2 1 3 2
Equity in earnings (losses) of
affiliates (3) 1 (9) (3)
Dividends on Convertible Preferred
Securities (8) (8) (15) (15)
Income (loss) before income taxes (8) 34 (46) 26
Provision for income taxes (6) (11) (2) (15)
Income (loss) from continuing
operations (14) 23 (48) 11
Income from discontinued operations (c) - 1 - 14
Net income (loss) (14) 24 (48) 25
Less: dividends on preferred stock (9) (9) (18) (18)
Net income (loss) available to common
shareholders $ (23) $ 15 $ (66) $ 7
Basic and diluted earnings (loss) per
common share $ (.09) $ .06 $ (.25) $ .03
(a) Our consolidated statements of operations have been prepared without
audit. Certain information and footnote disclosures normally included
in financial statements presented in accordance with GAAP have been
omitted. The unaudited consolidated statements of operations should be
read in conjunction with the consolidated financial statements and
notes thereto included in our annual report on Form 10-K for the year
ended December 31, 2002.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
(b) Rental income and expense are as follows:
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Rental Income
Full-service $ 7 $ 7 $ 17 $ 17
Limited service 16 16 32 31
Office buildings 1 1 2 2
$ 24 $ 24 $ 51 $ 50
Rental and other expenses
(included in "Other
property-level expenses")
Full-service $ 2 $ 2 $ 3 $ 3
Limited service 16 16 32 32
Office buildings - 1 1 1
$ 18 $ 19 $ 36 $ 36
(c) In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," we have restated prior year periods to
reflect $1 million of discontinued operations for the Ontario Airport
Marriott, which we sold during the first quarter of 2003. Also, $13
million of discontinued operations for year-to-date 2002 relates to
the St. Louis Marriott Pavilion, which we disposed of in January 2002.
HOST MARRIOTT CORPORATION
Earnings (Loss) per Share (a)
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
June 20, 2003 June 14, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) $ (14) 264.7 $ (.05) $ 24 263.0 $ .09
Dividends on preferred
stock (9) - (.04) (9) - (.03)
Basic earnings (loss)
and basic earnings
(loss)per share $ (23) 264.7 (.09) $ 15 263.0 .06
Assuming distribution of
common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - - - - 3.3 -
Diluted earnings (loss)
and diluted earnings
(loss) per share $ (23) 264.7 $ (.09) $ 15 266.3 $ .06
Year-to-date ended Year-to-date ended
June 20, 2003 June 14, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) $ (48) 264.5 $ (.18) $ 25 262.3 $ .10
Dividends on preferred
stock (18) - (.07) (18) - (.07)
Basic and diluted
earnings (loss)and
basic and diluted
earnings (loss) per
share $ (66) 264.5 $ (.25) $ 7 262.3 $ .03
(a) Basic earnings (loss) per common share is computed by dividing net
income (loss) available to common shareholders by the weighted average
number of shares of common stock outstanding. Diluted earnings (loss)
per common share is computed by dividing net income (loss) available
to common shareholders as adjusted for dilutive securities, by the
weighted average number of shares of common stock outstanding plus
other dilutive securities. Dilutive securities may include shares
granted under comprehensive stock plans, those preferred OP Units held
by minority partners, other minority interests that have the option to
convert their limited partnership interests to common OP Units and the
Convertible Preferred Securities. No effect is shown for securities if
they are anti-dilutive.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) Available to Common Shareholders
to Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
June 20, 2003 June 14, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss)
available to common
shareholders $ (23) 264.7 $ (.09) $ 15 263.0 $ .06
Adjustments:
Depreciation and
amortization 85 - .32 83 - .31
Partnership adjustments 3 - .02 8 - .03
FFO of minority partners
of Host LP (a) (6) - (.02) (10) - (.03)
Adjustments for dilutive
securities: (b)
Assuming distribution of
common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.8 (.01) - 3.3 (.01)
Assuming conversion of
Convertible Preferred
Securities - - - 8 30.9 (.01)
FFO per diluted share
(c)(d) 59 267.5 $ 0.22 $ 104 297.2 $0.35
Year-to-date ended Year-to-date ended
June 20, 2003 June 14, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss)
available to common
shareholders $ (66) 264.5 $ (.25) $ 7 262.3 $ .03
Adjustments:
Gain from discontinued
operations - - - (13) - (.05)
Depreciation and
amortization 171 - .65 166 - .63
Partnership adjustments 6 - .02 14 - .05
FFO of minority partners
of Host LP (a) (11) - (.04) (16) - (.06)
Adjustments for dilutive
securities: (b)
Assuming distribution of
common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.7 (.01) - 3.2 (.01)
Assuming conversion of
Convertible Preferred
Securities - - - 15 30.9 (.01)
FFO per diluted share
(c)(d) $ 100 267.2 $ .37 $ 173 296.4 $ .58
(a) Represents FFO attributable to the minority interest in Host LP.
(b) The share count has not been adjusted for shares of common stock
issuable upon redemption of common OP Units outstanding held by
minority partners in Host LP as they were antidilutive for all periods
presented. For the quarters ended June 20, 2003 and June 14, 2002,
there were 27.4 million and 26.9 million, respectively, weighted
average units outstanding. For year-to-date June 20, 2003 and June 14,
2002, there were 27.5 million and 24.2 million, respectively, weighted
average units outstanding.
(c) FFO per diluted share in accordance with NAREIT is adjusted for the
effects of dilutive securities. Dilutive securities may include shares
granted under comprehensive stock plans, those preferred OP Units held
by minority partners, other minority interests that have the option to
convert their limited partnership interest to common OP Units and the
Convertible Preferred Securities. No effect is shown for securities
if they are anti-dilutive.
(d) The Company previously reported Comparative FFO (see the discussion
beginning on page 5 of this press release). FFO per NAREIT excludes $3
million for each of the second quarter 2003 and 2002 and $6 million
for each of year-to-date 2003 and 2002 related to an income tax
benefit for the purchase of our leases that would have been included
in Comparative FFO.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Net income (loss) $ (14) $ 24 $ (48) $ 25
Interest expense 107 106 218 211
Dividends on Convertible Preferred
Securities 8 8 15 15
Depreciation and amortization 86 84 174 168
Income tax expense 6 11 2 15
EBITDA (a) 193 233 361 434
Gains and losses on dispositions
and related debt extinguishments (1) (1) (2) (15)
Consolidated partnership adjustments:
Minority interest (income) expense (1) 6 (2) 11
Distributions to minority interest
partners of Host LP and other
minority partners (3) (5) (4) (7)
Equity investment adjustments:
Equity in (earnings) losses of
affiliates 3 (1) 9 3
Distributions received from
equity investments 2 1 3 2
Adjusted EBITDA (a) $ 193 $ 233 $ 365 $ 428
(a) See discussion of EBITDA and Adjusted EBITDA described in the "Non-
GAAP Financial Measures" section earlier in this press release.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) to Adjusted
EBITDA for Full Year 2003 Forecasts (a)
(unaudited, in millions)
Full Year 2003
Low-end High-end
of Range of Range
Net Income (Loss) $ (148) $ (124)
Interest expense 474 474
Dividends on Convertible Preferred
Securities 32 32
Depreciation and amortization 367 367
Income taxes (2) (3)
EBITDA 723 746
Gains and losses on dispositions and
related debt extinguishments (4) (4)
Consolidated partnership adjustments:
Minority interest (income) expense (10) (8)
Distributions to minority interest
partners of Host LP and other
minority partners (6) (6)
Equity investment adjustments:
Equity in (earnings) losses of
affiliates 18 18
Distributions received from equity
investments 4 4
Adjusted EBITDA (1) $ 725 $ 750
(1) The Company's previous full year forecast of EBITDA included
approximately $15 million of adjustments primarily related to non-cash
stock compensation expense, fair market value adjustments for hedge
instruments and foreign currency adjustments. See discussion of
Adjusted EBITDA beginning on page 5 for further detail.
See additional notes "a" to "d" located after the next four tables.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) Available to Common Shareholders to
Funds From Operations per Diluted Share for Third Quarter 2003 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Third Quarter 2003 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income (loss) available
to common shareholders $ (77) 264.8 $ (.29)
Adjustments:
Depreciation and amortization 81 - .30
Partnership adjustments (2) - (.01)
FFO of minority partners of
Host LP (b) (1) - -
Adjustment for dilutive securities: (c)
Assuming distribution of common
shares granted under the
comprehensive stock plan less shares
assumed purchased at average market
price - 2.8 -
FFO per diluted share (d) $ 1 267.6 $ .00
High-end of Range
Third Quarter 2003 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income (loss) available
to common shareholders $ (72) 264.8 $ (.27)
Adjustments:
Depreciation and amortization 81 - .30
Partnership adjustments (2) - (.01)
FFO of minority partners of
Host LP (b) (1) - -
Adjustment for dilutive securities: (c)
Assuming distribution of common
shares granted under the
comprehensive stock plan less shares
assumed purchased at average market
price - 2.8 -
FFO per diluted share (d) $ 6 267.6 $ .02
See notes located after the next two tables.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) Available to Common Shareholders to
Funds From Operations per Diluted Share for Full Year 2003 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2003 Forecast
Income Per Share
(Loss) Shares Impact
Forecast net income (loss) available
to common shareholders $ (183) 264.6 $ (.69)
Adjustments:
Depreciation and amortization 359 - 1.36
Partnership adjustments 8 - .03
FFO of minority partners of
Host LP (b) (18) - (.07)
Adjustment for dilutive securities: (c)
Assuming distribution of common
shares granted under the
comprehensive stock plan less shares
assumed purchased at average market
price - 2.8 (.01)
FFO per diluted share (d) $ 166 267.4 $ .62
High-end of Range
Full Year 2003 Forecast
Income Per Share
(Loss) Shares Impact
Forecast net income (loss) available
to common shareholders $ (159) 264.6 $ (.60)
Adjustments:
Depreciation and amortization 359 - 1.36
Partnership adjustments 9 - .03
FFO of minority partners of
Host LP (b) (21) - (.08)
Adjustment for dilutive securities: (c)
Assuming distribution of common
shares granted under the
comprehensive stock plan less shares
assumed purchased at average market
price - 2.8 (.01)
FFO per diluted share (d) $ 188 267.4 $ .70
(a) The amounts shown in these reconciliations are based on
management's estimate of operations for full-year 2003 and the
third quarter of 2003. These tables are forward-looking and as such
contain assumptions by management based on known and unknown risks,
uncertainties and other factors which may cause the actual
transactions, results, performance or achievements to be materially
different from any future transactions, results, performance or
achievements expressed or implied by this table. General economic
conditions, competition and governmental actions will affect future
transactions, results, performance and achievements. Although we
believe the expectations reflected in this reconciliation are based
upon reasonable assumptions, we can give no assurance that the
expectations will be attained or that any deviations will not be
material.
For purposes of preparing the third quarter and full-year 2003
forecasts, we have made the following assumptions:
* RevPAR will decrease between 2.5% and 4.0% for the third
quarter and decrease between 3.0% and 5.0% for the full-year
2003 for the high and low ends of the forecasted ranges,
respectively.
* Comparable hotel-level EBITDA margins will decrease between
2.0 percentage points and 2.5 percentage points for the full-
year 2003 for the high and low end of the forecasted ranges,
respectively.
* $175 million of hotels will be sold during 2003 and the
proceeds are utilized to retire debt, including proceeds from
the $97 million in dispositions completed to date.
* $210 million in renewal and replacement capital expenditures
will be incurred during 2003.
* Fully diluted shares will be 267.6 million and 267.4 million,
respectively, for the third quarter and full-year 2003.
(b) Represents FFO attributable to the minority interests in Host LP
during 2003.
(c) These shares are dilutive for purposes of the FFO per diluted share
calculation, yet are anti-dilutive for the purposes of the earnings
per share calculation. This is due to the net loss that is
forecasted for 2003 compared to net earnings for FFO for the year.
(d) FFO per diluted share in accordance with NAREIT is adjusted for the
effects of dilutive securities. Dilutive securities may include
shares granted under comprehensive stock plans, those preferred OP
Units held by minority partners, other minority interests that have
the option to convert their limited partnership interest to common
OP Units and the Convertible Preferred Securities. No effect is
shown for securities if they are anti-dilutive.
HOST MARRIOTT CORPORATION
Hotel Operational Data
Comparable Property Statistics (a)
(unaudited)
Comparable by Region
As of June 20, 2003 Quarter ended June 20, 2003
Average
No. of No. of Average Occupancy
Properties Rooms Daily Rate Percentages RevPAR(b)
Atlanta 15 6,563 $133.67 63.8% $ 85.26
DC Metro 13 4,998 141.80 76.4 108.34
Florida 13 7,582 166.59 72.1 120.14
International 6 2,552 110.16 61.4 67.69
Mid-Atlantic 9 6,222 179.66 75.5 135.55
Mountain 8 3,313 103.78 64.3 66.78
New England 6 2,277 125.86 63.1 79.45
North Central 15 5,395 123.23 67.4 83.10
Pacific 22 11,526 149.32 66.5 99.27
South Central 12 6,514 128.39 76.7 98.53
All Regions 119 56,942 142.98 69.5 99.41
Quarter ended June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR(b) RevPAR
Atlanta $147.85 69.0% $101.99 (16.4)%
DC Metro 144.63 76.9 111.17 (2.5)
Florida 163.43 73.4 119.95 0.2
International 109.88 72.2 79.38 (14.7)
Mid-Atlantic 191.15 79.0 150.93 (10.2)
Mountain 107.90 69.3 74.79 (10.7)
New England 134.37 69.1 92.91 (14.5)
North Central 122.52 69.3 84.87 (2.1)
Pacific 157.27 70.1 110.22 (9.9)
South Central 134.14 81.0 108.66 (9.3)
All Regions 148.11 73.1 108.32 (8.2)
Comparable by Region
As of June 20, 2003 Year-to-date June 20, 2003
Average
No. of No. of Average Occupancy
Properties Rooms Daily Rate Percentages RevPAR(b)
Atlanta 15 6,563 $136.26 66.0% $ 89.98
DC Metro 13 4,998 139.90 71.0 99.35
Florida 13 7,582 170.83 74.5 127.22
International 6 2,552 107.85 64.1 69.11
Mid-Atlantic 9 6,222 173.89 72.6 126.29
Mountain 8 3,313 109.42 64.7 70.82
New England 6 2,277 121.10 59.4 71.99
North Central 15 5,395 118.51 63.9 75.74
Pacific 22 11,526 153.04 66.5 101.77
South Central 12 6,514 130.89 77.2 101.11
All Regions 119 56,942 143.78 69.1 99.34
Year-to-date June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR(b) RevPAR
Atlanta $145.25 69.10% $100.50 (10.50)%
DC Metro 140.51 70.2 98.66 0.7
Florida 168.41 76.4 128.65 (1.1)
International 109.61 69.2 75.83 (8.9)
Mid-Atlantic 184.29 77.6 143.03 (11.7)
Mountain 117.82 68.9 81.21 (12.8)
New England 127.21 64.0 81.46 (11.6)
North Central 117.92 65.7 77.52 (2.3)
Pacific 157.87 70.2 110.82 (8.2)
South Central 137.17 79.9 109.57 (7.7)
All Regions 148.19 72.1 106.77 (7.0)
HOST MARRIOTT CORPORATION
Hotel Operational Data
Comparable Property Statistics (a)
(unaudited)
Other Portfolio Statistics
As of June 20, 2003 Quarter ended June 20, 2003
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR (b)
Ritz-
Carlton(c) 9 3,536 $246.79 66.3 % $163.65
Quarter ended June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR(b) RevPAR
Ritz-
Carlton(c) $253.14 69.5 % $172.02 (7.0)%
As of June 20, 2003 Year-to-date June 20, 2003
Average Average
No. of No. of Daily Occupancy
Properties Rooms Rate Percentages RevPAR (b)
Ritz-
Carlton(c) 9 3,536 $246.35 65.5 % $161.43
Year-to-date June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR(b) RevPAR
Ritz-
Carlton(c) $248.80 68.2 % $169.73 (4.9)%
(a) Our comparable operating statistics include the results of three
hotels (the Norfolk Waterside Marriott, the Oklahoma City Waterford
Marriott and the Palm Beach Gardens Marriott) which were sold on July
18, 2003. Excluding these hotels, our RevPAR would be $99.71 and
$99.64, respectively, for the quarter ended and year-to-date June 20,
2003 and $108.75 and $107.16, respectively, for the quarter ended and
year-to-date June 14, 2002. See discussion of Reporting Periods and
Hotel Operating Statistics described earlier in this press release.
(b) RevPAR represents room revenue per available room, which measures
daily room revenues generated on a per room basis, excluding food and
beverage revenues or other ancillary revenues generated by the
properties.
(c) Includes nine Ritz-Carlton properties owned by us for all periods
presented, excluding The Ritz-Carlton, Naples Golf Resort, which was
placed in service in January 2002.
HOST MARRIOTT CORPORATION
Hotel Operational Data
Property Statistics by Region (All Properties) (a)
(unaudited)
As of June 20, 2003 Quarter ended June 20, 2003
Average
No. of No. of Average Occupancy
Properties(b) Rooms(b) Daily Rate Percentages RevPAR
Atlanta 15 6,563 $133.67 63.8% $ 85.26
DC Metro 14 5,770 141.80 76.4 108.34
Florida 14 7,877 170.68 71.7 122.34
International 6 2,552 110.16 61.4 67.69
Mid-Atlantic 10 6,726 180.86 75.2 136.02
Mountain 8 3,313 103.78 64.3 66.78
New England 7 3,416 149.55 69.4 103.82
North Central 15 5,395 123.23 67.4 83.10
Pacific 22 11,526 149.32 66.5 99.27
South Central 12 6,514 128.39 76.7 98.53
All Regions 123 59,652 145.12 69.8 101.22
Quarter ended June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR RevPAR
Atlanta $147.85 69.0% $101.99 (16.4)%
DC Metro 144.63 76.9 111.17 (2.5)
Florida 167.10 72.9 121.78 .5
International 109.88 72.2 79.38 (14.7)
Mid-Atlantic 190.62 78.8 150.14 (9.4)
Mountain 107.87 69.3 74.77 (10.7)
New England 134.85 69.2 93.33 11.2
North Central 122.52 69.3 84.87 (2.1)
Pacific 157.81 70.2 109.33 (9.2)
South Central 134.14 81.0 108.66 (9.3)
All Regions 148.78 73.1 108.75 (6.9)
As of June 20, 2003 Year-to-date ended June 20, 2003
Average
No. of No. of Average Occupancy
Properties(b) Rooms(b) Daily Rate Percentages RevPAR
Atlanta 15 6,563 $136.26 66.0% $ 89.98
DC Metro 14 5,770 139.90 71.0 99.35
Florida 14 7,877 174.80 74.1 129.53
International 6 2,552 107.85 64.1 69.11
Mid-Atlantic 10 6,726 175.64 72.5 127.38
Mountain 8 3,313 109.42 64.7 70.82
New England 7 3,416 140.98 65.3 92.04
North Central 15 5,395 118.51 63.9 75.74
Pacific 22 11,526 152.79 66.5 101.66
South Central 12 6,514 130.89 77.2 101.11
All Regions 123 59,652 145.48 69.2 100.73
Year-to-date ended June 14, 2002
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR RevPAR
Atlanta $145.52 69.1% $100.50 (10.5)%
DC Metro 140.51 70.2 98.66 .7
Florida 171.79 75.9 130.39 (.7)
International 109.61 69.2 75.83 (8.9)
Mid-Atlantic 183.48 77.1 141.50 (10.0)
Mountain 117.77 68.9 81.18 (12.8)
New England 127.52 64.1 81.72 12.6
North Central 117.92 65.7 77.52 (2.3)
Pacific 156.51 70.3 110.08 (7.6)
South Central 136.78 79.2 108.36 (6.7)
All Regions 148.67 72.0 106.97 (5.8)
(a) See discussion of Reporting Periods and Hotel Operating Statistics
located earlier in this press release.
(b) The number of properties and the room count reflect all consolidated
properties as of June 20, 2003. However, the results of operations do
not include the JW Marriott, Washington, D.C. We acquired the
remaining general partnership interest and preferred equity interest
held by outside partners in this hotel during June 2003 and began to
consolidate these operations effective June 20, 2003.
HOST MARRIOTT CORPORATION
Schedule of Comparable Hotel-Level Results (a)
(unaudited, in millions)
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Number of hotels 119 119 119 119
Number of rooms 56,942 56,942 56,942 56,942
Percent change in Comparable
RevPAR (8.2)% - (7.0)% -
Operating profit margin under
GAAP (b) 12.0 % 16.1% 11.1 % 15.1%
Comparable hotel-level operating
profit margin (c) 24.0 % 27.3% 23.6 % 27.2%
Comparable hotel sales
Room $ 485 $ 529 $ 930 $ 1,000
Food and beverage 270 281 508 529
Other 57 65 110 123
Comparable hotel sales (d) 812 875 1,548 1,652
Comparable hotel expenses
Room 117 125 225 236
Food and beverage 193 198 367 374
Other 34 36 64 67
Management fees, ground rent
and other costs 273 277 526 525
Comparable hotel expenses
(e) 617 636 1,182 1,202
Comparable Hotel-Level Operating
Profit 195 239 366 450
Non-comparable hotel results,
net (f) 8 5 18 3
Office building and limited
service properties, net 1 - 1 -
Other income - - 2 -
Depreciation and amortization (86) (84) (174) (167)
Corporate and other expenses (13) (12) (27) (29)
Operating Profit $ 105 $ 148 $ 186 $ 257
(a) See discussion of Comparable Hotel-level Results, Reporting Periods
and Hotel Operating Statistics section located earlier in this press
release.
(b) Operating profit margin under GAAP is calculated as the operating
profit per the Consolidated Statements of Operations divided by the
total revenues per the Consolidated Statement of Operations.
(c) Comparable hotel-level operating profit margin is calculated as the
comparable hotel-level operating profit per the schedule above divided
by the comparable hotel sales per the schedule above.
(d) The reconciliation of total revenues per the consolidated statements
of operations to the comparable hotel sales is as follows (in
millions):
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Revenues per the consolidated
statements of operations $ 874 $ 917 $1,679 $1,704
Non-comparable hotel sales (55) (35) (100) (59)
Hotel sales for the property for
which we receive rental income,
net 10 10 22 21
Rental income for office buildings
and limited service hotels (17) (17) (34) (33)
Other income - - (2) -
Adjustment for hotel sales for
comparable hotels to reflect
twenty-four weeks of operations
for Marriott-managed hotels - - (17) 19
Comparable hotel sales $ 812 $ 875 $1,548 $1,652
(e) The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows (in
millions):
Quarter ended Year-to-date
June 20, June 14, June 20, June 14,
2003 2002 2003 2002
Operating costs and expenses per
the consolidated statements of
operations $ 769 $ 769 $1,493 $1,447
Non-comparable hotel expenses (48) (31) (88) (56)
Hotel expenses for the property
for which we receive rental
income 11 11 26 25
Rent expense for office buildings
and limited service properties (16) (17) (33) (33)
Adjustment for hotel expenses for
comparable hotels to reflect
twenty-four weeks of operations
for Marriott-managed hotels - - (15) 15
Depreciation and amortization (86) (84) (174) (167)
Corporate and other expenses (13) (12) (27) (29)
Comparable hotel expenses $ 617 $ 636 $1,182 $1,202
(f) Non-comparable hotel results, net includes the following items: (i)
the results of operations of our non-comparable hotels and (ii) the
difference between the comparable hotel-level operating profit which
reflects 168 days of operations year-to-date and the operating results
included in the consolidated statement of operations which reflects
171 and 165 days for the year-to-date 2003 and 2002, respectively.
For further detail see "Reporting Periods, Comparable Hotel-Level
Results and Operating Statistics" section earlier in this press
release.
HOST MARRIOTT CORPORATION
Other Financial Data
(unaudited, in millions, except per share and ratio data)
June 20, 2003 December 31, 2002
Equity
Common shares outstanding 265.0 263.7
Common shares and minority-held
common OP Units outstanding 292.1 291.5
Preferred OP Units outstanding .02 .02
Class A Preferred stock outstanding 4.1 4.1
Class B Preferred stock outstanding 4.0 4.0
Class C Preferred stock outstanding 6.0 6.0
Class D Preferred stock outstanding (a) .03 -
Security pricing:
Share price-common (b) $ 8.79 $ 8.85
Share price-Class A Preferred (b) $ 25.50 $ 26.15
Share price-Class B Preferred (b) $ 25.24 $ 25.65
Share price-Class C Preferred (b) $ 25.25 $ 25.70
Share price-Convertible Preferred
Securities (b) $ 40.18 $ 36.94
Dividends per share (year-to-date
2003 and full year 2002)
Common (c) $ - $ -
Class A Preferred (d) $ 1.25 $ 2.50
Class B Preferred (d) $ 1.25 $ 2.50
Class C Preferred (d) $ 1.25 $ 2.50
Class D Preferred (d) $ 0.625 $ -
Debt
Percentage of fixed rate debt 90% 90%
Weighted average interest rate 7.9% 7.9%
Weighted average debt maturity 5.0 years 5.5 years
Credit facility, outstanding balance $ - $ -
Other Financial Data
Construction in progress $ 63 $ 39
(a) On June 19, 2003, we issued 33,182 shares of 10% Class D Cumulative
Redeemable Preferred Stock to Fernwood Holdings LLC, an indirectly
wholly owned taxable subsidiary of Host LP. Dividends paid on the
Class D preferred stock, will equal approximately $21,000 per quarter.
The holder of the Class D preferred stock is entitled to receive
cumulative cash dividends at a rate of 10% per annum of the $25.00 per
share liquidation preference and is payable quarterly in arrears. We
have the option to redeem the Class D preferred stock at any time
after July 1, 2004, for $25.00 per share, plus accrued and unpaid
dividends to the date of redemption. The Class D preferred stock is on
parity with our Class A, B and C preferred stock. The Class D
preferred stock has not been registered with the Securities and
Exchange Commission or listed on the New York Stock Exchange. In
accordance with Accounting Research Bulletin No. 51, stock issued to a
wholly-owned subsidiary is not presented on the balance sheet and
dividends on such stock are not deducted in the determination of net
income (loss) available to common stockholders or in the calculation
of earnings per share.
(b) Share prices are the closing price on the balance sheet date, as
reported by the NYSE for the common and preferred stock. The shares of
Convertible Preferred Securities are not traded on an exchange. Our
Convertible Preferred Securities per share price is deemed to be the
higher of the buy or sell price as provided by the trading desk for
Goldman Sachs in New York, New York on the relevant date.
(c) We did not declare a common stock dividend in the first two quarters
of 2003 or in full year 2002.
(d) Dividends reflect a quarterly cash dividend of $.625 per share for the
Class A, Class B, Class C and Class D preferred stock. Dividends paid
on the four classes of preferred stock are distributions for purposes
of satisfying the minimum distribution requirement necessary to
maintain REIT status.
HOST MARRIOTT CORPORATION
Reconciliation of Funds From Operations per Diluted Share per NAREIT
to Previously Reported Comparative Funds From Operations per
Diluted Share for 2002 and First Quarter 2003(a)
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
March 22, 2002 June 14, 2002
Income Per Share Income Per Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss)
available to common
shareholders $ (8) 261.7 $ (.03) $ 15 263.0 $ .06
Adjustments:
Gain from discontinued
operations (13) - (.05) - - -
Depreciation and
amortization 83 - .32 83 - .31
Partnership adjustments 6 - .02 8 - .03
FFO of minority partners
of Host LP (b) (6) - (.02) (10) - (.03)
Adjustments for dilutive
securities: (c)
Assuming distribution of
common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 3.1 (.01) - 3.3 (.01)
Assuming conversion of
Convertible Preferred
Securities 7 30.9 - 8 30.9 (.01)
FFO per Diluted Share
in accordance with
NAREIT (d) 69 295.7 .23 104 297.2 .35
Tax benefit of lease
repurchase (a) 3 - .01 3 - .01
SAB 101 effect on FFO
(a) 1 - .01 1 - -
Comparative FFO per
Diluted Share
previously reported (d) $ 73 295.7 $ .25 $ 108 297.2 $ .36
See notes following next two tables.
HOST MARRIOTT CORPORATION
Reconciliation of Funds From Operations per Diluted Share per NAREIT
to Previously Reported Comparative Funds From Operations per
Diluted Share for 2002 and First Quarter 2003(a)
(unaudited, in millions, except per share amounts)
Quarter ended Year ended
September 6, 2002 December 31, 2002
Income Per Share Income Per Share
(Loss) Shares Amount (Loss) Shares Amount
Net loss available to
common shareholders $ (47) 263.3 $ (.18) $ (51) 263.0 $ (.19)
Adjustments:
Gain from discontinued
operations - - - (13) - (.05)
Depreciation and
amortization 85 - .32 366 - 1.39
Partnership adjustments 4 - .02 20 - .07
FFO of minority partners
of Host LP (b) (5) - (.02) (30) - (.11)
Adjustments for dilutive
securities: (c)
Assuming distribution
of common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 3.0 - - 4.0 (.02)
Assuming conversion of
Convertible Preferred
Securities - - - 32 30.9 -
FFO per Diluted Share
in accordance with
NAREIT (d) 37 266.3 .14 324 297.9 1.09
Tax benefit of lease
repurchase (a) 3 - .01 12 - .04
Tax effect of non-
recurring items (a) - - - (4) - (.02)
SAB 101 effect on FFO
(a) 1 - - - - -
Comparative FFO per
Diluted Share
previously reported
(d) $ 41 266.3 $ .15 $ 332 297.9 $ 1.11
See notes below next table.
HOST MARRIOTT CORPORATION
Reconciliation of Funds From Operations per Diluted Share per NAREIT to
Previously Reported Comparative Funds From Operations per Diluted Share for
2002 and First Quarter 2003(a)
(unaudited, in millions, except per share amounts)
Quarter ended March 28, 2003
Income Per Share
(Loss) Shares Amount
Net loss available to common
shareholders $ (43) 264.3 $(.16)
Adjustments:
Depreciation and amortization 86 - .33
Partnership adjustments 3 - .01
FFO of minority partners of Host LP(b) (5) - (.02)
Adjustments for dilutive securities:(c)
Assuming distribution of common
shares granted under the
comprehensive stock plan less
shares assumed purchased at average
market price - 2.5 (.01)
FFO per Diluted Share in accordance
with NAREIT (d) 41 266.8 .15
Tax benefit of lease repurchase (a) 3 - .01
Comparative FFO per Diluted Share
previously reported (d) $ 44 266.8 $ .16
(a) The three tables shown above present reconciliations of FFO per
diluted share to our previously reported Comparative FFO per diluted
share for each reporting period in 2002 and the first quarter of 2003.
The SEC recently finalized its guidance related to non-GAAP financial
measures and, as a result, we have revised our calculation of FFO per
diluted share to conform to the NAREIT definition. See the discussion
in the "Non-GAAP Financial Measures" mentioned earlier in this press
release. As previously presented, Comparative FFO per diluted share
included adjustments for the following significant items:
* Results for all periods in 2002 and first quarter 2003 were
adjusted to reflect the realization of an income tax benefit as a
result of the purchase of 120 leasehold interests at year-end
2000 and during June 2001.
* Results for year-end 2002 were adjusted to reflect the effect of
non-recurring items in the current period tax provision (benefit)
including the resolution of prior year tax matters and other
items.
* Results for the first three quarters of 2002 were adjusted to
reflect contingent rent that was previously deferred under SEC
Staff Accounting Bulletin 101, or SAB 101. This adjustment
reflects revenues based on payment amounts calculated under our
hotel leases.
(b) Represents FFO attributable to the minority interests in Host LP.
(c) The share count has not been adjusted for the minority common OP Units
outstanding as they were antidilutive for all periods presented. For
the quarters ended June 20, 2003 and June 14, 2002, there were 27.4
million and 26.9 million, respectively, weighted average units
outstanding. For year-to-date June 20, 2003 and June 14, 2002 there
were 27.5 million and 24.2 million, respectively, weighted average
units outstanding.
(d) FFO per diluted share in accordance with NAREIT is adjusted for the
effects of dilutive securities. Dilutive securities may include shares
granted under comprehensive stock plans, those preferred OP Units held
by minority partners, other minority interests that have the option to
convert their limited partnership interest to common OP Units and the
Convertible Preferred Securities. No effect is shown for securities
if they are anti-dilutive.
HOST MARRIOTT CORPORATION
Reconciliation of EBITDA and Adjusted EBITDA
to Previously Reported EBITDA for 2002 and First Quarter 2003
(unaudited, in millions)
Year Quarter
Quarter ended ended ended
March 22, June 14, Sept. 6, Dec. 31, March 28,
2002 2002 2002 2002 2003
Net income (loss) $ 1 $ 24 $ (38) $ (16) $ (34)
Interest expense 105 106 107 466 111
Dividends on Convertible
Preferred Securities 7 8 7 32 7
Depreciation and
amortization 84 84 86 372 88
Income tax expense 4 11 (7) 6 (4)
EBITDA 201 233 155 860 168
(Losses) gains on
dispositions and
related debt
extinguishments debt (14) (1) (1) (18) (1)
Consolidated partnership
adjustments:
Minority interest
(income) expense 5 6 (3) 7 (1)
Distributions to
minority interest
partners of Host LP
and other minority
partners (2) (5) (2) (13) (1)
Equity investment
adjustments:
Equity in (earnings)
losses of affiliates 4 (1) 3 9 6
Distributions received
from equity investments 1 1 1 6 1
Adjusted EBITDA (a) 195 233 153 851 172
Other non-cash items (b) 9 5 6 12 3
Previously reported EBITDA $ 204 $ 238 $ 159 $ 863 $ 175
(a) See discussion of EBITDA and Adjusted EBITDA located in the
"Introductory Notes to Financial Information" under the "Non-GAAP
Financial Measures" section, described earlier in this press release.
(b) Primarily represents non-cash stock compensation expense and fair
market value adjustments for hedge instruments and foreign currency
adjustments.
SOURCE Host Marriott Corporation
Greg Larson of Host Marriott Corporation, +1-240-744-5120, or
Fax: +1-240-744-5125
http://www.hostmarriott.com
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Host Hotels & Resorts, Inc.
