Host Marriott Reports Results of Operations for Fourth Quarter and Full Year 2003 and Issues 2004 Guidance
BETHESDA, Md., Host Marriott Corporation
- Revenues were $1,092 million and $3,448 million for the fourth quarter and full year 2003, respectively, as compared to $1,128 million and $3,516 million for the fourth quarter and full year 2002, respectively
- Net income was $150 million and $14 million for the fourth quarter and full year 2003, respectively, as compared to a net loss of $3 million and $16 million for the fourth quarter and full year 2002, respectively. Net income for the 2003 fourth quarter includes a $24 million gain from the cumulative effect of a change in accounting principle. See the consolidated statements of operation.
- Earnings (loss) per diluted share was $.46 and $(.07) for the fourth quarter and full year 2003, respectively, as compared to a loss per diluted share of $(.04) and $(.19) for the fourth quarter and full year 2002, respectively.
- Funds from Operations (FFO) per diluted share, were $.53 and $.99 for the fourth quarter and full year 2003, respectively, as compared to FFO per diluted share of $.36 and $1.09 for the fourth quarter and full year 2002, respectively.
- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $222 million and $709 million for the fourth quarter and full year 2003, respectively, as compared to $270 million and $851 million for the fourth quarter and full year 2002, respectively.
- Quarterly and full year results for 2003 were significantly affected by several transactions, including the settlement of the insurance claims for the New York Marriott World Trade Center hotel. As a result of the settlement, the Company recorded a gain of approximately $212 million, which is comprised of $156 million in post-2003 business interruption proceeds and $56 million from the disposition of the hotel. A more detailed presentation of the transactions significantly affecting the Company's results for the 2003 fourth quarter and full year is presented in the tables included in this press release.
FFO per diluted share and Adjusted EBITDA are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
Operating Results
Comparable hotel RevPAR for the fourth quarter decreased 1.0% and comparable hotel operating profit margins declined two percentage points when compared to the fourth quarter of 2002. The Company's fourth quarter comparable hotel RevPAR decrease was the result of a slight decrease in both occupancy and average room rate. Full year 2003 comparable hotel RevPAR declined 4.2% (comprised of a 1.9% decline in average room rate and a decrease in occupancy of 1.6 percentage points), while comparable hotel operating profit margins declined three percentage points as compared to full year 2002.
Christopher J. Nassetta, president and chief executive officer, stated, "We were pleased to finish a demanding year with improving fourth quarter trends. Our comparable hotel RevPAR results have steadily improved since the second quarter, particularly for our downtown and urban properties, which had a slight overall increase in comparable hotel RevPAR in the fourth quarter. We expect further improvements to occur in 2004, as lodging demand continues to strengthen."
Balance Sheet
Primarily as a result of the uncertain operating environment in 2003, the Company focused on maximizing its liquidity and financial flexibility. As of December 31, 2003, the Company had $764 million in cash and cash equivalents and $250 million of availability under its credit facility.
During 2003, the Company completed the sale of eight non-core properties for total proceeds of approximately $190 million. These sales, combined with the insurance settlement proceeds of approximately $372 million from the New York Marriott World Trade Center Hotel and New York Financial Center Marriott, have enabled the Company to repay or redeem a total of approximately $470 million of debt in 2003 and January 2004 ($208 million in 2003 and $262 million in January 2004). The Company also completed the sale of four additional properties during January 2004 for total proceeds of approximately $80 million and expects to complete the sale of two additional properties by the end of the first quarter. Proceeds from these sales are expected to be used to repay debt, acquire new properties, or for other corporate purposes. To the extent the proceeds are used to repay debt, the Company expects to incur certain charges consisting of call premiums and accelerated deferred financing costs.
W. Edward Walter, executive vice president and chief financial officer, stated, "We aggressively managed our balance sheet in 2003, thereby reducing our overall leverage and average interest rate, as well as increasing our financial flexibility. These steps have positioned us to take advantage of opportunities that may arise in the future, including acquiring assets that fit our target profile. After the repayment of debt in January 2004, we have approximately $500 million in cash, a significant portion of which has been designated for acquisitions and investments in our existing portfolio."
2004 Outlook
The Company expects comparable hotel RevPAR for full year 2004 to increase approximately 3% to 4%, with margins relatively unchanged from 2003. Based upon this guidance, the Company estimates that for 2004 its:
- diluted loss per common share should be approximately $.14 to $.12 for the first quarter and $.35 to $.30 for the full year;
- net loss should be approximately $34 million to $28 million for the first quarter and $77 million to $63 million for the full year;
- FFO per diluted share should be approximately $.10 to $.12 for the first quarter and $.59 to $.64 for the full year (including $11 million, or $.03 per diluted share for the first quarter and $29 million, or $.09 per diluted share for the full year related to charges for call premiums and accelerated deferred financing costs for debt expected to be repaid) and
- Adjusted EBITDA should be approximately $700 million to $715 million for the full year.
Based on the taxable income generated by the New York Marriott World Trade Center hotel insurance settlement, the Company expects to be able to pay dividends on its preferred stock for the first three quarters of 2004. It is unlikely, however, that the Company will pay a meaningful dividend on its common shares in 2004. Although the Company has more than adequate liquidity, payment of the fourth quarter dividend will depend on, among other things, results of operations and limitations in the Company's senior notes indenture and credit facility. The indenture and credit facility restrict the payment of dividends when the Company's EBITDA to interest coverage ratio is below 2.0 to 1.0, except to the extent required to maintain our status as a REIT.
Mr. Nassetta noted, "We have seen a number of positive signs both in the economy and in our business. We expect to take full advantage of the recovery as the long term strength inherent in lodging industry fundamentals begins to take effect. We believe that a disciplined approach to capital allocation will continue to provide opportunities to increase shareholder value now and in the future."
Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 113 upscale and luxury hotel properties primarily operated under premium brands, such as Marriott, Ritz-Carlton, Hyatt, Four Seasons, Westin and Hilton. For further information, please visit the Company's website at
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, including the potential for additional 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; 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 SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of February 23, 2004 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 CORPORATION
Consolidated Balance Sheets(a)
(unaudited, in millions, except share amounts)
December 31,
2003 2002
ASSETS
$7,085 $7,031
Property and equipment, net 73
Assets held for sale 54 53
Notes and other receivables 62 82
Due from managers 74 133
Investments in affiliates 364 552
Other assets 116 104
Restricted cash 764 361
Cash and cash equivalents $8,592 $8,316
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt $3,180 $3,247
Senior notes 2,205 2,289
Mortgage debt 101 102
Other 5,486 5,638
108 118
Accounts payable and accrued expenses 2
Liabilities associated with assets
held for sale 166 252
Other liabilities 5,762 6,008
Total liabilities
Interest of minority partners of Host
Marriott L.P. 130 131
Interest of minority partners of
other consolidated partnerships 89 92
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; 320.3
million shares and 263.7 million
shares issued and outstanding,
respectively 3 3
Additional paid-in capital 2,617 2,100
Accumulated other comprehensive
income (loss) 28 (2)
Deficit (851) (830)
Total shareholders' equity 2,136 1,610
$8,592 $8,316
(a) Our consolidated balance sheet as of December 31, 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.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations(a)
(in millions, except per share amounts)
Quarter ended Year ended
December 31, December 31,
2003 2002 2003 2002
Revenues
Rooms $622 $650 $2,014 $2,073
Food and beverage 369 372 1,095 1,096
Other 72 75 227 246
Total hotel sales 1,063 1,097 3,336 3,415
Rental income(b) 29 31 100 101
Other income - - 12
Total revenues 1,092 1,128 3,448 3,516
Expenses
Rooms 159 160 508 508
Food and beverage 274 273 823 811
Hotel departmental expenses 290 291 934 905
Management fees 42 49 138 156
Other property-level expenses(b) 85 95 301 294
Depreciation and amortization 114 113 367 358
Corporate expenses and other expenses 21 9 61 47
Total expenses 985 990 3,132 3,079
Operating profit 107 138 316 437
Interest income 4 6 11 20
Interest expense (167) (146) (491) (462)
Net gains on property transactions 1 2 5 5
Loss on foreign currency and
derivative contracts (17) (1) (19) (2)
Minority interest income (expense) (16) 1 (5) (7)
Equity in losses of affiliates (9) (3) (22) (9)
Dividends on Convertible Preferred
Securities (10) (10) (32) (32)
Loss before income taxes (107) (13) (237) (50)
Benefit from (provision for) income
taxes 3 3 12 (4)
Loss from continuing operations (104) (10) (225) (54)
Income from discontinued operations(c) 230 7 239 38
Income (loss) before cumulative
effect of a change in accounting
principle 126 (3) 14 (16)
Cumulative effect of a change in
accounting principle(d) 24 - -
Net income (loss) 150 (3) 14 (16)
Less: dividends on preferred stock (8) (8) (35) (35)
Net income (loss) available to common
shareholders $142 $(11) $(21) $(51)
Basic and diluted earnings (loss) per
common share $0.46 $(0.04) $(0.07) $(0.19)
(a) Our consolidated statements of operations for the year ended December
31, 2003 and the quarter ended December 31, 2003 and 2002 have been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted. The 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.
(b) Rental income and expense for the quarter ended and years ended
December 31, 2003 and 2002 are as follows:
Quarter ended Year ended
December December December December
31, 31, 31, 31,
2003 2002 2003 2002
Rental income $5 $5 $25 $24
Full-service 24 26 75 77
Limited service and office buildings $29 $31 $100 $101
Rental and other expenses (included
in other property-level expenses) $2 $2 $7 $7
Full-service 24 23 74 73
Limited service and office buildings $26 $25 $81 $80
(c) Reflects the results of operations and gain (loss) on sale, net of the
related income tax, for eight properties disposed of during 2003 and
one in 2002, five properties classified as held for sale as of
December 31, 2003 and the business interruption proceeds, net of
expenses, for the New York Marriott World Trade Center hotel for 2003,
as well as the gain recorded from the settlement of insurance claims
for the hotel of approximately $212 million. This gain is comprised of
$156 million in post-2003 business interruption proceeds and $56
million from the disposition of the hotel.
(d) We adopted Statement of Financial Accounting Standards No. 150,
"Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity," or SFAS 150, as of the beginning of our
quarter ended September 12, 2003 as required by the pronouncement. On
October 8, 2003, the Financial Accounting Standards Board (FASB)
issued guidance with respect to SFAS 150 that issuers whose financial
statements include consolidated ventures with finite lives should
reflect any minority interests in such consolidated ventures as a
liability on the issuer's financial statements presented at its fair
value as of the applicable balance sheet date. Under SFAS 150, any
fluctuation in the fair value of the minority interest from period to
period would be recorded on the issuer's financial statements as
interest expense for the change in the fair value of the liability. As
a result of applying SFAS 150 in accordance with this guidance from
the FASB, we recorded a loss from a cumulative effect of a change in
accounting principle of $24 million in our third quarter Form 10-Q.
Additionally, we included minority interests with a fair value of $112
million in our liabilities as of September 12, 2003.
On November 7, 2003, the FASB issued a FASB Staff Position (FSP) 150-3
indefinitely deferring the application of a portion of SFAS 150 with
respect to minority interests in consolidated ventures entered into
prior to November 5, 2003 effectively reversing its guidance of
October 8, 2003. In accordance with FSP 150-3, we recorded a
cumulative effect of a change in accounting principle reversing the
impact of our adoption of SFAS 150 with respect to consolidated
ventures with finite lives in the fourth quarter of 2003.
HOST MARRIOTT CORPORATION
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amount)
Quarter ended Quarter ended
December 31, 2003 December 31, 2002
Income Income
(Loss) Shares Per (Loss) Shares Per
(Numer- (Denomi- Share (Numer- (Denomi- Share
ator) nator) Amount ator) nator) Amount
Net income
(loss)(a) $150 310.7 $0.48 $(3) 263.6 $(0.01)
Dividends on
preferred stock (8) - (0.02) (8) - (0.03)
Basic and diluted
earnings (loss)
available to common
shareholders per
share(b) $142 310.7 $0.46 $(11) 263.6 $(0.04)
Year ended Year ended
December 31, 2003 December 31, 2002
Income Income
(Loss) Shares Per (Loss) Shares Per
(Numer- (Denomi- Share (Numer- (Denomi- Share
ator) nator) Amount ator) nator) Amount
Net income
(loss)(a) $14 281.0 $0.05 $(16) 263.0 $(0.06)
Dividends on
preferred stock (35) - (0.12) (35) - (0.13)
Basic and diluted
earnings (loss)
available to common
shareholders per
share(b) $(21) 281.0 $(0.07) $(51) 263.0 $(0.19)
(a) Our results for the fourth quarter of 2003 and for full-year 2003 were
significantly affected by several items. For a discussion of these
items, see footnote (c) to the table reconciling net income available
to common shareholders to FFO per diluted share included in this
release.
(b) 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 potentially dilutive
securities, by the weighted average number of shares of common stock
outstanding plus other potentially 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 any securities that are anti-dilutive.
HOST MARRIOTT CORPORATION
Hotel Operational Data
Comparable Hotels by Region(a)
(unaudited)
As of December 31, 2003
No. of No. of
Properties Rooms
Pacific 22 11,526
Florida 11 7,047
Atlanta 15 6,563
Mid-Atlantic 9 6,222
South Central 9 5,700
North Central 15 5,395
DC Metro 11 4,296
Mountain 8 3,313
International 6 2,552
New England 6 2,274
All Regions 112 54,888
Quarter ended December 31, 2003
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific $143.59 65.7% $94.27
Florida 147.86 65.0 96.13
Atlanta 138.12 62.3 86.06
Mid-Atlantic 197.10 76.5 150.87
South Central 128.14 73.0 93.57
North Central 126.37 64.6 81.61
DC Metro 150.43 67.2 101.09
Mountain 105.22 56.2 59.12
International 112.38 73.4 82.46
New England 127.12 63.0 80.09
All Regions 143.38 66.9 95.86
Quarter ended December 31, 2002
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $147.41 64.5% $95.09 -0.9%
Florida 147.01 65.6 96.42 (0.3)
Atlanta 136.00 62.9 85.57 0.6
Mid-Atlantic 196.74 76.5 150.48 0.3
South Central 133.38 74.4 99.27 (5.7)
North Central 125.24 66.5 83.26 (2.0)
DC Metro 146.59 66.3 97.17 4.0
Mountain 105.98 57.0 60.43 (2.2)
International 109.67 69.3 76.01 8.5
New England 131.51 71.1 93.54 (14.4)
All Regions 143.96 67.2 96.78 (1.0)
As of December 31, 2003
No. of No. of
Properties Rooms
Pacific 22 11,526
Florida 11 7,047
Atlanta 15 6,563
Mid-Atlantic 9 6,222
South Central 9 5,700
North Central 15 5,395
DC Metro 11 4,296
Mountain 8 3,313
International 6 2,552
New England 6 2,274
All Regions 112 54,888
Year ended December 31, 2003
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific $146.12 68.0% $99.29
Florida 155.59 69.5 108.11
Atlanta 134.29 65.2 87.58
Mid-Atlantic 178.89 74.5 133.27
South Central 128.11 75.1 96.25
North Central 121.81 66.4 80.88
DC Metro 146.07 70.5 102.91
Mountain 103.61 61.9 64.16
International 110.95 67.9 75.33
New England 122.83 62.3 76.47
All Regions 140.86 68.8 96.85
Year ended December 31, 2002
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $150.77 69.3% $104.42 -4.9%
Florida 153.37 70.3 107.88 0.2
Atlanta 138.70 66.4 92.03 (4.8)
Mid-Atlantic 186.41 76.7 143.05 (6.8)
South Central 132.39 77.2 102.16 (5.8)
North Central 120.89 67.8 82.00 (1.4)
DC Metro 144.29 69.6 100.42 2.5
Mountain 107.87 64.1 69.17 (7.3)
International 110.03 71.0 78.09 (3.5)
New England 129.97 69.3 90.02 (15.1)
All Regions 143.60 70.4 101.07 (4.2)
HOST MARRIOTT CORPORATION
Hotel Operational Data
All Full-Service Hotels by Region(a)
(unaudited)
As of December 31, 2003
No. of No. of
Properties(b) Rooms(b)
Pacific 23 12,332
Florida 12 7,342
Atlanta 15 6,563
Mid-Atlantic 10 6,726
South Central 9 5,700
North Central 15 5,395
DC Metro 12 5,068
Mountain 8 3,313
International 6 2,552
New England 7 3,413
All Regions 117 58,404
Quarter ended December 31, 2003
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific $147.23 65.8% $96.82
Florida 149.12 64.4 96.08
Atlanta 138.12 62.3 86.06
Mid-Atlantic 197.99 76.4 151.34
South Central 125.93 72.6 91.38
North Central 126.37 64.6 81.61
DC Metro 153.28 68.0 104.31
Mountain 105.22 56.2 59.12
International 112.38 73.4 82.46
New England 149.34 67.1 100.27
All Regions 145.84 67.1 97.88
Quarter ended December 31, 2002
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $146.04 64.6% $94.40 2.6%
Florida 145.41 64.6 93.93 2.3
Atlanta 136.00 62.9 85.57 0.6
Mid-Atlantic 197.74 76.4 151.07 0.2
South Central 129.08 73.9 95.43 (4.2)
North Central 125.24 66.5 83.26 (2.0)
DC Metro 141.88 66.1 93.74 11.3
Mountain 105.98 57.0 60.43 (2.2)
International 109.67 69.3 76.01 8.5
New England 151.95 71.6 108.85 (7.9)
All Regions 144.15 67.3 96.97 0.9
As of December 31, 2003
No. of No. of
Properties(b) Rooms(b)
Pacific 23 12,332
Florida 12 7,342
Atlanta 15 6,563
Mid-Atlantic 10 6,726
South Central 9 5,700
North Central 15 5,395
DC Metro 12 5,068
Mountain 8 3,313
International 6 2,552
New England 7 3,413
All Regions 117 58,404
Year ended December 31, 2003
Average
Average Occupancy
Daily Rate Percentages RevPAR
Pacific $147.11 68.0% $100.02
Florida 155.97 69.0 107.56
Atlanta 134.29 65.2 87.58
Mid-Atlantic 180.11 74.3 133.85
South Central 124.93 75.0 93.76
North Central 121.81 66.4 80.88
DC Metro 145.09 71.1 103.13
Mountain 103.61 61.9 64.16
International 110.95 67.9 75.33
New England 142.32 67.5 96.11
All Regions 141.93 69.1 98.01
Year ended December 31, 2002
Average Average Percent
Daily Occupancy Change in
Rate Percentages RevPAR RevPAR
Pacific $149.43 69.3% $103.63 -3.5%
Florida 152.53 69.3 105.76 1.7
Atlanta 138.70 66.4 92.03 (4.8)
Mid-Atlantic 186.47 76.5 142.70 (6.2)
South Central 128.47 76.5 98.32 (4.6)
North Central 120.89 67.8 82.00 (1.4)
DC Metro 139.70 69.9 97.59 5.7
Mountain 107.87 64.1 69.17 (7.2)
International 110.03 71.0 78.09 (3.5)
New England 142.27 70.0 99.65 (3.6)
All Regions 143.19 70.4 100.74 (2.7)
(a) See the introductory notes to financial information for a discussion
of reporting periods and comparable hotel results.
(b) The number of properties and the room count reflect all consolidated
properties as of December 31, 2003. However, the operating statistics
include the results of operations for the nine properties sold in 2003
and 2002 prior to their disposition and the results of operations of
properties acquired subsequent to the date of their acquisition.
HOST MARRIOTT CORPORATION
Hotel Operational Data
Schedule of Comparable
Hotel Results (a)
(unaudited, in millions, except per share amounts)
Quarter ended Year ended
December 31, December 31,
2003 2002 2003 2002
Number of hotels 112 112 112 112
Number of rooms 54,888 54,888 54,888 54,888
Percent change in Comparable Hotel
RevPAR -1.0% -4.2%
Operating profit margin under
GAAP(b) 9.8% 12.2% 9.2% 12.4%
Comparable hotel adjusted
operating profit margin(c) 21.7% 23.7% 21.6% 24.6%
Comparable hotel sales
Room $599 $635 $1,937 $2,052
Food and beverage 360 367 1,061 1,091
Other 68 77 224 250
Comparable hotel sales(d) 1,027 1,079 3,222 3,393
Comparable hotel expenses
Room 154 158 490 502
Food and beverage 265 268 791 798
Other 43 44 137 142
Management fees, ground rent and
other costs 342 353 1,109 1,117
Comparable hotel expenses(e) 804 823 2,527 2,559
Comparable Hotel Adjusted Operating
Profit 223 256 695 834
Non-comparable hotel results, net(f) 21 4 43 13
Comparable hotels classified as held
for sale(g) (2) (3) (7) (9)
Office building and limited service
properties, net(h) - 3 1 4
Other income - - 12
Depreciation and amortization (114) (113) (367) (358)
Corporate and other expenses (21) (9) (61) (47)
Operating Profit $107 $138 $316 $437
(a) See the introductory notes to the financial information for discussion
of non-GAAP measures, reporting periods and comparable hotel results.
(b) Operating profit margin under GAAP is calculated as the operating
profit divided by the total revenues per the consolidated statements
of operations.
(c) Comparable hotel adjusted operating profit margin is calculated as the
comparable hotel adjusted operating profit divided by the comparable
hotel sales per the 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 ended
December 31, December 31,
2003 2002 2003 2002
Revenues per the consolidated
statements of operations $1,092 $1,128 $3,448 $3,516
Revenues of hotels held for sale 13 14 42 44
Non-comparable hotel sales (80) (70) (221) (172)
Hotel sales for the property for
which we record rental income, net 15 15 46 45
Rental income for office buildings
and limited service hotels (24) (26) (75) (77)
Other income - - (12)
Adjustment for hotel sales for
comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels 11 18 (6) 37
Comparable hotel sales $1,027 $1,079 $3,222 $3,393
(e) The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows (in
millions):
Quarter ended Year Ended
December 31, December 31,
2003 2002 2003 2002
Operating costs and expenses per
the consolidated statements
of operations $985 $990 $3,132 $3,079
Operating costs of hotels held
for sale 11 11 35 35
Non-comparable hotel expenses (57) (61) (183) (155)
Hotel expenses for the property
for which we record rental income 14 13 50 48
Rent expense for office buildings
and limited service hotels (24) (23) (74) (73)
Adjustment for hotel expenses for
comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels 10 15 (5) 30
Depreciation and amortization (114) (113) (367) (358)
Corporate and other expenses (21) (9) (61) (47)
Comparable hotel expenses $804 $823 $2,527 $2,559
(f) Non-comparable hotel results, net includes the following items: (i)
the results of operations of our non-comparable hotels whose
operations are included in our consolidated statement of operations as
continuing operations, (ii) for full year 2003 and 2002 results, the
difference between comparable hotel adjusted operating profit which
reflects 364 and 371 days, respectively, of operations and the
operating results included in the consolidated statements of
operations which reflects 365 days and (iii) for fourth quarter of
2003 and 2002 results, the difference between 112 and 119 days,
respectively, of operations versus 110 and 116 days, respectively, in
the statements of operations.
(g) Included in our comparable hotel results are five hotels that are
classified as held for sale as of December 31, 2003 per the
requirements of SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets." Because the hotels are classified as held for
sale, their operating results are not included in the revenues or
operating costs and expenses from continuing operations, but are
instead included in discontinued operations. We continue to include
them as comparable hotels, however, because the operating results for
these properties were reported by us throughout the entire reporting
periods being compared.
(h) Represents rental income less rental expense for limited service
properties and office buildings. For detail, see footnote (b) to the
statements of operations.
HOST MARRIOTT CORPORATION
Other Financial Data
(unaudited, in millions, except per share)
December 31
2003 2002
Equity
Common shares outstanding 320.3 263.7
Common shares and minority held
common OP Units outstanding 343.8 291.5
Preferred OP Units outstanding 0.02 0.02
Class A Preferred shares outstanding 4.1 4.1
Class B Preferred shares outstanding 4.0 4.0
Class C Preferred shares outstanding 6.0 6.0
Class D Preferred shares outstanding 0.3
Security pricing (per share price)
Common(a) $ 12.32 $ 8.86
Class A Preferred(a) $ 26.74 $ 26.15
Class B Preferred(a) $ 27.00 $ 25.65
Class C Preferred(a) $ 27.26 $ 25.70
Convertible Preferred Securities(b) $ 51.00 $ 36.94
Dividends per share
Common(c) $ - $
Class A Preferred $ 2.50 $ 2.50
Class B Preferred $ 2.50 $ 2.50
Class C Preferred $ 2.50 $ 2.50
Class D Preferred $ 1.88 $
Debt
Percentage of fixed rate debt 85% 90%
Weighted average interest rate(d) 7.7% 7.9%
Weighted average debt maturity(d) 5.5 years 5.5 years
Credit facility, outstanding balance
(capacity of $250 million) $ - $
Other Financial Data
Construction in progress $ 56 $ 39
(a) Share prices are the closing price on the balance sheet date, as
reported by the New York Stock Exchange, for the common and preferred
stock.
(b) Market price as of December 31, 2003 as quoted by Bloomberg L.P.
(c) We did not declare a common stock dividend during 2003 or 2002.
(d) As a result of debt repayments of approximately $262 million during
January 2004, our weighted average interest rate has been reduced to
7.4% and our weighted average maturity is 5.6 years.
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
December 31, 2003 December 31, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) available to
common shareholders $142 310.7 $0.46 $(11) 263.6 $(0.04)
Adjustments:
Cumulative effect of change
in accounting principle (24) - (0.08) - -
Gain on the disposition of
the New York Marriott World
Trade Center hotel (56) - (0.18) - -
Gains on dispositions, net (9) - (0.03) - -
Depreciation and amortization 114 - 0.37 115 - 0.43
Partnership adjustments 21 - 0.07 2 - 0.01
FFO of minority partners of
Host LP(a) (14) - (0.05) (10) - (0.03)
Adjustments for dilutive
securities:
Assuming distribution of
common shares granted under
the comprehensive stock plan
less shares assumed purchased
at average market price - 3.9 (0.01) - 4.0 (0.01)
Assuming conversion of
Convertible Preferred
Securities 10 30.9 (0.02) 10 30.9
Assuming conversion of
minority OP Units issuable - 2.0 - - -
FFO per diluted share(b)(c) $184 347.5 $0.53 $106 298.5 $0.36
Year ended Year ended
December 31, 2003 December 31, 2002
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) available
to common shareholders $(21) 281.0 $(0.07) $(51) 263.0 $(0.19)
Adjustments:
Gain on the disposition of
the New York Marriott World
Trade Center hotel (56) - (0.20) - -
Gain on dispositions, net (9) - (0.04) (13) - -0.05
Depreciation and amortization 371 - 1.32 366 - 1.39
Partnership adjustments 24 - 0.08 20 - 0.07
FFO of minority partners of
Host LP(a) (26) - (0.09) (30) - -0.11
Adjustments for dilutive
securities:
Assuming distribution of
common shares granted under
the comprehensive stock plan
less shares assumed purchased
at average market price - 3.5 (0.01) - 4.0 -0.02
Assuming conversion of
Convertible Preferred
Securities - - - 32 30.9
FFO per diluted share(b)(c) $283 284.5 $0.99 $324 297.9 $1.09
(a) Represents FFO attributable to the minority interest in Host LP.
(b) 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.
(c) Quarterly and full year results were significantly affected by several
transactions, the effect of which is shown in the table below:
Quarter ended Year ended
December 31, 2003 December 31, 2003
Net Adjusted Net Adjusted
Income EBITDA Income EBITDA
(Loss) FFO (Loss) FFO
World Trade Center
insurance gain(1) $212 $156 $ - $212 $156 $
Senior notes
redemptions(2) (33) (33) - (35) (35)
Loss on foreign
currency forward
contracts(3) (17) (17) (17) (18) (18) (18)
Directors' and
officers' insurance
settlement(4) - - - 7 7 10
Minority interest
(expense) benefit(5) (14) (8) - (14) (9)
(1) As a result of the New York Marriott World Trade Center hotel
insurance settlement in the fourth quarter of 2003, we recorded a
gain of approximately $212 million, which is comprised of $156
million in post-2003 business interruption proceeds and $56
million from the disposition of the hotel. See the previous
discussion of non-GAAP financial measures, which describes why we
exclude the $56 million gain from FFO per diluted share and
Adjusted EBITDA. For these reasons, we have also excluded the $156
million gain on settlement for business interruption insurance
proceeds for the periods subsequent to December 31, 2003 from
Adjusted EBITDA. These business interruption proceeds, because
they relate to future periods for a hotel that, even if rebuilt
would be in a different location and would be significantly
different from the prior hotel, are not consistent with reflecting
the ongoing performance of our remaining assets.
(2) In conjunction with the redemption of $711 million of our senior
notes in the fourth quarter of 2003, we incurred a total of
approximately $28 million of expense related to the call premiums
paid and the acceleration of related deferred financing fees. We
also incurred approximately $5 million of incremental interest
expense during the redemption call period. In addition, we
incurred approximately $2.3 million of call premiums and
accelerated deferred financing fees related to a $71 million
senior notes redemption in the third quarter of 2003.
(3) In the fourth quarter of 2003, we made a partial repayment of the
Canadian mortgage debt, which resulted in the related forward
currency contracts hedge being deemed ineffective for accounting
purposes. Accordingly, the company recorded an approximate $17
million decrease in net income, FFO and Adjusted EBITDA in the
fourth quarter in addition to the approximate $1 million recorded
in the first three quarters of 2003.
(4) Represents approximately $9.6 million of other income in the third
quarter of 2003 from the settlement of a claim that we brought
against our directors' and officers' insurance carriers for
reimbursement of defense costs and settlement payments incurred in
resolving a series of related actions brought against us and
Marriott International that arose from the sale of certain limited
partnership units to investors prior to 1993. The settlement
amount, net of taxes of approximately $2.4 million, totaled $7.2
million.
(5) Represents the portion of the above listed amounts attributable to
the minority partners in Host LP.
HOST MARRIOTT CORPORATION
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended Year ended
December 31, December 31,
2003 2002 2003 2002
Net income (loss)(a) $150 $(3) $14 $(16)
Interest expense 167 146 491 462
Dividends on Convertible Preferred
Securities 10 10 32 32
Depreciation and amortization 114 113 367 358
Income taxes (3) (3) (12) 4
Discontinued operations(b) 5 8 16 20
EBITDA(c) 443 271 908 860
Gains and losses on dispositions and
related debt extinguishments (11) (2) (13) (18)
Gain on settlement of the New York
Marriott World Trade Center hotel
for post-2003 business interruption
insurance(a) (156) - (156)
Gain on the disposition of the New
York Marriott World Trade Center
hotel(a) (56) - (56)
Impairment of assets held for sale 2 - 2
Consolidated partnership adjustments:
Minority interest (income) expense 16 (1) 5 7
Distributions to minority interest
partners of Host LP and other
minority partners (1) (4) (6) (13)
Equity investment adjustments:
Equity in losses of affiliates 9 3 22 9
Distributions received from equity
investments - 3 3 6
Cumulative effect of a change in
accounting principle(d) (24) - -
Adjusted EBITDA(a)(c) $222 $270 $709 $851
(a) Our results for the fourth quarter and full-year 2003 were
significantly affected by several items. For a discussion of these
items, see footnote (c) to the table reconciling net income available
to common shareholders to FFO per diluted share included in this
release.
(b) Reflects the interest expense, depreciation and amortization and
income taxes included in discontinued operations.
(c) See the introductory notes to the financial information for discussion
of non-GAAP measures.
(d) For detail, see footnote (d) to the statements of operations.
HOST MARRIOTT CORPORATION
Reconciliation of Net Loss Available to Common Shareholders to Funds
From Operations per Diluted Share for Full Year 2004 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available
to common shareholders $ (112) 322.1 $ (.35)
Adjustments:
Depreciation and amortization 360 - 1.12
Gain on dispositions, net (58) - (.18)
Partnership adjustments 20 - .06
FFO of minority partners
of Host LP(b) (17) - (.05)
Adjustment for
dilutive securities:(c)
Assuming distribution
of common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.9 (.01)
FFO per diluted share(a)(d) $ 193 325.0 $ .59
High-end of Range
Full Year 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available
to common shareholders $ (98) 322.1 $ (.30)
Adjustments:
Depreciation and amortization 360 - 1.12
Gain on dispositions, net (58) - (.18)
Partnership adjustments 21 - .07
FFO of minority partners
of Host LP(b) (18) - (.06)
Adjustment for
dilutive securities:(c)
Assuming distribution
of common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.9 (.01)
FFO per diluted share(a)(d) $ 207 325.0 $ .64
See the notes following the table reconciling net loss to EBITDA and Adjusted EBITDA for full year 2004 forecasts.
HOST MARRIOTT CORPORATION
Reconciliation of Net Loss Available to Common Shareholders to Funds
From Operations per Diluted Share for First Quarter 2004 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
First Quarter 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available
to common shareholders $ (43) 320.3 $ (.14)
Adjustments:
Depreciation and amortization 83 - .26
Partnership adjustments (5) - (.01)
FFO of minority partners
of Host LP(b) (3) - (.01)
Adjustment for
dilutive securities:(c)
Assuming distribution of
common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.5
FFO per diluted share(a)(d) $ 32 322.8 $ .10
High-end of Range
First Quarter 2004 Forecast
Per Share
Income (Loss) Shares Amount
Forecast net loss available
to common shareholders $ (37) 320.3 $ (.12)
Adjustments:
Depreciation and amortization 83 - .26
Partnership adjustments (4) - (.01)
FFO of minority partners
of Host LP(b) (3) - (.01)
Adjustment for
dilutive securities:(c)
Assuming distribution
of common shares granted
under the comprehensive
stock plan less shares
assumed purchased at
average market price - 2.5
FFO per diluted share(a)(d) $ 39 322.8 $ .12
See the notes following the table reconciling net loss to EBITDA and Adjusted EBITDA for full year 2004 forecasts.