Host Hotels & Resorts, Inc. Reports Results of Operations for the Third Quarter of 2009
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Host Hotels & Resorts, Inc. Reports Results of Operations for the Third Quarter of 2009
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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 2009-10-14
Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the third quarter ended September 11, 2009.
-- Total revenue decreased $227 million, or 19.9%, to $912 million for the third quarter and $719 million, or 20.2%, to $2,839 million for year-to-date 2009 as compared to last year.
-- Net loss was $58 million for the third quarter of 2009 compared to net income of $47 million for the third quarter of 2008. For year-to-date 2009, net loss was $187 million compared to net income of $303 million for year-to-date 2008. Loss per diluted share was $.09 for the third quarter of 2009 compared to earnings per diluted share of $.09 in 2008. For year-to-date 2009, loss per diluted share was $.33 compared to earnings per diluted share of $.53 for year-to-date 2008.
Operating results for 2008 and 2009 were affected by an increase in non-cash interest expense related to the Company's exchangeable debentures, as well as non-cash impairment charges recorded in the first half of 2009, partially offset by gains associated with hotel dispositions. The net effect of these items on loss per diluted share was an increase in earnings of $6 million, or $.01 per diluted share for both the third quarter of 2009 and 2008. The net effect of these items was a decrease in earnings of $111 million, or $.20 per diluted share for year-to-date 2009, and an increase in earnings of $3 million, or $.01 per diluted share, for year-to-date 2008.
-- Funds from Operations (FFO) per diluted share was $.11 for the third quarter of 2009 compared to $.31 per diluted share for the third quarter of 2008. FFO per diluted share was also affected by the non-cash interest expense for all periods presented and non-cash impairment charges for the first half of 2009. FFO per diluted share was reduced by $.01 for the third quarter of 2009 due to non-cash interest expense. For year-to-date 2009, FFO per diluted share was $.33 compared to $1.19 per diluted share for year-to-date 2008. The net effect of these non-cash charges decreased FFO per diluted share by $.24 and $.02 for year-to-date 2009 and 2008, respectively.
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $131 million to $139 million for the third quarter and $381 million to $570 million for year-to-date 2009 when compared to last year.
For further detail of the transactions affecting net income, earnings per diluted share and FFO per diluted share, refer to the notes to the "Reconciliation of Net Income to EBITDA, Adjusted EBITDA and FFO per Diluted Share."
Adjusted EBITDA, FFO per diluted share and comparable hotel adjusted operating profit margins (discussed below) are non-GAAP (generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.
OPERATING RESULTS
Comparable hotel RevPAR decreased 21.3% and 22.3% for third quarter and year-to-date 2009 compared to 2008. Comparable hotel adjusted operating profit margins decreased 685 basis points and 560 basis points for the third quarter and year-to-date 2009, respectively. For further detail, see "Notes to the Financial Information."
BALANCE SHEET
As of September 11, 2009, the Company had in excess of $1 billion of cash and cash equivalents and $600 million of available capacity under its credit facility. During the third quarter, the Company used proceeds from financing transactions completed in the first half of 2009, the proceeds from asset dispositions and available cash to complete the following debt transactions:
-- Repaid the $210 million term loan outstanding under its credit facility;
-- Repaid the $135 million mortgage debt secured by the Westin Kierland;
-- Repaid the $175 million mortgage debt secured by the San Diego Hotel &
Marina; and
-- Repurchased approximately $49 million face amount of its 2.625%
Exchangeable Senior Debentures ("2007 Debentures") for approximately $42
million and recorded a gain on the repurchases of $2 million.
Beginning in August 2009, the Company initiated a continuous equity offering program under which it may sell shares of common stock in at-the-market transactions over time. The Company has issued approximately 13 million shares of common stock for net proceeds of $130 million under this program, of which $22 million was received subsequent to the end of the quarter.
DISPOSITIONS
During the third quarter, the Company sold four non-core properties: the 253-room Washington Dulles Marriott Suites, the 448-room Sheraton Stamford, the 430-room Boston Marriott Newton and the 353-room Hanover Marriott, for approximately $90 million and recorded a gain of $9 million on the sales. The Company sold its remaining 3.6% limited partner interest in CBM Joint Venture Limited Partnership for approximately $13 million and recorded a gain of approximately $5 million, net of tax. The Company's results of operations include a $12 million tax benefit, or $.02 for both the loss per diluted share and FFO per diluted share, associated with the sale.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $63 million and $255 million for the quarter and year-to-date, which was a decline of approximately 59% and 45%, respectively, from the prior year. Return on investment (ROI) and repositioning projects accounted for approximately $40 million and $141 million for the third quarter and year-to-date 2009, respectively, of these expenditures. Significant projects completed during the year include the development of a 62,750 square foot ballroom at Swissotel Chicago for $52 million, the renovation of approximately 1,500 guest rooms at the Sheraton Boston, San Francisco Marriott Fisherman's Wharf and the Westin Tabor Center and the $8 million renovation of the 51,000 square foot Palms Ballroom at the Orlando World Center Marriott Resort and Convention Center.
DIVIDEND
Consistent with the previously announced guidance, and subsequent to quarter end, the Company declared a special common dividend of $.25 per share payable on December 18, 2009 to stockholders of record on November 6, 2009. The Board of Directors has determined to pay this special dividend with cash, shares of common stock or a combination of cash and shares of common stock based on stockholder elections, provided that the cash component of this dividend will be approximately 10% of the aggregate dividend, or $0.025 per share. The Company previously suspended its regular quarterly dividend; however, it intends to continue paying a cash dividend on its preferred stock.
2009 OUTLOOK
The current recessionary climate, and its effect on business and leisure travel, continues to hinder the Company's ability to predict future operating results. However, assuming that comparable hotel RevPAR were to decline approximately 20% to 22% for the full year 2009, the Company would anticipate that operating profit margins under GAAP would decrease approximately 1,180 basis points to 1,260 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 600 basis points to 640 basis points. Based upon these parameters, the Company would estimate the following would occur for full year 2009:
-- loss per diluted share should be approximately $.42 to $.47;
-- net loss should be approximately $250 million to $282 million;
-- FFO per diluted share should be approximately $.46 to $.51 (including
the effect of the deduction of $131 million in non-cash impairment
charges and $27 million of non-cash interest expense on the exchangeable
debentures, as well as the net gains on debt extinguishments of $8
million, which reduced FFO per diluted share by $.25); and
-- Adjusted EBITDA should be approximately $760 million to $800 million.
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