Host Hotels & Resorts, Inc. reports results of operations for the first quarter 2009
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Host Hotels & Resorts, Inc. reports results of operations for the first quarter 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 2009-04-24
Host Hotels & Resorts, Inc. (NYSE: HST), the nation’s largest lodging real estate investment trust (REIT), today announced its results of operations for the first quarter ended March 27, 2009.
Total revenue decreased $171 million, or 16.2%, to $882 million for the first quarter of 2009 compared to 2008.
Net loss was $60 million for the first quarter of 2009 compared to net income of $63 million for the first quarter of 2008. The diluted loss per share was $.12 for the first quarter of 2009 compared to earnings per share of $.10 in 2008.
Operating results for the first quarter of 2009 were significantly affected by gains on a hotel disposition as well as non-cash impairment charges related to potential asset sales. Additionally, the first quarter of 2009 and 2008 include an increase in non-cash interest expense due to an accounting change implemented in the first quarter of 2009 that related to our exchangeable debentures. The cumulative effects of these items were to decrease earnings by $28 million, or $.05 per diluted share, for the first quarter of 2009. For further detail, refer to the “Schedule of Significant Items Affecting Earnings per Share and Funds From Operations per Diluted Share” attached to this earnings release.
Funds from Operations (FFO) per diluted share were $.10 for the first quarter of 2009 compared to $.33 per share for the first quarter of 2008. FFO per diluted share for the first quarter of 2009 was reduced by $.09 per diluted share due to non-cash impairment charges and the accounting change noted above.
Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, decreased $88 million for first quarter 2009, to $174 million.
For further detail of certain transactions affecting net income, earnings per diluted share and FFO per diluted share, refer to the “Schedule of Significant Items 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 first quarter of 2009 decreased 19.8% when compared to the first quarter of 2008. Comparable hotel adjusted operating profit margins decreased 400 basis points for the first quarter. For further detail, see “Notes to the Financial Information.”
BALANCE SHEET
As of March 27, 2009, the Company had approximately $653 million of cash and cash equivalents. The Company’s cash balance will generally be utilized for repayments or repurchases of debt, capital improvements and to maintain higher than historical cash levels for working capital. The Company has $400 million of available capacity under the credit facility.
In the first quarter, the Company repurchased $75 million face value of its 3.25% Exchangeable Senior Debentures (2004 Debentures) for approximately $69 million under its stock and equity-linked security repurchase program. The repurchased debentures had a carrying value of $72 million at the time of repurchase; therefore, the Company recorded a gain on the repurchases of approximately $3 million. Since the fourth quarter of 2008, the Company has repurchased $175 million face value of the debentures for $151 million, and currently has $325 million of the 2004 Debentures outstanding.
The Company also obtained a $120 million mortgage on the JW Marriott, Washington, D.C. The mortgage matures on April 2, 2013, with an additional one-year extension subject to certain conditions. During the first quarter, the Company repaid the $34 million mortgage secured by the Westin Indianapolis prior to its scheduled maturity.
CAPITAL EXPENDITURES
Capital expenditures totaled approximately $108 million for the first quarter, which was a decline of approximately 28% from prior year. These expenditures included return on investment (ROI) and repositioning projects of approximately $59 million.
DIVIDEND
Consistent with our previous guidance, the Company expects to declare a $.30 to $.35 per share common stock dividend in the fourth quarter (assuming no increase in its outstanding common shares), which may be payable either in cash or in a combination of cash and shares of common stock. The Company did pay the first quarter dividend on its preferred stock and plans to continue paying such dividends.
2009 OUTLOOK
The Company’s ability to predict future operating results continues to be significantly affected by the current recession and its effect on business and leisure travel. The Company expects that the trends affecting the economy will continue to depress hotel operating results across the portfolio. In the event that comparable hotel RevPAR were to decline approximately 18% to 20% for the full year 2009, the Company would anticipate that full year 2009 operating profit margins under GAAP would decrease approximately 1,000 basis points to 1,100 basis points and its comparable hotel adjusted operating profit margins would decrease approximately 540 basis points to 600 basis points. Based upon these parameters, the Company would estimate the following would occur:
loss per diluted share should be approximately $.34 to $.41;
net loss should be approximately $176 million to $216 million;
FFO per diluted share should be approximately $.68 to $.76 (including the deduction of $40 million of first quarter non-cash impairment charges and $30 million of non-cash interest expense on the exchangeable debentures for full year 2009 due to an accounting change); and
Adjusted EBITDA should be approximately $800 million to $850 million.
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