HOST HOTELS & RESORTS, INC. 
By BETHESDA, Md., Feb. 19, 2014 /PRNewswire/ -- Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the year.
(Logo: http://photos.prnewswire.com/prnh/20060417/HOSTLOGO )
Operating Results
(in millions, except per share and hotel statistics)
Quarter ended (a)
----------------
As Adjusted As Reported
December 31, December 31, Percent December 31,
2013 2012 (b) Change (c) 2012 (d)
---- ------- --------- -------
Total owned hotel revenues $1,318 $1,226 7.5% $1,590
Comparable hotel revenues (b) 1,195 1,128 6.0% N/M
Net income (loss) 126 (26) N/M 15
Adjusted EBITDA (b) 322 314 2.5% 426
Change in comparable hotel RevPAR - Constant US$ (e) 6.6%
Change in comparable hotel RevPAR - Nominal US$ (e) 6.2%
Diluted earnings (loss) per share $.16 $(.04) N/M $.02
NAREIT FFO per diluted share (b) .33 .29 13.8% .40
Adjusted FFO per diluted share (b) .33 .30 10.0% .40
Year ended
----------
December 31, December 31, Percent
2013 2012 Change
---- ---- ------
Total owned hotel revenues $5,115 $4,788 6.8%
Comparable hotel revenues (b) 4,670 4,452 4.9%
Net income 325 63 N/M
Adjusted EBITDA (b) 1,306 1,190 9.7%
Change in comparable hotel RevPAR - Constant US$ (e) 5.8%
Change in comparable hotel RevPAR - Nominal US$ (e) 5.6%
Diluted earnings per share $.42 $.08 N/M
NAREIT FFO per diluted share (b) 1.26 1.04 21.2%
Adjusted FFO per diluted share (b) 1.31 1.10 19.1%
N/M=Not Meaningful
(a) As of January 1, 2013, the Company adopted calendar quarter reporting periods. For further discussion, see "Adjustments for Calendar Quarter Reporting Periods" on page 2 of this release.
(b) NAREIT Funds From Operations ("FFO") per diluted share, Adjusted FFO per diluted share (which excludes debt extinguishment costs and other expenses), Adjusted EBITDA (which is earnings before
interest, taxes, depreciation, amortization and other items) and comparable hotel operating results (including comparable hotel revenues and comparable hotel adjusted operating profit margins) are
non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission ("SEC"). In addition, the presentation of
fourth quarter 2012 As Adjusted results, including total owned hotel revenues and net income (loss), are also non-GAAP financial measures. See the Notes to Financial Information included in this
press release on why the Company believes these supplemental measures are useful, reconciliations to the applicable GAAP measure, the limitations on their use and information on the 2012 As Adjusted
results calculations.
(c) Percent changes provided are from the fourth quarter 2012 As Adjusted results.
(d) Historical operating results for the fourth quarter 2012 as filed with the SEC on February 21, 2013.
(e) For RevPAR statistics, the Company presents results in constant US$ and nominal US$. Constant US$ results assume that the year-over-year results are translated to U.S. Dollars using the same
prevailing exchange rate; thereby eliminating the effect of currency fluctuation for comparative purposes. Nominal US$ results include the effect of currency fluctuations consistent with our
financial statement presentation. See Notes to Financial Information.
The Company's owned hotel revenues increased 7.5% for the fourth quarter, compared to the corresponding 2012 "As Adjusted" quarterly results, as described herein, and 6.8% for the full year 2013, compared to 2012. The growth reflects a 6.0% revenue improvement at the Company's comparable hotels for the fourth quarter and a 4.9% increase for the full year.
The improvements in the Company's results were driven by strong growth in comparable RevPAR. On a constant US$ basis, RevPAR increased 6.6% and 5.8% for the fourth quarter and full year, respectively, reflecting strong improvements in average room rates, coupled with continued occupancy growth. The Company believes this presentation is useful to investors because it provides greater clarity with respect to growth in RevPAR in the local currency of the hotel consistent with how the Company would evaluate its domestic portfolio. On a nominal US$ basis, which includes the effect of foreign currency fluctuation, comparable hotel RevPAR increased 6.2% for the fourth quarter and 5.6% for the full year when compared to the 2012 results. For the fourth quarter and full year 2013, average room rates improved 4.1% and 4.2%, respectively, while occupancy improved 1.5 percentage points to 73% for the fourth quarter and one percentage point to 76% for the full year. Additionally, comparable food and beverage revenues increased 6.1% and 4.0% for the fourth quarter and full year, respectively.
The improvements in revenues led to strong margin growth as comparable hotel adjusted operating profit margins increased 130 basis points for the fourth quarter and 100 basis points for the full year.
Adjustments for Calendar Quarter Reporting Periods- As of January 1, 2013, the Company adopted calendar quarter reporting periods, compared to 2012 where the Company reported quarterly results based on the fiscal quarters that had been used by Marriott International. Accordingly, the Company's revenues, net income, Adjusted EBITDA, diluted earnings per share and NAREIT and Adjusted FFO per diluted share quarterly results for 2013 are not comparable to the historical quarterly results of 2012. Because the Company has always reported full year results on a calendar year, full year results for 2013 and 2012 are comparable. To enable investors to evaluate its quarterly performance, the Company has presented 2012 RevPAR and certain historical results on a calendar quarter basis (the "2012 As Adjusted" results). The 2012 As Adjusted fourth quarter results include (i) an adjustment to exclude operations from September 8, 2012 through September 30, 2012 for the Company's Marriott-managed hotels and (ii) an adjustment to exclude the September operations for its hotels managed by Ritz-Carlton, Hyatt, Starwood and other managers who report on a calendar basis, as the Company's historical fourth quarter results included September, October, November and December operations for these properties. Accordingly, the discussion of quarterly operating performance includes a comparison between the three months ended December 31 for both years, which management believes is an important supplemental measure of the Company's performance. For further discussion of the 2012 As Adjusted quarterly results, see the Notes to Financial Information included in this release.
Acquisitions
On January 21, 2014, the Company acquired the 151-room Powell Hotel in San Francisco, along with 8,554 square feet of retail space, and the fee simple interest in the land for $75 million. The property is located in the heart of downtown San Francisco, two blocks from Union Square and three blocks from the Moscone Convention Center. The hotel will be managed by Kokua Hospitality. The retail space is occupied by Sephora, a leading provider of perfume and cosmetics, under a long-term lease. The Company intends to invest approximately $22 million in an extensive redevelopment of the property beginning late 2014.
In December 2013, the Company made the final incremental payment of $19.9 million for the purchase of the fee simple interest in the land at the New York Marriott Marquis Times Square. In addition, $25 million of the payments made pursuant to the terms of the ground lease have been attributed toward the purchase of the land. The purchase was completed in conjunction with the Company's 2012 lease of the existing retail space to Vornado Realty Trust and its on-going redevelopment, which is expected to be completed in early 2015.
Dispositions
On November 20, 2013, the Company sold the Four Seasons Hotel Atlanta, including the furniture, fixtures and equipment ("FF&E") replacement fund, for a sale price of $63 million and recognized a gain on sale of approximately $11 million. On December 18, 2013, the Company sold the Dallas/Addison Marriott Quorum by the Galleria for a sale price of $56 million, including the FF&E replacement fund, and recognized a gain on sale of approximately $15 million.
On January 10, 2014, the Company sold an 89% interest in the Philadelphia Marriott Downtown to Clearview and funds managed by Oaktree Capital Management L.P. based on a market value of $303 million. The partnership owning the hotel entered into a $230 million mortgage loan to facilitate the transaction and the Company retained an $8 million equity interest in the hotel. The Company also completed the sale of the Courtyard Nashua, New Hampshire on February 12, 2014 for $10 million. In the last twelve months, the Company has sold six properties for a total sale price of approximately $667 million. The proceeds were used to repay debt and for general corporate purposes.
Capital Expenditures
The Company continues to pursue opportunities to enhance asset value through select capital improvements, while ensuring that its high standards for product quality are maintained. For full year 2013, the Company has completed renovations of 6,900 guestrooms, over 420,000 square feet of meeting space and approximately 150,000 square feet of public space.
-- Redevelopment and Return on Investment Expenditures - The Company
invested approximately $26 million and $97 million in the fourth quarter
and full year 2013, respectively, in redevelopment and return on
investment ("ROI") capital expenditures. These projects are designed to
increase cash flow and to improve profitability by capitalizing on
changing market conditions and the favorable locations of the Company's
properties. Projects completed during the fourth quarter include the
significant renovation of the food and beverage program at The
Ritz-Carlton, Naples, including a repositioning of the Terrazza, Dusk
and Grill outlets. The Company expects that ROI capital expenditures for
2014 will range from $70 million to $80 million.
-- Capital Expenditures for Recent Acquisitions - In conjunction with the
acquisition of a property, the Company prepares capital and operational
improvement plans designed to maximize profitability and to enhance the
guest experience. The Company invested approximately $7 million and $36
million on these projects during the fourth quarter and full year 2013,
respectively. The Company expects that acquisition capital expenditures
will total $30 million to $35 million for 2014.
-- Renewal and Replacement Expenditures - The Company invested
approximately $64 million and $303 million in renewal and replacement
capital expenditures during the fourth quarter and full year 2013,
respectively. During the fourth quarter, major renewal and replacement
projects completed include the renovation of 230 suites at the Fairmont
Kea Lani, Maui and renovation of the 35,000 square foot ballroom at the
JW Marriott Washington, D.C. The Company expects that renewal and
replacement expenditures for 2014 will total approximately $320 million
to $340 million.
Balance Sheet
During the quarter, the Company refinanced the 5.55%, $134 million mortgage loan on the Harbor Beach Marriott Resort and Spa through the issuance of a new $150 million mortgage loan, with an interest rate of 4.75% that matures in January 2024. Additionally, the Company prepaid the 8.5%, $31 million mortgage loan on The Westin Denver Downtown. Subsequent to year end, the Company redeemed the remaining $150 million of 6¾% Series Q senior notes at 101.125%, which reflects a $2 million call premium, and repaid $225 million borrowed under its credit facility. Additionally, the Company intends to repay the $300 million mortgage note on The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa when due on March 1, 2014 with available cash.
The Company's senior notes were recently upgraded by Standard & Poor's to a BBB investment grade rating, due in part to its low leverage levels, balanced debt maturities and large pool of unencumbered assets. Since January 1, 2013, including the debt repayments discussed above, the Company has reduced its total debt by $1.3 billion and extended its weighted average debt maturity to 6.0 years. As a result of these efforts, 2014 cash interest expense is forecast to be approximately $195 million, compared to cash interest expense of $282 million in 2013.
After adjusting for the acquisition, dispositions and dividend payments that have occurred in the first quarter of 2014, as well as the debt repayments discussed above, the Company has approximately $779 million of available capacity under its credit facility and a debt balance of $4,084 million. Additionally, after giving effect to these transactions, the Company has $310 million of available cash as detailed in the below table:
Cash balance at December 31, 2013 $861
Proceeds from the sale of 89% of the Philadelphia Marriott Downtown 290
Repayment of credit facility (225)
Redemption of the 63/4% Series Q senior notes (152)
January 15, 2014 dividend payment (99)
Acquisition of Powell Hotel (75)
Proceeds from the sale of the Courtyard Nashua, New Hampshire 10
Expected repayment of The Ritz-Carlton, Naples and Newport Beach Marriott mortgage (300)
----
Cash balance at March 1, 2014 $310
====
European Joint Venture
On December 12, 2013, the Company's joint venture in Europe entered into a EUR17 million mortgage loan secured by the Le Méridien Grand Hotel Nuremburg. The mortgage loan matures in 2016 and bears interest at an initial rate of 3%. The joint venture's comparable hotel RevPAR on a constant euro basis increased 5.1% in the fourth quarter and 1.9% for full year 2013 for the 12 properties with comparable results. The comparable RevPAR results exclude one hotel that was under extensive renovations in 2012, five hotels that were purchased by the joint venture in 2012 and one hotel that was acquired in 2013.
Dividend
The Company paid a regular quarterly cash dividend of $.13 per share on its common stock on January 15, 2014 to stockholders of record on December 31, 2013. This dividend brings the total dividend for 2013 to $.46 per share, which represents a 53% increase over the total dividend for 2012. On February 18, 2014, the Board of Directors authorized a regular quarterly cash dividend of $.14 per share on its common stock. The dividend will be paid on April 15, 2014 to stockholders of record on March 31, 2014. The amount of any future dividend is dependent on the Company's taxable income and will be determined by the Company's Board of Directors.
2014 Outlook
The Company anticipates that the following 2014 statistics will increase compared to 2013 as follows:
Full Year
2014
---------
Low-end High-end
of range of range
-------- --------
Comparable hotel RevPAR
for domestic properties 5.0% 6.0%
Comparable hotel RevPAR
for international
properties -constant US $5.5% 6.5%
Total comparable hotel
RevPAR -constant US $5.0% 6.0%
Total revenues under GAAP 2.9% 3.9%
Total comparable hotel
revenues 4.3% 5.3%
Operating profit margins
under GAAP 140 bps 200 bps
Comparable hotel adjusted
operating profit margins 60 bps 110 bps
Based upon these parameters, the Company
estimates that its 2014 guidance is as follows
(in millions, except per share amounts):
Full Year
2014
---------
Low-end High-end
of range of range
-------- --------
Diluted earnings per
share $0.63 $0.68
Net income 490 527
NAREIT FFO per diluted
share 1.39 1.44
Adjusted FFO per diluted
share 1.40 1.44
Adjusted EBITDA 1,350 1,390
See the 2014 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecast results.
About Host Hotels & Resorts
Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 99 properties in the United States and 15 properties internationally totaling approximately 59,800 rooms. The Company also holds non-controlling interests in a joint venture in Europe that owns 19 hotels with approximately 6,400 rooms and a joint venture in Asia that owns one hotel in Australia and a minority interest in two hotels in India. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott(®), Ritz-Carlton(®),( )Westin(®), Sheraton(®), W(®), St. Regis(®), Le Meridien(®), The Luxury Collection(®), Hyatt(®), Fairmont(®), Four Seasons(®), Hilton(®), Swissotel(®), ibis(®), Pullman(®), and Novotel(®) in the operation of properties in over 50 major markets worldwide. For additional information, please visit the Company's website at www.hosthotels.com.
Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements include forecast results and are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "plan," "predict," "project," "will," "continue" and other similar terms and phrases, including references to assumptions 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: changes in national and local economic and business conditions that will affect occupancy rates at our hotels and the demand for hotel products and services; the impact of geopolitical developments outside the U.S. on lodging demand; volatility in global financial and credit markets; operating risks associated with the hotel business; risks and limitations in our operating flexibility associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; risks associated with our relationships with property managers and joint venture partners; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; the effects of hotel renovations on our hotel occupancy and financial results; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; risks associated with our ability to complete acquisitions and dispositions and develop new properties and the risks that acquisitions and new developments may not perform in accordance with our expectations; our ability to continue to satisfy complex rules in order for us to remain a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described in the Company's annual report on Form 10?K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of February 19, 2014, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
* This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein referred to as "we" or "Host Inc.," 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. ("Host LP"), of which we are the sole general partner. When distinguishing between Host Inc. and Host LP, the primary difference is approximately 1.3% of the partnership interests in Host LP held by outside partners as of December 31, 2013, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income attributable to non-controlling interests in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10?K.
Effective January 1, 2013, we report quarterly operating results on a calendar cycle, which is not comparable to the quarterly reporting method used in 2012. For additional information on the change in reporting periods, comparable hotel measures and non-GAAP financial measures which we believe is useful to investors, see the Notes to Financial Information included in this release.
Consolidated Balance Sheets (a)
(in millions, except shares and per share amounts)
December 31, December 31,
2013 2012
---- ----
(unaudited)
ASSETS
------
Property and
equipment, net $10,995 $11,588
Due from managers 52 80
Advances to and
investments in
affiliates 415 347
Deferred financing
costs, net 42 53
Furniture, fixtures
and equipment
replacement fund 173 154
Other 244 319
Restricted cash 32 36
Cash and cash
equivalents 861 417
--- ---
Total assets $12,814 $12,994
======= =======
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY
-------------------------------------------------
Debt
Senior notes,
including $371
million and $531
million,
respectively, net of
discount, of
Exchangeable Senior
Debentures $3,018 $3,569
Credit facility,
including the $500
million term loan 946 763
Mortgage debt 709 993
Other 86 86
--- ---
Total debt 4,759 5,411
Accounts payable and
accrued expenses 214 194
Other 389 372
--- ---
Total liabilities 5,362 5,977
----- -----
Non-controlling
interests-Host
Hotels & Resorts,
L.P. 190 158
Host Hotels & Resorts, Inc. stockholders'
equity:
Common stock, par
value $.01, 1,050
million shares
authorized; 754.8
million shares and
724.6 million shares
issued and
outstanding,
respectively 8 7
Additional paid-in
capital 8,492 8,040
Accumulated other
comprehensive income
(loss) (9) 12
Deficit (1,263) (1,234)
Total equity of Host
Hotels & Resorts,
Inc. stockholders 7,228 6,825
Non-controlling
interests-other
consolidated
partnerships 34 34
--- ---
Total equity 7,262 6,859
----- -----
Total liabilities,
non-controlling
interests and equity $12,814 $12,994
------- -------
(a) Our consolidated balance sheets as of December 31, 2013
have been prepared without audit. Certain information and
footnote disclosures normally included in financial statements
presented in accordance with GAAP have been omitted
HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Quarter Year
ended ended
December December
31, 31,
-------- ---------
2013 2012 2013 2012
---- ---- ---- ----
Revenues
Rooms $838 $1,015 $3,317 $3,082
Food and
beverage 407 485 1,503 1,419
Other 73 90 295 287
--- --- --- ---
Owned hotel
revenues 1,318 1,590 5,115 4,788
Other revenues 13 83 51 271
--- --- --- ---
Total revenues 1,331 1,673 5,166 5,059
----- ----- ----- -----
Expenses
Rooms 226 272 894 836
Food and
beverage 288 353 1,095 1,049
Other
departmental
and support
expenses 317 395 1,249 1,219
Management
fees 60 70 222 199
Other
property-
level
expenses 92 180 376 576
Depreciation
and
amortization
(b) 178 272 697 722
Corporate and
other
expenses 32 34 121 107
Gain on
insurance
settlements - (11) - (11)
--- --- --- ---
Total
operating
costs and
expenses 1,193 1,565 4,654 4,697
----- ----- ----- -----
Operating
profit 138 108 512 362
Interest
income 1 12 4 23
Interest
expense (c) (60) (101) (304) (373)
Net gains on
property
transactions
and other 1 9 33 13
Gain (loss) on
foreign
currency
transactions
and
derivatives 1 (1) 3 (4)
Equity in
earnings
(losses) of
affiliates
(b) (20) - (17) 2
--- --- --- ---
Income before
income taxes 61 27 231 23
Provision for
income taxes (2) (22) (21) (31)
--- --- --- ---
Income (loss)
from
continuing
operations 59 5 210 (8)
Income from
discontinued
operations,
net of tax 67 10 115 71
--- --- --- ---
Net income 126 15 325 63
Less: Net
income
attributable
to non-
controlling
interests (3) - (8) (2)
--- --- --- ---
Net income
attributable
to Host Inc. $123 $15 $317 $61
==== === ==== ===
Basic earnings (loss) per
common share:
Continuing
operations $.07 $.01 $.27 $(.01)
Discontinued
operations .09 .01 .16 .09
--- --- --- ---
Basic earnings
per common
share $.16 $.02 $.43 $.08
==== ==== ==== ====
Diluted earnings (loss)
per common share:
Continuing
operations $.07 $.01 $.27 $(.01)
Discontinued
operations .09 .01 .15 .09
--- --- --- ---
Diluted
earnings per
common share $.16 $.02 $.42 $.08
==== ==== ==== ====
(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) Depreciation and amortization expense includes a $60
million impairment expense in 2012 related to the Westin
Mission Hills Resort & Spa. Equity in earnings (losses) of
affiliates also includes an adjustment of $15 million in 2013
for our portion of the non-cash impairment expense related
to one of the hotels in our joint venture in Europe.
(c) Interest expense includes the following items:
Quarter Year
ended ended
December December
31, 31,
-------- ---------
2013 2012 2013 2012
---- ---- ---- ----
Non-cash
interest for
exchangeable
debentures $4 $5 $15 $17
Debt
extinguishment
costs - 3 36 30
--- --- --- ---
Total $4 $8 $51 $47
=== === === ===
HOST HOTELS & RESORTS, INC.
Earnings per Common Share
(unaudited, in millions, except per share amounts)
Quarter Year
ended ended
December December
31, 31,
-------- ---------
2013 2012 2013 2012
---- ---- ---- ----
Net income $126 $15 $325 $63
Less: Net income
attributable to non-
controlling interests (3) - (8) (2)
--- --- --- ---
Net income
attributable to Host
Inc. $123 $15 $317 $61
==== === ==== ===
Diluted income
attributable to Host
Inc. $123 $15 $317 $61
==== === ==== ===
Basic weighted average
common shares
outstanding 754.7 723.9 744.4 718.2
===== ===== ===== =====
Diluted weighted
average common shares
outstanding (a) 755.6 725.1 747.9 719.6
===== ===== ===== =====
Basic earnings per
common share $.16 $.02 $.43 $.08
==== ==== ==== ====
Diluted earnings per
common share $.16 $.02 $.42 $.08
==== ==== ==== ====
(a) Dilutive securities may include shares granted under
comprehensive stock plans, preferred operating partnership units
("OP Units") held by minority partners, exchangeable debt
securities and other non-controlling interests that have the
option to convert their limited partnership interests to common OP
Units. No effect is shown for any securities that were anti-
dilutive for the period.
HOST HOTELS & RESORTS, INC.
Hotel Operating Data for Consolidated Hotels (a)
Comparable Hotels by Market in Constant US$
As Adjusted
As of Quarter ended December Quarter ended December
December 31, 31, 2013 31, 2012
2013
------------- ----------------------- -----------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Market (b) Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
--------- ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Boston 6 3,672 $202.76 73.7% $149.51 $194.05 69.5% $134.85 10.9%
New York 8 6,450 319.98 88.8 284.06 310.27 88.1 273.46 3.9
Philadelphia 3 2,191 191.20 74.6 142.55 183.67 66.4 121.91 16.9
Washington, D.C. 11 5,119 191.70 69.0 132.36 195.53 66.5 130.08 1.8
Atlanta 5 1,939 172.31 72.7 125.20 173.61 68.5 118.96 5.2
Florida 7 3,230 182.99 71.4 130.63 175.87 68.9 121.24 7.7
Chicago 6 2,387 189.94 72.2 137.17 194.70 73.1 142.42 (3.7)
Denver 3 1,363 145.69 57.9 84.38 143.49 54.4 78.00 8.2
Houston 4 1,706 179.57 74.4 133.64 153.93 75.9 116.88 14.3
Phoenix 4 1,522 189.31 65.2 123.39 178.45 63.5 113.29 8.9
Seattle 3 1,774 162.42 73.4 119.16 154.83 71.4 110.48 7.9
San Francisco 5 3,701 209.75 77.0 161.43 184.55 76.7 141.61 14.0
Los Angeles 8 3,228 156.75 77.1 120.81 150.62 76.2 114.77 5.3
San Diego 5 4,691 181.66 71.8 130.43 176.48 67.2 118.57 10.0
Hawaii 2 1,256 354.17 78.4 277.63 327.40 82.7 270.74 2.5
Other 12 7,532 159.51 62.5 99.65 147.44 63.6 93.72 6.3
--- ----- ------ ---- ----- ------ ---- ----- ---
Domestic 92 51,761 206.52 73.0 150.76 198.27 71.4 141.51 6.5
=== ====== ====== ---- ====== ====== ---- ====== ---
Asia-Pacific 6 1,255 $158.97 82.0% $130.37 $150.21 81.2% $121.89 7.0%
Canada 3 1,219 180.76 67.9 122.81 167.56 68.2 114.30 7.5
Latin America 4 1,075 242.05 69.7 168.63 214.56 73.4 157.47 7.1
--- ----- ------ ---- ------ ------ ---- ------ ---
International 13 3,549 189.77 73.4 139.36 174.91 74.4 130.06 7.2
--- ----- ------ ---- ------ ------ ---- ------ ---
All Markets - Constant US $105 55,310 205.44 73.0 150.03 196.71 71.6 140.77 6.6
==== ======
All Owned Hotels in Constant US$ (d)
As Adjusted
As of Quarter ended December Quarter ended December
December 31, 31, 2013 31, 2012
2013
------------- ----------------------- -----------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Comparable Hotels 105 55,310 $205.44 73.0% $150.03 $196.71 71.6% $140.77 6.6%
Non-comparable Hotels (Pro Forma) 10 6,030 218.02 69.5 151.46 204.41 65.2 133.18 13.7
--- ----- ------ ---- ------ ------ ---- ------ ----
All Hotels 115 61,340 206.63 72.7 150.17 197.39 70.9 140.04 7.2
=== ======
Comparable Hotels in Nominal US$
As Adjusted
As of Quarter ended December Quarter ended December
December 31, 31, 2013 31, 2012
2013
------------- ----------------------- -----------------------
Average Average Percent
International No. of No. of Average Occupancy Average Occupancy Change in
Market Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
------ ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Asia-Pacific 6 1,255 $158.97 82.0% $130.37 $159.18 81.2% $129.17 0.9%
Canada 3 1,219 180.76 67.9 122.81 177.05 68.2 120.77 1.7
Latin America 4 1,075 242.05 69.7 168.63 229.21 73.4 168.22 0.2
--- ----- ------ ---- ------ ------ ---- ------ ---
International 13 3,549 189.77 73.4 139.36 185.75 74.4 138.11 0.9
Domestic 92 51,761 206.52 73.0 150.76 198.27 71.4 141.51 6.5
--- ------ ------ ---- ------ ------ ---- ------ ---
All Markets -Constant US $105 55,310 205.44 73.0 150.03 197.43 71.6 141.29 6.2
==== ======
Comparable Hotels by Type in Nominal US$
As Adjusted
As of Quarter ended December Quarter ended December
December 31, 31, 2013 31, 2012
2013
------------- ----------------------- -----------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Property Type (b) Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------------- ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Urban 54 34,215 $223.69 75.3% $168.46 $216.04 73.2% $158.12 6.5%
Suburban 28 10,021 161.76 66.5 107.60 153.46 66.1 101.49 6.0
Resort/Conference 12 5,906 234.70 66.7 156.44 223.93 66.3 148.47 5.4
Airport 11 5,168 132.30 77.8 102.98 127.85 77.4 98.91 4.1
--- ----- ------ ---- ------ ------ ---- ----- ---
All Types 105 55,310 205.44 73.0 150.03 197.43 71.6 141.29 6.2
=== ======
Comparable Hotels by Market in Constant US$
As of Year ended December 31, Year ended December 31,
December 31, 2013 2012
2013
------------- ------------------------ ------------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Market (b) Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
--------- ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Boston 6 3,672 $193.69 77.6% $150.25 $189.22 74.0% $140.11 7.2%
New York 8 6,450 278.42 86.6 241.20 272.52 83.5 227.64 6.0
Philadelphia 3 2,191 185.36 75.2 139.37 180.98 74.7 135.24 3.1
Washington, D.C. 11 5,119 197.26 74.4 146.68 197.96 73.4 145.21 1.0
Atlanta 5 1,939 171.38 73.6 126.11 165.63 69.5 115.06 9.6
Florida 7 3,230 196.43 75.3 147.99 186.39 74.0 137.95 7.3
Chicago 6 2,387 191.06 75.1 143.52 184.03 75.5 138.94 3.3
Denver 3 1,363 144.17 63.9 92.18 138.62 63.6 88.13 4.6
Houston 4 1,706 181.26 76.6 138.75 157.53 76.5 120.51 15.1
Phoenix 4 1,522 188.53 68.2 128.65 180.15 66.9 120.47 6.8
Seattle 3 1,774 168.60 78.1 131.71 158.04 75.1 118.73 10.9
San Francisco 5 3,701 199.66 80.3 160.41 180.22 80.8 145.55 10.2
Los Angeles 8 3,228 162.93 81.7 133.11 152.29 81.1 123.49 7.8
San Diego 5 4,691 186.14 78.2 145.59 182.78 76.4 139.69 4.2
Hawaii 2 1,256 353.41 82.0 289.89 332.04 83.3 276.47 4.9
Other 12 7,532 155.82 66.8 104.05 146.87 68.0 99.90 4.2
--- ----- ------ ---- ------ ------ ---- ----- ---
Domestic 92 51,761 199.44 76.3 152.13 191.00 75.2 143.62 5.9
=== ====== ====== ---- ====== ====== ---- ====== ---
Asia-Pacific 6 1,255 $156.30 82.3% $128.59 $149.15 79.8% $118.96 8.1%
Canada 3 1,219 183.53 68.9 126.43 174.08 68.2 118.70 6.5
Latin America 4 1,075 238.71 65.6 156.52 224.15 71.2 159.49 (1.9)
--- ----- ------ ---- ------ ------ ---- ------ ----
International 13 3,549 187.71 72.6 136.31 179.22 73.2 131.15 3.9
--- ----- ------ ---- ------ ------ ---- ------ ---
All Markets - Constant US $105 55,310 198.72 76.0 151.12 190.26 75.1 142.82 5.8
==== ======
All Owned Hotels in Constant US$ (d)
As of Year ended December 31, Year ended December 31,
December 31, 2013 2012 (c)
2013
------------- ------------------------ ------------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Comparable Hotels 105 55,310 $198.73 76.0% $151.12 $190.26 75.1% $142.82 5.8%
Non-comparable Hotels (Pro Forma) 10 6,030 208.17 70.3 146.32 193.55 67.1 129.95 12.6
--- ----- ------ ---- ------ ------ ---- ------ ----
All Hotels 115 61,340 199.59 75.5 150.65 190.54 74.3 141.60 6.4
=== ======
Comparable Hotels in Nominal US$
As of Year ended December 31, Year ended December 31,
December 31, 2013 2012 (c)
2013
------------- ------------------------ ------------------------
Average Average Percent
International No. of No. of Average Occupancy Average Occupancy Change in
Market Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
------ ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Asia-Pacific 6 1,255 $156.30 82.3% $128.59 $154.17 79.8% $122.96 4.6%
Canada 3 1,219 183.53 68.9 126.43 179.47 68.2 122.37 3.3
Latin America 4 1,075 238.71 65.6 156.52 232.18 71.2 165.21 (5.3)
--- ----- ------ ---- ------ ------ ---- ------ ----
International 13 3,549 187.71 72.6 136.31 185.24 73.2 135.56 0.6
Domestic 92 51,761 199.44 76.3 152.13 191.00 75.2 143.62 5.9
--- ------ ------ ---- ------ ------ ---- ------ ---
All Markets -Constant US $105 55,310 198.72 76.0 151.12 190.64 75.1 143.10 5.6
==== ======
Comparable Hotels by Type in Nominal US$
As of Year ended December 31, Year ended December 31,
December 31, 2013 2012 (c)
2013
------------- ------------------------ ------------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Property Type (b) Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------------- ---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Urban 54 34,215 $212.05 77.8% $164.95 $205.15 76.4% $156.81 5.2%
Suburban 28 10,021 163.16 70.7 115.40 152.34 70.7 107.74 7.1
Resort/Conference 12 5,906 239.60 71.5 171.32 228.57 70.3 160.61 6.7
Airport 11 5,168 132.13 80.0 105.74 126.34 79.9 100.91 4.8
--- ----- ------ ---- ------ ------ ---- ------ ---
All Types 105 55,310 198.72 76.0 151.12 190.64 75.1 143.10 5.6
=== ======
(a) See the Notes to
Financial Information for
a discussion of reporting
periods, comparable hotel
operating statistics and
constant US$ presentation.
Nominal US$ results
include the effect of
currency fluctuations,
consistent with our
financial statement
(b) See the Notes to
Financial Information for
a description of these
markets and property
types.
(c) The full year 2012 is a
leap year and includes one
additional day of
operations compared to
2013.
(d) Operating statistics
presented are for all
consolidated properties
owned as of December 31,
2013 and do not include
the results of operations
for properties sold in
2013 or 2012. Operations
for hotels acquired in
2013 and 2012 are
presented on a pro forma
Hotel Operating Data - European Joint Venture
Constant Euros (a)
As Adjusted
As of December 31, Quarter ended December Quarter ended December
2013 31, 2013 31, 2012
------------------- ----------------------- -----------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Total
comparable 12 3,547 EUR 186.36 76.0% EUR 141.63 EUR 187.94 71.7% EUR 134.77 5.1%
Non-
comparable
(Pro
Forma) 7 2,880 144.93 76.2 110.44 151.86 73.6 111.84 (1.3)
--- ----- ------ ---- ------ ------ ---- ------ ----
All
Hotels 19 6,427 167.76 76.1 127.65 171.54 72.6 124.50 2.5
=== =====
Constant Euros (a)
As of December 31, Year ended December 31, Year ended December 31,
2013 2013 2012
------------------- ------------------------ ------------------------
Average Average Percent
No. of No. of Average Occupancy Average Occupancy Change in
Properties Rooms Room Rate Percentage RevPAR Room Rate Percentage RevPAR RevPAR
---------- ----- --------- ---------- ------ --------- ---------- ------ ------
Total
comparable 12 3,547 EUR 192.70 77.0% EUR 148.45 EUR 192.67 75.6% EUR 145.75 1.9%
Non-
comparable
(Pro
Forma) 7 2,880 151.28 76.3 115.44 154.59 73.0 112.82 2.3
--- ----- ------ ---- ------ ------ ---- ------ ---
All
Hotels 19 6,427 174.24 76.7 133.66 175.95 74.5 130.99 2.0
=== =====
(a) The presentation above includes the operating performance for the 12 properties in the joint venture with comparable results (determined on the same basis as for the Company's consolidated
portfolio). The operations for five hotels acquired in 2012 and one hotel acquired in 2013 are presented as non-comparable properties on a pro forma basis, as the joint venture did not own the
hotels for the entirety of 2012. The non-comparable properties also include one hotel that was under extensive renovations in 2012. See Notes to Financial Information for a discussion of the
constant euro presentation and a discussion on these pro forma statistics and the limitations on their use.
HOST HOTELS & RESORTS, INC.
Comparable Hotel Operating Data
Schedule of Comparable Hotel Results (a)
(unaudited, in millions, except hotel statistics)
Quarter ended Year ended (b)
------------- -------------
As Adjusted
December 31, December 31, December 31, December 31,
2013 2012 (c) 2013 2012
---- ------- ---- ----
Number of hotels 105 105 105 105
Number of rooms 55,310 55,310 55,310 55,310
Percent change in comparable hotel RevPAR - Constant US $6.6% - 5.8% -
Percent change in comparable hotel RevPAR - Nominal US $6.2% - 5.6% -
Operating profit margin (d) 10.4% 3.3% 9.9% 7.2%
Comparable hotel adjusted operating profit margin (d) 25.6% 24.3% 25.5% 24.5%
Comparable hotel revenues
Room $764 $719 $3,051 $2,896
Food and beverage (e) 364 343 1,347 1,295
Other 67 66 272 261
--- --- --- ---
Comparable hotel revenues (f) 1,195 1,128 4,670 4,452
----- ----- ----- -----
Comparable hotel expenses
Room 205 194 817 777
Food and beverage (g) 259 249 983 958
Other 34 34 139 139
Management fees, ground rent and other costs 391 377 1,541 1,489
--- --- ----- -----
Comparable hotel expenses (h) 889 854 3,480 3,363
--- --- ----- -----
Comparable hotel adjusted operating profit 306 274 1,190 1,089
Non-comparable hotel results, net (i) 42 37 140 105
Earnings for hotels leased from HPT (j) - (5) - (3)
Depreciation and amortization (178) (235) (697) (722)
Corporate and other expenses (k) (32) (29) (121) (107)
--- --- ---- ----
Operating profit $138 $42 $512 $362
==== === ==== ====
Less: Estimated operating profit adjustments for the calendar period (c) 66
---
Operating profit for the period September 8, 2012 through December 31, 2012 (As Reported) $108
====
(a) See the Notes to Financial Information for a discussion of non-GAAP measures, reporting periods and the calculation of comparable hotel results.
(b) The full year 2012 is a leap year and includes one additional day of operations compared to the full year 2013.
(c) Comparable hotel results and statistics for the quarter ended December 31, 2012 are based on 2012 As Adjusted results. For the As Adjusted quarter ended December 31, 2012, adjustments for the calendar period
reflect (i) the exclusion of results for the 23 days from September 8, 2012 through September 30, 2012 for our Marriott-managed properties and (ii) for the remainder of the portfolio, the exclusion of the month
of September 2012 results, which previously were reported in fourth quarter 2012 results. See the Notes to Financial Information for further discussion and information on how the 2012 As Adjusted results were
calculated.
(d) 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 statements of
operations, or amounts As Adjusted. Comparable margins are calculated using amounts presented in the above table.
(e) The reconciliation of total food and beverage sales per the consolidated statements of operations to the comparable food and beverage sales is as follows:
Quarter ended Year ended (b)
------------- -------------
As Adjusted
December 31, December 31, December 31, December 31,
2013 2012 (c) 2013 2012
---- ------- ---- ----
Food and beverage sales per
the consolidated statements
of operations:
For the period September 8,
2012 through December 31,
2012 (As Reported) $485
Food and beverage adjustment
for the calendar period (c) (107)
For the quarter and year
ended $407 378 $1,503 $1,419
Non-comparable hotel food
and beverage sales (51) (43) (189) (157)
Food and beverage sales for
the property for which we
record rental income 8 8 33 33
---------- --- --- ---
Comparable food and beverage
sales $364 $343 $1,347 $1,295
=========================== ==== ==== ======
(f) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel revenues is as follows:
Quarter ended Year ended (b)
------------- -------------
As Adjusted
December 31, December 31, December 31, December 31,
2013 2012 (c) 2013 2012
---- ------- ---- ----
Revenues per the
consolidated statements of
operations:
For the period September 8,
2012 through December 31,
2012 (As Reported) $1,673
Revenue adjustment for the
calendar period (c) (383)
For the quarter and year
ended $1,331 1,290 $5,166 $5,059
Non-comparable hotel
revenues (148) (121) (548) (426)
Hotel revenues for which we
record rental income, net 12 12 52 51
Revenues for hotels leased
from HPT (j) - (53) - (232)
--------------------------- --- --- ---
Comparable hotel revenues $1,195 $1,128 $4,670 $4,452
========================= ====== ====== ======
(g) The reconciliation of total food and beverage expenses per the consolidated statements of operations to the comparable food and beverage expenses is as follows:
Quarter ended Year ended (b)
------------- -------------
As Adjusted
December 31, December 31, December 31, December 31,
2013 2012 (c) 2013 2012
---- ------- ---- ----
Food and beverage expenses
per the consolidated
statements of operations
For the period September 8,
2012 through December 31,
2012 (As Reported) $353
Food and beverage expenses
adjustment for the calendar
period (c) (76)
For the quarter and year
ended $288 277 $1,095 $1,049
Non-comparable hotel food
and beverage expenses (34) (33) (133) (112)
Food and beverage expenses
for the property for which
we record rental income 5 5 21 21
---------- --- --- ---
Comparable food and beverage
expenses $259 $249 $983 $958
=========================== ==== ==== ====
(h) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows:
Quarter ended Year ended (b)
------------- -------------
As Adjusted
December 31, December 31, December 31, December 31,
2013 2012 (c) 2013 2012
---- ------- ---- ----
Operating costs and expenses
per the consolidated
statements of operations:
For the period September 8,
2012 through December 31,
2012 (As Reported) $1,565
Operating costs and expenses
adjustment for the calendar
period (c) (317)
For the quarter and year
ended $1,193 1,248 $4,654 $4,697
Non-comparable hotel
expenses (106) (84) (408) (321)
Hotel expenses for which we
record rental income 12 12 52 51
Expense for hotels leased
from HPT (j) - (58) - (235)
Depreciation and
amortization (178) (235) (697) (722)
Corporate and other expenses
(k) (32) (29) (121) (107)
---------- --- --- ----
Comparable hotel expenses $889 $854 $3,480 $3,363
========================= ==== ==== ======
(i) 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 statements of operations as
continuing operations, (ii) gains on property insurance settlements and (iii) the results of our office buildings.
(j) The leases terminated on December 31, 2012.
(k) For the year ended December 31, 2013, corporate expenses include a litigation accrual of $8 million due to an adverse ruling related to our San Antonio ground lease.
HOST HOTELS & RESORTS, INC.
Other Financial Data
(unaudited, in millions, except per share amounts)
December 31, December 31,
2013 2012
---- ----
Equity
------
Common shares outstanding 754.8 724.6
Common shares outstanding assuming conversion of non-controlling interest OP Units (a) 764.5 734.7
Preferred OP Units outstanding .02 .02
Security pricing
----------------
Common (b) $19.44 $15.67
31/4% Exchangeable Senior Debentures (c) $ - $1,152.8
21/2% Exchangeable Senior Debentures (c) $1,507.7 $1,309.2
Dividends declared per share for calendar year
----------------------------------------------
Common $.46 $.30
Debt
----
December 31, December 31,
Senior debt Rate Maturity date 2013 2012
----------- ---- ------------- ---- ----
Series Q 63/4% 6/2016 $150 $550
Series T 9% 5/2017 - 391
Series V 6% 11/2020 500 500
Series X 57/8% 6/2019 497 497
Series Z 6% 10/2021 300 300
Series B 51/4% 3/2022 350 350
Series C 43/4% 3/2023 450 450
Series D 33/4% 10/2023 400 -
Exchangeable senior debentures 31/4% 4/2024 - 175
Exchangeable senior debentures (d) 21/2% 10/2029 371 356
Credit facility term loan 1.8% 7/2017 500 500
Credit facility revolver (e) 2.2% 11/2015 446 263
------- ---
3,964 4,332
Mortgage debt and other
-----------------------
Mortgage debt (non-recourse) 3.3-6.3% 3/2014-1/2024 709 993
Other 7.0-7.8% 10/2014-12/2017 86 86
--- ---
Total debt (f)(g) $4,759 $5,411
====== ======
January 10, 2014 repayment on the credit facility (225)
February 10, 2014 redemption of 63/4% Series Q senior note (150)
Anticipated repayment of The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa mortgage (h) (300)
----
Total debt: as adjusted for subsequent debt transactions $4,084
======
Percentage of fixed rate debt 71% 78%
Weighted average interest rate 4.7% 5.4%
Weighted average debt maturity 5.3 years 5.1 years
Cash interest expense (i) $282
(a) Each OP Unit is redeemable for cash or, at our option, for 1.021494 common shares of Host Inc. At December 31, 2013 and 2012, there were 9.5 million and 9.9 million common OP Units, respectively, held by
non-controlling interests.
(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) At December 31, 2013, the principal balance outstanding of the 21/2% Exchangeable Senior Debentures due 2029 (the "2009 Debentures") is $400 million. The discount related to these debentures is amortized
through October 15, 2015, the first date at which holders can require us to repurchase the 2009 Debentures for cash.
(e) The interest rate shown is the weighted average rate of the outstanding credit facility at December 31, 2013.
(f) In accordance with GAAP, total debt includes the debt of entities that we consolidate, but of which we do not own 100%, and excludes the debt of entities that we do not consolidate, but of which we have a
non-controlling ownership interest and record our investment therein under the equity method of accounting. As of December 31, 2013, our non-controlling partners' share of consolidated debt is $93 million
and our share of debt in unconsolidated investments is $500 million.
(g) Total debt as of December 31, 2013 and 2012 includes net discounts of $31 million and $48 million, respectively.
(h) We intend to repay the 3.25% $300 million mortgage loan on The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa at maturity on March 1, 2014 with available cash.
(i) The following chart reconciles cash interest expense to the GAAP interest expense for 2013 and Forecast Full Year 2014:
Forecast December 31,
Full Year 2014 2013
-------------- ----
GAAP interest expense $222 $304
Non-cash losses on debt
extinguishments (1) (1) (13)
Non-cash interest for
exchangeable debentures (16) (15)
Amortization of deferred financing
costs (9) (10)
Change in accrued interest (1) 16
----------- ---
Cash interest expense $195 $282
===================== ====
(1) Represents the accelerated amortization of deferred financing costs and original issue discounts due to debt extinguishments.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (a)
(unaudited, in millions)
Quarter ended Year ended
------------- ----------
As Adjusted As Reported
December 31, December 31, December 31, December 31, December 31,
2013 2012 (a) 2012 2013 2012
---- ------- ---- ---- ----
Net income (loss) (b) (f) $126 $(26) $15 $325 $63
Interest expense 60 81 101 304 373
Depreciation and amortization 177 175 212 696 662
Income taxes 2 12 22 21 31
Discontinued operations (c) - 8 9 15 32
--- --- --- --- ---
EBITDA (d) 365 250 359 1,361 1,161
Gain on dispositions (e) (66) - - (98) (48)
Acquisition costs - - - 1 7
Recognition of deferred gain on land
condemnation (f) - - - (11) -
Litigation loss (g) - - - 8 -
Gain on property insurance settlement - (2) (2) - (2)
Non-cash impairment expense 1 60 60 1 60
Amortization of deferred gains and
other property transactions - (1) (1) - (4)
Equity investment adjustments:
Equity in (earnings) losses of
affiliates (h) 20 2 - 17 (2)
Pro rata Adjusted EBITDA of equity
investments 11 9 14 48 34
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA attributable
to non-controlling partners in other
consolidated partnerships (9) (4) (4) (21) (16)
--- --- --- --- ---
Adjusted EBITDA (d) $322 $314 $426 $1,306 $1,190
==== ==== ==== ====== ======
(a) See the Notes to Financial Information for discussion of non-GAAP measures, reporting periods and information on the calculation of As Adjusted quarterly results.
(b) The difference of $41 million in net income (loss) between the As Adjusted quarter ended December 31, 2012 and the As Reported quarter ended December 31, 2012 reflects
the exclusion of estimated net income (loss) from September 8, 2012 through September 30, 2012 for our Marriott-managed hotels and the exclusion of September 2012
operations for our non-Marriott properties, which previously had been reported in the fourth quarter 2012 results.
(c) Reflects the interest expense, depreciation and amortization and income taxes included in discontinued operations.
(d) EBITDA and Adjusted EBITDA include a gain on sale of $21 million for the year ended December 31, 2013 for the sale of excess land adjacent to our Newport Beach Marriott
Hotel & Spa as a gain on sale of undepreciated property.
(e) Reflects the gain recorded on the sale of five hotels in 2013 and three hotels in 2012.
(f) During the first quarter of 2013, we recognized a previously deferred gain of approximately $11 million related to the eminent domain claim by the State of Georgia for
2.9 acres of land at the Atlanta Marriott Perimeter Center for highway expansion, for which we received cash proceeds in 2007. We have included the gain in NAREIT FFO per
diluted share, which is consistent with the treatment of gains recognized on the disposition of undepreciated assets. However, due to the significant passage of time since
we received the proceeds, we have excluded the gain from Adjusted FFO per diluted share and Adjusted EBITDA.
(g) Effective April 1, 2013, we modified the definition of Adjusted EBITDA to exclude gains or losses associated with litigation outside the ordinary course of business,
which is consistent with the definition of Adjusted FFO that we adopted effective January 1, 2011. See the Notes to Financial Information for further discussion. On
December 13, 2013, the Texas Supreme Court granted our Petition for Review on litigation related to the sale of land under the San Antonio Marriott Rivercenter in 2005. We
have accrued $68 million related to this litigation, which we believe reflects substantially all of our obligation assuming we lose the appeal. We have $25 million in
restricted cash that will be utilized to pay a portion of any judgment, assuming we lose the appeal.
(h) Includes an adjustment of $15 million for our portion of the non-cash impairment charges related to one of the hotels in our joint venture in Europe. The impairment
charge has no effect on Adjusted EBITDA, NAREIT FFO or Adjusted FFO. See the Notes to Financial Information.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) to NAREIT
and Adjusted Funds From Operations per Diluted Share (a)
(unaudited, in millions, except per share amounts)
Quarter ended Year ended
------------- ----------
As Adjusted As Reported
December 31, December 31, December 31, December 31, December 31,
2013 2012 (a) 2012 2013 2012
---- ------- ---- ---- ----
Net income (loss) (b) $126 $(26) $15 $325 $63
Less: Net income attributable to non-controlling interests (3) - - (8) (2)
--- --- --- --- ---
Net income (loss) attributable to Host Inc. 123 (26) 15 317 61
Gain on dispositions, net of taxes (c) (65) - - (97) (48)
Gain on property insurance settlement - (2) (2) - (2)
Amortization of deferred gains and other property transactions, net of taxes - (1) (1) - (4)
Depreciation and amortization 176 182 220 703 691
Non-cash impairment charges 1 60 60 1 60
Equity investment adjustments:
Equity in (earnings) losses of
affiliates 20 1 - 17 (2)
Pro rata FFO of equity investments
(d) 1 4 7 26 20
Consolidated partner adjustments:
FFO adjustment for non-controlling
partnerships (3) (2) (2) (8) (7)
FFO adjustment for non-controlling
interests of Host LP (2) (3) (4) (8) (10)
---------- --- --- --- ---
NAREIT FFO (e) 251 213 293 951 759
Loss on debt extinguishment - 3 3 40 35
Acquisition costs (f) - 2 2 1 10
Recognition of deferred gain on land condemnation (g) - - - (11) -
Litigation loss (h) - - - 8 -
Loss attributable to non-controlling interests - - - - (1)
--- --- --- --- ---
Adjusted FFO (e) $251 $218 $298 $989 $803
==== ==== ==== ==== ====
For calculation on a per share basis:
Adjustments for dilutive securities (i):
Assuming conversion of Exchangeable Senior Debentures $7 $8 $10 $26 $31
--- --- --- --- ---
Diluted NAREIT FFO $258 $221 $303 $977 $790
==== ==== ==== ==== ====
Diluted Adjusted FFO $258 $226 $308 $1,015 $834
==== ==== ==== ====== ====
Diluted weighted average shares outstanding-EPS 755.6 725.3 725.1 747.9 719.6
Assuming conversion of Exchangeable Senior Debentures 29.9 40.7 40.7 29.5 40.4
---- ---- ---- ---- ----
Diluted weighted average shares outstanding - NAREIT FFO and Adjusted FFO 785.5 766.0 765.8 777.4 760.0
----- ----- ----- ----- -----
NAREIT FFO per diluted share $.33 $.29 $.40 $1.26 $1.04
==== ==== ==== ===== =====
Adjusted FFO per diluted share $.33 $.30 $.40 $1.31 $1.10
==== ==== ==== ===== =====
(a) See the Notes to Financial Information for discussion of non-GAAP measures, reporting periods and information on the calculation of As Adjusted quarterly results.
(b) The difference of $41 million in net income (loss) between the As Adjusted quarter ended December 31, 2012 and the As Reported quarter ended December 31, 2012 reflects the exclusion of estimated net income (loss) from September 8, 2012 through September
30, 2012 for our Marriott-managed hotels and the exclusion of the September 2012 operations for our non-Marriott properties, which previously were reported in the fourth quarter 2012 results.
(c) Reflects the gain recorded on the sale of five hotels in 2013 and three hotels in 2012.
(d) See footnote (h) to the Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA.
(e) NAREIT and Adjusted FFO include a gain on sale of $21 million for the year ended December 31, 2013 for the sale of excess land adjacent to our Newport Beach Marriott Hotel & Spa.
(f) Includes approximately $3 million for the year ended December 31, 2012, related to our share of acquisition costs incurred by unconsolidated joint ventures.
(g) See footnote (f) to the Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA.
(h) See footnote (g) to the Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA.
(i) Earnings (loss) per diluted share and NAREIT FFO and Adjusted FFO per diluted share are 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 interests to common OP units. No effect is shown for securities if they are anti-dilutive.
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and
NAREIT and Adjusted Funds From Operations per Diluted Shares
for 2014 Forecasts (a)
(unaudited, in millions, except per share amounts)
Full Year
2014
----------
Low-end High-end
of range of range
-------- --------
Net income $490 $527
Interest expense 222 222
Depreciation and amortization 697 697
Income taxes 22 25
--- ---
EBITDA 1,431 1,471
Gain on disposition (b) (122) (122)
Acquisition costs 3 3
Equity investment adjustments:
Equity in earnings of
affiliates (11) (11)
Pro rata Adjusted EBITDA of
equity investments 72 72
Consolidated partnership adjustments:
Pro rata Adjusted EBITDA
attributable to non-
controlling partners in other
consolidated partnerships (23) (23)
--- ---
Adjusted EBITDA $1,350 $1,390
====== ======
Full Year
2014
----------
Low-end High-end
of range of range
-------- --------
Net income $490 $527
Less: Net income attributable
to non-controlling interests (13) (13)
--- ---
Net income attributable to Host
Inc. 477 514
Gain on disposition (b) (122) (122)
Depreciation and amortization 694 694
Equity investment adjustments
Equity in earnings of
affiliates (11) (11)
Pro rata FFO of equity
investments 44 44
Consolidated partnership adjustments
FFO adjustment for non-
controlling partners in other
consolidated partnerships (6) (6)
FFO adjustment for non-
controlling interests of Host
LP (8) (8)
--- ---
NAREIT FFO 1,068 1,105
Loss on debt extinguishments 2 2
Acquisition costs 3 3
--- ---
Adjusted FFO 1,073 1,110
===== =====
Adjustment for dilutive securities:
Assuming conversion of
Exchangeable Senior Debentures 27 27
--- ---
Diluted NAREIT FFO 1,095 1,132
===== =====
Diluted Adjusted FFO $1,100 $1,137
====== ======
Weighted average diluted shares
-EPS 756.2 756.2
Weighted average diluted shares
-NAREIT and Adjusted FFO (c) 787.0 787.0
Earnings per diluted share $.63 $.68
NAREIT FFO per diluted share $1.39 $1.44
Adjusted FFO per diluted share $1.40 $1.44
(a) The forecasts were based on the below assumptions:
--Total comparable
hotel RevPAR in
constant US$ will
increase 5% to 6%
for the low and high
end of the forecast
range. However, the
effect of estimated
changes in foreign
currency has been
reflected in the
forecast of net
income, EBITDA,
earnings per diluted
share and Adjusted
FFO per diluted
share.
--Comparable hotel
adjusted operating
profit margins will
increase 60 basis
points to 110 basis
points for the low
and high ends of the
forecasted range,
respectively.
-- Interest expense
includes
approximately $2
million related to
debt extinguishments
and $25 million
related to non-cash
interest expense for
exchangeable senior
debentures,
amortization of
original issue
discounts and
deferred financing
fees.
--We expect to spend
approximately $100
million to $115
million on ROI/
redevelopment and
acquisition capital
expenditures and
approximately $320
million to $340
million on renewal
and replacement
expenditures.
Additionally, we
expect to spend
approximately $65
million on new
development projects
in 2014.
--Due to uncertainty
related to the
completion and
timing of any
potential
acquisitions and
dispositions, we
have not adjusted
the forecast for any
use of proceeds,
gains on sale,
acquisition costs or
adjusted the number
of comparable
properties for
acquisitions or
dispositions that
have not yet
occurred.
For a discussion of
additional items
that may affect
forecasted results,
see the Notes to
Financial
Information.
(b) Represents the estimated gain on the January 10, 2014
disposition of an 89% interest in the Philadelphia Marriott
Downtown.
(c) The NAREIT and Adjusted FFO per diluted share include 30.8
million shares for the dilution of exchangeable senior
debentures.
HOST HOTELS & RESORTS, INC.
Schedule of Comparable Hotel Adjusted Operating Profit
Margin
for 2014 Forecasts (a)
(unaudited, in millions, except hotel statistics)
2014
----
Low-end High-end
of range of range
-------- --------
Operating profit margin under
GAAP (b) 11.3% 11.9%
Comparable hotel adjusted
operating profit margin (c) 26.0% 26.5%
Comparable hotel sales
Room $3,298 $3,330
Food and beverage 1,428 1,442
Other 281 284
--- ---
Comparable hotel sales (d) 5,007 5,056
----- -----
Comparable hotel expenses
Rooms, food and beverage and
other departmental costs 2,065 2,068
Management fees, ground rent and
other costs 1,642 1,650
----- -----
Comparable hotel expenses (e) 3,707 3,718
----- -----
Comparable hotel adjusted
operating profit 1,300 1,338
Non-comparable hotel results, net 108 109
Depreciation and amortization (697) (697)
Corporate and other expenses (111) (111)
---- ----
Operating profit $600 $639
==== ====
(a) Forecast comparable hotel results include 109 hotels
that we have assumed will be classified as comparable as of
December 31, 2014. See "Comparable Hotel Operating
Statistics" in the Notes to Financial Information. No
assurances can be made as to the hotels that will be in the
comparable hotel set for 2014. Also, see the notes to the
"Reconciliation of Net Income to EBITDA, Adjusted EBITDA
and NAREIT and Adjusted Funds From Operations per Diluted
Share for Full Year 2014 Forecasts" for other forecast
assumptions and further discussion of our comparable hotel
set.
(b) Operating profit margin under GAAP is calculated as the
operating profit divided by the forecast total revenues per
the consolidated statements of operations. See (d) below
for forecast revenues.
(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 forecast total revenues to the
forecast comparable hotel sales is as follows (in
millions):
2014
----
Low-end High-end
of range of range
-------- --------
Revenues $5,309 $5,360
Non-
comparable
hotel
revenues (356) (358)
Hotel
revenues
for which
we record
rental
income,
net 54 54
----- ---
Comparable
hotel
sales $5,007 $5,056
=========== ======
(e) The reconciliation of forecast operating costs and
expenses to the comparable hotel expenses is as follows (in
millions):
2014
----
Low-end High-end
of range of range
-------- --------
Operating
costs and
expenses $4,709 $4,721
Non-
comparable
hotel and
other
expenses (248) (249)
Hotel
expenses
for which
we record
rental
income 54 54
Depreciation
and
amortization (697) (697)
Corporate
and other
expenses (111) (111)
----- ----
Comparable
hotel
expenses $3,707 $3,718
=========== ======
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
Forecasts
Our forecast of earnings per diluted share, NAREIT and Adjusted FFO per diluted share, EBITDA, Adjusted EBITDA and comparable hotel adjusted operating profit margins are forward-looking statements and are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause actual 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 not be materially different. Risks that may affect these assumptions and forecasts include the following: potential changes in overall economic outlook make it inherently difficult to forecast the level of RevPAR and margin growth; 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 on dispositions; the level of capital expenditures may change significantly, which will directly affect the level of depreciation expense and net income; the amount and timing of debt payments may change significantly based on market conditions, which will directly affect the level of interest expense and net income; the amount and timing of transactions involving shares of our common stock may change based on market conditions; and other risks and uncertainties associated with our business described herein and in our annual report on Form 10?K, quarterly reports on Form 10-Q and current reports on Form 8?K filed with the SEC.
Reporting Periods for Statement of Operations
Effective January 1, 2013, we report quarterly operating results on a calendar cycle, which now is consistent with all of our hotel managers and the majority of companies in the lodging industry. Historically, our annual financial statements have been reported on a calendar basis and are unaffected by this change. However, our quarterly operating results have been reported based on a 52-53 week fiscal calendar used by Marriott International, Inc. ("Marriott"), the manager of approximately 50% of our properties. For 2013, Marriott converted to reporting results based on a 12-month calendar year. During 2012, Marriott used a fiscal year ending on the Friday closest to December 31 and reported twelve weeks of operations for the first three quarters and sixteen weeks for the fourth quarter of the year for its Marriott-managed hotels. Accordingly, our first three quarters of operations in 2012 ended on March 23, June 15 and September 7. In contrast, managers of our other hotels, such as Ritz-Carlton, Hyatt, and Starwood, reported results on a monthly basis. During 2012, we did not report the month of operations that ended after our fiscal quarter until the following quarter for those hotels using a monthly reporting period because these hotel managers did not make mid-month results available to us. Accordingly, the month of operations that ended after our fiscal quarter was included in our quarterly results of operations in the following quarter for those calendar reporting hotel managers. As a result, our 2012 quarterly results of operations include results from hotel managers reporting results on a monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December).
We will not restate the previously filed 2012 quarterly financial statements prepared in accordance with GAAP because certain property-level operating expenses for our Marriott-managed properties necessary to restate operations are unavailable on a daily basis. Because we rely on our operators for the hotel operating results used in our financial statements, the unavailability of this information on a calendar quarter basis for 2012 made restating our financial statements in accordance with GAAP unfeasible. Accordingly, the corresponding 2012 quarterly historical operating results are not comparable to our 2013 quarterly operating results.
However, to enable investors to better evaluate our performance over comparable periods, we have presented certain 2012 quarterly results and operating statistics on a calendar year basis of reporting, which we refer to as "2012 As Adjusted" results. The financial information for the 2012 As Adjusted results presented herein was calculated based on our actual reported operating results for the quarter ended December 31, 2012, adjusted as follows:
-- Our 57 hotels operated by Marriott traditionally have reported
operations on the basis of a 52-53 week fiscal calendar. For the fourth
quarter, operations from September 8, 2012 through December 31, 2012
were included. Based on daily revenue information provided by Marriott,
our 2012 fourth quarter As Reported results were adjusted to exclude
$157 million of revenue for the 23 days from September 8, 2012 through
September 30, 2012 (that were previously included in our results of
operations for the fourth quarter 2012) to determine the 2012 As
Adjusted fourth quarter revenues.
-- Because Marriott is unable to provide us with operating expenses for our
Marriott-operated hotels on a daily basis, we derived estimated expenses
based on an internally developed allocation methodology based on
historical expenses provided by Marriott consistent with its prior 52-53
week reporting calendar. Our 2012 fourth quarter As Reported operating
expenses were adjusted to exclude approximately $109 million of
estimated expenses incurred from September 8, 2012 through September 30,
2012 to determine the 2012 As Adjusted fourth quarter expenses.
-- For our 57 hotels operated by managers other than Marriott (including
those managed by Ritz-Carlton, Hyatt and Starwood) that traditionally
have reported operations on a calendar month basis, our 2012 As Adjusted
fourth quarter results exclude $207 million of revenues and $151 million
of operating expenses for these hotels for the full calendar month of
September 2012 that previously were included in our results of
operations for the fourth quarter 2012.
-- For all other income statement line items presented for the 2012 As
Adjusted quarter ended December 31, 2012, including depreciation,
interest income and expense and other corporate costs, as well as those
used in the reconciliations for our non-GAAP measures, our As Adjusted
results reflect such amounts for the full calendar quarter ended
December 31, 2012, respectively, based on historical information.
Comparable Hotel Operating Statistics
To facilitate a quarter-to-quarter comparison of our operations, we present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses, adjusted operating profit and associated margins) for the periods included in this report on a comparable hotel basis. Because these statistics and operating results relate only to our hotel properties, they exclude results for our non-hotel properties and other real estate investments. We define our comparable hotels as properties:
(i) that are owned or leased by us and the operations of which are included in our consolidated results, whether as continuing operations or discontinued operations, for the entirety of the reporting periods being compared; and
(ii) that have not sustained substantial property damage or business interruption, or undergone large-scale capital projects (as further defined below) during the reporting periods being compared.
The hotel business is capital-intensive and renovations are a regular part of the business. Generally, hotels under renovation remain comparable hotels. A large scale capital project that would cause a hotel to be excluded from our comparable hotel set is an extensive renovation of several core aspects of the hotel, such as rooms, meeting space, lobby, bars, restaurants and other public spaces. Both quantitative and qualitative factors are taken into consideration in determining if the renovation would cause a hotel to be removed from the comparable hotel set, including unusual or exceptional circumstances such as: a reduction or increase in room count, rebranding, a significant alteration of the business operations, or the closing of the hotel during the renovation.
We do not include an acquired hotel in our comparable hotel set until the operating results for that hotel have been included in our consolidated results for one full calendar year. For example, we acquired the Grand Hyatt Washington in July of 2012. The hotel was not included in our comparable hotels until January 1, 2014. Hotels that we sell are excluded from the comparable hotel set once the transaction has closed. Similarly, hotels are excluded from our comparable hotel set from the date that they sustain substantial property damage or business interruption or commence a large-scale capital project. In each case, these hotels are returned to the comparable hotel set when the operations of the hotel have been included in our consolidated results for one full calendar year after completion of the repair of the property damage or cessation of the business interruption, or the completion of large-scale capital projects, as applicable.
Of the 115 hotels that we owned on December 31, 2013, 105 have been classified as comparable hotels. The operating results of the following hotels that we owned or leased as of December 31, 2013 are excluded from comparable hotel results for these periods:
-- The Ritz-Carlton, Naples, removed in the third quarter of 2013 (business
interruption due to closure of the hotel during extensive renovations,
which included renovations of 450 rooms, including 35 suites,
restaurant, façade and windows);
-- Hyatt Place Waikiki Beach (acquired in May 2013);
-- Grand Hyatt Washington (acquired in July 2012);
-- The Westin New York Grand Central (business interruption due to
re-branding of the hotel and extensive renovations that were
substantially completed by December 2012, including the renovation of
774 guest rooms, lobby, public and meeting spaces, fitness center,
restaurant and bar);
-- Two hotels in Christchurch, New Zealand (business interruption due to
closure of the hotels following an earthquake in February 2011 and the
subsequent extensive renovations, which hotels reopened August 2013 and
September 2012);
-- Orlando World Center Marriott, removed in the third quarter of 2012
(business interruption due to extensive renovations, which included
façade restoration, the shutdown of the main pool and a complete
restoration and enhancement of the hotel, including new water slides and
activity areas, new pool, dining facilities and the renovation of one
tower of guestrooms, meeting space and restaurants);
-- Atlanta Marriott Perimeter Center, removed in the third quarter of 2011
(business interruption due to extensive renovations that were completed
in April 2012, including renovation of the guest rooms, lobby, bar and
restaurant and the demolition of one tower of the hotel);
-- Chicago Marriott O'Hare, removed in the third quarter of 2011 (business
interruption due to extensive renovations that were completed in April
2012, including renovating every aspect of the hotel and shutting down
over 200 rooms); and
-- Sheraton Indianapolis Hotel at Keystone Crossing, removed in the first
quarter of 2011 (business interruption due to extensive renovations that
were completed in January 2013, including the conversion of one tower of
the hotel into apartments, reducing the room count, and the renovation
of the remaining guest rooms, lobby, bar and meeting space).
The operating results of eight hotels disposed of in 2013 and 2012 are not included in comparable hotel results for the periods presented herein. These operations are also excluded from the hotel operating data for all owned hotels.
Operating statistics for the non-comparable hotels listed above are included in the hotel operating data for all owned hotels on pages 11 and 12. By definition, the RevPAR results for these properties are not comparable due to the reasons listed above, and, therefore, are not indicative of the overall trends for our portfolio. The operating results for two hotels acquired in 2013 and 2012 are also included in the all owned hotel operating data on a pro forma basis, which includes operating results assuming they were owned as of January 1, 2012 and based on actual results obtained from the managers for periods prior to our ownership. For these two hotels, since the year over year comparison includes periods prior to our ownership, the changes will not necessarily correspond to changes in our actual results. All owned hotel operating statistics are provided for completeness and to show the difference between our comparable hotel information (upon which we usually evaluate performance) and all of our hotels, including non-comparable hotels. Also, while they may not be illustrative of trends (as compared to comparable hotel operating statistics), changes in all owned hotel statistics will have an effect on our overall revenues.
We evaluate the operating performance of our comparable hotels based on both market and property type. These divisions are generally consistent with groupings recognized in the lodging industry.
Our markets consist of the following:
Domestic
-- Boston -Greater Boston Metropolitan area;
-- New York - Greater New York Metropolitan area, including northern New
Jersey;
-- Philadelphia - Philadelphia Metropolitan area;
-- Washington, D.C. -Metropolitan area, including the Maryland and Virginia
suburbs;
-- Atlanta - Atlanta Metropolitan area;
-- Florida - All Florida locations;
-- Chicago - Chicago Metropolitan area;
-- Denver - Denver Metropolitan area;
-- Houston - Houston Metropolitan area;
-- Phoenix - Phoenix Metropolitan area, including Scottsdale;
-- Seattle - Seattle Metropolitan area;
-- San Francisco - Greater San Francisco Metropolitan area, including San
Jose;
-- Los Angeles - Greater Los Angeles area, including Orange County;
-- San Diego -San Diego Metropolitan area;
-- Hawaii - All Hawaii locations;
-- Other - Select cities in California, Indiana, Louisiana, Minnesota,
Missouri, North Carolina, Ohio, Tennessee, and Texas;
International
-- Asia-Pacific -Australia and New Zealand;
-- Canada - Toronto and Calgary; and
-- Latin America -Brazil, Chile and Mexico.
Our property types consist of the following:
-- Urban--Hotels located in primary business districts of major cities;
-- Suburban--Hotels located in office parks or smaller secondary markets;
-- Resort/Conference--Hotels located in resort/conference destinations such
as Arizona, Florida, Hawaii and Southern California; and
-- Airport--Hotels located at or near airports.
Constant US$, Nominal US$ and Constant Euros
Operating results denominated in foreign currencies are translated using the prevailing exchange rates on the date of the transaction, or monthly based on the weighted average exchange rate for the period. For comparative purposes, we also present the RevPAR results for 2012 assuming the results for our foreign operations were translated using the same exchange rates that were effective for the comparable periods in 2013, thereby eliminating the effect of currency fluctuation for the year-over-year comparisons. For the 2014 forecast results, we use the applicable forward currency curve (as published by Bloomberg) for each monthly period to estimate 2014 forecast foreign operations in US dollars and have restated the 2013 RevPAR results using the same forecast exchange rates to estimate year-over-year growth in RevPAR in constant US$. We believe this presentation is useful to investors as it shows growth in RevPAR in the local currency of the hotel consistent with how we would evaluate our domestic portfolio. However, the estimated effect of changes in foreign currency has been reflected in the actual and forecast results of net income, EBITDA, earnings per diluted share and Adjusted FFO per diluted share. Nominal US$ results include the effect of currency fluctuations, consistent with our financial statement presentation.
We also present RevPAR results for our joint venture in Europe in constant Euros using the same methodology as used for the constant US$ presentation.
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial measures," which are measures of our historical or future financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules. They are as follows: (i) FFO and FFO per diluted share (both NAREIT and Adjusted), (ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating Results. The following discussion defines these measures and presents why we believe they are useful supplemental measures of our performance.
To facilitate comparison against a comparable period in 2012, we are presenting our above non-GAAP financial measures for the quarter ended December 31, 2013 and for the 2012 As Adjusted quarter ended December 31, 2012. We also present Adjusted EBITDA, NAREIT FFO per diluted share and Adjusted FFO per diluted share for our as reported quarter ended December 31, 2012. In addition, we present our Total Owned Hotel Revenue and Net Income (Loss) for the 2012 As Adjusted quarter. Because the presentation of these line items on an "As Adjusted" basis is not in accordance with GAAP, they also constitute non-GAAP financial measures. We present these measures because we believe that doing so provides investors and management with useful supplemental information for evaluating the period-to-period performance of our hotels. These results are, however, based on estimates. Our internal allocation methodology used to develop these estimates is based on assumptions, some of which may be inaccurate. For this reason, while management believes presentation of these supplemental measures is beneficial, investors are cautioned from placing undue reliance on the 2012 As Adjusted results and should consider these results together with the presentation of GAAP revenues, net income (loss) and expenses.
NAREIT FFO and NAREIT FFO per Diluted Share
We present NAREIT FFO and NAREIT FFO per diluted share as non-GAAP measures of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate NAREIT FFO per diluted share as our NAREIT FFO (defined as set forth below) for a given operating period, as adjusted for the effect of dilutive securities, divided by the number of fully diluted shares outstanding during such period, in accordance with NAREIT guidelines. NAREIT defines FFO as net income (calculated in accordance with GAAP) excluding gains and losses from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation, amortization and impairments and adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect our pro rata share of the FFO of those entities on the same basis.
We believe that NAREIT FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of NAREIT FFO per diluted share, when combined with the primary GAAP presentation of earnings per share, provides beneficial information to investors. By excluding the effect of real estate depreciation, amortization, impairments and gains and losses from sales of depreciable real estate, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that such measures can facilitate comparisons of operating performance between periods and with other REITs, even though NAREIT FFO per diluted share does not represent an amount that accrues directly to holders of our common stock. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. As noted by NAREIT in its April 2002 "White Paper on Funds From Operations," since real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, NAREIT adopted the FFO metric in order to promote an industry-wide measure of REIT operating performance.
Adjusted FFO per Diluted Share
We also present Adjusted FFO per diluted share when evaluating our performance because management believes that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance, in our annual budget process and for our compensation programs. We believe that the presentation of Adjusted FFO per diluted share, when combined with both the primary GAAP presentation of earnings per share and FFO per diluted share as defined by NAREIT, provides useful supplemental information that is beneficial to an investor's complete understanding of our operating performance. We adjust NAREIT FFO per diluted share for the following items, which may occur in any period, and refer to this measure as Adjusted FFO per diluted share:
-- Gains and Losses on the Extinguishment of Debt - We exclude the effect
of finance charges and premiums associated with the extinguishment of
debt, including the acceleration of the write-off of deferred financing
costs associated with the original issuance of the debt being redeemed
or retired. We also exclude the gains on debt repurchases and the
original issuance costs associated with the retirement of preferred
stock. We believe that these items are not reflective of our ongoing
finance costs.
-- Acquisition Costs - Under GAAP, costs associated with completed property
acquisitions are expensed in the year incurred. We exclude the effect of
these costs because we believe they are not reflective of the ongoing
performance of the Company.
-- Litigation Gains and Losses - We exclude the effect of gains or losses
associated with litigation recorded under GAAP that we consider outside
the ordinary course of business. We believe that including these items
is not consistent with our ongoing operating performance.
In unusual circumstances, we may also adjust NAREIT FFO for gains or losses that management believes are not representative of the Company's current operating performance. For example, in the first quarter of 2013, management excluded the $11 million gain from the eminent domain claim for land adjacent to the Atlanta Marriott Perimeter Center for which we received the cash proceeds in 2007, but, pending the resolution of certain contingencies, was not recognized until 2013. Typically, gains from the disposition of non-depreciable property are included in the determination of NAREIT and Adjusted FFO.
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and Amortization ("EBITDA") is a commonly used measure of performance in many industries. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of the Company's capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO and Adjusted FFO per diluted share, is widely used by management in the annual budget process and for our compensation programs.
Adjusted EBITDA
Historically, management has adjusted EBITDA when evaluating the performance of Host Inc. and Host LP because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance. Adjusted EBITDA also is a relevant measure in calculating certain credit ratios. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:
-- Real Estate Transactions - We exclude the effect of gains and losses,
including the amortization of deferred gains, recorded on the
disposition or acquisition of depreciable assets and property insurance
gains in our consolidated statement of operations because we believe
that including them in Adjusted EBITDA is not consistent with reflecting
the ongoing performance of our assets. In addition, material gains or
losses from the depreciated book value of the disposed assets could be
less important to investors given that the depreciated asset book value
often does not reflect the market value of real estate assets as noted
above.
-- Equity Investment Adjustments - We exclude the equity in earnings
(losses) of affiliates as presented in our consolidated statement of
operations because it includes our pro rata portion of the depreciation,
amortization and interest expense related to such investments, which are
excluded from EBITDA. We include our pro rata share of the Adjusted
EBITDA of our equity investments as we believe this reflects more
accurately the performance of our investments. The pro rata Adjusted
EBITDA of equity investments is defined as the EBITDA of our equity
investments adjusted for any gains or losses on property transactions
multiplied by our percentage ownership in the partnership or joint
venture.
-- Consolidated Partnership Adjustments - We deduct the non-controlling
partners' pro rata share of Adjusted EBITDA of our consolidated
partnerships as this reflects the non-controlling owners' interest in
the EBITDA of our consolidated partnerships. The pro rata Adjusted
EBITDA of non-controlling partners is defined as the EBITDA of our
consolidated partnerships adjusted for any gains or losses on property
transactions multiplied by the non-controlling partners' percentage
ownership in the partnership or joint venture.
-- Cumulative Effect of a Change in Accounting Principle - Infrequently,
the Financial Accounting Standards Board promulgates new accounting
standards that require the consolidated statement of operations to
reflect the cumulative effect of a change in accounting principle. We
exclude these one-time adjustments because they do not reflect our
actual performance for that period.
-- Impairment Losses - We exclude the effect of impairment expense recorded
because we believe that including them in Adjusted EBITDA is not
consistent with reflecting the ongoing performance of our remaining
assets. In addition, we believe that impairment expense, which is based
on historical cost book values, is similar to gains and losses on
dispositions and depreciation expense, both of which are excluded from
EBITDA.
-- Acquisition Costs - Under GAAP, costs associated with completed property
acquisitions are expensed in the year incurred. We exclude the effect of
these costs because we believe they are not reflective of the ongoing
performance of the company.
-- Litigation Gains and Losses - Effective April 1, 2013, we have excluded
the effect of gains or losses associated with litigation recorded under
GAAP that we consider outside the ordinary course of business, which is
consistent with the definition of Adjusted FFO that we adopted effective
January 1, 2011. We believe that including these items is not consistent
with our ongoing operating performance.
In unusual circumstances, we may also adjust EBITDA for gains or losses that management believes are not representative of the Company's current operating performance. For example, in the first quarter of 2013, management excluded the $11 million gain from the eminent domain claim for land adjacent to the Atlanta Marriott Perimeter Center for which we received the cash proceeds in 2007, but, pending the resolution of certain contingencies, was not recognized until 2013. Typically, gains from the disposition of non-depreciable property are included in the determination of Adjusted EBITDA.
Limitations on the Use of NAREIT FFO per Diluted Share, Adjusted FFO per Diluted Share, EBITDA and Adjusted EBITDA
We calculate NAREIT FFO per diluted share in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. In addition, although FFO per diluted share is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. We also calculate Adjusted FFO per diluted share, which is not in accordance with NAREIT guidance and may not be comparable to measures calculated by other REITs. EBITDA and Adjusted EBITDA, as presented, may also not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense (for EBITDA and Adjusted EBITDA purposes only) and other items have been and will be made and are not reflected in the EBITDA, Adjusted EBITDA, NAREIT FFO per diluted share and Adjusted FFO per diluted share presentations. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statement of operations and cash flows include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, NAREIT FFO per diluted share, Adjusted FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to make cash distributions. In addition, NAREIT FFO per diluted share and Adjusted FFO per diluted share do not measure, and should not be used as a measure of, amounts that accrue directly to stockholders' benefit.
Comparable Hotel Operating Results
We present certain operating results for our hotels, such as hotel revenues, expenses, adjusted operating profit (and the related margin) and food and beverage adjusted profit (and the related margin), on a comparable hotel, or "same store," basis as supplemental information for investors. Our comparable hotel results present operating results for hotels owned during the entirety of the periods being compared without giving effect to any acquisitions or dispositions, significant property damage or large scale capital improvements incurred during these periods. We present these comparable hotel operating results by eliminating corporate-level costs and expenses related to our capital structure, as well as depreciation and amortization. We eliminate corporate-level costs and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time. As noted earlier, because real estate values have historically risen or fallen with market conditions, many real estate industry investors have considered presentation of historical cost accounting for operating results to be insufficient by themselves.
As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses, operating profit or operating profit margin and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a "same store" supplemental measure that provides useful information in evaluating our ongoing performance, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.
SOURCE Host Hotels & Resorts, Inc.
