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Host Marriott Reports Outstanding Fourth Quarter and Full Year 2005 Results |
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Total revenue increased 9.7% to $1,272 million for the fourth quarter and 8.6% to $3,881 million for full year 2005.
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Host Marriott Corporation (NYSE:HMT) , the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the fourth quarter and for the year ended December 31, 2005. Fourth quarter and full year results include the following:
• Total revenue increased 9.7% to $1,272 million for the fourth quarter and 8.6% to $3,881 million for full year 2005.
• Net income increased $13 million to $74 million for the fourth quarter and increased from a loss of $.01 million for full year 2004 to net income of $166 million for full year 2005. Earnings per diluted share increased $.04 to $.19 for the fourth quarter and $.50 to $.38 for full year 2005 from a loss per diluted share of $(.12) for full year 2004. For the fourth quarter and full year 2005, net income includes net gains of $7 million, or $.02 per diluted share, and $21 million, or $.06 per diluted share, respectively, from the following transactions: the sale of a significant interest in a joint venture; gains on hotel dispositions; and costs associated with the refinancing of senior notes and the redemption of preferred stock. By comparison, for the fourth quarter and full year 2004, net income (loss) includes a net gain of $30 million, or $.08 per diluted share, and a net loss of $12 million, or $(.04) per diluted share, respectively, associated with similar transactions in 2004. 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.
• Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, increased 16.9% to $312 million for the fourth quarter and 16.2% to $918 million for full year 2005. (Adjusted EBITDA has been reduced by $2 million and $6 million for the fourth quarter and full year 2005, respectively, and $1 million for both the fourth quarter and full year 2004 for distributions to minority interest partners of Host Marriott, L.P.)
• Funds from Operations (FFO) per diluted share increased 26%, to $.44 for the fourth quarter and 49% to $1.15 for full year 2005. FFO per diluted share was reduced by $.08 and $.17 for full year 2005 and 2004, respectively, for costs associated with refinancing the senior notes and the redemption of preferred stock noted above.
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 fourth quarter of 2005 increased 10.3% and comparable hotel adjusted operating profit margin increased 155 basis points. The fourth quarter increases in comparable hotel RevPAR and comparable hotel adjusted operating profit margin were driven by a 7.7% increase in average room rate and a 1.7 percentage point increase in occupancy. Full year 2005 comparable hotel RevPAR increased 9.5%, while comparable hotel adjusted operating profit margin increased 170 basis points, both of which exceeded the high end of the Company's guidance. The full year 2005 RevPAR growth was driven by an increase in average room rates of 7.6% and an increase in occupancy of 1.2 percentage points.
Christopher J. Nassetta, president, chief executive officer, stated, "We finished 2005 with an outstanding fourth quarter, as strong RevPAR and margin growth drove significant increases in Adjusted EBITDA and FFO per diluted share, which exceeded the high end of our guidance by $.04." Mr. Nassetta added, "We expect that the favorable supply and demand environment in the industry will continue to drive further improvement in our operating results in 2006."
Balance Sheet
As of December 31, 2005, the Company had $184 million of cash and cash equivalents. Since December 31, 2004, the Company's total debt has been reduced by approximately $444 million primarily as a result of the redemption or conversion of substantially all of the Convertible Subordinated Debentures, which was completed in the first quarter of 2006. The Company currently has $575 million of availability under its credit facility.
W. Edward Walter, executive vice president, chief financial officer, stated, "As a result of the conversion or redemption of substantially all of our QUIPs, we have reduced our debt by approximately $492 million as well as annual interest costs by approximately $32 million. Despite the increase in shares, we believe this change should contribute to an increase in the common dividend to stockholders, while not becoming dilutive to FFO per share or earnings per share based on our 2006 forecast."
Acquisitions and Dispositions
In 2006, the Company has sold, or has, subject to customary closing conditions, signed contracts to sell five properties (the Swissotel The Drake, New York; the Fort Lauderdale Marina Marriott; the Albany Marriott; the Marriott at Research Triangle Park; and the Chicago Marriott Deerfield Suites) for expected total proceeds of approximately $700 million and a total estimated gain in excess of $380 million. The proceeds from the sales will be used to partially fund the acquisition of 38 properties from Starwood Hotels & Resorts Worldwide, Inc. and for other corporate purposes.
James F. Risoleo, executive vice president, chief investment officer, stated, "We are thrilled with the sales prices of all of our recent and expected dispositions, especially the Swissotel The Drake, New York and the Fort Lauderdale Marina Marriott. We will continue to take advantage of the current strong environment to recycle capital. We also continue to have a strong pipeline of potential acquisition candidates in urban and resort destinations both in North America and Europe that we believe are consistent with our strategy of improving our best in class portfolio."
2006 Outlook
The Company expects comparable hotel RevPAR for first quarter and full year 2006 to increase approximately 7.0% to 9.0% and 7.0% to 10.0%, respectively. For full year 2006, the Company also expects its operating profit margin under GAAP to increase approximately 210 basis points to 270 basis points and its comparable hotel adjusted operating profit margin to increase approximately 140 basis points to 175 basis points. Based upon this guidance and the assumption that the Starwood acquisition of 38 hotels (including entering into a joint venture for the six European assets in which the Company expects to retain approximately 25% of the equity interests) will be substantially completed in early April, the Company estimates that for 2006:
• earnings per diluted share should be approximately $.99 to $1.01 for the first quarter and $1.44 to $1.54 for the full year;
• net income should be approximately $379 million to $387 million for the first quarter and $724 million to $774 million for the full year;
• Adjusted EBITDA should be approximately $1,225 million to $1,270 million for the full year, both of which have been reduced by approximately $10 million for distributions to minority interest partners of Host Marriott, L.P.;
• FFO per diluted share should be approximately $.23 to $.25 for the first quarter and $1.44 to $1.54 for the full year (including a charge of approximately $7 million, or approximately $.01 per diluted share, for the full year, related to costs associated with debt or perpetual preferred stock expected to be refinanced or prepaid in 2006); and
• the common dividend will modestly increase throughout the year.
Mr. Nassetta also stated, "We believe that the trends for 2006 and beyond remain very positive. We are convinced that the Starwood portfolio complements our existing properties and will be accretive to the short- and long-term value of the Company. We believe that the strategic positioning of our portfolio both in terms of premium brands and international and domestic markets will result in meaningful growth in RevPAR, earnings and dividends. As we move forward in 2006 under our new name, Host Hotels & Resorts, we will continue to aggressively pursue our mission of being the premier hospitality real estate company and maximizing shareholder returns."
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