Host Marriott Reports Results of Operations for Second Quarter 2004
BETHESDA, Md. | 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 2004. Second quarter results include the following:
BETHESDA, Md. | 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 2004. Second quarter results include the following:
- Total revenue was $927 million and $1,730 million for the second quarter and year-to-date 2004, respectively, compared to $828 million and $1,597 million for the second quarter and year-to-date 2003, respectively.
- Net income (loss) was $17 million and $(14) million for the second quarter and year-to-date 2004, respectively, as compared to $(14) million and $(48) million for the second quarter and year-to-date 2003, respectively.
- Earnings (loss) per diluted share was $.02 and $(.10) for the second quarter and year-to-date 2004, respectively, compared to $(.09) and $(.25) for the second quarter and year-to-date 2003, respectively.
- Funds from Operations (FFO) per diluted share was $.21 and $.34 for the second quarter and year-to-date 2004, respectively, compared to $.22 and $.37 for the second quarter and year-to-date 2003, respectively.
- Results of operations for the second quarter and year-to-date 2004 include approximately $30 million and $42 million, respectively, of charges for call premiums and the acceleration of deferred financing costs for prepayment of debt. For the second quarter and year-to-date 2004, this represents approximately $.09 and $.13 of earnings and FFO per diluted share, respectively.
- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $218 million and $390 million for the second quarter and year-to-date 2004, respectively, compared to $193 million and $365 million for the same periods in 2003, respectively.
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.
Comparable hotel RevPAR for the second quarter increased 8.8% as compared to the second quarter of 2003, driven by an increase in occupancy of 5.3 percentage points and a 1.1% increase in average room rate. Comparable hotel adjusted operating profit margins for the second quarter increased 60 basis points. Year-to-date, comparable hotel RevPAR increased 6.0% and comparable hotel adjusted operating profit margins increased 10 basis points.
Christopher J. Nassetta, president and chief executive officer, stated, "Strengthening demand has accelerated our RevPAR growth, leading to earnings results which exceeded our expectations. Our leading indicators continue to suggest we are in the early stages of a strong recovery, and that we should continue to see positive results throughout the remainder of the year and into 2005."
Financing Transactions and Balance Sheet
During the second quarter, the Company completed several financing transactions, including:
* the redemption of $559 million of 7 7/8% Series B senior notes with the
proceeds from the first quarter issuance of 3.25% exchangeable senior
debentures, asset sales and available cash. As a result of these
redemptions, the Company recorded a charge for call premiums and the
acceleration of deferred financing costs totaling approximately $30
million in the quarter.
* the issuance of 4 million shares of 8 7/8% Class E redeemable preferred
stock for net proceeds of approximately $97 million. These proceeds,
along with available cash, will be used to redeem all 4.16 million
shares of the 10% Class A preferred stock on August 3, 2004 for
approximately $104 million.
* the issuance of 25 million shares of common stock for net proceeds to
the Company of approximately $301 million, which, along with available
cash, were used to acquire the Fairmont Kea Lani Maui on July 15, 2004
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A F HOST MARRIOTT CORPORATION LOGO HOST MARRIOTT CORPORATION LOGO Host Marriott Corporation logo. (PRNewsFoto)[RV] BETHESDA, MD USA 03/24/2004
Jul 21, 2004 06:00 ET
Host Marriott Reports Results of Operations for Second Quarter 2004
BETHESDA, Md., July 21 /PRNewswire-FirstCall/ -- 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 2004. Second quarter results include the following:
(Logo: http://www.newscom.com/cgi-bin/prnh/20040324/HOSTMARRIOTTLOGO )
* Total revenue was $927 million and $1,730 million for the second
quarter and year-to-date 2004, respectively, compared to $828 million
and $1,597 million for the second quarter and year-to-date 2003,
respectively.
* Net income (loss) was $17 million and $(14) million for the second
quarter and year-to-date 2004, respectively, as compared to $(14)
million and $(48) million for the second quarter and year-to-date 2003,
respectively.
* Earnings (loss) per diluted share was $.02 and $(.10) for the second
quarter and year-to-date 2004, respectively, compared to $(.09) and
$(.25) for the second quarter and year-to-date 2003, respectively.
* Funds from Operations (FFO) per diluted share was $.21 and $.34 for the
second quarter and year-to-date 2004, respectively, compared to $.22
and $.37 for the second quarter and year-to-date 2003, respectively.
* Results of operations for the second quarter and year-to-date 2004
include approximately $30 million and $42 million, respectively, of
charges for call premiums and the acceleration of deferred financing
costs for prepayment of debt. For the second quarter and year-to-date
2004, this represents approximately $.09 and $.13 of earnings and FFO
per diluted share, respectively.
* Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items, was $218 million and
$390 million for the second quarter and year-to-date 2004,
respectively, compared to $193 million and $365 million for the same
periods in 2003, respectively.
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.
Comparable hotel RevPAR for the second quarter increased 8.8% as compared to the second quarter of 2003, driven by an increase in occupancy of 5.3 percentage points and a 1.1% increase in average room rate. Comparable hotel adjusted operating profit margins for the second quarter increased 60 basis points. Year-to-date, comparable hotel RevPAR increased 6.0% and comparable hotel adjusted operating profit margins increased 10 basis points.
Christopher J. Nassetta, president and chief executive officer, stated, "Strengthening demand has accelerated our RevPAR growth, leading to earnings results which exceeded our expectations. Our leading indicators continue to suggest we are in the early stages of a strong recovery, and that we should continue to see positive results throughout the remainder of the year and into 2005."
Financing Transactions and Balance Sheet
During the second quarter, the Company completed several financing transactions, including:
* the redemption of $559 million of 7 7/8% Series B senior notes with the
proceeds from the first quarter issuance of 3.25% exchangeable senior
debentures, asset sales and available cash. As a result of these
redemptions, the Company recorded a charge for call premiums and the
acceleration of deferred financing costs totaling approximately $30
million in the quarter.
* the issuance of 4 million shares of 8 7/8% Class E redeemable preferred
stock for net proceeds of approximately $97 million. These proceeds,
along with available cash, will be used to redeem all 4.16 million
shares of the 10% Class A preferred stock on August 3, 2004 for
approximately $104 million.
* the issuance of 25 million shares of common stock for net proceeds to
the Company of approximately $301 million, which, along with available
cash, were used to acquire the Fairmont Kea Lani Maui on July 15, 2004.
As of June 18, 2004, the Company had $771 million of cash and cash equivalents and $250 million of availability under its credit facility. After taking into consideration the acquisition of Fairmont Kea Lani and the redemption of the Class A preferred stock, the Company will have a cash balance of approximately $300 million.
W. Edward Walter, executive vice president and chief financial officer, stated, "Our efforts to strengthen our balance sheet through debt reduction and refinancing, along with the strategic deployment of our capital, have positioned us well to take advantage of opportunities in the lodging market. We will continue to look at opportunities in the capital markets that will increase our flexibility and lower our financing costs."
Acquisitions and Dispositions
On July 15, 2004, the Company acquired the 450-suite Fairmont Kea Lani Maui, a premier luxury resort hotel located on 21 acres of Wailea's Polo Beach for $355 million. The Company also completed the sale of the Dallas/Fort Worth Marriott for $59 million in the second quarter.
James F. Risoleo, executive vice president, acquisitions and development stated, "We are pleased with the acquisition of the Fairmont Kea Lani Maui. In addition to expanding our portfolio of resorts, this hotel benefits from extremely high barriers to entry for new supply and represents the Company's first Fairmont-branded hotel. It will be the Company's second property in Hawaii, a market that we believe should continue to perform well. We are continuing to pursue additional acquisitions that are consistent with our target profile of upscale and luxury properties in markets with significant barriers to entry, while seeking to dispose of non-core assets to recycle our capital and build on our truly unmatched portfolio of properties."
2004 Outlook
The Company expects comparable hotel RevPAR for the third quarter of 2004 and full year 2004 to increase approximately 6.0% to 8.0% and 5.5% to 7.0%, respectively. This reflects an increase from the Company's 2004 RevPAR guidance issued on April 28, 2004. Based upon this revised guidance, the Company estimates that for 2004 its:
* diluted loss per common share should be approximately $.13 to $.11 for
the third quarter and $.24 to $.17 for the full year;
* net loss should be approximately $32 million to $24 million for the
third quarter and $38 million to $17 million for the full year;
* FFO per diluted share should be approximately $.09 to $.11 for the
third quarter and $.70 to $.76 for the full year (including
approximately $5 million, or $.01 per diluted share, for the quarter,
and approximately $51 million, or $.15 per diluted share, for the full
year related to charges for call premiums and the acceleration of
deferred financing costs for debt repaid or expected to be repaid and
the redemption of the Class A preferred stock); and
* Adjusted EBITDA should be approximately $760 million to $785 million
for the full year.
The Company indicated that it will continue to pay its quarterly dividends on its preferred stock. In addition, the Company expects to pay a $.04 to $.06 per share dividend on its common stock in the fourth quarter of 2004, representing the final distribution of 2003 taxable income. Assuming continued improvement in operations in 2005 and a corresponding growth in taxable income, the Company intends to reinstate a quarterly dividend on its common stock in the $.04 to $.06 per share range beginning with the first quarter of 2005, which will be payable on or about April 15, 2005. Assuming further continued improvement in the Company's operations, the Company believes its taxable income and hence its common dividend has the potential to grow substantially in subsequent years.
Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 112 upscale and luxury hotel properties primarily operated under premium brands, such as Marriott, Ritz-Carlton, Hyatt, Four Seasons, Fairmont, Hilton and Westin. For further information, please visit the Company's website at http://www.hostmarriott.com/.
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," "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 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 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 20, 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)
June 18, December 31,
2004 2003
ASSETS
Property and equipment, net $7,031 $7,085
Assets held for sale - 73
Notes and other receivables 54 54
Due from managers 92 62
Investments in affiliates(b) 83 74
Deferred financing costs, net 75 82
Furniture, fixture and
equipment replacement fund 156 144
Other 152 138
Restricted cash 124 116
Cash and cash equivalents(c) 771 764
Total assets $8,538 $8,592
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Senior notes, including $490 million, net
of discount, of Exchangeable
Senior Debentures at June 18, 2004 $2,884 $3,180
Mortgage debt 2,094 2,205
Convertible Subordinated Debentures(b) 492 -
Other 99 101
Total debt 5,569 5,486
Accounts payable and accrued expenses 93 108
Liabilities associated with assets
held for sale - 2
Other 161 166
Total liabilities 5,823 5,762
Interest of minority partners of
Host Marriott L.P. 133 130
Interest of minority partners of
other consolidated partnerships 88 89
Company-obligated mandatorily redeemable
convertible preferred securities of a
subsidiary whose sole assets are convertible
subordinated debentures due 2026
("Convertible Preferred Securities")(b) - 475
Shareholders' equity
Cumulative redeemable preferred stock
(liquidation preference $453.5
million), 50 million shares
authorized; 18.1 million shares
issued and outstanding(c) 436 339
Common stock, par value $.01, 750
million shares authorized; 347.0
million shares and 320.3 million
shares issued and outstanding,
respectively 4 3
Additional paid-in capital 2,914 2,617
Accumulated other comprehensive income 24 28
Deficit (884) (851)
Total shareholders' equity 2,494 2,136
Total liabilities and
shareholders' equity $8,538 $8,592
(a) Our consolidated balance sheet as of June 18, 2004 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 our Annual Report on Form 10-K and as amended from
time to time in other filings with the SEC.
(b) We adopted Financial Interpretation No. 46 "Consolidation of Variable
Interest Entities" (FIN 46) in 2003. Under FIN 46, our limited purpose
trust subsidiary that was formed to issue trust-preferred securities
(the Convertible Preferred Securities Trust) was accounted for on a
consolidated basis as of December 31, 2003 since we were the primary
beneficiary under FIN 46.
In December 2003, the FASB issued a revision to FIN 46, which we refer
to as FIN 46R. Under FIN 46R, we are not the primary beneficiary and
we are required to deconsolidate the accounts of the Convertible
Preferred Securities Trust. We adopted the provisions of FIN 46R on
January 1, 2004. As a result, we recorded the $492 million in
debentures (the Convertible Subordinated Debentures) issued by the
Convertible Preferred Securities Trust and eliminated the $475 million
of Convertible Preferred Securities that were previously classified in
the mezzanine section of our consolidated balance sheet prior to
January 1, 2004. The difference of $17 million is our investment in
the Convertible Preferred Securities Trust, which is included in
"Investments in affiliates" on our consolidated balance sheet.
Additionally, we classified the related dividend payment of
approximately $15 million as interest expense. The adoption of FIN
46R had no effect on our net loss, loss per diluted share or financial
covenants under our senior notes indentures.
(c) On July 1, 2004, we called for the redemption of all of the
outstanding 10% Class A Cumulative Redeemable Preferred Stock. The
Class A preferred stock will be redeemed on August 3, 2004 at a
redemption price of $25.00 per share plus accrued dividends to the
redemption date.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations(a)
(unaudited, in millions, except per share amounts)
Quarter ended Year-to-date ended
June 18, June 20, June 18, June 20,
2004 2003 2004 2003
Revenues
Rooms $ 544 $ 482 $1,013 $ 930
Food and beverage 300 267 554 507
Other 59 55 110 107
Total hotel sales 903 804 1,677 1,544
Rental income(b) 24 24 53 51
Other income - - - 2
Total revenues 927 828 1,730 1,597
Expenses
Rooms 132 116 249 226
Food and beverage 215 192 404 371
Hotel departmental expenses 241 217 456 421
Management fees 39 35 71 67
Other property-level expenses(b) 71 76 140 145
Depreciation and amortization 83 81 165 165
Corporate expenses 12 12 25 25
Total expenses 793 729 1,510 1,420
Operating profit 134 99 220 177
Interest income 2 2 5 5
Interest expense, including interest
expense for the Convertible
Subordinated Debentures in 2004(c) (130) (107) (248) (216)
Net gains on property transactions 4 2 5 3
Loss on foreign currency and
derivative contracts - (1) - (2)
Minority interest income (expense) 1 1 (2) 2
Equity in losses of affiliates (3) (3) (8) (9)
Dividends on Convertible Preferred
Securities(c) - (8) - (15)
Income (loss) before income taxes 8 (15) (28) (55)
Provision for income taxes (11) (6) (8) (2)
Loss from continuing operations (3) (21) (36) (57)
Income from discontinued operations(d) 20 7 22 9
Net income (loss) 17 (14) (14) (48)
Less: dividends on preferred stock (10) (9) (19) (18)
Net income (loss) available to
common shareholders $ 7 $ (23) $ (33) $ (66)
Basic and diluted earnings (loss)
per common share $ 0.02 $(0.09) $(0.10) $(0.25)
(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. 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 and as amended from time to time in other filings with the SEC.
(b) Rental income and expense are as follows:
Quarter ended Year-to-date ended
June 18, June 20, June 18, June 20,
2004 2003 2004 2003
Rental income $ 7 $ 7 $ 18 $ 17
Full-service 17 17 35 34
Limited service and
office buildings $ 24 $ 24 $ 53 $ 51
Rental and other expenses
(included in other
property-level expenses) $ 2 $ 2 $ 3 $ 3
Full-service 18 17 36 33
Limited service and
office buildings $ 20 $ 19 $ 39 $ 36
(c) See discussion of FIN 46R in footnote (b) to the consolidated balance
sheet. Interest expense also includes approximately $30 million and
$42 million for the payment of call premiums and the acceleration of
deferred financing costs on debt redemptions and repayments for the
second quarter and year-to-date 2004, respectively.
(d) Reflects the results of operations and gain (loss) on sale, net of the
related income tax, for seven properties sold in 2004 and eight
properties sold in 2003.
HOST MARRIOTT CORPORATION
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
June 18, 2004 June 20, 2003
Income
Income Per (loss) Per
(loss) Shares Share (Numer-) Shares Share
(Numerator) (Denominator) Amount (ator) (Denominator) Amount
Net income
(loss) $ 17 323.1 $ 0.05 $ (14) 264.7 $ (0.05)
Dividends on
preferred
stock (10) - (0.03) (9) - (0.04)
Basic and diluted
earnings (loss)
available to
common
shareholders
per share (a) $ 7 323.1 $ 0.02 $ (23) 264.7 $ (0.09)
Year-to-date ended Year-to-date ended
June 18, 2004 June 20, 2003
Income
Income Per (loss) Per
(loss) Shares Share (Numer-) Shares Share
(Numerator) (Denominator) Amount (ator) (Denominator) Amount
Net loss $ (14) 322.0 $ (0.04) $ (48) 264.5 $ (0.18)
Dividends on
preferred
stock (19) - (0.06) (18) - (0.07)
Basic and diluted
loss available
to common
shareholders
per share (a) $ (33) 322.0 $ (0.10) $ (66) 264.5 $ (0.25)
(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 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 Subordinated
Debentures. No effect is shown for any securities that are anti-
dilutive.