Total revenue decreased 16.8% to $1,331 million for the fourth quarter of 2009 compared to the same period in 2008 and decreased 19.1% to $4,158 million for full year 2009 compared to the full year 2008.
Host Hotels & Resorts, Inc. (NYSE:HST) , the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the fourth quarter and for the full year ended December 31, 2009.
• Total revenue decreased 16.8% to $1,331 million for the fourth quarter of 2009 compared to the same period in 2008 and decreased 19.1% to $4,158 million for full year 2009 compared to the full year 2008.
• Net loss was $72 million for the fourth quarter of 2009 compared to net income of $111 million for the fourth quarter of 2008. For the full year 2009, net loss was $258 million compared to net income of $414 million for the full year 2008. Loss per diluted share was $.12 for the fourth quarter of 2009 compared to earnings per diluted share of $.18 in 2008. For the full year 2009, loss per diluted share was $.45 compared to earnings per diluted share of $.72 for the full year 2008.
Operating results for 2009 were affected by non-cash impairment charges in the first half of 2009 and a fourth quarter accrual for a potential litigation loss, partially offset by gains associated with hotel dispositions and debt extinguishments. The net effect of these items was a decrease in earnings of $39 million, or $.07 per diluted share for the fourth quarter of 2009 and a decrease in earnings of $131 million, or $.23 per diluted share, for full year 2009. Operating results for full year 2008 include net gains on dispositions of $22 million, or $.04 per diluted share. No similar transactions occurred in the fourth quarter of 2008.
• Funds from Operations (FFO) per diluted share was $.18 for the fourth quarter of 2009 compared to $.52 for the fourth quarter of 2008. For full year 2009, FFO per diluted share was $.51 compared to $1.71 for full year 2008. The net effect of the above transactions affecting operating results also decreased FFO per diluted share by $.06 and $.28 for the fourth quarter and full year 2009, respectively. FFO per diluted share was not affected by similar transactions in 2008.
• Earnings and FFO per diluted share for all periods presented also include non-cash interest expense related to the Company's exchangeable debentures in accordance with accounting requirements adopted on January 1, 2009. The increase to interest expense was $8 million and $9 million in the fourth quarter of 2009 and 2008, respectively, and $27 million and $30 million for the full year 2009 and 2008, respectively.
• Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $229 million for the fourth quarter 2009 compared to $414 million for the fourth quarter 2008. For full year 2009, adjusted EBITDA was $798 million compared to $1365 million for 2008. Adjusted EBITDA for the fourth quarter and full year 2009 has been decreased by approximately $41 million due to the fourth quarter accrual of a potential litigation loss.
For further detail of the transactions affecting net income, earnings per diluted share and FFO per diluted share, refer to the notes to the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share."
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR decreased 14.6% and 19.9% for the fourth quarter and full year 2009 compared to 2008. Comparable hotel adjusted operating profit margins decreased 430 basis points and 520 basis points for the fourth quarter and full year 2009, respectively. For further detail, see "Notes to the Financial Information."
BALANCE SHEET
As of December 31, 2009, the Company had over $1.6 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the fourth quarter, the Company issued $400 million of 2.5% Exchangeable Senior Debentures due 2029 and received net proceeds of approximately $391 million, which it used in the first quarter of 2010, along with available cash, to redeem the remaining $346 million of the 7% Series M senior notes and repay the $124 million mortgage on the Atlanta Marriott Marquis. As a result of these two transactions, the Company reduced its outstanding debt by $470 million to approximately $5.4 billion and currently has approximately $1.2 billion of available cash and cash equivalents.
Beginning in August of 2009, the Company initiated a continuous equity offering program under which it may sell up to $400 million in shares of common stock in at-the-market transactions over time. The Company issued approximately 15 million shares of common stock for net proceeds of $157 million in the fourth quarter at an average net price per share of approximately $10.49. Since the inception of the program, the Company has issued nearly 28 million shares for net proceeds of over $287 million at an average net price per share of approximately $10.27.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $85 million and $340 million for the fourth quarter and full year 2009, respectively. Return on investment (ROI) and repositioning projects accounted for approximately $35 million and $176 million for the fourth quarter and full year 2009, respectively, of these expenditures. The Company expects to spend approximately $270 million to $300 million in capital expenditures in 2010.
DIVIDEND
Beginning with the first quarter of 2010, the Company intends to reinstate the payment of a quarterly dividend on its common stock and to pay a $.01 per share dividend in the first quarter. The Company paid a special common dividend of $.25 per share on December 18, 2009 to stockholders of record as of November 6, 2009, of which approximately 10% was paid with cash and approximately 90% was paid with shares of Host common stock. Based on stockholder elections and the cash requirement, the special dividend consisted of approximately $15.6 million of cash and approximately 13.4 million shares of common stock valued at a per share price of approximately $10.46. The Company intends to continue paying the cash dividend on its preferred stock.
LITIGATION LOSS
On February 8, 2010, the Company received an adverse jury verdict in a trial in the 166th Judicial District Court of Bexar County, Texas involving the sale of land encumbered by a ground lease for the San Antonio Marriott Rivercenter hotel. The jury found that the Company intentionally interfered with the attempted sale by Keystone-Texas Property Holding Corporation of the land under the San Antonio Marriott Rivercenter and slandered title to the property. The jury awarded damages that range from $42 million to $56 million, including statutory interest, as well as exemplary damages on the latter claim. The verdict is not yet final and is subject to post-trial motions. Based on the range of possible outcomes, the Company accrued an additional potential litigation loss of approximately $41 million in the fourth quarter consistent with generally accepted accounting principles. The Company believes that a number of legal rulings decided by the trial court were in error and had an adverse effect on the jury's verdict. The Company intends to vigorously pursue these issues in post trial motions and, if necessary, on appeal.
2010 OUTLOOK
While it appears that the economy has started to recover, we believe that several factors, including uncertainty in the strength and sustainability of the economic recovery and continued high unemployment, will continue to negatively affect lodging industry fundamentals in 2010. Additionally, the uncertainty in the economic climate and its effect on business and leisure travel, combined with shorter booking lead times, continue to inhibit the Company's ability to predict future operating results. However, assuming a decrease in comparable hotel RevPAR in the range of 0% to 5% for 2010, the Company would anticipate that 2010 operating profit margins under GAAP would range from an increase of 100 basis points to a decrease of 170 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 175 basis points to 350 basis points. Based upon these parameters, the Company estimates the following would occur:
• loss per diluted share should be approximately $.32 to $.49;
• net loss should be approximately $207 million to $315 million;
• FFO per diluted share should be approximately $.57 to $.41 (which has been reduced by $.01 per share for debt prepayment costs for the Series M senior notes repaid in early 2010); and
• Adjusted EBITDA should be approximately $750 million to $635 million.
HOST HOTELS & RESORTS, INC.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
December 31,
2009 2008
(unaudited)
ASSETS
------
Property and equipment, net $10,231 $10,739
Assets held for sale 8 -
Due from managers 29 65
Investments in affiliates 153 229
Deferred financing costs, net 49 46
Furniture, fixtures and equipment replacement fund 124 119
Other 266 200
Restricted cash 53 44
Cash and cash equivalents 1,642 508
------- -------
Total assets $12,555 $11,950
======= =======
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY
-------------------------------------------------
Debt
Senior notes, including $1,123 million and $916
million, respectively, net of discount, of
Exchangeable Senior Debentures (b) $4,534 $3,943
Mortgage debt 1,217 1,436
Credit facility - 410
Other 86 87
------- -------
Total debt 5,837 5,876
Accounts payable and accrued expenses 174 119
Other 194 183
------- -------
Total liabilities 6,205 6,178
------- -------
Non-controlling interests-Host Hotels & Resorts, L.P. 139 158
Host Hotels & Resorts, Inc. stockholders' equity:
Cumulative redeemable preferred stock (liquidation
preference $100 million) 50 million shares
authorized; 4 million shares issued and outstanding 97 97
Common stock, par value $.01, 1,050 million shares
and 750 million shares authorized, respectively;
646.3 million shares and 525.3 million shares issued
and outstanding, respectively 6 5
Additional paid-in capital 6,875 5,868
Accumulated other comprehensive income 12 5
Deficit (801) (385)
------- -------
Total equity of Host Hotels & Resorts,
Inc. stockholders 6,189 5,590
Non-controlling interests-other consolidated
partnerships (c) 22 24
------- -------
Total equity 6,211 5,614
------- -------
Total liabilities, non-controlling
interests and equity $12,555 $11,950
======= =======
(a) Our consolidated balance sheet as of December 31, 2009 has been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted.
(b) As a result of the adoption of a new accounting requirement for
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) on January 1, 2009, we separately
account for the liability and equity components of our Exchangeable Senior
Debentures (the "Debentures"). The principal balance shown has been
reduced by $124 million and $76 million as of December 31, 2009 and
December 31, 2008, respectively, with an offsetting increase to equity.
The face amount of the Debentures was $1,251 million at December 31, 2009.
See notes to "Other Financial and Operating Data," for further discussion.
(c) As a result of the adoption of a new accounting requirement on January
1, 2009, non-controlling interests of other consolidated partnerships
(previously referred to as "Interest of minority partners of other
consolidated partnerships") are now included as a separate component of
equity.
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter ended December 31, Year ended December 31,
2009 2008 2009 2008
Revenues
Rooms $796 $949 $2,497 $3,116
Food and beverage 416 500 1,243 1,556
Other 88 111 311 348
----- ----- ----- -----
Total hotel sales 1,300 1,560 4,051 5,020
Rental income 31 40 107 119
----- ----- ----- -----
Total revenues 1,331 1,600 4,158 5,139
----- ----- ----- -----
Expenses
Rooms 219 237 686 766
Food and beverage 310 363 940 1,139
Hotel departmental
expenses 350 393 1,109 1,259
Management fees 54 72 160 242
Other property-level
expenses 117 124 387 386
Depreciation and
amortization (b) 187 181 662 557
Corporate and other
expenses (c) 64 13 116 58
Gain on insurance
settlement - - - (7)
----- ----- ----- -----
Total operating
costs and
expenses 1,301 1,383 4,060 4,400
----- ----- ----- -----
Operating profit 30 217 98 739
Interest income 1 7 7 20
Interest expense (d) (115) (114) (379) (375)
Net gains on property
transactions and other 1 - 14 2
Gain on foreign
currency transactions
and derivatives - 1 5 1
Equity in earnings
(losses) of
affiliates (b) 5 (13) (32) (10)
----- ----- ----- -----
Income (loss) before
income taxes (78) 98 (287) 377
Benefit for
income taxes 10 14 39 3
----- ----- ----- -----
Income (loss) from
continuing operations (68) 112 (248) 380
Income (loss) from
discontinued operations (4) (1) (10) 34
----- ----- ----- -----
Net income (loss) (72) 111 (258) 414
Less: Net (income) loss
attributable to
non-controlling
interests (d) 1 (2) 6 (19)
----- ----- ----- -----
Net income (loss)
attributable to common
stockholders (71) 109 (252) 395
Less: Dividends on
preferred stock (2) (2) (9) (9)
----- ----- ----- -----
Net income (loss)
available to common
stockholders $(73) $107 $(261) $386
===== ===== ===== =====
Basic earnings (loss)
per common share:
Continuing
operations $(.11) $.20 $(.43) $.67
Discontinued
operations (.01) - (.02) .07
----- ----- ----- -----
Basic earnings (loss)
per common share $(.12) $.20 $(.45) $.74
===== ===== ===== =====
Diluted earnings
(loss) per common
share:
Continuing
operations $(.11) $.18 $(.43) $.65
Discontinued
operations (.01) - (.02) .07
----- ----- ----- -----
Diluted earnings
(loss) per common
share $(.12) $.18 $(.45) $.72
===== ===== ===== =====
(a) Our consolidated statements of operations presented above have been
prepared without audit. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
GAAP have been omitted.
(b) During 2009, we identified several properties to be tested for
impairment based on certain triggering events, as prescribed by GAAP. We
tested these properties for impairment based on management's estimate of
expected future undiscounted cash flows over our expected holding period.
As a result, we recorded non-cash impairment charges totaling $131 million
and $3 million in 2009 and 2008, respectively, based on the difference
between the properties' fair values and their carrying amounts.
$66 million has been included in depreciation expense and $31 million was
included in discontinued operations for full year 2009. The remaining
$34 million of impairment charges was for our investment in the European
joint venture, which is included in equity in earnings (losses) of
affiliates.
(c) Corporate and other expenses include a fourth quarter expense accrual
of approximately $41 million for a potential litigation loss.
(d) Interest expense includes $8 million and $9 million for the fourth
quarter of 2009 and 2008, respectively, and $27 million and $30 million
for full year 2009 and 2008, respectively, in connection with the adoption
of a new accounting requirement regarding the Debentures on January 1,
2009. Interest expense for full year 2009 also includes a $3 million gain
on the first quarter repurchase of a portion of the 3.25% Exchangeable
Senior Debentures issued in April 2004 (the "2004 Debentures") and a
$2 million gain on the third and fourth quarter repurchases of a portion
of the 2.625% Exchangeable Senior Debentures (the "2007 Debentures"). See
notes to the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and
FFO per Diluted Share" for further discussion.
(e) As a result of the adoption of a new accounting requirement on January
1, 2009, net income attributable to non-controlling interests of Host LP
and of other non-consolidated partnerships are no longer included in the
determination of net income. Prior periods have been revised to reflect
this presentation. The net income attributable to non-controlling
interests is included in the net income available to common stockholders;
therefore, the implementation of this requirement had no effect on our
basic or diluted earnings per share calculation.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended Year ended
December 31, December 31,
------------- ----------
2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $(72) $111 $(258) $414
Net (income) loss attributable to non-
controlling interests 1 (2) 6 (19)
Dividends on preferred stock (2) (2) (9) (9)
--- --- --- --
Earnings (loss) available to common
stockholders (73) 107 (261) 386
Assuming deduction of gain recognized for the
repurchase of 2004 Exchangeable Senior
Debentures (a) - (12) (2) (8)
--- --- --- --
Diluted earnings (loss) available to common
stockholders $(73) $95 $(263) $378
==== === ===== ====
Basic weighted average shares outstanding 626.5 523.3 586.3 521.6
Diluted weighted average shares outstanding
(b) 626.5 527.1 587.2 527.4
Basic earnings (loss) per share (c) $(.12) $.20 $(.45) $.74
Diluted earnings (loss) per share (c) (d) $(.12) $.18 $(.45) $.72
(a) During the first quarter of 2009 and fourth quarter 2008, we
repurchased $75 million and $100 million face amount, respectively, of the
2004 Debentures with a carrying value of $72 million and $96 million for
approximately $69 million and $82 million, respectively. The adjustments
to dilutive earnings per common share related to the repurchased 2004
Debentures include a $3 million and $14 million gain, respectively, net of
interest expense on the repurchased Debentures.
(b) Dilutive securities may include shares granted under comprehensive
stock plans, preferred OP Units held by minority partners, exchangeable
debt securities and other non-controlling interests that have the option
to convert their limited partnership interests to common OP Units. No
effect is shown for any securities that are anti-dilutive.
(c) Basic earnings per common share is computed by dividing net income
available to common stockholders by the weighted average number of shares
of common stock outstanding. Diluted earnings per common share is computed
by dividing net income available to common stockholders, as adjusted for
potentially dilutive securities, by the weighted average number of shares
of common stock outstanding plus potentially dilutive securities.
(d) See notes to the "Reconciliation of Net Income to EBITDA, Adjusted
EBITDA and FFO per Diluted Share" for information on significant items
affecting diluted earnings per common share for which no adjustments were
made.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
(unaudited)
Comparable Hotels by Region (a)
As of December 31, 2009 Quarter ended December 31, 2009
----------------------- -------------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- --------- ----------- ------
Pacific 27 15,943 $162.94 64.8% $105.66
Mid-Atlantic 10 8,330 250.48 81.7 204.60
North Central 14 6,204 134.71 61.3 82.61
South Central 9 5,687 142.10 61.6 87.59
Florida 9 5,677 166.62 58.3 97.18
DC Metro 12 5,416 189.80 69.6 132.06
New England 8 4,297 166.63 67.2 111.99
Atlanta 8 4,252 150.86 54.5 82.26
Mountain 7 2,889 148.35 58.9 87.41
International 7 2,473 153.03 62.9 96.30
--- -----
All Regions 111 61,168 174.73 65.4 114.27
=== ======
Quarter ended December 31, 2008
-------------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
--------- ----------- ------ ------
Pacific $191.25 66.7% $127.58 (17.2)%
Mid-Atlantic 296.10 79.5 235.28 (13.0)
North Central 155.09 63.3 98.12 (15.8)
South Central 162.75 65.0 105.78 (17.2)
Florida 189.48 56.8 107.69 (9.8)
DC Metro 206.01 70.1 144.49 (8.6)
New England 183.58 67.6 124.07 (9.7)
Atlanta 178.35 60.6 108.12 (23.9)
Mountain 175.94 62.7 110.26 (20.7)
International 166.44 65.5 109.04 (11.7)
All Regions 200.44 66.7 133.77 (14.6)
As of December 31, 2009 Year ended December 31, 2009
----------------------- ----------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- --------- ----------- ------
Pacific 27 15,943 $169.46 67.4% $114.22
Mid-Atlantic 10 8,330 219.22 76.4 167.47
North Central 14 6,204 130.93 60.8 79.64
South Central 9 5,687 143.88 63.8 91.83
Florida 9 5,677 182.88 62.9 115.04
DC Metro 12 5,416 190.52 73.6 140.13
New England 8 4,297 161.76 63.7 103.11
Atlanta 8 4,252 152.32 58.2 88.63
Mountain 7 2,889 157.85 59.4 93.69
International 7 2,473 143.29 61.6 88.21
--- -----
All Regions 111 61,168 171.61 66.2 113.68
=== ======
Year ended December 31, 2008
----------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
--------- ----------- ------ ------
Pacific $198.45 73.7% $146.16 (21.9)%
Mid-Atlantic 270.15 79.8 215.56 (22.3)
North Central 152.23 65.5 99.72 (20.1)
South Central 161.26 67.7 109.11 (15.8)
Florida 211.20 69.7 147.21 (21.9)
DC Metro 199.85 74.4 148.77 (5.8)
New England 179.11 71.9 128.85 (20.0)
Atlanta 172.87 66.0 114.01 (22.3)
Mountain 182.43 66.5 121.36 (22.8)
International 170.63 68.1 116.22 (24.1)
All Regions 198.30 71.6 141.97 (19.9)
Comparable Hotels by Property Type (a)
As of December 31, 2009 Quarter ended December 31, 2009
----------------------- -------------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- --------- ----------- ------
Urban 53 34,485 $194.12 68.7% $133.28
Suburban 31 11,646 134.47 60.1 80.85
Resort/Conference 13 8,082 199.44 55.7 110.99
Airport 14 6,955 113.27 69.5 78.67
--- -----
All Types 111 61,168 174.73 65.4 114.27
=== ======
Quarter ended December 31, 2008
-------------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
--------- ----------- ------ ------
Urban $220.98 69.5% $153.55 (13.2)%
Suburban 157.88 61.6 97.31 (16.9)
Resort/
Conference 226.81 58.6 132.96 (16.5)
Airport 135.77 71.1 96.58 (18.5)
All Types 200.44 66.7 133.77 (14.6)
As of December 31, 2009 Year ended December 31, 2009
----------------------- ----------------------------
Average
No. of No. of Average Occupancy
Properties Rooms Room Rate Percentages RevPAR
---------- ----- --------- ----------- ------
Urban 53 34,485 $183.44 69.0% $126.64
Suburban 31 11,646 138.72 60.2 83.45
Resort/
Conference 13 8,082 215.19 61.1 131.57
Airport 14 6,955 115.61 68.5 79.18
--- -----
All
Types 111 61,168 171.61 66.2 113.68
=== ======
Year ended December 31, 2008
----------------------------
Average Percent
Average Occupancy Change in
Room Rate Percentages RevPAR RevPAR
--------- ----------- ------ ------
Urban $211.15 73.6% $155.39 (18.5)%
Suburban 160.68 66.1 106.19 (21.4)
Resort/
Conference 248.61 69.0 171.45 (23.3)
Airport 136.71 74.0 101.14 (21.7)
All Types 198.30 71.6 141.97 (19.9)
(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 December 31, Year ended December 31,
2009 2008 2009 2008
Number of hotels 111 111 111 111
Number of rooms 61,168 61,168 61,168 61,168
Percent change in comparable
hotel RevPAR (14.6)% - (19.9)% -
Operating profit
margin under GAAP (b) 2.3% 13.6% 2.4% 14.4%
Comparable hotel adjusted
operating profit margin (b)(c) 21.2% 25.5% 21.1% 26.3%
Comparable hotel sales
Room $810 $948 $2,533 $3,166
Food and beverage 425 505 1,266 1,591
Other 91 111 321 362
----- ----- ----- -----
Comparable hotel sales (d) 1,326 1,564 4,120 5,119
----- ----- ----- -----
Comparable hotel expenses
Room 223 238 694 779
Food and beverage 317 367 957 1,164
Other 49 57 160 189
Management fees, ground rent
and other costs 456 504 1,438 1,639
----- ----- ----- -----
Comparable hotel expenses (e) 1,045 1,166 3,249 3,771
----- ----- ----- -----
Comparable hotel adjusted
operating profit 281 398 871 1,348
Non-comparable hotel
results, net (f) (1) 4 3 (1)
Office buildings and select
service properties, net (g) 1 8 1 7
Comparable hotels classified as
held-for-sale, net - 1 1 -
Depreciation and amortization (187) (181) (662) (557)
Corporate and other expenses (64) (13) (116) (58)
----- ----- ----- -----
Operating profit $30 $217 $98 $739
===== ===== ===== =====
(a) See the notes to the financial information for discussion of non-GAAP
measures, reporting periods and comparable hotel results.
(b) Operating profit margins are calculated by dividing the applicable
operating profit by the related revenue amount. GAAP margins are
calculated using amounts presented in the consolidated statement of
operations. Comparable margins are calculated using amounts presented in
the above table.
(c) The decline in GAAP margins and comparable hotel adjusted operating
profit margins includes the effect of the following two items of
approximately 50 basis points for the quarter and full year periods ended
December 31, 2009. (1) The 2008 full year comparable hotel operating
profit includes business interruption proceeds of approximately
$5 million, net of expenses, received in 2008 for the New Orleans Marriott
which had previously been non-comparable. We did not receive any business
interruption proceeds in 2009. (2) We have incurred additional expenses in
2009 due to the treatment of the ground lease payments related to the New
York Marriott Marquis. Since the renegotiation of the ground lease on the
New York Marriott Marquis in 1998, the ground lease payments have reduced
the deferred ground rent liability, and more recently, have been applied
against the deferred purchase price of the land. As a result, there was no
operating profit reduction for these payments. In 2009, a small portion of
the payments funded the deferred purchase price and the remainder of
approximately $7 million and $19 million for the quarter and full year,
respectively, have been treated as rent and deducted from operating
profit.
(d) The reconciliation of total revenues per the consolidated statements
of operations to the comparable hotel sales is as follows:
Quarter ended Year ended
December 31, December 31,
2009 2008 2009 2008
Revenues per the consolidated
statements of operations $1,331 $1,600 $4,158 $5,139
Hotel sales for comparable hotels
classified as held-for-sale 4 4 11 12
Business interruption revenues
for comparable hotels - - - 7
Hotel sales for the property for
which we record rental income,
net 12 13 42 51
Rental income for office buildings
and select service hotels (26) (33) (84) (91)
Adjustment for hotel sales for
comparable hotels to reflect
Marriott's fiscal year for
Marriott managed hotels 5 (20) (7) 1
------ ------ ------ ------
Comparable hotel sales $1,326 $1,564 $4,120 $5,119
====== ====== ====== ======
(e) The reconciliation of operating costs per the consolidated statements
of operations to the comparable hotel expenses is as follows:
Quarter ended Year ended
December 31, December 31,
2009 2008 2009 2008
Operating costs and expenses
per the consolidated statements
of operations $1,301 $1,383 $4,060 $4,400
Hotel expenses for comparable
hotels classified as
held-for-sale 4 5 12 12
Hotel expenses for the property
for which we record rental
income 12 12 42 51
Rent expense for office buildings
and select service hotels (25) (25) (83) (84)
Adjustment for hotel expenses
for comparable hotels to reflect
Marriott's fiscal year for
Marriott-managed hotels 4 (15) (4) -
Depreciation and amortization (187) (181) (662) (557)
Corporate and other expenses (64) (13) (116) (58)
Gain on insurance settlement - - - 7
------ ------ ------ ------
Comparable hotel expenses $1,045 $1,166 $3,249 $3,771
====== ====== ====== ======
(f) Non-comparable hotel results, net, includes the results of operations
of our non-comparable hotels whose operations are included in our
consolidated statements of operations as continuing operations and 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 select service
properties and office buildings.
HOST HOTELS & RESORTS, INC.
Other Financial and Operating Data
(unaudited, in millions, except per share amounts)
December 31,
2009 2008
Equity
------
Common shares outstanding 646.3 525.3
Common shares outstanding assuming
conversion of minority partner OP Units (a) 658.2 540.4
Preferred OP Units outstanding .02 .02
Class E Preferred shares outstanding 4.0 4.0
Security pricing
----------------
Common (b) $11.67 $7.57
Class E Preferred (b) $25.23 $17.20
3 1/4% Exchangeable Senior Debentures (c) $1,002.8 $861.51
2 5/8% Exchangeable Senior Debentures (c) $942.1 $663.70
2 1/2% Exchangeable Senior Debentures (c) $1,062.8 $-
Dividends declared per share for calendar
year
Common (d) $.25 $.65
Class E Preferred (e) $2.22 $2.22
Debt
----
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 (f) 344 348
Series O senior notes, with a rate of 6 3/8%
due March 2015 650 650
Series Q senior notes, with a rate of 6 3/4%
due June 2016 800 800
Series S senior notes, with a rate of 6 7/8%
due November 2014 498 497
Series T senior notes, with a rate of 9%
due May 2017 387 -
Exchangeable Senior Debentures, with a rate of
3 1/4% due April 2024 (g)(h) 323 383
Exchangeable Senior Debentures, with a
rate of 2 5/8% due April 2027 (g)(h) 484 533
Exchangeable Senior Debentures, with a
rate of 2 1/2% due October 2029 (the "2009
Debentures") (h) 316 -
Senior notes, with rate of 10.0% due May 2012 7 7
----- -----
Total senior notes 4,534 3,943
Mortgage debt (non-recourse) secured by $1.5
billion and $2.1 billion of real estate assets,
with an average interest rate of 5.1% and 6.2%
at December 31, 2009 and December 31, 2008,
respectively, maturing through December 2023
(f)(i) 1,217 1,436
Credit facility, including the $210 million
term loan(j) - 410
Other 86 87
Total debt (k)(l) $5,837 $5,876
====== ======
Percentage of fixed rate debt 88% 88%
Weighted average interest rate 6.6% 6.4%
Weighted average debt maturity 4.4 years 4.6 years
Quarter ended December 31, Year ended December 31,
------------------------- -----------------------
2009 2008 2009 2008
Hotel Operating Statistics
for All Properties (m)
Average daily rate $174.31 $198.84 $170.93 $196.70
Average occupancy 65.2% 66.6% 65.9% 71.4%
RevPAR $113.61 $132.36 $112.57 $140.35
(a) In connection with the 2009 $.25 per share common dividend described
below, common OP unit holders received the cash distribution of 10% of
the $0.25 per share dividend paid by Host to its common stockholders, or
$0.025 per OP unit, but did not receive an equivalent per unit
distribution for the 90% of the dividend paid with Host common stock.
Therefore, subsequent to the issuance of shares of common stock to
stockholders of Host, each OP Unit is now convertible into 1.021494 common
shares. At December 31, 2009, there are ll.7 million common OP Units held
by minority partners that are convertible into 11.9 million shares of
Host common stock.
(b) Share prices are the closing price as reported by the New York Stock
Exchange.
(c) Amount reflects market price of a single $1,000 debenture as quoted by
Bloomberg L.P.
(d) In reliance on the specific terms of guidance issued by the IRS and,
subject to certain elections by our stockholders and the effect of a 10%
cash limitation, Host paid approximately 90% of the special dividend with
Host common stock or 13.4 million common shares, with the remaining 10%
paid with cash of approximately $15.6 million.
(e) On December 16, 2009, we declared a fourth quarter preferred cash
dividend of $.5546875 per share for our Class E cumulative redeemable
preferred stock.
(f) During the first quarter of 2010, we used the proceeds from the
issuance of the 2009 Debentures and available cash to repurchase
$346 million face amount of our Series M senior notes and to repay the
mortgage debt on Atlanta Marriott Marquis of $124 million.
(g) During the first quarter of 2009, we repurchased $75 million face
amount of the 2004 Debentures with a carrying value of $72 million for
$69 million. We recorded a gain on repurchase of approximately $3 million.
During the third and fourth quarters of 2009, we repurchased approximately
$74 million face amount of the 2007 Debentures with a carrying value of
$68 million for $66 million. We recorded a gain on repurchase of
approximately $2 million.
(h) During the first quarter of 2009, we adopted a new accounting
requirement that issuers of cash-settled exchangeable debentures must
separately account for the liability and equity components in a manner
that will reflect the entity's nonconvertible debt borrowing rate on the
instrument's issuance date. Therefore, we are required to record the debt
components of the Debentures at fair value as of the date of issuance with
the adjustment to additional paid-in capital and amortize the resulting
discount as an increase to interest expense over the expected life of the
debt. The principal balance shown has been reduced by $124 million
and $76 million as of December 31, 2009 and December 31, 2008,
respectively, which reflects the remaining unamortized discount at these
dates. The discounts will be amortized through the first date at which the
holders can require Host to repurchase the Debentures for cash (April 2010
for the 2004 Debentures, April 2012 for the 2007 Debentures and October
2015 for the 2009 Debentures). The face amount of the 2004, 2007 and 2009
Debentures is $325 million, $526 million and $400 million, respectively,
at December 31, 2009.
(i) The assets securing mortgage debt represents the book value of real
estate assets, net of accumulated depreciation. These amounts do not
represent the current market value of the assets.
(j) Currently, we have $600 million of available capacity under the
revolver portion of the credit facility.
(k) In accordance with GAAP, total debt includes the debt of entities that
we consolidate, but do not own 100% of the interests, and excludes the
debt of entities that we do not consolidate, but have a non-controlling
ownership interest and record our investment therein under the equity
method of accounting. As of December 31, 2009, our non-controlling
partners' share of consolidated debt is $68 million and our share of debt
in unconsolidated investments is $332 million.
(l) Total debt as of December 31, 2009 and December 31, 2008 includes net
discounts of $142 million and $86 million, respectively.
(m) The operating statistics reflect all consolidated properties as of
December 31, 2009 and December 31, 2008, respectively. The operating
statistics include the results of operations for six properties
disposed of in 2009 (including one hotel for which our ground
lease expired in 2009 and will revert back to the ground lessor)
and two properties disposed of in 2008 prior to their disposition.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA
and Funds From Operations per Diluted Share
(unaudited, in millions, except per share amounts)
Quarter ended December 31, Year ended December 31,
2009 2008 2009 2008
Net income (loss) $(72) $111 $(258) $414
Interest expense 115 114 379 375
Depreciation and
amortization 187 181 597 557
Income taxes (10) (14) (39) (3)
Discontinued operations (a) - 10 8 23
--- --- --- ---
EBITDA 220 402 687 1,366
Gains on dispositions - - (35) (24)
Non-cash impairment charges - 3 131 3
Amortization of deferred
gains (1) (1) (4) (4)
Equity investment
adjustments:
Equity in (earnings)
losses of affiliates (5) 13 (3) 10
Pro rata EBITDA of equity
investments 17 1 33 30
Consolidated partnership
adjustments:
Pro rata EBITDA
attributable to non-
controlling partners in
other consolidated
partnerships (2) (4) (11) (16)
--- --- --- ---
Adjusted EBITDA (b) $229 $414 $798 $1,365
==== ==== ==== ======
(a) Reflects the interest expense, depreciation and amortization and
income taxes included in discontinued operations.
(b) Adjusted EBITDA for the fourth quarter and full year 2009 has been
reduced by $41 million due to the accrual of a potential litigation loss.
Quarter ended December 31, Year ended December 31,
2009 2008 2009 2008
Net income (loss) $(72) $111 $(258) $414
Less: Net (income) loss
attributable to
non-controlling
interests 1 (2) 6 (19)
Dividends on
preferred stock (2) (2) (9) (9)
--- --- --- ---
Net income (loss)
available to common
Stockholders (73) 107 (261) 386
Adjustments:
Gains on dispositions,
net of taxes - - (31) (23)
Amortization of deferred
gains and other
property transactions,
net of taxes (1) (1) (4) (4)
Depreciation and
amortization (a) 187 191 604 578
Partnership adjustments 2 6 4 27
FFO of non-controlling
interests of Host LP (2) (10) (7) (37)
Adjustments for dilutive
securities (b):
Assuming conversion of
2004 Exchangeable Senior
Debentures - 8 - 26
Assuming deduction of
gain recognized for the
repurchase of 2004
Exchangeable Debentures
(c) - (12) (2) (8)
--- --- --- ---
Diluted FFO (d) $113 $289 $303 $945
==== ==== ==== ====
Diluted weighted average
shares outstanding (d) 628.9 552.4 589.0 552.8
Diluted FFO per share (d) $.18 $.52 $.51 $1.71
(a) In accordance with the guidance on FFO per diluted share provided by
the National Association of Real Estate Investment Trusts, we do not
adjust net income for the non-cash impairment charges when determining our
FFO per diluted share.
(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, preferred OP Units held by non-
controlling partners, exchangeable debt securities and other non-
controlling 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) During the first quarter of 2009 and fourth quarter of 2008, we
repurchased $75 million and $100 million face amount, respectively, of the
2004 Debentures with a carrying value of $72 million and $96 million for
$69 million and $82 million, respectively. The adjustments to dilutive FFO
related to the 2004 Debentures repurchased include the $3 million and
$14 million gain on repurchase in 2009 and 2008, respectively, net of
interest expense on the repurchased Debentures.
(d) FFO per diluted share and earnings per diluted share were
significantly affected by certain transactions, the effects of which are
shown in the table below (in millions, except per share amounts):
Quarter ended Quarter ended
December 31, 2009 December 31, 2008
----------------- -----------------
Net Income Net Income
(Loss) FFO (Loss) FFO
--- --- --- ---
Loss on litigation (1) $(41) $(41) $- $-
Gain (loss) on debt
extinguishments (2) 1 1 - -
(Gain) loss attributable to
non-controlling interests (3) 1 1 - -
--- --- --- ---
Total (4) $(39) $(39) $- $-
==== ==== === ===
Diluted shares 626.5 628.9 527.1 552.4
Per diluted share $(.07) $(.06) $- $-
===== ===== === ===
Year ended Year ended
December 31, 2009 December 31, 2008
----------------- -----------------
Net Income Net Income
(Loss) FFO (Loss) FFO
--- --- --- ---
Gain on dispositions, net of
taxes $31 $- $23 $-
Loss on litigation (1) (41) (41) - -
Non-cash impairment charges (131) (131) - -
Gain (loss) on debt
extinguishments and the CMBS
defeasance (2) 7 7 - -
(Gain) loss attributable to
non-controlling interests (3) 3 3 (1) -
--- --- --- ---
Total (4) $(131) $(162) $22 $-
===== ===== === ===
Diluted shares 587.2 589.7 527.4 552.8
Per diluted share $(.23) $(.28) $.04 $-
===== ===== ==== ===
(1) Includes the accrual of a potential litigation loss in the fourth
quarter of 2009.
(2) Includes gains/losses associated with the repurchase of our 2007
Debentures and the repayment of the term loan. Additionally, as prescribed
by the sharing agreement with the successor borrower in connection with
the 2007 defeasance of $514 million in collateralized mortgage-backed
securities, we received $7 million and recorded the gain as a reduction of
interest expense in the second quarter 2009. The loan had an initial
maturity date of September 15, 2009, and was prepayable beginning on
May 1, 2009. We had been legally released from all obligations under the
loan upon the defeasance in 2007.
(3) Represents the portion of the significant items attributable to non-
controlling partners in Host LP.
(4) Earnings and FFO per diluted share for all periods presented also
include non-cash interest expense related to the Company's exchangeable
debentures in accordance with accounting requirements adopted on January
1, 2009. The increase to interest expense was $8 million and $9 million
in the fourth quarter of 2009 and 2008 (or $.01 for FFO and earnings per
diluted share for both periods), respectively, and $27 million and $30
million for the full year 2009 and 2008 (or $.03 for FFO per diluted share
and $.04 for earnings per diluted share for both full year periods),
respectively.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and
Funds From Operations per Diluted Share for Full Year 2010 Forecasts (a)
(unaudited, in millions, except per share amounts)
2010 Forecast
Low end High end
of range of range
-------- --------
Net loss $(315) $(207)
Interest expense (b) 369 369
Depreciation and amortization 598 598
Income taxes (30) (23)
--- ---
EBITDA 622 737
Gains on dispositions (5) (5)
Equity investment adjustments:
Equity in losses of affiliates 8 8
Pro rata Adjusted EBITDA of equity investments 23 23
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA attributable to
non-controlling partners in other
consolidated partnerships (13) (13)
--- ---
Adjusted EBITDA $635 $750
==== ====
2010 Forecast
Low end High end
of Range of Range
-------- --------
Net loss $(315) $(207)
Less: Net loss attributable to non-controlling
interests 6 4
Dividends on preferred stock (9) (9)
Net loss available to common stockholders (318) (212)
Adjustments:
Depreciation and amortization 596 596
Gain on dispositions, net of taxes (5)
