The Timeshare Beat: Second and Final Add -- Dcth001 -- Host Marriott Earnings

Second and Final Add -- Dcth001 -- Host Marriott Earnings

Company Press Release: Host Marriott Corporation
July 20, 2000
HOST MARRIOTT CORPORATION

EBITDA (a)

(unaudited, in millions)

                              Twelve weeks ended     Twenty-four weeks ended
                             June 16,     June 18,      June 16,    June 18,
                              2000          1999         2000          1999

    EBITDA
     Hotels                   $122          $125         $236          $240
     Office buildings            1             1            1             1
     Interest income             8             8           17            15
     Corporate and other
      expenses                (17)          (17)          (32)          (28)
     Effect on revenue
      of SAB 101               168           138          291           253

    EBITDA of Host LP          282           255          513           481

     Distributions to
     minority interest
     partners of
      Host LP (b)             (14)          (13)          (27)         (27)

    EBITDA of Host REIT       $268          $242          $486         $454


                              Twelve weeks ended     Twenty-four weeks ended
                             June 16,     June 18,      June 16,    June 18,
                               2000        1999          2000          1999

    EBITDA of Host REIT       $268          $242         $486          $454
     Effect on revenue
      of SAB 101             (168)         (138)        (291)         (253)
     Interest expense         (97)         (101)        (193)         (200)
     Income taxes              (2)           (1)          (3)           (2)
     Dividends on
      Convertible
      Preferred Securities     (7)           (8)         (14)          (17)
     Depreciation and
      amortization            (75)          (67)        (149)         (135)
     Minority interest
      benefit                   11            5            22            13
     Distributions to
      minority interest
      partners of
      Host Marriott, L.P.       14            13           27            27
     Other non-cash changes,
      net                        6            11            8            25
      Loss before
       extraordinary items    $(50)        $(44)       $(107)         $(88)

(a) We consider our consolidated earnings before interest expense, income taxes, depreciation, amortization, and other non-cash items (including contingent rental revenue) (``EBITDA'') to be an indicative measure of our operating performance due to the significance of our long-lived assets and because such data is considered useful by the investment community to better understand our results, and can be used to measure our ability to service debt, fund capital expenditures and expand our business. However, such information should not be considered as an alternative to net income, operating profit, cash from operations, or any other operating or liquidity performance measure prescribed by generally accepted accounting principles. Cash expenditures for various long-term assets, interest expense and income taxes have been, and will be incurred which are not reflected in the EBITDA presentation.
(b) Host REIT holds approximately 77% of the outstanding OP Units of Host LP. The distributions to minority interest partners of Host LP reflect distributions to minority holders of OP Units and holders of certain preferred OP units. These units are convertible into cash or common stock of Host REIT at Host REIT's option. Quarterly distributions of $0.21 per unit were declared on March 23, 2000 and June 21, 2000, and March 15, 1999 and June 15, 1999, and paid on April 14, 2000 and July 14, 2000, and April 14, 1999 and July 14, 1999.

                            HOST MARRIOTT CORPORATION
                               Other Financial Data
            (unaudited, in millions, except per share and ratio data)

                                                     June 16,  December 31,
                                                       2000           1999
    Capitalization
     Diluted common shares outstanding,
      excluding Convertible
       Preferred Securities (a)                          299            304
     Security pricing:
       Share price-common (b)                          $9.81          $8.25
       Share price-Class A Preferred stock (b)        $23.94         $18.50
       Share price-Class B Preferred stock (b)        $22.50         $18.50
       Share price-Convertible Preferred
        Securities (b)                                $33.50         $34.25
     Total enterprise value (c)                       $8,391         $7,794

    Equity
    Common shares outstanding                          220.2          223.5
    Common OP Units outstanding                        283.6          287.5
    Preferred OP Units outstanding                       0.6            0.6
    Class A Preferred shares outstanding                 4.2            4.2
    Class B Preferred shares outstanding                 4.0            4.0

    Dividends (per share)
     Common (d)                                         $.42           $.84
     Common dividend yield (f)                            9%            10%
     Common dividend payout ratio
      (Common dividends/Net
       income) (g)                                       n/a            88%
     Comparative FFO payout ratio
      (Common dividends/Comparative
       FFO) (g)(h)                                       41%            44%
     Class A Preferred (e)                             $1.25          $1.13
     Class B Preferred (e)                             $1.25           $.33

    Debt
     Percentage fixed rate                               95%            96%
     Weighted average rate                              8.1%           8.1%
     Weighted average maturity                     7.5 years      7.9 years
     Line of Credit, available balance (i)              $599           $900
     Line of Credit, outstanding balance (i)            $176           $125


    Financial Ratios
     Interest coverage ratio
      (EBITDA/cash interest
       expense) (j) (k)                                 2.7x           2.4x
     Ratio of Earnings to Fixed Charges (l)             1.8x           1.5x
     Debt service coverage ratio
      (EBITDA/(interest + principal
       payments)) (j)                                   2.4x           2.2x
     Debt as a percentage of total
      enterprise value                                   61%            65%

(a) Includes the number of shares of common stock outstanding plus shares granted under comprehensive stock plans and those common and preferred OP Units issuable or outstanding that are held by minority partners which potentially could be converted.
(b) Share prices are the closing price on the balance sheet date, as reported by the New York Stock Exchange for the common and preferred stock. The shares of Convertible Preferred Securities are not traded on an exchange. The per share price is the higher of the buy or sell price as provided by the trading desk for Goldman Sachs in New York, New York.
(c) Total enterprise value is calculated as the fair value of our debt, plus the Class A and Class B Preferred Stock, diluted common shares outstanding excluding Convertible Preferred Securities as computed in footnote (a), and the Convertible Preferred Securities multiplied by the closing stock prices on the balance sheet date, less cash. Total enterprise value is based on a market price as of the balance sheet date and should not be deemed to represent the fair market value of the company.
(d) On March 23, 2000 and June 21, 2000, we declared quarterly dividends of $.21 per common share, which were paid on April 14, 2000 and July 14, 2000. Consistent with federal income tax regulation for REITs, which require that we distribute at least 95% of our current year earnings and profits on a tax basis, we have estimated the annualized dividend to be $.84 per share for common shareholders in 2000. The responsibility to declare dividends is the sole responsibility of our board of directors, who have not declared a dividend other than for the first and second quarters, and so this annualized amount may not reflect the actual dividend, if any, to common shareholders. Throughout 1999, we declared a quarterly dividend of $.21 per common share, totaling $0.84 per common share for the year, of which $.63 was distributed as of year end. The 1999 fourth quarter dividend of $0.21 per common share, was paid on January 17, 2000.
(e) 2000 dividends reflect quarterly cash dividends of $0.625 per share of Class A and Class B Preferred Stock, which were declared on March 23, 2000 and June 21, 2000 and paid on April 14, 2000 and July 14, 2000. 1999 dividends reflect the pro rata dividend, based on the stated rate of 10% per annum on a liquidation value of $25 per share for both classes, from the date of issuance of each respective class through the end of the year. On an annualized basis the Class A and Class B Preferred Stock will earn $2.50 per share.
(f) The dividend yield ratio is calculated using the 2000 annualized dividend to common shareholders as computed in footnote (d) and the 1999 annual dividend to common shareholders divided by the closing stock price for common shares as of the respective balance sheet dates.
(g) Dividends used for the calculation of the dividend payout ratio and Comparative FFO payout ratio include, per basic share, the first and second quarter 2000 dividends to common shareholders, as computed in footnote (d), and the 1999 annual dividend to common shareholders.
(h) The Comparative FFO payout ratio has been calculated using year-to- date Comparative FFO available to common shareholders, per basic share.
(i) In June 2000, we renegotiated our bank credit facility, which allowed us to obtain more favorable terms and save on applicable fees. As modified, the total line has been permanently reduced from $1.025 billion to $775 million, consisting of a $150 million term loan and a $625 million revolver. In addition, the original term was extended for two additional years, through August 2003. As of June 16, 2000, $176 million is outstanding under the line of credit. As a result, the available capacity under the line of credit is $599 million.
(j) These coverage ratios have been calculated using EBITDA of Host LP. The financial ratios are not calculated in the same manner as required by the indentures for the senior notes and the line of credit. Calculation of these ratios consistent with those indentures would require, among other items, presentation of certain pro forma financial information which has not been provided. These ratios are intended to provide an investor with an understanding of our ability to make interest and principal payments on our current debt structure.
(k) Cash interest is calculated as interest expense under generally accepted accounting principles less amortization of deferred costs and other non-cash interest expense, plus capitalized interest.
(l) The ratio of earnings to fixed charges for the twenty-four weeks ended June 16, 2000 has been adjusted to include in earnings the contingent rental revenue of $291 million deferred under SAB 101. Without this adjustment, we would show a deficiency of earnings to fixed charges of $123 million.

                          HOST MARRIOTT CORPORATION
                            Hotel Operational Data
                    Comparable Property Statistics (cont.)
                                 (unaudited)

                             Comparable by Region

                                     As of June 16, 2000

                                No. of                No. of
                             Properties (a)            Rooms

    Atlanta                       11                   5,351
    Florida                       11                   4,877
    Mid-Atlantic                  16                   5,791
    Midwest                       13                   4,688
    New York                       9                   5,778
    Northeast                     10                   3,935
    South Central                 19                   9,439
    Western                       25                  12,539
    All Regions                  114                  52,398



                                     Twelve weeks ended June 16, 2000

                                                Average
                               Average         Occupancy
                             Daily Rate       Percentages          REVPAR (b)
    Atlanta                   $159.62             72.9%           $116.33
    Florida                    167.79             81.7             137.00
    Mid-Atlantic               149.17             83.9             125.20
    Midwest                    141.05             78.7             111.02
    New York                   224.76             90.5             203.51
    Northeast                  139.94             79.0             110.57
    South Central              128.99             79.4             102.41
    Western                    166.86             83.0             138.45
    All Regions                160.49             81.4             130.66



                                   Twelve weeks ended June 18, 1999

                                       Average                        Percent
                        Average       Occupancy                     Change in
                      Daily Rate     Percentages      REVPAR (b)       REVPAR

    Atlanta             $150.97        77.7%          $117.29          (0.8)%
    Florida              152.75         82.5           126.00           8.7
    Mid-Atlantic         138.93         82.5           114.56           9.3
    Midwest              136.11         78.3           106.52           4.2
    New York             206.92         89.6           185.44           9.7
    Northeast            131.05         79.8           104.62           5.7
    South Central        127.61         76.8            98.04           4.5
    Western              158.61         79.9           126.72           9.3
    All Regions          151.59         80.6           122.11           7.0

                             Comparable by Region


                                      As of June 16, 2000

                                No. of               No. of
                             Properties (a)          Rooms

    Atlanta                       11                 5,351
    Florida                       11                 4,877
    Mid-Atlantic                  16                 5,791
    Midwest                       13                 4,688
    New York                       9                 5,778
    Northeast                     10                 3,935
    South Central                 19                 9,439
    Western                       25                12,539
    All Regions                  114                52,398



                                 Twenty-four weeks ended June 16, 2000

                                               Average
                              Average         Occupancy
                            Daily Rate       Percentages          REVPAR (b)

    Atlanta                  $162.46            74.9%              $121.73
    Florida                   175.18             82.8               145.12
    Mid-Atlantic              144.09             76.9               110.82
    Midwest                   134.20             74.0                99.35
    New York                  218.17             87.2               190.16
    Northeast                 132.40             73.6                97.51
    South Central             133.25             78.3               104.31
    Western                   167.49             81.2               135.94
    All Regions               160.04             79.2               126.69



                                Twenty-four weeks ended June 18, 1999

                                       Average                        Percent
                        Average       Occupancy                     Change in
                      Daily Rate    Percentages       REVPAR (b)      REVPAR

    Atlanta            $149.19         78.2%         $116.65           4.4%
    Florida             164.84          84.6          139.44            4.1
    Mid-Atlantic        134.31          76.8          103.19            7.4
    Midwest             130.72          75.8           99.08            0.3
    New York            200.81          87.0          174.77            8.8
    Northeast           123.51          74.6           92.11            5.9
    South Central       131.46          77.3          101.55            2.7
    Western             160.56          80.1          128.58            5.7
    All Regions         151.61          79.4          120.39            5.2



                            HOST MARRIOTT CORPORATION
                              Hotel Operational Data
                      Comparable Property Statistics (cont.)
                                   (unaudited)

                            Other Portfolio Statistics

                                      As of June 16, 2000
                                   No. of             No. of
                               Properties              Rooms
    Ritz-Carlton (c)                    9              3,540


                                       Twelve weeks ended June 16, 2000
                                                     Average
                                  Average          Occupancy
                               Daily Rate        Percentages       REVPAR(b)
    Ritz-Carlton (c)              $242.64              81.3%        $197.21



                                  Twelve weeks ended June 18, 1999
                                          Average                   Percent
                           Average      Occupancy                    Change
                        Daily Rate    Percentages    REVPAR (b)      REVPAR
    Ritz-Carlton (c)       $224.27       81.4%        $182.57          8.0%



                          Other Portfolio Statistics

                                  As of June 16, 2000
                                No. of           No. of
                            Properties            Rooms
    Ritz-Carlton (c)                 9            3,540


                                Twenty-four weeks ended June 16, 2000
                                                Average
                               Average        Occupancy
                            Daily Rate      Percentages        REVPAR (b)
    Ritz-Carlton (c)           $242.30            80.0%           $193.74


                               Twenty-four weeks ended June 18, 1999
                                          Average                    Percent
                         Average        Occupancy                  Change in
                      Daily Rate      Percentages      REVPAR (b)     REVPAR
    Ritz-Carlton (c)     $225.73            80.4%        $181.56        6.7%

(a) Comparable properties consist of the 114 properties owned, directly or indirectly by us for the same period of time in each period covered, excluding two properties where significant expansion at the hotels affected operations and five properties where reported results were affected by a change in reporting period.
(b) REVPAR represents room revenue per available room, which measures daily room revenues generated on a per room basis, excluding food and beverage revenues or other ancillary revenues generated by the property.
(c)Includes nine Ritz-Carlton properties owned by Host REIT for all periods presented.

                          HOST MARRIOTT CORPORATION
                            Hotel Operational Data
                  Property Status by Region (All Properties)
                                 (unaudited)


                                 As of June 16, 2000
                              No. of           No. of
                          Properties            Rooms
    Atlanta                     11              5,351
    Florida                     13              7,097
    Mid-Atlantic                17              6,195
    Midwest                     14              5,008
    New York                    10              7,188
    Northeast                   11              4,294
    South Central               19              9,439
    Western                     27             13,269
    All Regions                122             57,841


                                 Twelve weeks ended June 16, 2000
                           Average           Occupancy
                        Daily Rate (a)     Percentages (a)      REVPAR (a)
    Atlanta                $159.62             72.9%              $116.33
    Florida                 162.53              81.2               131.95
    Mid-Atlantic            147.29              83.6               123.09
    Midwest                 139.93              78.0               109.20
    New York                216.73              87.8               190.18
    Northeast               138.84              79.3               110.05
    South Central           128.99              79.4               102.41
    Western                 164.59              83.0               136.63
    All Regions             159.36              81.2               129.36


                                As of June 18, 1999
                            No. of              No. of
                        Properties (a)           Rooms
    Atlanta                     11             5,351
    Florida                     13             6,673
    Mid-Atlantic                17             6,195
    Midwest                     14             5,008
    New York                    10             7,166
    Northeast                   12             4,569
    South Central               20             9,735
    Western                     27            13,269
    All Regions                124            57,966


                                   Twelve weeks ended June 18, 1999
                                               Average
                           Average           Occupancy
                        Daily Rate (b)     Percentages (b)       REVPAR (b)
    Atlanta                $150.97             77.7%              $117.29
    Florida                 153.00              82.5               126.26
    Mid-Atlantic            137.52              82.4               113.29
    Midwest                 134.71              77.7               104.68
    New York                199.93              87.0               174.01
    Northeast               140.39              79.9               112.11
    South Central           126.08              77.2                97.32
    Western                 156.14              80.2               125.15
    All Regions             151.25              80.6               121.84

                                                     As of June 16, 2000
                                            No. of Properties    No. of Rooms
    Atlanta                                         11             5,351
    Florida                                         13             7,097
    Mid-Atlantic                                    17             6,195
    Midwest                                         14             5,008
    New York                                        10             7,188
    Northeast                                       11             4,294
    South Central                                   19             9,439
    Western                                         27            13,269
      All Regions                                  122            57,841


                                    Twenty-four weeks ended June 16, 2000
                                                     Average
                                    Average         Occupancy
                                Daily Rate (a)   Percentages (a)  REVPAR (a)
    Atlanta                         $162.46           74.9%       $121.73
    Florida                          171.84            81.4        139.84
    Mid-Atlantic                     142.25            76.8        109.22
    Midwest                          133.02            73.7         98.06
    New York                         210.14            83.4        175.17
    Northeast                        131.64            74.3         97.86
    South Central                    133.25            78.3        104.31
    Western                          165.08            81.2        134.12
      All Regions                    159.12            78.8        125.42


                                                   As of June 18, 1999
                                           No. of Properties   No. of Rooms
    Atlanta                                         11           5,351
    Florida                                         13           6,673
    Mid-Atlantic                                    17           6,195
    Midwest                                         14           5,008
    New York                                        10           7,166
    Northeast                                       12           4,569
    South Central                                   20           9,735
    Western                                         27          13,269
      All Regions                                  124          57,966


                                     Twenty-four weeks ended June 18, 1999
                                                    Average
                                    Average        Occupancy
                                 Daily Rate (b)  Percentages (b)  REVPAR (b)
    Atlanta                         $149.19           78.2%       $116.65
    Florida                          164.78            84.2        138.76
    Mid-Atlantic                     132.78            76.8        101.98
    Midwest                          128.54            75.3         96.76
    New York                         192.82            84.6        163.06
    Northeast                        131.81            74.9         98.70
    South Central                    129.81            77.5        100.65
    Western                          158.23            80.2        126.97
      All Regions                    151.07            79.4        119.91

    (a) The operating results include operations for the Tampa Waterside
        Marriott, which opened February 19, 2000.
    (b) The operating results include operations for five hotels (1,577 rooms)
        which were sold at various times in 1999.

                          HOST MARRIOTT CORPORATION
                            Hotel Operational Data
                    Schedule of Property Level Results (a)
                           (unaudited, in millions)

                                        Comparable Properties (b)
                               Twelve weeks ended     Twenty-four weeks ended

                             June 16,     June 18,      June 16,     June 18,
                              2000          1999         2000          1999

    Sales (c)
     Room                     $586          $547       $1,091        $1,035
     Food and beverage         294           270          536           498
     Other                      71            63          130           119
      Total hotel sales        951           880        1,757         1,652

    Hotel costs and expenses   557           520        1,041           983
    Management fees and
     other property-
      level expenses (d)       101            92          189           178
                               658           612        1,230         1,161

    Property-level hotel
     profit before
      depreciation and
       amortization (e)       $293          $268         $527          $491

(a) The schedules of property-level results represent the unaudited results of operations of our leased properties. In connection with the REIT conversion substantially all of these properties were leased to Crestline Capital Corporation. Marriott International and other hotel operators conduct the day to day management of the hotels pursuant to management agreements with Crestline. Therefore, the hotel sales, costs, or other expenses, including management fees, are not included in our results of operations for the twelve weeks ended and the twenty-four weeks ended June 16, 2000 and June 18, 1999, but rather are the sales and expenses of our lessees with the exception of property-level owner expenses which are Host REIT's for all periods presented. Additionally, the sales and expenses are not subject to our system of internal accounting controls. We have presented this information because we feel that it may be useful to investors in determining the unleveraged economic value of our properties. However, this should not be deemed to be a method for the calculation of the market value of either Host REIT or the hotel properties. It also does not represent the value at which we could sell the properties on the open market. Property-level hotel profit does not reflect significant costs such as the requirements of the lease and management agreements including the amounts due to the lessee of the properties in the determination of the property-level profit. Additionally, our management and lease agreements restrict our ability to sell properties without incurring significant fees for termination of these agreements.
(b) Comparable properties consist of the 114 properties owned, directly or indirectly by us for the same period of time in each period covered, excluding two properties where significant expansion at the hotels affected operations and five properties where reported results were affected by a change in reporting period.
(c) Hotel sales amounts represent the unaudited comparable gross hotel sales, which includes room, food and beverage and other hotel revenues generated by the properties. Gross hotels sales are presented here to provide a means of comparison of property level results which investors may find useful. However, these gross sales do not represent our reported results of operations. Our rental income under each lease is the greater of base or percentage rent as defined in the lease agreements. Percentage rent applicable to room, food and beverage, and other types of hotel revenue varies by lease and is calculated by multiplying fixed percentages by the total amount of such revenues over specified threshold amounts. Both the minimum rents and the revenue thresholds used in computing percentage rents are subject to annual adjustments based on increases in the United States Consumer Price Index and the Labor Index, as defined in the lease agreements. Certain amounts of the percentage rent considered contingent under SAB 101 are deferred until such time as the underlying sales exceeds annual thresholds, which are determined individually by property.
(d) These amounts represent our direct obligations as owner of the hotel properties as well as management fees and other expenses such as permit and license fees and certain taxes which are obligations of the lessee. Our direct obligations are primarily insurance, ground rent, property taxes and rental payments on certain leased hotel properties. Management fees represent amounts paid to Marriott International and other hotel operators under management agreements with Crestline. These agreements generally provide for payment of base management fees equal to one to four percent of sales and incentive management fees generally equal to 20% to 50% of operating profit (as defined in the agreements) over a priority return to the lessee, with total incentive management fees not to exceed 20% of cumulative operating profit, or 20% of current year operating profit. We remain obligated to the hotel operators in case the lessee fails to pay these fees (but we would be entitled to reimbursement from the lessee under the terms of the leases). The management fees and other expenses of the lessee are not included in our results of operations or net income for all periods presented.
(e) As stated above, these results represent property-level results and are not the revenues or operating profit of Host REIT. Further, certain significant cost items normally recorded under generally accepted accounting principles including lease payments, depreciation and amortization have not been included in the calculation of property-level profit. Additionally, the property-level profit does not reflect our EBITDA reported herein or that of our lessee.

                          HOST MARRIOTT CORPORATION
                    Select Development and Expansion Data
                           (unaudited, in millions)

                                                Expected       Estimated Total
                      Project Description    Completion Date    Investment (a)

    Marriott Orlando
     World Center       500 room expansion   Completed June 21, 2000      $ 84
    Ritz-Carlton
     Naples Golf Lodge    295 room hotel         November 1, 2001           75
    Ritz-Carlton
     Naples Spa       50,000 sq. foot addition   February 1, 2001           23
    Memphis Marriott    200 room expansion        April 1, 2002             16
    Marriott Harbor
     Beach Resort Spa  20,000 sq. foot addition   April 15, 2001             7

    (a) Represents estimated total cost (unleveraged) to construct the
        designated development or expansion project.

                 Twelve Weeks Twelve Weeks Twenty-four Weeks Twenty-four Weeks
                    Ended         Ended         Ended             Ended
                 June 16, 2000  June 18, 1999  June 16, 2000   June 18, 1999

    Replacement
    and renewal
    cash
    expenditures (b)  $52           $36           $106             $86

    (b) Represents amounts expended or reserved for routine maintenance or
        replacement of furniture, fixtures and equipment at the properties.

SOURCE: Host Marriott Corporation