Company Press Release
HOST MARRIOTT CORPORATION
Introduction
The following financial data is presented in order to help our investors understand the financial position and
operations of the company as of March 24, 2000. In this press release we present certain information regarding
Comparative FFO and EBITDA wherein Host Marriott Corporation (``Host REIT'') and Host Marriott, L.P. (``Host LP'')
are separate entities with distinct reconciling items between them. Throughout this press release you will see
references to Host LP, a 77% owned operating partnership which owns all of our hotels. When distinguishing between
Host REIT and Host LP, the primary difference is the 23% ownership by outside partners in Host LP, which is reflected
for financial reporting purposes as minority interest in our balance sheet and minority interest expense in our
income statement. We have included below a brief discussion of these entities and their relationship to one another.
Readers are encouraged to find further detail regarding our corporate structure in our annual report on Form 10-K
for the fiscal year ended December 31, 1999.
Host REIT operates as a self-managed and self-administered real estate investment trust with operations conducted
solely through the operating partnership, Host LP. Host REIT contributed substantially all of its hotels and certain
other assets and liabilities to Host LP on December 30, 1998 and holds approximately 77% of the operating partnership
units-which we refer to as OP Units-in an amount equal to the outstanding number of shares of Host REIT's common
stock. Partners holding OP Units, other than Host REIT, have the right to exchange their OP Units for cash, or,
at Host REIT's option, shares of Host REIT common stock.
For purposes of determining diluted earnings per share, diluted Comparative FFO per share and EBITDA (all of which
are defined herein) we consider all of the outstanding OP Units not held by Host REIT to have been exchanged for
common stock.
HOST MARRIOTT CORPORATION
Consolidated Balance Sheets (a)
(unaudited, in millions)
March 24, December 31,
2000 1999
ASSETS
Property and equipment, net $7,120 $7,108
Notes and other receivables (including amounts
due from affiliates of $128 million and
$127 million, respectively) 176 175
Rent receivable 84 72
Investments in affiliates 49 49
Other assets 531 521
Cash and cash equivalents 126 277
$8,086 $8,202
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Senior notes $2,539 $2,539
Mortgage debt 2,304 2,309
Other 221 221
5,064 5,069
Accounts payable and accrued expenses 145 148
Deferred income taxes 49 49
Deferred rent 123 --
Other liabilities 396 426
Total liabilities 5,777 5,692
Minority interest 472 508
Company-obligated mandatorily redeemable
convertible preferred securities of a subsidiary
whose sole assets are the convertible
subordinated debentures due 2026 ("Convertible
Preferred Securities") 475 497
Shareholders' equity
Cumulative redeemable preferred stock,
50 million shares authorized; 8.2 million shares
issued and outstanding 196 196
Common stock, 750 million shares authorized;
219.8 million shares and 223.5 million shares
issued and outstanding, respectively 2 2
Additional paid-in capital 1,810 1,844
Accumulated other comprehensive income 1 2
Retained deficit (647) (539)
Total shareholders' equity 1,362 1,505
$8,086 $8,202
a) Our unaudited consolidated balance sheets have been prepared without
audit. Certain information and footnote disclosures normally included
in financial statements presented in accordance with accounting
principles generally accepted in the United States have been omitted.
The unaudited consolidated balance sheets should be read in conjunction
with the consolidated financial statements and notes thereto included
in our annual report on Form 10-K for the year ended December 31, 1999.
HOST MARRIOTT CORPORATION
Consolidated Statements of Operations (a)
(unaudited, in millions, except per share amounts)
Twelve weeks ended
March 24, March 26,
2000 1999
Revenues
Rental income (b) $173 $171
Interest income 9 8
Other 3 13
Total revenues 185 192
Expenses
Depreciation and amortization 74 68
Property-level owner expenses 59 58
Minority interest benefit (b) (11) (8)
Interest expense 96 99
Dividends on convertible preferred securities
of subsidiary trust 7 9
Corporate expenses 10 7
Other expenses 6 2
Total expenses 241 235
Loss before income taxes (56) (43)
Provision for income taxes (1) (1)
Net loss (57) (44)
Less: Preferred dividends (5) --
Add: Gain on repurchase of Convertible
Preferred Securities, net of income tax
expense of $1 million 4 --
Net loss available to common shareholders $(58) $(44)
Basic loss per common share $(.26) $(.19)
Diluted loss per common share $(.26) $(.19)
(a) Our unaudited consolidated statements of operations have been prepared
without audit. Certain information and footnote disclosures normally
included in financial statements presented in accordance with
accounting principles generally accepted in the United States have
been omitted. The unaudited consolidated statements of operations
should be read in conjunction with the consolidated financial
statements and notes thereto included in our annual report on Form 10-
K for the year ended December 31, 1999.
(b) The staff of the Securities & Exchange Commission issued Staff
Accounting Bulletin 101 "Revenue Recognition" (SAB 101) in December
1999, which we retroactively adopted effective January 1, 1999. SAB
101 discusses factors to consider in determining when contingent
revenue should be recognized during interim periods. As a result of
the adoption of SAB 101, contingent rental income of $123 million and
$115 million, respectively, for the twelve weeks ended March 24, 2000
and March 26, 1999 was deferred because they are contingent upon
achieving annual levels of hotel sales. The deferral of contingent
rent also caused a reduction in minority interest expense, which
ultimately resulted in a minority interest benefit for the same
periods, reflecting the minority owners' share in the net loss for the
quarter.
HOST MARRIOTT CORPORATION
Reconciliation of Earnings per Share (a)
(unaudited, in millions)
Twelve weeks ended March 24, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
Net Loss $(57) 221.4 $(.26)
Dividends on preferred stock (5) -- (.02)
Gain on repurchase of
Convertible Preferred
Securities 4 -- .02
Basic loss available to common
shareholders per share (58) 221.4 (.26)
Assuming distribution of
common shares granted under
the comprehensive stock plan,
less shares assumed purchased
at average market price (d) -- -- --
Assuming conversion of minority
OP Units outstanding (b) (17) 63.8 --
Assuming conversion of
preferred OP Units (c) -- .6 --
Assuming conversion of minority
OP Units issuable (d) -- -- --
Assuming conversion of
Convertible Preferred
Securities (d) -- -- --
Diluted Loss per Share $ (75) 285.8 $ (.26)
Twelve weeks ended March 26, 1999
Income Shares Per Share
(Numerator)(Denominator) Amount
Net Loss $(44) 226.9 $(.19)
Dividends on preferred stock -- -- --
Gain on repurchase of
Convertible Preferred Securities -- -- --
Basic loss available to common
shareholders per share (44) 226.9 (.19)
Assuming distribution of
common shares granted under
the comprehensive stock plan,
less shares assumed purchased
at average market price (d) -- -- --
Assuming conversion of minority
OP Units outstanding (b) (12) 64.6 --
Assuming conversion of
preferred OP Units (c) -- -- --
Assuming conversion of minority
OP Units issuable (d) -- -- --
Assuming conversion of
Convertible Preferred
Securities (d) -- -- --
Diluted Loss per Share $ (56) 291.5 $(.19)
(a) Basic loss per common share is computed by dividing the net loss
adjusted for dividends on preferred stock and gains on repurchases of
Convertible Preferred Securities by the weighted average number of
shares of common stock outstanding. The diluted loss per share is
computed by dividing the net loss adjusted for dividends on preferred
stock, gains on repurchases of Convertible Preferred Securities, and
potentially dilutive securities, by the weighted average number of
shares of common stock outstanding plus other potentially dilutive
securities. Dilutive securities may include shares granted under
comprehensive stock plans and the Convertible Preferred Securities.
Dilutive securities may also include those common and preferred OP
Units issuable or outstanding that are held by minority partners which
are assumed to be converted.
(b) In connection with the conversion to a REIT, we formed Host LP, whose
OP Units are convertible to common stock, or cash at the option of
Host REIT, based on certain conditions, including the passage of time.
(c) Includes those minority partners that have the option to convert their
limited partnership interest or preferred OP Units to common OP Units.
Whether any of these actually occur depends on a number of conditions,
including, in some cases, the passage of time.
(d) For all periods presented these securities were antidilutive.
HOST MARRIOTT CORPORATION
COMPARATIVE FUNDS FROM OPERATIONS (a)
(unaudited, in millions, except per share amounts)
Twelve weeks ended
March 24, March 26,
2000 1999
Funds from Operations
Net loss $(57) $(44)
Depreciation and amortization 72 68
Other real estate activities -- (11)
Partnership adjustments (10) (9)
Funds from operations of Host LP 5 4
Effect on funds from operations of SAB 101 (a) 119 113
Comparative funds from operations of Host LP 124 117
Dividends on preferred stock (5) --
Comparative funds from operations of Host LP
available to common unitholders 119 117
Comparative funds from operations of minority
partners of Host LP (b) (27) (26)
Comparative funds from operations available
to common shareholders of Host REIT $92 $91
Comparative funds from operations of Host REIT
per basic common share (c) $.42 $.40
Comparative funds from operations of Host REIT
per diluted common share (d) $.39 $.38
(a) We consider Comparative Funds from Operations ("Comparative FFO"),
which consists of funds from operations, as defined by the National
Association of Real Estate Investment Trusts ("NAREIT"), plus
contingent rent which is deferred in accordance with SAB 101, 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
and income taxes have been, and will be incurred, which are not
reflected in the Comparative FFO presentation. However, Comparative
FFO as presented may not be comparable to amounts calculated by other
companies. The deferrals under SAB 101 would have impacted funds from
operations by $119 million and $113 million for the first quarter of
2000 and 1999, respectively. Rental revenues would have been increased
by $123 million and $115 million for the first quarters of 2000 and
1999, respectively, and Partnership adjustments would have been
reduced by $4 million and $2 million, respectively. If such contingent
rent were not included in our Comparative FFO, then our funds from
operations would be $0 and $4 million for the twelve weeks ended March
24, 2000 and March 26, 1999, respectively. Funds from operations would
be $.00 and $.02 per basic share for the same periods, respectively.
In the calculation of funds from operations per diluted share, the
Convertible Preferred Securities and other adjustments are
antidilutive for both periods.
(b) During 1998, Host REIT and its subsidiaries and affiliates consummated
a series of transactions intended to enable us to qualify as a REIT
for federal income tax purposes. As a result of these transactions,
the hotels formerly owned by Host REIT and its subsidiaries are now
owned by Host LP and its subsidiaries; Host LP leases substantially
all of these hotels to Crestline Capital Corporation ("Crestline").
Marriott International, Inc. and other hotel operators conduct the day
to day management of the hotels pursuant to management agreements with
Crestline.
During the above reorganization, Host REIT received a number of units
of general and limited partnership interests in the Operating
Partnership -_ which we refer to as OP Units -_ equal to the number of
the then outstanding shares of Host REIT common stock, and Host LP
assumed all of the liabilities of Host REIT. As a result of this
reorganization we are the sole general partner in Host LP and as of
March 24, 2000 held approximately 77% of the outstanding OP Units. The
$27 million and $26 million deducted for the twelve weeks ended March
24, 2000 and March 26, 1999, respectively, represent the Comparative
FFO attributable to the interests in Host LP held by the 23% minority
partners. OP Units owned by holders other than us are redeemable at
the option of the holder, generally commencing one year after the
issuance of their OP Units. Upon redemption of an OP Unit, the holder
would receive from Host LP cash in an amount equal to the market value
of one share of our common stock, or at our option, a share of our
common stock. For additional detail regarding the reorganization and
our operating structure investors should read our annual report on
Form 10-K for the year ended December 31, 1999.
(c) Comparative FFO per basic share is calculated in conformity with
NAREIT guidelines, with the exception of the adjustment to include
contingent rent in the calculation. Comparative FFO per basic share
is computed by dividing comparative funds from operations available to
common shareholders by the weighted average number of shares of common
stock outstanding.
(d) Comparative FFO per diluted share is calculated in conformity with
NAREIT guidelines, with the exception of the adjustment to include
contingent rent in the calculation. Diluted shares include a
provision for the assumed conversion of the minority limited partners'
interest and preferred OP Units in Host LP to our common shares.
Additionally, the calculation includes shares from the assumed
conversion of those minority partners of subsidiary partnerships of
Host LP that have the option to convert their limited partnership
interests to OP units and a corresponding conversion of those OP Units
to common stock. Whether any of these actually occur depends on a
number of conditions including, in some cases, the passage of time.
Should the conversions of these minority interests occur, we would
then receive the additional cash flow and the equity value from the
acquired limited partnership interests.
HOST MARRIOTT CORPORATION
RECONCILIATION OF COMPARATIVE FUNDS FROM OPERATIONS ON A PER SHARE BASIS (a)
(unaudited, in millions, except per share basis)
Twelve weeks ended March 24, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic Comparative Funds
from Operations available
to common shareholders $92 221.4 $.42
Assuming distribution of
common shares granted under
the comprehensive stock plan,
less shares assumed purchased
at average market price -- 4.4 (.01)
Assuming conversion of minority
OP Units outstanding (b) 27 63.8 --
Assuming conversion of preferred
OP Units(c) -- .6 --
Assuming conversion of minority
OP Units issuable (c) 4 10.9 --
Assuming conversion of Convertible
Preferred Securities 7 31.9 (.02)
Diluted Comparative Funds
from Operations $130 333.0 $.39
Twelve weeks ended March 26, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic Comparative Funds
from Operations available
to common shareholders $91 226.9 $.40
Assuming distribution of
common shares granted under
the comprehensive stock plan,
less shares assumed purchased
at average market price -- 5.9 (.01)
Assuming conversion of minority
OP Units outstanding (b) 26 64.6 --
Assuming conversion of preferred
OP Units(c) outstanding (c) -- 1.2 --
Assuming conversion of minority
OP Units issuable (c) 4 8.6 --
Assuming conversion of Convertible
Preferred Securities 9 35.8 (.01)
Diluted Comparative Funds
from Operations $130 343.0 $.38
(a) Comparative FFO per basic share is computed by dividing Comparative
FFO available to common shareholders by the weighted average number of
shares of common stock outstanding. Comparative FFO per diluted share
is computed by dividing Comparative FFO available to common
shareholders, as adjusted for potentially dilutive securities, by the
weighted average number of shares of common stock outstanding plus
other potentially dilutive securities. Dilutive securities may
include shares granted under comprehensive stock plans and the
Convertible Preferred Securities. Dilutive securities also includes
those common and preferred OP Units issuable or outstanding that are
held by minority partners which are assumed to be converted.
(b) In connection with our conversion to a REIT, we formed Host LP, whose
OP Units are convertible to common stock, or cash, at the option of
Host REIT, based on certain conditions, including the passage of time.
(c) Includes those minority partners that have the option to convert their
limited partnership interest or preferred OP Units to common OP Units.
Whether any of these actually occur depends on a number of conditions,
including, in some cases, the passage of time.