Host Hotels & Resorts Reports Strong Results of Operations for First Quarter 2006
BETHESDA, Md. -- Host Hotels & Resorts, Inc. (NYSE: HST - News), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the first quarter ended March 24, 2006. First quarter results include the following:
- Total revenue increased 7.3% to $848 million for the first quarter of 2006.
- Net income increased $166 million to $172 million for the first quarter of 2006. Earnings per diluted share increased $.45 to $.44 for the first quarter.
- For the first quarter of 2006, net income includes $146 million, or $.39 per diluted share, from gains on hotel dispositions. By comparison, for the first quarter of 2005, net income includes a net loss of $1 million from costs associated with the refinancing of senior notes and gains on hotel dispositions. For further detail, refer to the "Schedule of Significant Transactions Affecting Earnings per Share and Funds From Operations per Diluted Share" attached to this press release.
- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, increased 9.4% to $210 million for the first quarter of 2006. (Adjusted EBITDA has been reduced by $2 million for the first quarter of 2006 for distributions to minority interest partners of Host Hotels & Resorts, L.P.)
- Funds from Operations (FFO) per diluted share increased 42% to $.27 for the first quarter of 2006. FFO per diluted share was reduced by $.04 for the first quarter of 2005 for costs associated with the refinancing of senior notes.
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 (based on 98 of our 103 full-service hotels as of March 24, 2006) for the first quarter of 2006 increased 7.6% and comparable hotel adjusted operating profit margins increased 2.2 percentage points when compared to the first quarter of 2005. The first quarter increases were driven by a 7.7% increase in average room rate, while occupancy remained stable, with a decline of only 0.1 percentage points. Based on a March 31 calendar quarter end, our comparable hotel RevPAR increased 8.8% over the first quarter of 2005. The first quarter comparable hotel RevPAR was negatively affected by approximately one percentage point as a result of the significant renovation at the JW Marriott Hotel in Washington, D.C.
Christopher J. Nassetta, president and chief executive officer, stated, "The outstanding operating results we accomplished in 2005 continued through the first quarter of 2006, as our RevPAR and operating margin growth led to a strong first quarter FFO per diluted share of $.27, exceeding the high-end of our expectations by $.02 per diluted share."
Starwood Acquisition
On April 10, 2006, the Company completed the acquisition of 28 hotels from Starwood Hotels and Resorts Worldwide, Inc. ("Starwood") for approximately $3.1 billion. The closing of the remaining seven international hotels to be acquired from Starwood (two in Fiji and five in Europe) has been deferred as a result of certain notice periods and approvals that have not yet lapsed or been received.
On March 24, 2006, the Company entered into a joint venture in Europe with Stichting Pensioenfonds ABP and Jasmine Hotels Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd. The Company expects the joint venture will acquire four of the European hotels previously deferred from Starwood on May 3, 2006. The Sheraton Warsaw Hotel & Towers, which was acquired as part of the April 10, 2006 closing, will be contributed by the Company along with approximately $15 million in cash in exchange for an approximate 32% equity investment in the joint venture. The joint venture also is expected to acquire the Westin Europa & Regina in Venice, Italy. The total consideration for the six hotels will be approximately $621 million.
Balance Sheet
As of March 24, 2006, the Company had $481 million of cash and cash equivalents. The Company currently has $575 million of availability under its credit facility.
Subsequent to quarter end, the Company issued $800 million of 6 3/4% Series P senior notes due in 2016 for net proceeds of approximately $787 million, which were used, or will be used, to fund a portion of the Starwood acquisition, redeem the remaining $136 million of 7 7/8% Series B senior notes, redeem all of the $150 million 10% Class C preferred stock and other general corporate purposes. In addition, subsequent to quarter end, the Company has received approximately $420 million in net proceeds from the sale of The Drake, New York, funded approximately $750 million of cash, including certain transaction expenses and net of certain cash acquired from Starwood, in the first phase of the Starwood acquisition and paid approximately $60 million in common and preferred dividends. Upon the completion of these transactions, the Company will have approximately $590 million of available cash, $115 million of which we expect to use to purchase the two deferred hotels in Fiji from Starwood and to fund the Company's cash investment in the European joint venture.
During December of 2005 and the first quarter of 2006, the Company completed the conversion of $473 million of Convertible Subordinated Debentures into approximately 30.8 million common shares. On April 5, 2006, the Company redeemed the remaining $2 million of Convertible Subordinated Debentures for cash.
W. Edward Walter, executive vice president, chief financial officer, stated, "The combination of strong operating results, reduced interest costs, and our approach to financing the Starwood transaction, which included an equity issuance, asset sales and the formation of a joint venture, has resulted in significant improvements to our balance sheet. As a result, when evaluated on the basis of our interest coverage ratio, we have the strongest balance sheet in the history of our company."
Other Acquisitions and Dispositions
During the first quarter of 2006, the Company disposed of four hotels, including the Fort Lauderdale Marina Marriott, for net proceeds of approximately $250 million and a combined gain on the sales of approximately $150 million. The Company also completed the sale of The Drake, New York on March 31, 2006 and received net proceeds of approximately $420 million and will recognize a gain of approximately $235 million in the second quarter. The proceeds from these sales were used to fund a portion of the Starwood acquisition.
James F. Risoleo, executive vice president, chief investment officer, stated, "The strategic sales of the Fort Lauderdale Marina Marriott and The Drake in New York allowed us to realize the tremendous real estate value inherent in these assets, which far exceeded their value as hotel properties. As we move forward in 2006, we still see opportunities to acquire high quality assets in North America and Europe that are consistent with our strategy of acquiring luxury and upper upscale hotels in urban and resort destinations."
2006 Outlook
The Company expects comparable hotel RevPAR for both the second quarter and full year of 2006 to increase approximately 8% to 10%. For full year 2006, the Company also expects its operating profit margins under GAAP to increase approximately 210 basis points to 270 basis points and its comparable hotel adjusted operating profit margins to increase approximately 140 basis points to 175 basis points. The comparable hotel guidance listed above does not include the Starwood portfolio. Based upon this guidance, the Company estimates that for 2006:
-- earnings per diluted share should be approximately $.58 to $.60 for
the second quarter and $1.44 to $1.52 for the full year;
-- net income should be approximately $310 million to $320 million for
the second quarter and $738 million to $779 million for the full
year;
-- Adjusted EBITDA should be approximately $1,224 million to $1,264
million for the full year, which has been reduced by approximately
$11 million for distributions to minority interest partners of Host
Hotels & Resorts, L.P.;
-- FFO per diluted share should be approximately $.34 to $.36 for the
second quarter and $1.47 to $1.55 for the full year (including a
charge of approximately $10 million and $17 million, or approximately
$.02 and $.03 per diluted share, for the second quarter and full
year, respectively, related to costs associated with debt or
perpetual preferred stock expected to be refinanced or prepaid in
2006); and
-- common dividend will modestly increase throughout the year.
The net income and earnings per diluted share guidance include gains on the sales of assets of approximately $235 million ($.45 per diluted share) for the second quarter and approximately $440 million ($.86 per diluted share) for the full year.
Mr. Nassetta also stated, "The first quarter of 2006 reinforced our belief that lodging fundamentals for this year and beyond remain very positive. We believe that our unmatched portfolio of hotels, disciplined capital allocation and strong lodging fundamentals will lead to continued meaningful growth in RevPAR, earnings and dividends."
Host Hotels & Resorts, Inc. is a lodging real estate company that currently owns or holds controlling interests in 130 luxury and upper upscale hotel properties primarily operated under premium brands such as Marriott®, Westin®, Sheraton®, Ritz-Carlton®, Hyatt®, W®, Four Seasons®, St. Regis®, The Luxury Collection®, Fairmont®, Hilton® and Swissotel®*. For further information please visit the Company's website at http://www.hosthotels.com.
* 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 4% of the partnership interests in Host LP held by outside partners as of April 25, 2006, which is reflected as minority interest in our consolidated balance sheets and minority interest expense in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K.
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)
(unaudited, in millions, except share amounts)
March 24, December 31,
2006 2005
ASSETS
Property and equipment, net $ 7,244 $ 7,434
Assets held for sale 191 73
Due from managers 81 41
Investments in affiliates 24 41
Deferred financing costs, net 53 63
Furniture, fixtures and equipment replacement
fund 129 143
Other 194 157
Restricted cash 88 109
Cash and cash equivalents 481 184
Total assets $ 8,485 $ 8,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Senior notes, including $493 million, net of
discount, of Exchangeable Senior Debentures $ 3,047 $ 3,050
Mortgage debt 1,927 1,823
Convertible Subordinated Debentures 2 387
Other 88 110
Total debt 5,064 5,370
Accounts payable and accrued expenses 169 165
Other 211 148
Total liabilities 5,444 5,683
Interest of minority partners of Host Hotels
& Resorts, L.P. 130 119
Interest of minority partners of other
consolidated partnerships 29 26
Stockholders' equity
Cumulative redeemable preferred stock
(liquidation preference $250 million), 50
million shares authorized; 10.0 million
shares issued and outstanding 241 241
Common stock, par value $.01, 750 million
shares authorized; 386.6 million shares and
361.0 million shares issued and outstanding,
respectively 4 4
Additional paid-in capital 3,434 3,080
Accumulated other comprehensive income 15 15
Deficit (812) (923)
Total stockholders' equity 2,882 2,417
Total liabilities and stockholders' equity $ 8,485 $ 8,245
(a) Our consolidated balance sheet as of March 24, 2006 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 most recent Annual Report on Form 10-K.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended
March 24, March 25,
2006 2005
Revenues
Rooms $ 507 $ 467
Food and beverage 261 244
Other 51 50
Total hotel sales 819 761
Rental income (b) 29 29
Total revenues 848 790
Expenses
Rooms 121 114
Food and beverage 189 180
Hotel departmental expenses 211 210
Management fees 35 32
Other property-level expenses (b) 67 64
Depreciation and amortization 89 81
Corporate and other expenses 20 14
Total operating costs and expenses 732 695
Operating profit 116 95
Interest income 5 7
Interest expense (91) (109)
Net gains on property transactions 1 3
Gain on foreign currency and derivative contracts - 2
Minority interest expense (13) (4)
Equity in earnings (losses) of affiliates 1 (4)
Income (loss) before income taxes 19 (10)
Provision for income taxes (1) -
Income (loss) from continuing operations 18 (10)
Income from discontinued operations (c) 154 16
Net income 172 6
Less: Dividends on preferred stock (6) (8)
Net income (loss) available to common stockholders $ 166 $ (2)
Basic and diluted earnings (loss) per common share:
Continuing operations $ 0.03 $(0.05)
Discontinued operations 0.41 0.04
Basic and diluted earnings (loss) per common share $ 0.44 $(0.01)
(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 most recent Annual Report
on Form 10-K.
(b) Rental income and expense are as follows:
Quarter ended
March 24, March 25,
2006 2005
Rental income $ 11 $ 11
Full-service 18 18
Limited service and office buildings $ 29 $ 29
Rental and other expenses (included in
other property level expenses) $ 1 $ 2
Full-service 19 18
Limited service and office buildings $ 20 $ 20
(c) Reflects the results of operations and gain (loss) on sale, net of the
related income tax, for four properties sold in 2006, one property
classified as held for sale as of March 24, 2006 and five properties
sold in 2005.
HOST HOTELS & RESORTS, INC.
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended March 24, 2006 Quarter ended March 25, 2005
Income Per Income Per
(loss) Shares Share (loss) Shares Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
Net income $ 172 378.0 $ .46 $ 6 352.0 $ .02
Dividends on
preferred
stock (6) - (.02) (8) - (.03)
Basic earnings
available to
common
stockholders
(a)(b) 166 378.0 .44 (2) 352.0 (.01)
Assuming
distribution
of common
shares granted
under the
comprehensive
stock plan
less shares
assumed
purchased at
average market
price - .9 - - -
Diluted earnings
available to
common
stockholders
(a)(b) $ 166 378.9 $ .44 $ (2) 352.0 $(.01)
(a) Basic earnings (loss) per common share is computed by dividing net
income (loss) available to common stockholders 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 stockholders 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, the Exchangeable
Senior Debentures and the Convertible Subordinated Debentures. No
effect is shown for any securities that are anti-dilutive.
(b) Our results for certain periods presented were significantly affected
by certain transactions, which are detailed in the table entitled,
"Schedule of Significant Transactions Affecting Earnings per Share
and Funds From Operations per Diluted Share."
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of March 24, 2006 Quarter ended March 24, 2006
Average
No. of No. of Average Occupancy
Properties Rooms Daily Rate Percentages RevPAR
Pacific 21 11,485 $ 196.54 73.6% $ 144.61
Florida 10 6,448 222.15 77.8 172.79
Mid-Atlantic 9 6,361 207.17 73.1 151.53
North Central 13 5,130 127.35 64.7 82.45
DC Metro 11 4,661 192.96 63.3 122.06
South Central 7 4,126 143.21 76.0 108.82
Atlanta 10 3,743 168.24 71.7 120.70
New England 6 3,032 142.28 63.7 90.60
Mountain 6 2,210 157.87 63.1 99.61
International 5 1,953 141.07 68.0 95.88
All Regions 98 49,149 181.24 71.0 128.65
Quarter ended March 25, 2005
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR RevPAR
Pacific $ 179.62 74.5% $ 133.77 8.1%
Florida 205.96 81.0 166.92 3.5
Mid-Atlantic 186.88 73.9 138.12 9.7
North Central 119.86 56.9 68.17 20.9
DC Metro 180.73 71.9 129.92 (6.1)
South Central 133.87 74.2 99.32 9.6
Atlanta 154.19 68.5 105.58 14.3
New England 136.25 58.9 80.26 12.9
Mountain 146.02 62.6 91.47 8.9
International 125.15 68.7 86.04 11.4
All Regions 168.25 71.1 119.59 7.6
Comparable Hotels by Property Type (a)
As of March 24, 2006 Quarter ended March 24, 2006
Average
No. of No. of Average Occupancy
Properties Rooms Daily Rate Percentages RevPAR
Urban 41 23,620 $ 186.70 72.7% $ 135.72
Suburban 30 11,363 144.51 65.1 94.01
Airport 16 7,328 136.53 71.9 98.13
Resort/Convention 11 6,838 269.08 74.2 199.78
All Types 98 49,149 181.24 71.0 128.65
Quarter ended March 25, 2005
Average Percent
Average Occupancy Change in
Daily Rate Percentages RevPAR RevPAR
Urban $ 173.44 72.5% $ 125.73 7.9%
Suburban 131.41 64.1 84.27 11.6
Airport 124.11 73.0 90.60 8.3
Resort/Convention 254.37 76.0 193.40 3.3
All Types 168.25 71.1 119.59 7.6
(a) See the notes to financial information for a discussion of reporting
periods and comparable hotel results.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended
March 24, March 25,
2006 2005
Number of hotels 98 98
Number of rooms 49,149 49,149
Percent change in Comparable Hotel RevPAR 7.6% -
Operating profit margin under GAAP (b) 13.7% 12.0%
Comparable hotel adjusted operating profit
margin (c) 25.9% 23.7%
Comparable hotel sales
Room $ 492 $ 457
Food and beverage 258 240
Other 52 51
Comparable hotel sales (d) 802 748
Comparable hotel expenses
Room 119 112
Food and beverage 185 177
Other 31 32
Management fees, ground rent and other costs 259 250
Comparable hotel expenses (e) 594 571
Comparable hotel adjusted operating profit 208 177
Non-comparable hotel results, net (f) 19 14
Comparable hotels classified as held for sale, net (1) (1)
Office buildings and limited service properties,
net (g) (1) -
Depreciation and amortization (89) (81)
Corporate and other expenses (20) (14)
Operating profit $ 116 $ 95
(a) See the 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 table above.
(d) The reconciliation of total revenues per the consolidated statements
of operations to the comparable hotel sales is as follows:
Quarter ended
March 24, March 25,
2006 2005
Revenues per the consolidated statements
of operations $ 848 $ 790
Revenues of hotels held for sale 7 7
Non-comparable hotel sales (54) (43)
Hotel sales for the property for which we
record rental income, net 12 12
Rental income for office buildings and
limited service hotels (18) (18)
Adjustment for hotel sales for comparable
hotels to reflect Marriott's fiscal year
for Marriott-managed hotels 7 -
Comparable hotel sales $ 802 $ 748
(e) The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows (in
millions):
Quarter ended
March 24, March 25,
2006 2005
Operating costs and expenses per the
consolidated statements of operations $ 732 $ 695
Operating cost of hotels held for sale 6 6
Non-comparable hotel expenses (36) (31)
Hotel expenses for the property for which
we record rental income 15 14
Rent expense for office buildings and
limited service hotels (19) (18)
Adjustment for hotel expenses for comparable
hotels to reflect Marriott's fiscal year for
Marriott-managed hotels 5 -
Depreciation and amortization (89) (81)
Corporate and other expenses (20) (14)
Comparable hotel expenses $ 594 $ 571
(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 and (ii) the difference between the number of
days of operations reflected in the comparable hotel results and the
number of days of operations reflected in the consolidated statements
of operations.
(g) Represents rental income less rental expense for limited service
properties and office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per unit amounts)
March 24, December 31,
2006 2005
Equity
Common shares outstanding (a) 386.6 361.0
Common shares and minority held common OP
Units outstanding (a) 405.8 380.8
Preferred OP Units outstanding .02 .02
Class C Preferred shares outstanding 6.0 6.0
Class E Preferred shares outstanding 4.0 4.0
Security pricing (per share price)
Common (a) $ 21.10 $ 18.95
Class C Preferred (a) (b) $ 26.15 $ 25.25
Class E Preferred (a) $ 26.92 $ 26.75
Convertible Preferred Securities (c) $ - $ 61.02
Exchangeable Senior Debentures (d) $1,269.13 $1,163.70
Dividends declared per share for calendar year
Common (e) $ .14 $ .41
Class B Preferred (f) $ - $ .87
Class C Preferred (e) (b) $ .625 $ 2.50
Class E Preferred (e) $ .555 $ 2.22
Debt
Series B senior notes, with a rate of 7 7/8%
due August 2008 (g) $ 136 $ 136
Series G senior notes, with a rate of 9 1/4%
due October 2007 (h) 235 236
Series I senior notes, with a rate of 9 1/2%
due January 2007 (i) 449 451
Series K senior notes, with a rate of 7 1/8%
due November 2013 725 725
Series M senior notes, with a rate of 7% due
August 2012 346 346
Series O senior notes, with a rate of 6 3/8%
due March 2015 650 650
Exchangeable Senior Debentures, with a rate of
3.25% due April 2024 493 493
Senior notes, with an average rate of 9.7%,
maturing through May 2012 13 13
Total senior notes 3,047 3,050
Mortgage debt (non-recourse) secured by $3.2
billion of real estate assets, with an average
interest rate of 7.7% and 7.8% at March 24, 2006
and December 31, 2005, respectively, maturing
through February 2023 1,927 1,823
Credit facility (j) - 20
Convertible Subordinated Debentures, with a
rate of 6 3/4% due December 2026 (c) 2 387
Other 88 90
Total debt (l) $ 5,064 $ 5,370
Percentage of fixed rate debt 85% 85%
Weighted average interest rate (c) 7.3% 7.2%
Weighted average debt maturity (c) 5.0 years 6.4 years
Quarter ended
March 24, March 25,
2006 2005
Hotel Operating Statistics for All Full-Service
Properties (k)
Average daily rate $ 179.21 $ 165.83
Average occupancy 70.6% 70.8%
RevPAR $ 126.55 $ 117.41
(a) Share prices are the closing price as reported by the New York Stock
Exchange. In conjunction with the acquisition of the Starwood
portfolio, we issued approximately 133.5 million shares of common
stock on April 10, 2006, which increased our common shares and
minority held common OP unites outstanding to approximately 539.3
million.
(b) On April 19, 2006, we announced that on May 19, 2006 we intend to
redeem, at par, all of the shares of our 10% Class C Cumulative
Redeemable Preferred Stock for approximately $151 million, including
accrued dividends.
(c) Effective February 10, 2006, the Company exercised its right to cause
the conversion rights of its Convertible Subordinated Debentures (and
corresponding Convertible Preferred Securities) to expire. Prior to
this date, a substantial majority of holders of the Convertible
Subordinated Debentures exercised their right to convert their
debentures into the Company's common stock. The remaining $2 million
of Convertible Subordinated Debentures were redeemed for cash on
April 5, 2006. As a result, between December 2005 through February
10, 2006, the Company issued 30.8 million shares of its common stock
to converting holders. Market price for December 31, 2005 is as
quoted by Bloomberg L.P. Amount reflects the price of a single $50
security.
(d) Market price as quoted by Bloomberg L.P. Amount reflects the price of
a single $1,000 debenture, which is exchangeable for common stock
upon the occurrence of certain events.
(e) On March 21, 2006, we declared a first quarter common dividend of
$.14 per share and preferred dividends per share for our Class C and
Class E preferred stock of $.625 and $.5546875, respectively.
(f) On May 20, 2005, we redeemed, at par, all four million shares of our
10% Class B Cumulative Redeemable Preferred stock for approximately
$101 million, including accrued dividends.
(g) In connection with the issuance of $800 million of 6 3/4% Series P
senior notes on April 4, 2006, we announced that we will use a
portion of the proceeds from that issuance to redeem the remaining
7 7/8% Series B senior notes. We expect to redeem the Series B senior
notes on May 15, 2006.
(h) Includes the fair value of interest rate swap agreements of $(7)
million and $(6) million as of March 24, 2006 and December 31, 2005,
respectively.
(i) Includes the fair value of an interest rate swap agreement of $(1)
million and $1 million as of March 24, 2006 and December 31, 2005,
respectively.
(j) The outstanding balance on our credit facility of $20 million as of
December 31, 2005 was repaid on January 13, 2006. Currently, we have
$575 million of available capacity under our credit facility.
(k) The operating statistics reflect all consolidated properties as of
March 24, 2006 and March 25, 2005, respectively. The operating
statistics include the results of operations for four properties sold
in 2006 and five properties sold in 2005 prior to their disposition.
(l) As discussed in footnote g above, we issued new senior notes in the
second quarter and will utilize a portion of the proceeds to pay off
certain debt. In addition, we assumed approximately $77 million of
debt in the Starwood acquisition on April 10, 2006 and expect to incur
an additional $31 million of debt with the acquisition of the two
hotels in Fiji. After adjusting for these items, our total debt
balance would be approximately $5,836 million.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) Available to Common Stockholders
to Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
March 24, 2006 March 25, 2005
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
Net income (loss) available
to common stockholders $ 166 378.0 $ .44 $ (2) 352.0 $(.01)
Adjustments:
Gains on dispositions,
net of taxes (153) - (.41) (13) - (.04)
Amortization of deferred
gains and other
property transactions,
net of taxes (1) - - (2) - (.01)
Depreciation and
amortization 89 - .24 83 - .24
Partnership adjustments 8 - .02 6 - .02
FFO of minority partners
of Host LP (a) (5) - (.01) (4) - (.01)
Adjustments for dilutive
securities: Assuming
distribution of common
shares granted under the
comprehensive stock plan
less shares assumed
purchased at average
market price - .9 - - 2.0 -
Assuming conversion of
Exchangeable Senior
Debentures 5 28.1 (.01) 5 27.4 -
Assuming conversion of
Convertible Subordinated
Debentures 2 8.2 - - - -
FFO per diluted share
(b)(c) $ 111 415.2 $ .27 $ 73 381.4 $ .19
(a) Represents FFO attributable to the minority interests 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, convertible debt securities and other minority
interests that have the option to convert their limited partnership
interest to common OP units. No effect is shown for securities if they
are anti-dilutive.
(c) FFO per diluted share for certain periods presented was significantly
affected by certain transactions, which are detailed in the table
entitled, "Schedule of Significant Transactions Affecting Earnings per
Share, Funds from Operations per Diluted Share and Adjusted EBITDA."
HOST HOTELS & RESORTS, INC.
Schedule of Significant Transactions Affecting Earnings per Share
and Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended Quarter ended
March 24, 2006 March 25, 2005
Net Income Net Income
(Loss) FFO (Loss) FFO
Senior notes redemptions and debt
prepayments (a) $ - $ - $ (14) $ (14)
Gain on hotel dispositions,
net of taxes 153 - 13 -
Minority interest expense (b) (7) - - 1
Total $ 146 $ - $ (1) $ (13)
Per diluted share $ .39 $ - $ - $ (.04)
(a) Represents call premiums and the acceleration of original issue
discounts and deferred financing costs, as well as incremental
interest during the call or prepayment notice period, included in
interest expense in the consolidated statements of operations. We
recognized these costs in conjunction with the prepayment or
refinancing of senior notes and mortgages during certain periods
presented.
(b) Represents the portion of the significant transactions attributable
to minority partners in Host LP.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(unaudited, in millions)
Quarter ended
March 24, March 25,
2006 2005
Net income $ 172 $ 6
Interest expense 91 109
Depreciation and amortization 89 81
Income taxes 1 -
Discontinued operations (a) - 3
EBITDA 353 199
Gains on dispositions (153) (13)
Amortization of deferred gains (1) (3)
Consolidated partnership adjustments:
Minority interest expense 13 4
Distributions to minority partners - -
Equity investment adjustments:
Equity in (earnings) losses of affiliates (1) 4
Distributions received from equity investments 1 1
Adjusted EBITDA of Host LP 212 192
Distributions to minority interest partners of
Host LP (2) -
Adjusted EBITDA of Host $ 210 $ 192
(a) Reflects the interest expense, depreciation and amortization and
income taxes included in discontinued operations.
HOST HOTELS & RESORTS, L.P.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per unit amounts)
Quarter ended
March 24, March 25,
2006 2005
Revenues
Rooms $ 507 $ 467
Food and beverage 261 244
Other 51 50
Total hotel sales 819 761
Rental income 29 29
Total revenues 848 790
Expenses
Rooms 121 114
Food and beverage 189 180
Hotel departmental expenses 211 210
Management fees 35 32
Other property-level expenses 67 64
Depreciation and amortization 89 81
Corporate and other expenses 20 14
Total operating costs and expenses 732 695
Operating profit 116 95
Interest income 5 7
Interest expense (91) (109)
Net gains on property transactions 1 3
Gain on foreign currency and derivative contracts - 2
Minority interest expense (4) (4)
Equity in earnings (losses) of affiliates 1 (4)
Income (loss) before income taxes 28 (10)
Provision for income taxes (1) -
Income (loss) from continuing operations 27 (10)
Income from discontinued operations (b) 154 16
Net income 181 6
Less: Distributions on preferred units (6) (8)
Net income (loss) available to common unitholders $ 175 $ (2)
Basic and diluted earnings (loss) per common unit:
Continuing operations $ .05 $ (.05)
Discontinued operations .39 .04
Basic and diluted earnings (loss) per common unit $ .44 $ (.01)
(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. When distinguishing between Host and
Host LP, the primary difference is the partnership interests in Host
LP held by outside partners, which is reflected as minority interest
in our consolidated balance sheets and minority interest expense in
our consolidated statements of operations. The consolidated
statements of operations should be read in conjunction with the
consolidated financial statements and notes thereto included in our
most recent Annual Report on Form 10-K.
(b) Reflects the results of operations and gain (loss) on sale, net of
the related income tax, for four properties sold in 2006, one
property classified as held for sale as of March 24, 2006, and five
properties sold in 2005.
HOST HOTELS & RESORTS, L.P.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
for HOST HOTELS & RESORTS, L.P.
(unaudited, in millions)
Quarter ended
March 24, March 25,
2006 2005
Net income $ 181 $ 6
Interest expense 91 109
Depreciation and amortization 89 81
Income taxes 1 -
Discontinued operations (a) - 3
EBITDA 362 199
Gains on dispositions (153) (13)
Amortization of deferred gains (1) (3)
Consolidated partnership adjustments:
Minority interest expense 4 4
Distributions to minority partners - -
Equity investment adjustments:
Equity in (earnings) losses of affiliates (1) 4
Distributions received from equity investments 1 1
Adjusted EBITDA of Host LP $ 212 $ 192
(a) Reflects the interest expense, depreciation and amortization and
income taxes included in discontinued operations.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share for
Second Quarter 2006 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Second Quarter 2006 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders $ 300 494.9 $ .61
Adjustments:
Depreciation and amortization 104 - .21
Gain on dispositions, net of taxes (237) - (.48)
Partnership adjustments 14 - .03
FFO of minority partners of Host LP (b) (6) - (.02)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive stock
plan less shares assumed purchased at
average market price - .9 -
Assuming conversion of Exchangeable
Senior Debentures 4 28.5 (.01)
FFO per diluted share $ 179 524.3 $ .34
High-end of Range
Second Quarter 2006 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders $ 310 494.9 $ .63
Adjustments:
Depreciation and amortization 104 - .21
Gain on dispositions, net of taxes (237) - (.48)
Partnership adjustments 15 - .03
FFO of minority partners of Host LP (b) (7) - (.02)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive stock
plan less shares assumed purchased at
average market price - .9 -
Assuming conversion of Exchangeable
Senior Debentures 4 28.5 (.01)
FFO per diluted share $ 189 524.3 $ .36
See the notes following the table reconciling net income to EBITDA and Adjusted
EBITDA for assumptions relating to the 2006 forecasts.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share for Full Year 2006 Forecasts (a)
(unaudited, in millions, except per share amounts)
Low-end of Range
Full Year 2006 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders $ 718 482.6 $ 1.49
Adjustments:
Depreciation and amortization 454 - .94
Gain on dispositions, net of taxes (441) - (.91)
Partnership adjustments 32 - .06
FFO of minority partners of Host LP (b) (28) - (.06)
Adjustment for dilutive securities:
Assuming distribution of common shares
granted under the comprehensive stock
plan less shares assumed purchased
at average market price - .9 -
Assuming conversion of Exchangeable
Senior Debentures 19 28.9 (.05)
Assuming conversion of Convertible
Subordinated Debentures 2 1.9 -
FFO per diluted share $ 756 514.3 $ 1.47
High-end of Range
Full Year 2006 Forecast
Income Per Share
(Loss) Shares Amount
Forecast net income available to
common stockholders $ 759 482.6 $ 1.57
Adjustments:
Depreciation and amortization 454 - .94
Gain on dispositions, net of taxes (441) - (.91)
Partnership adjustments 34 - .07
FFO of minority partners of Host LP (b) (30) - (.06)
Adjustment for dilutive securities:
Assuming distribution of common share
granted under the comprehensive stock
plan less shares assumed purchased at
average market price - 0.9 (.01)
Assuming conversion of Exchangeable
Senior Debentures 19 28.9 (.05)
Assuming conversion of Convertible
Subordinated Debentures 2 1.9 -
FFO per diluted share (c) $ 797 514.3 $ 1.55
See the notes following the table reconciling net income to EBITDA and Adjusted EBITDA for assumptions relating to the 2006 forecasts.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full Year
2006 Forecasts (a)
(unaudited, in millions)
Full Year 2006
Low-end High-end
of Range of Range
Net income $ 738 $ 779
Interest expense 434 434
Depreciation and amortization 455 455
Income taxes 10 8
EBITDA 1,637 1,676
Gains on dispositions (441) (441)
Consolidated partnership adjustments:
Minority interest expense 40 41
Distributions to minority partners (5) (5)
Equity investment adjustments:
Equity in losses of affiliates 1 1
Distributions received from equity investments 3 3
Adjusted EBITDA of Host LP 1,235 1,275
Distributions to minority interest partners of
Host LP (11) (11)
Adjusted EBITDA of Host $ 1,224 $ 1,264
(a) The second quarter and full year 2006 forecasts were based on the
following assumptions (the comparable hotel guidance below does not
include the Starwood portfolio):
* Comparable hotel RevPAR will increase 8% to 10% for both the
second quarter and full year for the low and high ends of the
forecasted range, respectively.
* Comparable hotel adjusted operating profit margins will increase
140 basis points and 175 basis points for the full year for the
low and high ends of the forecasted range, respectively.
* Approximately $950 million of hotels and other assets will be sold
during 2006, including approximately $700 million of hotels
already sold.
* The remaining seven hotels in the Starwood portfolio will be
acquired in the second quarter (two by Host LP and five by the
European joint venture). In addition to the Starwood portfolio
acquisition, approximately $250 million of acquisitions will be
made during 2006.
* Approximately $735 million of debt and perpetual preferred stock
will be refinanced, and approximately $170 million will be repaid.
Charges, net of the minority interest benefit, totaling
approximately $10 million ($.02 of FFO per diluted share) and $17
million ($.03 of FFO per diluted share) related to costs
associated with the debt and perpetual preferred stock repayments
will be incurred for the second quarter and full year 2006,
respectively.
* Fully diluted weighted average shares will be 524.3 million and
514.3 million for the second quarter and full year, respectively.
The amounts shown in these forecasts are based on these and other
assumptions, as well as management's estimate of operations for 2006.
These forecasts are forward-looking and are not guarantees of future
performance and involve known and unknown risks, uncertainties and
other factors which may cause actual transactions, results and
performance to differ materially from those expressed or implied by
these forecasts. Although we believe the expectations reflected in the
forecasts are based upon reasonable assumptions, we can give no
assurance that the expectations will be attained or that the results
will be materially different. Risks that may affect these assumption
and forecasts include the following:
* the level of RevPAR and margin growth may change significantly;
* the amount and timing of acquisitions and dispositions of hotel
properties is an estimate that can substantially affect financial
results, including such items as net income, depreciation and
gains (losses) on dispositions;
* the level of capital expenditures may change significantly, which
will directly affect the level of depreciation expense and net
income; and
* other risks and uncertainties associated with our business
described herein and in the Company's filings with the SEC.
(b) Represents FFO attributable to the minority interests in Host LP.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Adjusted Operating Profit Margin
for Full Year 2006 Forecasts (a)
(unaudited, in millions, except hotel statistics)
Full Year 2006 Forecast
Low-end High-end
of range of range
Percent change in Comparable Hotel RevPAR 8.0% 10.0%
Operating profit margin under GAAP (b)