Host Hotels & Resorts, Inc. Reports Results of Operations for the Fourth Quarter and Full Year 2008
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Host Hotels & Resorts, Inc. Reports Results of Operations for the Fourth Quarter and Full Year 2008
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-02-18
Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the fourth quarter and for the full year ended December 31, 2008.
* Total revenue decreased $157 million, or 8.7%, to $1,647 million for the fourth quarter and decreased $123 million, or 2.3%, to $5,288 million for full year 2008.
* Net income decreased $172 million to $122 million and net income from continuing operations decreased $146 million to $122 million for the fourth quarter. For the full year 2008, net income decreased $300 million to $427 million and net income from continuing operations decreased $144 million to $402 million compared to 2007. Earnings per diluted share decreased $.35 to $.19 for the fourth quarter and decreased $.57 to $.76 for full year 2008.
Net income in 2008 included a net gain of approximately $22 million, or $.04 per diluted share, for the full year associated with gains on hotel dispositions and a gain of over $18 million on the repurchase of its 3.25% Exchangeable Senior Debentures. The repurchase of the debentures occurred in the fourth quarter and the gain has no effect on the Company's diluted earnings per share as the debentures are dilutive. By comparison, net income in 2007 included a net gain of approximately $24 million, or $.04 per diluted share, for the fourth quarter and $114 million, or $.21 per diluted share, for the full year associated with gains from hotel dispositions, partially offset by debt refinancing costs.
* Funds from Operations (FFO) per diluted share decreased 29.3% from $.75 to $.53 for the fourth quarter and 8.9% from $1.91 to $1.74 for full year 2008. FFO per diluted share was reduced by $.08 for full year 2007 due to costs associated with debt repayments or refinancings, but was not affected by such costs in 2008.
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The Company also announced the following results for Host Hotels & Resorts, L.P., (Host LP) through which it conducts all of its operations and, as of December 31, 2008, holds approximately 97% of the partnership interests:
* Net income decreased $178 million to $126 million for the fourth quarter and decreased $308 million to $445 million for full year 2008.
* Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $126 million to $414 million for the fourth quarter and decreased $156 million to $1,365 million for full year 2008.
For further detail of certain transactions affecting net income of the Company and Host LP, earnings per diluted share and FFO per diluted share, refer to the "Schedule of Significant Transactions Affecting Earnings per Share and Funds From Operations per Diluted Share" attached to this press release.
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR for the fourth quarter of 2008 decreased 9.4% when compared to the fourth quarter of 2007. Full year 2008 comparable hotel RevPAR decreased 2.6% when compared to full year 2007. Comparable hotel adjusted operating profit margins decreased 290 basis points and 140 basis points for the fourth quarter and full year 2008, respectively. For further detail, see "Notes to the Financial Information."
DISPOSITIONS
The Company sold the Hyatt Regency Boston on February 17, 2009 for approximately $113 million and will record a gain of approximately $21 million on the sale in the first quarter of 2009.
BALANCE SHEET
As of December 31, 2008, the Company had approximately $508 million of cash and cash equivalents, which does not include the $113 million in proceeds from the sale of the Hyatt Regency Boston. The Company's cash balance will generally be utilized for repayments or repurchasing of debt, capital improvements and to maintain higher than historical cash levels for working capital. During the fourth quarter, the Company drew $200 million under the revolver portion of its credit facility. The Company currently has $400 million of available capacity under its credit facility.
In the fourth quarter, the Company repurchased $100 million aggregate principal amount of its 3.25% Exchangeable Senior Debentures for approximately $82 million under its stock and equity-linked security repurchase program. The Company recorded a gain of over $18 million which has been included as a reduction to interest expense but which did not affect diluted FFO per share.
CAPITAL EXPENDITURES
The Company continued its capital expenditure program which totaled approximately $232 million and $695 million for the fourth quarter and full year 2008, respectively. These expenditures included return on investment (ROI) and repositioning projects of approximately $103 million and $321 million for the fourth quarter and full year 2008, respectively. The Company expects to spend approximately $340 million to $360 million in capital expenditures in 2009, which represents approximately one-half of the 2008 level.
EUROPEAN JOINT VENTURE
The European joint venture's previously announced agreement to purchase six hotels in France, Germany and The Netherlands for approximately euro 565 million did not close because of a disagreement between the parties over the completion of certain capital improvements that were a condition to closing.
DIVIDEND
The Company intends to suspend its regular quarterly dividend on its common stock in 2009 and instead expects to declare a $.30 to $.35 per share common dividend in the fourth quarter, which may be payable either in cash or in a combination of cash and shares of common stock. The Company plans to continue paying dividends on its preferred stock.
2009 OUTLOOK
The current recession and volatility in the credit markets have created limited visibility for advance bookings for both transient and group business and, accordingly, our ability to predict operating results for 2009. Continuing the negative trends experienced in the fourth quarter, hotel operating results in January and February have weakened significantly, particularly in luxury and resort properties. In the event that comparable hotel RevPAR were to decline approximately 12% to 16% for the full year 2009, the Company would anticipate that full year 2009 operating profit margins under GAAP would decrease approximately 750 basis points to 900 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 500 basis points to 580 basis points. Based upon these parameters, the Company would estimate the following would occur:
Host Hotels & Resorts, Inc.
* loss per diluted share should be approximately $.13 to $.26;
* net loss should be approximately $62 million to $129 million; and
* FFO per diluted share should be approximately $.79 to $.91.
Host Hotels & Resorts, L.P.
* net loss should be approximately $64 million to $132 million; and
* Adjusted EBITDA should be approximately $850 million to $930 million.
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