Host Hotels & Resorts, Inc. Reports Strong Growth In Operating Results For The Second Quarter 2007
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Host Hotels & Resorts, Inc. Reports Strong Growth In Operating Results For The Second Quarter 2007
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2007-07-18
Host Hotels & Resorts, Inc. , the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the second quarter ended June 15, 2007.
Total revenue increased $210 million, or 17.8%, to $1,391 million for
the second quarter and $422 million, or 21.0%, to $2,428 million for
year-to-date 2007. Excluding the revenues for the Starwood portfolio,
which was purchased in April 2006, revenues increased 8.4% and 7.9% for
the second quarter and year-to-date 2007, respectively.
-- Net income decreased $181 million to $149 million for the second
quarter and $166 million to $336 million for year-to-date 2007.
Earnings per diluted share decreased $.35 to $.27 and $.48 to $.62 for
the second quarter and year-to-date 2007, respectively.
Net income in 2007 included a net loss of approximately $46 million, or
$.08 per diluted share, for the second quarter, and a net gain of $90
million, or $.16 per diluted share, for year-to-date 2007 associated
with the refinancing of debt and gains (losses) on hotel dispositions.
By comparison, net income in 2006 included a net gain of approximately
$199 million, or $.38 per diluted share, and $345 million, or $.78 per
diluted share, in the second quarter and year-to-date 2006,
respectively, associated with similar transactions, as well as
preferred stock redemptions and non-recurring costs associated with the
Starwood acquisition. For further detail, refer to the "Schedule of
Significant Transactions Affecting Earnings per Share and Funds From
Operations per Diluted Share" attached to this press release.
-- Funds from Operations (FFO) per diluted share increased 23.1% to $.48
for the second quarter and 16.4% to $.78 for year-to-date 2007. FFO
was reduced by $.08 per diluted share for costs associated with debt
refinancings for both the second quarter and year-to-date 2007. By
comparison, FFO per diluted share was reduced by $.04 and $.05 for the
second quarter and year-to-date 2006, respectively, for costs
associated with debt refinancings, as well as costs associated with
preferred stock redemptions and the Starwood acquisition. For further
detail, refer to the "Schedule of Significant Transactions Affecting
Earnings per Share and Funds From Operations per Diluted Share"
attached to this press release.
The Company also announced the following second quarter results for Host Hotels & Resorts, L.P., through which it conducts all of its operations and holds approximately 97% of the partnership interests:
-- Net income decreased $189 million to $154 million for the second
quarter and $176 million to $348 million for year-to-date 2007. Net
income of Host LP was also affected by certain transactions-See
"Schedule of Significant Transactions Affecting Earnings per Share and
Funds From Operations per Diluted Share."
-- Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items, increased 19.3% to
$414 million for the second quarter and 21.1% to $677 million for year-
to-date 2007.
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
The Company presents RevPAR for its comparable hotels plus the Starwood portfolio acquired in April of 2006 due to the significant contribution of these hotels to the Company's operations. RevPAR for the comparable hotels plus the Starwood portfolio, which includes the 24 hotels acquired from Starwood in 2006 that we own as of June 15, 2007, increased 6.7% for the quarter and 6.8% year-to-date. The comparable hotel plus the Starwood portfolio RevPAR gains were driven by an increase in average room rates of 6.0% for the quarter and 6.1% year-to-date and increases in occupancy of .5 percentage points for both the quarter and year-to-date periods. Comparable hotel RevPAR for the second quarter of 2007 increased 5.5% when compared to the second quarter of 2006 and year-to-date comparable hotel RevPAR increased 5.8% when compared to year-to-date 2006. Comparable hotel adjusted operating profit margins increased .5 percentage points and .4 percentage points for the second quarter and year-to-date 2007, respectively. For further detail, see "Notes to the Financial Information."
Financing Activities and Balance Sheet
During the second quarter, the Company continued to reduce interest costs, as well as manage its capital structure to provide financial flexibility. On May 2, 2007, the Company paid approximately $547 million in connection with the defeasance of $514 million of mortgage debt with a 7.61% interest rate (the "CMBS Loan"), primarily utilizing proceeds from its March issuance of $600 million of 25/8% Exchangeable Senior Debentures. The payment included approximately $33 million in prepayment/defeasance and other costs. On May 25, 2007, the Company successfully amended its credit facility to increase the size of the facility to $600 million, extend the maturity from 2008 to 2011 and modify the terms of the facility, including lowering the rate of interest on borrowings from a spread of 200 to 375 basis points over LIBOR to 65 to 150 basis points over LIBOR, depending on the Company's leverage ratio. The amended facility also has an accordion feature that allows for total borrowing capacity of up to $1 billion. There are currently no amounts outstanding under the facility. Since December 31, 2006, the Company has decreased its weighted average interest rate from 6.8% to 6.1% as a result of its 2007 refinancings.
As of June 15, 2007, the Company had approximately $497 million of cash and cash equivalents. Excluding amounts necessary for working capital, the Company intends to use its remaining available funds to further invest in its portfolio, acquire new properties or make further debt repayments.
Dividend
As previously announced, the Company expects to declare a fixed $.20 per share common dividend each quarter, as well as a special dividend in the fourth quarter of each year, the amount of which will be based on the Company's taxable income. Based on the Company's 2007 guidance, the Company expects that the fourth quarter special dividend would be in the range of $.10 to $.20.
2007 Outlook
The Company expects RevPAR for the comparable hotels plus the Starwood portfolio to increase approximately 5.5% to 6.5% for the third quarter and 6.5% to 7.5% for the full year. For full year 2007, the Company expects its operating profit margins under GAAP to increase approximately 30 basis points to 70 basis points and its comparable hotel adjusted operating profit margins to increase approximately 75 basis points to 100 basis points. Based upon this guidance, the Company estimates that full year 2007 guidance for Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. would be as follows:
Host Hotels & Resorts, Inc.
-- earnings per diluted share should be approximately $.12 to $.13 for the
third quarter and $1.11 to $1.17 for the full year;
-- net income should be approximately $65 million to $70 million for the
third quarter and $602 million to $634 million for the full year; and
-- FFO per diluted share should be approximately $.32 to $.33 for the
third quarter and $1.78 to $1.84 for the full year (including a charge
of approximately $.08 per diluted share for the full year for debt
prepayment costs).
Host Hotels & Resorts, L.P.
-- net income should be approximately $624 million to $656 million for the
full year 2007; and
-- Adjusted EBITDA for the full year 2007 should be
approximately $1,450 million to $1,480 million.
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