Host Hotels & Resorts, Inc. Reports Outstanding Operating Results for the Fourth Quarter and Full Year 2006
Host Hotels & Resorts, Inc. (NYSE:HST) , the nation's largest lodging real estate investment trust, today announced its results of operations for the fourth quarter and for the year ended December 31, 2006.
• Total revenue increased 41%, to $1,734 million, for the fourth quarter and nearly 30%, to $4,888 million, for full year 2006, which includes $366 million and $762 million of revenues for the fourth quarter and full year 2006, respectively, for the Starwood portfolio acquired in April 2006. Excluding the revenues from the Starwood portfolio, revenues increased 11.2% and 9.6% for the fourth quarter and full year, respectively.
• Net income increased $122 million to $196 million for the fourth quarter and $572 million to $738 million for full year 2006. Earnings per diluted share increased $.17 to $.36 for the fourth quarter and $1.10 to $1.48 for full year 2006.
• Net income includes a net gain of $8 million, or $.01 per diluted share, for the fourth quarter, and $355 million, or $.73 per diluted share, for the full year from the following: gains on asset dispositions, costs associated with the refinancing of senior notes and the redemption of preferred stock and non-recurring costs associated with the Starwood acquisition. By comparison, for fourth quarter and full year 2005, net income included a net gain of $7 million, or $.02 per diluted share, and $21 million, or $.06 per diluted share, respectively, associated with similar transactions in 2005.
• Funds from Operations (FFO) per diluted share increased nearly 32%, to $.58, for the fourth quarter and 33%, to $1.53, for full year 2006. FFO per diluted share was reduced by $.03 and $.09 for the fourth quarter and full year 2006, respectively, due to costs associated with refinancing of senior notes, the redemption of preferred stock and non- recurring costs associated with the Starwood acquisition. By comparison, FFO per diluted share was reduced by $.08 for full year 2005 due to costs associated with similar transactions in 2005.
The Company also announced the following results for Host Hotels & Resorts, L.P. through which it conducts all of its operations and holds 96.5% of the partnership interests:
• Net income increased $128 million to $204 million for the fourth quarter and $596 million to $769 million for full year 2006. 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 50%, to $471 million, for the fourth quarter and nearly 39%, to $1,283 million, for full year 2006 primarily due to growth in EBITDA from the Company's comparable hotel portfolio and EBITDA generated by the Starwood portfolio.
Operating Results
Comparable hotel RevPAR for the fourth quarter of 2006 increased 8.1% and comparable hotel adjusted operating profit margins increased 2.1 percentage points. The fourth quarter increases were driven by a 9.5% increase in average room rate, while occupancy declined 0.9 percentage points. Full year 2006 comparable hotel RevPAR increased 8.5% and comparable hotel adjusted operating profit margins increased 2.1 percentage points. The full year 2006 increases were comprised of a 9.2% increase in average room rate and a slight decrease in occupancy.
Comparable hotel adjusted operating profit margins were positively affected by the Company's food and beverage operations, which represent approximately 32% of the Company's revenues. Food and beverage revenue at the Company's comparable hotels increased 6.0% and 6.6% for the fourth quarter and full year 2006, respectively, with food and beverage margins increasing 2.3 percentage points and 2.1 percentage points for the fourth quarter and full year 2006, respectively.
For the 27 Starwood hotels, which are not included in our comparable hotel results, RevPAR increased 11.5% and 10.9% for the fourth quarter and full year 2006, respectively.
Christopher J. Nassetta, president and chief executive officer, stated, "We are very pleased with our operating results in 2006 and expect to continue to benefit in 2007 from strong industry fundamentals."
Balance Sheet
The Company's balance sheet has significantly improved over the past three years from the strong growth in operations, debt repayment and refinancing efforts and the equity issued to acquire the Starwood portfolio. As a result, the Company has the best interest coverage and debt to equity leverage ratios in its history, which leaves it well-positioned for future growth.
During the fourth quarter, the Company redeemed its $450 million 9 1/2% Series I senior notes and its $242 million of 9 1/4% Series G senior notes through the issuance of $500 million of 6 7/8% Series R senior notes due 2014, a draw of $250 million from the Company's credit facility and available cash. As of December 31, 2006, the Company had approximately $364 million of cash and cash equivalents, approximately $133 million of which was utilized in January to pay the fourth quarter common and preferred dividends.
During February 2007, the Company refinanced the 8.58% mortgage debt on the Harbor Beach Marriott Resort and Spa with a non-amortizing, $134 million mortgage that bears interest at a rate of 5.55% and matures in 2014.
Asset Dispositions
During January 2007, the Company sold four non-core properties (the Sheraton Milwaukee Brookfield Hotel, the Sheraton Providence Airport Hotel, the Capitol Hill Suites and the Marriott Mountain Shadows Resort & Golf Club) for approximately $119 million. A portion of the proceeds from the asset sales were used to repay $75 million of the outstanding balance on the Company's credit facility. The Company currently has $400 million of availability under its credit facility.
2007 Outlook
The Company expects comparable hotel RevPAR to increase approximately 6.5% to 8.5% for the full year 2007 and at the lower end of this range for the first quarter. For full year 2007, the Company also expects its operating profit margins under GAAP to remain relatively unchanged and its comparable hotel adjusted operating profit margins to increase approximately 100 basis points to 125 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 $.26 to $.27 for the first quarter and $1.05 to $1.13 for the full year;
• net income should be approximately $138 million to $145 million for the first quarter and $573 million to $619 million for the full year; and
• FFO per diluted share should be approximately $.27 to $.28 for the first quarter and $1.80 to $1.88 for the full year.
Host Hotels & Resorts, L.P.
• net income should be approximately $143 million to $150 million for the first quarter and $593 million to $641 million for the full year; and
• Adjusted EBITDA should be approximately $1,450 million to $1,490 million.
Logos, product and company names mentioned are the property of their respective owners.
