otal revenue increased $96 million, or 8.6%, to $1,206 million
Host Hotels & Resorts, Inc. (NYSE:HST) , the nation's largest lodging real estate investment trust (REIT), today announced its results of operations for the third quarter ended September 7, 2007.
• Total revenue increased $96 million, or 8.6%, to $1,206 million for the third quarter and $518 million, or 16.6%, to $3,634 million for year-to-date 2007. Excluding the revenues for the Starwood portfolio, which was purchased in April 2006, revenues increased 8.3% for year-to-date 2007.
• Net income increased $57 million to $97 million for the third quarter and decreased $109 million to $433 million for year-to-date 2007. Earnings per diluted share increased $.11 to $.18 and decreased $.33 to $.79 for the third quarter and year-to-date 2007, respectively.
Net income included a net gain of $90 million, or $.16 per diluted share, for year-to-date 2007 associated with gains on hotel dispositions, partially offset by debt repayment or refinancing costs. By comparison, net income for year-to-date 2006 included a net gain of approximately $347 million, or $.74 per diluted share 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 35.7% from $.28 to $.38 for the third quarter and 23.4% from $.94 to $1.16 for year-to-date 2007. FFO was reduced by $.08 per diluted share for costs associated with debt repayments or refinancings for year-to-date 2007. By comparison, FFO per diluted share was reduced by $.05 for year-to-date 2006 for similar transactions, 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 third 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 increased $60 million to $101 million for the third quarter and decreased $116 million to $449 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 15.4% to $292 million for the third quarter and 19.3% to $969 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 September 7, 2007, increased 7.2% for the quarter and 7.0% year-to-date. The comparable hotel plus the Starwood portfolio RevPAR gains were driven by an increase in average room rates of 5.1% for the quarter and 5.7% year-to-date and increases in occupancy of 1.5 percentage points and .8 percentage points for the quarter and year-to-date periods, respectively. Comparable hotel RevPAR for the third quarter of 2007 (not including the Starwood portfolio) increased 6.7% and year-to-date comparable hotel RevPAR increased 6.1% over results for the same periods of 2006. Comparable hotel adjusted operating profit margins increased 1.4 percentage points and .7 percentage points for the third quarter and year-to- date 2007, respectively. For further detail, see "Notes to the Financial Information."
European Joint Venture
On July 20, 2007, the Company's joint venture based in Europe, in which the Company holds a 32.1% interest, purchased the 262-room Renaissance Brussels Hotel, the 218-room Brussels Marriott and the Marriott Executive Apartments comprised of 57 apartments.
Balance Sheet
As of September 7, 2007, the Company had approximately $559 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.
In October 2007, the Company intends to repay a $190 million mortgage secured by four of its properties. The Company currently has $600 million available under its line of credit.
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 $.15 to $.25.
2007 Outlook
The Company expects RevPAR for the comparable hotels plus the Starwood portfolio to increase approximately 6.5% to 7.5% for the full year. The Company expects its operating profit margins under GAAP to increase approximately 50 basis points to 90 basis points and its comparable hotel adjusted operating profit margins to increase approximately 75 basis points to 100 basis points. Based upon these estimates, 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 $1.33 to $1.37,
• net income should be approximately $725 million to $747 million, and
• FFO per diluted share should be approximately $1.81 to $1.85 (including a charge of approximately $.08 per diluted share for debt prepayment costs).
Host Hotels & Resorts, L.P.
• net income should be approximately $751 million to $774 million, and
• Adjusted EBITDA should be approximately $1,460 million to $1,480 million.
2008 Outlook
The Company is in the preliminary stages of its budget process for 2008. Accordingly, certain key items, including detailed property-level operating budgets, have not been determined which could significantly affect forecast results of operations. However, based on preliminary discussions with the Company's operators and hotel general managers, as well as a review of booking pace and other metrics, the Company believes that comparable hotel RevPAR for 2008, which will include the Starwood portfolio, will increase approximately 5% to 7%.
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