Oct. 14, 2009 (PR Newswire) -- BETHESDA, Md., Oct. 14 /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 third quarter ended September 11, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO )
-- Total revenue decreased $227 million, or 19.9%, to $912 million for the third quarter and $719 million, or 20.2%, to $2,839 million for year-to-date 2009 as compared to last year.
-- Net loss was $58 million for the third quarter of 2009 compared to net income of $47 million for the third quarter of 2008. For year-to-date 2009, net loss was $187 million compared to net income of $303 million for year-to-date 2008. Loss per diluted share was $.09 for the third quarter of 2009 compared to earnings per diluted share of $.09 in 2008. For year-to-date 2009, loss per diluted share was $.33 compared to earnings per diluted share of $.53 for year-to-date 2008.
Operating results for 2008 and 2009 were affected by an increase in non-cash interest expense related to the Company's exchangeable debentures, as well as non-cash impairment charges recorded in the first half of 2009, partially offset by gains associated with hotel dispositions. The net effect of these items on loss per diluted share was an increase in earnings of $6 million, or $.01 per diluted share for both the third quarter of 2009 and 2008. The net effect of these items was a decrease in earnings of $111 million, or $.20 per diluted share for year-to-date 2009, and an increase in earnings of $3 million, or $.01 per diluted share, for year-to-date 2008.
-- Funds from Operations (FFO) per diluted share was $.11 for the third quarter of 2009 compared to $.31 per diluted share for the third quarter of 2008. FFO per diluted share was also affected by the non-cash interest expense for all periods presented and non-cash impairment charges for the first half of 2009. FFO per diluted share was reduced by $.01 for the third quarter of 2009 due to non-cash interest expense. For year-to-date 2009, FFO per diluted share was $.33 compared to $1.19 per diluted share for year-to-date 2008. The net effect of these non-cash charges decreased FFO per diluted share by $.24 and $.02 for year-to-date 2009 and 2008, respectively.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $131 million to $139 million for the third quarter and $381 million to $570 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 decreased 21.3% and 22.3% for third quarter and year-to-date 2009 compared to 2008. Comparable hotel adjusted operating profit margins decreased 685 basis points and 560 basis points for the third quarter and year-to-date 2009, respectively. For further detail, see "Notes to the Financial Information."
BALANCE SHEET
As of September 11, 2009, the Company had in excess of $1 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the third quarter, the Company used proceeds from financing transactions completed in the first half of 2009, the proceeds from asset dispositions and available cash to complete the following debt transactions:
-- Repaid the $210 million term loan outstanding under its credit facility;
-- Repaid the $135 million mortgage debt secured by the Westin Kierland;
-- Repaid the $175 million mortgage debt secured by the San Diego Hotel &
Marina; and
-- Repurchased approximately $49 million face amount of its 2.625%
Exchangeable Senior Debentures ("2007 Debentures") for approximately $42
million and recorded a gain on the repurchases of $2 million.
Beginning in August 2009, the Company initiated a continuous equity offering program under which it may sell shares of common stock in at-the-market transactions over time. The Company has issued approximately 13 million shares of common stock for net proceeds of $130 million under this program, of which $22 million was received subsequent to the end of the quarter.
DISPOSITIONS
During the third quarter, the Company sold four non-core properties: the 253-room Washington Dulles Marriott Suites, the 448-room Sheraton Stamford, the 430-room Boston Marriott Newton and the 353-room Hanover Marriott, for approximately $90 million and recorded a gain of $9 million on the sales. The Company sold its remaining 3.6% limited partner interest in CBM Joint Venture Limited Partnership for approximately $13 million and recorded a gain of approximately $5 million, net of tax. The Company's results of operations include a $12 million tax benefit, or $.02 for both the loss per diluted share and FFO per diluted share, associated with the sale.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $63 million and $255 million for the quarter and year-to-date, which was a decline of approximately 59% and 45%, respectively, from the prior year. Return on investment (ROI) and repositioning projects accounted for approximately $40 million and $141 million for the third quarter and year-to-date 2009, respectively, of these expenditures. Significant projects completed during the year include the development of a 62,750 square foot ballroom at Swissotel Chicago for $52 million, the renovation of approximately 1,500 guest rooms at the Sheraton Boston, San Francisco Marriott Fisherman's Wharf and the Westin Tabor Center and the $8 million renovation of the 51,000 square foot Palms Ballroom at the Orlando World Center Marriott Resort and Convention Center.
DIVIDEND
Consistent with the previously announced guidance, and subsequent to quarter end, the Company declared a special common dividend of $.25 per share payable on December 18, 2009 to stockholders of record on November 6, 2009. The Board of Directors has determined to pay this special dividend with cash, shares of common stock or a combination of cash and shares of common stock based on stockholder elections, provided that the cash component of this dividend will be approximately 10% of the aggregate dividend, or $0.025 per share. The Company previously suspended its regular quarterly dividend; however, it intends to continue paying a cash dividend on its preferred stock.
2009 OUTLOOK
The current recessionary climate, and its effect on business and leisure travel, continues to hinder the Company's ability to predict future operating results. However, assuming that comparable hotel RevPAR were to decline approximately 20% to 22% for the full year 2009, the Company would anticipate that operating profit margins under GAAP would decrease approximately 1,180 basis points to 1,260 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 600 basis points to 640 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 $.42 to $.47;
-- net loss should be approximately $250 million to $282 million;
-- FFO per diluted share should be approximately $.46 to $.51 (including
the effect of the deduction of $131 million in non-cash impairment
charges and $27 million of non-cash interest expense on the exchangeable
debentures, as well as the net gains on debt extinguishments of $8
million, which reduced FFO per diluted share by $.25); and
-- Adjusted EBITDA should be approximately $760 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 112 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®, Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®, The Luxury Collection®, Hyatt®, Fairmont®, Four Seasons®, Hilton® and Swissotel®* in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company's website at 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 remain 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 October 13, 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 September 11, 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)
September 11, December 31,
2009 2008
---- ----
(unaudited)
ASSETS
------
Property and equipment, net $10,336 $10,739
Due from managers 52 65
Investments in affiliates 144 229
Deferred financing costs, net 46 46
Furniture, fixtures and equipment
replacement fund 139 119
Other 282 200
Restricted cash 49 44
Cash and cash equivalents 1,019 508
----- ---
Total assets $12,067 $11,950
======= =======
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY
-------------------------------------------------
Debt
Senior notes, including $822 million and
$916 million, respectively, net of
discount, of Exchangeable Senior
Debentures (b) $4,232 $3,943
Mortgage debt 1,221 1,436
Credit facility, including the $210
million term loan - 410
Other 86 87
-- --
Total debt 5,539 5,876
Accounts payable and accrued expenses 130 119
Other 201 183
--- ---
Total liabilities 5,870 6,178
----- -----
Non-controlling interests--Host Hotels &
Resorts, L.P. 124 158
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; 617.7 million
shares and 525.3 million shares issued
and outstanding, respectively 6 5
Additional paid-in capital 6,517 5,868
Accumulated other comprehensive income 6 5
Deficit (575) (385)
---- ----
Total equity of Host Hotels &
Resorts, Inc. stockholders 6,051 5,590
Non-controlling interests-other
consolidated partnerships (c) 22 24
-- --
Total equity 6,073 5,614
----- -----
Total liabilities, non-controlling
interests and equity $12,067 $11,950
======= =======
(a) Our consolidated balance sheet as of September 11, 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 $49 million
and $76 million as of September 11, 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 $876 million at September 11, 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
------------- ------------------
September 11, September 5, September 11, September 5,
2009 2008 2009 2008
---- ---- ---- ----
Revenues
Rooms $579 $736 $1,707 $2,179
Food and beverage 242 304 831 1,062
Other 69 77 225 238
-- -- --- ---
Total hotel sales 890 1,117 2,763 3,479
Rental income 22 22 76 79
-- -- -- --
Total revenues 912 1,139 2,839 3,558
--- ----- ----- -----
Expenses
Rooms 169 186 470 533
Food and beverage 205 249 634 781
Hotel departmental
expenses 263 305 765 873
Management fees 33 48 106 170
Other property-level
expenses 95 89 271 264
Depreciation and
amortization (b) 138 130 478 377
Corporate and other
expenses 19 14 51 45
Gain on insurance
settlement - - - (7)
--- --- --- --
Total operating
costs and
expenses 922 1,021 2,775 3,036
--- ----- ----- -----
Operating profit (loss) (10) 118 64 522
Interest income 1 4 5 13
Interest expense (c) (95) (90) (264) (262)
Net gains on property
transactions and other 11 - 13 2
Gain on foreign currency
transactions and
derivatives 1 - 5 -
Equity in earnings
(losses) of affiliates (b) (2) 1 (36) 3
-- --- --- ---
Income (loss)before
income taxes (94) 33 (213) 278
Benefit (provision) for
income taxes 25 (4) 29 (11)
-- -- -- ---
Income (loss) from
continuing operations (69) 29 (184) 267
Income (loss) from
discontinued operations 11 18 (3) 36
-- -- -- --
Net income (loss) (58) 47 (187) 303
Less: Net(income) loss
attributable to non-
controlling interests (d) 3 - 5 (18)
--- --- --- ---
Net income (loss)
attributable to
common stockholders (55) 47 (182) 285
Less: Dividends on
preferred stock (2) (2) (6) (6)
-- -- -- --
Net income (loss)
available to common
stockholders $(57) $45 $(188) $279
==== === ===== ====
Basic earnings (loss)
per common share:
Continuing
operations $(.11) $.05 $(.33) $.46
Discontinued
operations .02 .04 - .07
--- --- --- ---
Basic earnings (loss)
per common share $(.09) $.09 $(.33) $.53
===== ==== ===== ====
Diluted earnings (loss)
per common share:
Continuing
operations $(.11) $.05 $(.33) $.46
Discontinued
operations .02 .04 - .07
--- --- --- ---
Diluted earnings (loss)
per common share $(.09) $.09 $(.33) $.53
===== ==== ===== ====
(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 $131 million in the first half of 2009 based on the
difference between the discounted cash flows and the carrying amount.
$66 million has been included in depreciation expense and $31 million
was included in discontinued operations for year-to-date 2009. The
remaining $34 million of impairment charges was 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 the third quarter of 2009 and 2008, respectively,
and $19 million and $21 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") and the $2 million gain on the third quarter repurchase
of a portion of the 2007 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
------------- ------------------
September 11, September 5, September 11, September 5,
2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $(58) $47 $(187) $303
Net (income) loss
attributable to
non-controlling
interests 3 - 5 (18)
Dividends on
preferred stock (2) (2) (6) (6)
-- -- -- --
Earnings (loss)
available to common
stockholders (57) 45 (188) 279
Assuming deduction
of gain recognized
for the repurchase
of 2004 Exchangeable
Senior Debentures (a) - - (2) -
--- --- -- ---
Diluted earnings (loss)
available to common
stockholders $(57) $45 $(190) $279
==== === ===== ====
Basic weighted
average shares
outstanding 606.1 519.3 568.7 520.8
Diluted weighted
average shares
outstanding (b) 606.1 519.6 570.1 521.2
Basic earnings (loss)
per share (c) $(.09) $.09 $(.33) $.53
Diluted earnings
(loss) per
share (c) (d) $(.09) $.09 $(.33) $.53
(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 Quarter ended
September 11, 2009 September 11, 2009
------------------- ------------------
Average
No. of No.
