Announces the Acquisition of the Embassy Suites Chicago Downtown - Lakefront Hotel
Host Marriott Corporation (NYSE:HMT) , the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the first quarter of 2004. First quarter results include the following:
Revenues increased $34 million, or 4%, to $809 million in the first quarter of 2004 compared to $775 million for the first quarter of 2003.
Net loss was $31 million and $34 million for the first quarter of 2004 and 2003, respectively.
Loss per diluted share was $.12 and $.16 for the first quarter of 2004 and 2003, respectively.
Funds from Operations (FFO) per diluted share, were $.13 and $.15 for the first quarter of 2004 and 2003, respectively.
Results of operations in the first quarter of 2004 include approximately $12 million of charges for call premiums and the acceleration of deferred financing costs for prepayment of debt. This represents approximately $.04 per diluted share and approximately $.04 of FFO per diluted share.
Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $172 million in both the first quarter of 2004 and 2003.
FFO per diluted share and Adjusted EBITDA are non-GAAP 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.
Comparable hotel RevPAR for the first quarter increased 3.0%, driven by an increase in occupancy of almost two percentage points and a slight increase in average room rate. Comparable hotel adjusted operating profit margins declined approximately 55 basis points.
Christopher J. Nassetta, president and chief executive officer, stated, "We are pleased with the pace and the strength of the recovery. Demand accelerated throughout the quarter, helping us produce strong sequential improvement in RevPAR. The business mix has begun moving from discount business to higher-rated business and the group booking pace and net reservation volume continue to strengthen. Clearly, the operating environment for the lodging industry has improved considerably over the last few months and we feel the stage has been set for a sustained recovery."
Balance Sheet
As of March 26, 2004, the Company had $526 million in cash and cash equivalents and $250 million of availability under its credit facility. Additionally, the Company had $598 million of restricted cash, including net proceeds of $484 million from the sale of 3.25% senior exchangeable debentures issued on March 16, 2004, which were used, along with available cash, to redeem $494 million of 7 7/8% Series B senior notes on April 15, 2004. During the second quarter, the Company also called an additional $65 million of Series B senior notes, which it will redeem on May 3, 2004. As a result of these redemptions, the Company will record a charge for call premiums and the acceleration of deferred financing costs totaling approximately $30 million in the second quarter of 2004.
On April 27, 2004, the Company acquired the 455-room Embassy Suites Chicago Downtown-Lakefront for approximately $89 million, with a portion of the funds raised from its equity offerings in 2003. This property is the first Embassy Suites and second Hilton-branded property in the portfolio. The property was acquired at an approximate 20% discount to replacement cost. During the first quarter of 2004, the Company also completed the sale of six non-core properties for total proceeds of approximately $100 million, which has been, or will be, used to repay debt.
W. Edward Walter, executive vice president and chief financial officer, stated, "Improved operating performance at our hotels combined with our capital market activities, which reduced our interest expense, has increased our interest coverage ratio and reduced our leverage. As a result, we are currently not restricted under our debt covenants on our ability to pay dividends or incur debt. Given our improved earnings outlook, we expect to be able to pay dividends on our perpetual preferred securities on a going forward basis."
However, the Company does not expect to pay a meaningful dividend on its common shares in 2004.
2004 Outlook
As a result of the improving economic outlook, the Company expects comparable hotel RevPAR for the second quarter of 2004 and full year 2004 to increase approximately 5% to 7% and 4% to 6%, respectively. This reflects an increase from the Company's 2004 RevPAR guidance issued on February 24, 2004. Based upon this guidance, the Company estimates that for 2004 its:
* diluted loss per common share should be approximately $.08 to $.06 for
the second quarter and $.27 to $.17 for the full year;
* net loss should be approximately $17 million to $9 million for the
second quarter and $52 million to $21 million for the full year;
* FFO per diluted share should be approximately $.17 to $.20 for the
second quarter and $.61 to $.71 for the full year (including $30
million, or $.09 per diluted share, for the second quarter and $54
million, or $.16 per diluted share, for the full year related to charges
for call premiums and the acceleration of deferred financing costs for
debt repaid or expected to be repaid); and
* Adjusted EBITDA should be approximately $725 million to $755 million for
the full year.
Mr. Nassetta noted, "Lodging industry fundamentals have improved significantly over the first half of last year. Improvements in operations thus far in 2004 have been primarily driven by increases in occupancy at our properties. We expect that as lodging industry fundamentals continue to strengthen, we will experience growth in average room rates and margin improvement, which should ultimately result in meaningful growth in RevPAR, earnings and shareholder value."
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