BETHESDA, Md., July 22 /PRNewswire-FirstCall/ -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the second quarter ended June 19, 2009.
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- Total revenue decreased $324 million, or 23.3%, to $1,064 million for the second quarter and $494 million, or 20.3%, to $1,936 million for year-to-date 2009 as compared to last year.
- Net loss was $69 million for the second quarter of 2009 compared to net income of $193 million for the second quarter of 2008. For year-to-date 2009, net loss was $129 million compared to net income of $256 million for year-to-date 2008. Loss per diluted share was $.12 for the second quarter of 2009 compared to earnings per diluted share of $.34 in 2008. For year-to-date 2009, loss per diluted share was $.24 compared to earnings per diluted share of $.45 for year-to-date 2008.
Operating results for the periods presented were affected by several items including:
- non-cash impairment charges recorded on four hotels and the Company's investment in its European joint venture of $91 million and $131 million for second quarter and year-to-date 2009, respectively;
- non-cash interest expense in 2008 and 2009 due to an accounting change implemented retrospectively in the first quarter of 2009 related to the Company's exchangeable debentures; and
- gains associated with hotel dispositions and other items.
The net effect of these items on loss per diluted share for the second quarter of 2009 was a decrease in earnings of $89 million, or $.16 per diluted share. For the second quarter of 2008, these items increased earnings by $6 million, or $.01 per diluted share. The net effect of these items was a decrease in earnings of $117 million, or $.21 per diluted share, and $4 million, or $.01 per diluted share, for year-to-date 2009 and 2008, respectively.
- Funds from Operations (FFO) per diluted share was $.12 for the second quarter of 2009 compared to $.55 per diluted share for the second quarter of 2008. FFO per diluted share was also affected by the non-cash interest expense, non-cash impairment charges and other items described above. The net effect of these items was a decrease in FFO per diluted share of $.15 and $.01 for the second quarter 2009 and 2008, respectively. For year-to-date 2009, FFO per diluted share was $.22 compared to $.88 per diluted share for year-to-date 2008. The net effect the non-cash interest expense, non-cash impairment charges and other items was a decrease in FFO per diluted share of $.24 and $.01 for year-to-date 2009 and 2008, respectively.
- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $163 million to $256 million for the second quarter, and $251 million to $430 million for year-to-date 2009 when compared to last year.
For further detail of the transactions affecting net income, earnings per diluted share and FFO per diluted share, refer to the notes to the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share."
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR for the second quarter of 2009 decreased 24.9% when compared to the second quarter of 2008. Year-to-date 2009 comparable hotel RevPAR decreased 22.7% when compared to year-to-date 2008. Comparable hotel adjusted operating profit margins decreased 560 basis points and 500 basis points for the second quarter and year-to-date 2009, respectively. For further detail, see "Notes to the Financial Information."
LIQUIDITY
As of June 19, 2009, the Company had over $1.3 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the second quarter, the Company completed two significant transactions which enhanced its financial flexibility and liquidity. These transactions were:
- the issuance of 75,750,000 shares of common stock for net proceeds of approximately $480 million; and
- the issuance of $400 million, 9% Series T senior notes maturing May 15, 2017 for net proceeds of approximately $380 million;
The proceeds from these transactions, when combined with the first quarter $120 million mortgage loan obtained on the JW Marriott, Washington D.C. and the sale of the Hyatt Regency Boston for $113 million resulted in total proceeds raised year-to-date of over $1.1 billion. Subsequent to the end of the second quarter, we also disposed of three non-core properties: the 253-room Washington Dulles Marriott Suites, the 448-room Sheraton Stamford and the 430-room Boston Marriott Newton, for net proceeds of approximately $64 million. The proceeds from these transactions have been and will continue to be used to repay or redeem near-term debt maturities and to maintain higher than historical cash balances due to the current uncertainty in the credit markets. During the second quarter, the Company repaid $200 million outstanding under the revolver portion of the credit facility. Additionally, subsequent to quarter end, the Company repaid the $175 million mortgage debt secured by the San Diego Marriott Hotel & Marina. As a result of these transactions, the Company's remaining debt maturities total $480 million through year end 2010, which includes principal amortization of $20 million.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $84 million and $192 million for the quarter and year-to-date, which was a decline of approximately 48% and 38%, respectively, from the prior year. These expenditures included return on investment (ROI) and repositioning projects of approximately $47 million and $101 million for the second quarter and year-to-date 2009, respectively.
DIVIDEND
The Company intends to declare a common dividend of approximately $.23 to $.25 per share in the first half of September 2009. The common dividend is expected to consist of cash in the amount of approximately $.03 per share with the remainder to be paid in shares of common stock, both of which will be taxable to stockholders. The common dividend will be paid by the end of 2009. The Company intends to continue paying a cash dividend on its preferred stock.
2009 OUTLOOK
The Company's ability to predict future operating results continues to be significantly affected by the current recession and its effect on business and leisure travel. The Company expects that the trends affecting the economy will continue to depress hotel operating results across the portfolio for the remainder of 2009. In the event that comparable hotel RevPAR were to decline approximately 20% to 23% for the full year 2009, the Company would anticipate that full year 2009 operating profit margins under GAAP would decrease approximately 1,170 basis points to 1,290 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 600 basis points to 650 basis points. Based upon these parameters, the Company would estimate the following would occur for full year 2009:
- loss per diluted share should be approximately $.46 to $.53;
- net loss should be approximately $267 million to $310 million;
- FFO per diluted share should be approximately $.43 to $.50 (including the effect of the deduction of $131 million in non-cash impairment charges and $26 million of non-cash interest expense on the exchangeable debentures due to an accounting change for 2009, or, in total, a reduction of $.25 per diluted share); and
- Adjusted EBITDA should be approximately $750 million to $800 million.
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 113 properties with approximately 62,000 rooms, and also holds a non-controlling interest in a joint venture that owns 11 hotels in Europe with approximately 3,500 rooms. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott(R), Ritz-Carlton(R), Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R) and Swissotel(R)* 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 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 potential for terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions and dispositions; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes and other risks and uncertainties associated with our business described in the Company's filings with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of July 22, 2009, 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., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host and Host LP, the primary difference is approximately 2% of the partnership interests in Host LP held by outside partners as of June 19, 2009, 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.
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
June 19, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
------
Property and equipment, net $10,431 $10,739
Assets held for sale 55 -
Due from managers 81 65
Investments in affiliates 144 229
Deferred financing costs, net 51 46
Furniture, fixtures and equipment replacement
fund 121 119
Other 197 200
Restricted cash 46 44
Cash and cash equivalents 1,346 508
----- ---
Total assets $12,472 $11,950
======= =======
LIABILITIES AND EQUITY
----------------------
Debt
Senior notes, including $859 million and $916
million, respectively, net of $4,272 $3,943
discount, of Exchangeable Senior Debentures (b)
Mortgage debt 1,524 1,436
Credit facility, including the $210 million term
loan 210 410
Other 87 87
-- --
Total debt 6,093 5,876
Accounts payable and accrued expenses 86 119
Other 171 183
--- ---
Total liabilities 6,350 6,178
----- -----
Non-controlling interests in Host Hotels &
Resorts, L.P. 115 156
Host Hotels & Resorts, Inc. stockholders'
equity:
Cumulative redeemable preferred stock
(liquidation preference $100 million)
50 million shares authorized; 4 million shares
issued and outstanding 97 97
Common stock, par value $.01, 1,050 million
shares and 750 million shares
authorized, respectively; 604.6 million shares
and 525.3 million shares
issued and outstanding, respectively 6 5
Additional paid-in capital 6,397 5,874
Accumulated other comprehensive income 2 5
Deficit (518) (389)
----- -----
Total Host Hotels & Resorts, Inc. stockholders'
equity 5,984 5,592
Non-controlling interests-other consolidated
partnerships (c) 23 24
-- --
Total equity 6,007 5,616
----- -----
Total liabilities and equity $12,472 $11,950
======= =======
(a) Our consolidated balance sheet as of June 19, 2009 has been prepared
without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance
with GAAP have been omitted.
(b) As a result of the adoption of a new accounting requirement for
convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement), the principal
balance for our Exchangeable Senior Debentures was reduced by
$60 million and $76 million as of June 19, 2009 and December 31,
2008, respectively, with an offsetting increase to equity. The
decline in principal reflects the unamortized discount balance
related to the implementation of the new accounting requirement. The
face amount of the debentures was $925 million at June 19, 2009.
See notes to "Other Financial and Operating Data," for further
discussion.
(c) As a result of the adoption of a new accounting requirement, non-
controlling interests of other consolidated partnerships (previously
referred to as "Interest of minority partners of other consolidated
partnerships") is now included as a separate component of equity.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
----- ----- ----- -----
Revenues
Rooms $629 $837 $1,134 $1,450
Food and beverage 323 433 592 762
Other 87 91 156 161
-- -- --- ---
Total hotel sales 1,039 1,361 1,882 2,373
Rental income 25 27 54 57
-- -- -- --
Total revenues 1,064 1,388 1,936 2,430
----- ----- ----- -----
Expenses
Rooms 166 194 302 348
Food and beverage 232 297 431 535
Hotel departmental expenses 271 318 505 571
Management fees 41 71 74 123
Other property-level expenses 96 94 177 175
Depreciation and amortization (b) 196 128 353 249
Corporate and other expenses 17 14 32 31
Gain on insurance settlement - - - (7)
- - - ---
Total operating costs and expenses 1,019 1,116 1,874 2,025
----- ----- ----- -----
Operating profit 45 272 62 405
Interest income 2 4 4 9
Interest expense (c) (82) (88) (169) (171)
Net gains on property transactions and
other 1 1 2 2
Gain on foreign currency 6 - 4 -
Equity in earnings (losses) of
affiliates (b) (32) 1 (34) 2
---- - ---- -
Income (loss) before income taxes (60) 190 (131) 247
Benefit (provision) for income taxes (10) (13) 4 (7)
---- ---- - ---
Income (loss) from continuing
operations (70) 177 (127) 240
Income (loss) from discontinued
operations 1 16 (2) 16
- -- --- --
Net income (loss) (69) 193 (129) 256
Less: Net (income) loss attributable
to non-controlling
interests (d) 1 (10) 2 (18)
- ---- - ----
Net income (loss) attributable to
common stockholders (68) 183 (127) 238
Less: Dividends on preferred stock (2) (2) (4) (4)
--- --- --- ---
Net income (loss) available to common
stockholders $(70) $181 $(131) $234
==== ==== ===== ====
Basic earnings (loss) per common share:
Continuing operations $(.12) $.32 $(.24) $.42
Discontinued operations - .03 - .03
- --- ----- ---
Basic earnings (loss) per common share $(.12) $.35 $(.24) $.45
===== ==== ===== ====
Diluted earnings (loss) per common
share:
Continuing operations $(.12) $.31 $(.24) $.42
Discontinued operations - .03 - .03
- --- ----- ---
Diluted earnings (loss) per common
share $(.12) $.34 $(.24) $.45
===== ==== ===== ====
(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) During 2009, we identified several properties to be tested for
impairment based on certain triggering events, as prescribed by
GAAP. We tested these properties for impairment based on
management's estimate of expected future undiscounted cash flows
over our expected holding period. As a result, we recorded
non-cash impairment charges totaling $91 million for the second
quarter and $131 million year-to-date based on the difference between
the discounted cash flows and the carrying amount. Of these
impairment charges, $57 million and $78 million for second quarter
and year-to-date, respectively, have been included in depreciation
expense and $19 million was included in discontinued operations for
the year to date. The remaining $34 million of impairment charges
were for our investment in the European joint venture, which is
included in equity in earnings (losses) of affiliates.
(c) The retroactive adoption of a new accounting requirement regarding
the exchangeable debentures increased interest expense by $6
million and $7 million for both the second quarter of 2009 and 2008,
respectively, and $13 million and $14 million for year-to-date 2009
and 2008, respectively. Interest expense for year-to-date 2009
includes the $3 million gain on the first quarter repurchase of a
portion of the 3.25% Exchangeable Senior Debentures issued in April
2004 (the "2004 Debentures"). See notes to the "Reconciliation of
Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share" for
further discussion.
(d) As a result of the adoption of a new accounting requirement, net
income attributable to non-controlling interests of Host LP and of
other non-consolidated partnerships are no longer included in the
determination of net income. Prior periods have been revised to
reflect this presentation. The net income attributable to non-
controlling interests is included in the net income available to
common stockholders; therefore, the implementation of this
requirement had no effect on our basic or diluted earnings per
share calculation.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
---------------- ------------------
June 19, June 13, June 19, June 13,
2009 2008 2009 2008
----- ----- ----- -----
Net income (loss) $(69) $193 $(129) $256
Net (income) loss attributable to
non-controlling 1 (10) 2 (18)
interests
Dividends on preferred stock (2) (2) (4) (4)
--- --- --- ---
Earnings (loss) available to common
stockholders (70) 181 (131) 234
Assuming conversion of 2004
Exchangeable Senior
Debentures - 7 - -
Assuming deduction of gain recognized
for the repurchase of 2004 Exchangeable
Senior Debentures (a) - - (2) -
- - --- -
Diluted earnings (loss) available to
common stockholders $(70) $188 $(133) $234
==== ==== ===== ====
Basic weighted average shares
outstanding 575.0 520.5 550.3 521.5
Diluted weighted average shares
outstanding (b) 575.0 551.7 552.2 521.8
Basic earnings (loss) per share (c) $(.12) $.35 $(.24) $.45
Diluted earnings (loss) per share (c)
(d) $(.12) $.34 $(.24) $.45
(a) During the first quarter of 2009, we repurchased $75 million face
amount of the 2004 Debentures with a carrying value of $72 million
for $69 million. The adjustments to dilutive earnings per common
share related to the 2004 Debentures repurchased during the year
include the $3 million gain on repurchase, net of interest expense
on the repurchased debentures.
(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) Basic earnings per common share is computed by dividing net income
available to common stockholders by the weighted average number of
shares of common stock outstanding. Diluted earnings per common
share is computed by dividing net income available to common
stockholders, as adjusted for potentially dilutive securities, by the
weighted average number of shares of common stock outstanding plus
potentially dilutive securities.
(d) See notes to the "Reconciliation of Net Income to EBITDA, Adjusted
EBITDA and FFO per Diluted Share" for information on significant
items affecting diluted earnings per common share for which no
adjustments were made.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of June 19, 2009 Quarter ended June 19, 2009
------------------- ---------------------------
Average
No. of No.
