EX-99.1 2 dex991.htm EXHIBIT 99.1 EXHIBIT 99.1

Exhibit 99.1

 

HOST MARRIOTT CORPORATION

Introductory Notes to Financial Information

 

 

The Company

 

Host Marriott Corporation, herein referred to as “we” or “Host Marriott,” is a self-managed and self-administered real estate investment trust (REIT) that owns primarily hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Marriott, L.P., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host Marriott and Host LP, the primary difference is the 7% of the partnership interests in Host LP held by outside partners as of April 27, 2004, which is reflected as minority interest in our consolidated balance sheets and minority interest expense in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K.

HOST MARRIOTT CORPORATION

Consolidated Balance Sheets (a)

(unaudited, in millions, except share amounts)

 

     March 26,
2004
     December 31,
2003
  

ASSETS

                 

Property and equipment, net

    $ 7,020     $ 7,085  

Assets held for sale

      —         73  

Notes and other receivables

      54       54  

Due from managers

      79       62  

Investments in affiliates (c)

      86       74  

Other

      383       364  

Restricted cash

      598       116  

Cash and cash equivalents

      526       764  
    
 

Total assets

    $ 8,746     $ 8,592  
    
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

                 

Debt

                 

Senior notes, including $490 million, net of discount, of Exchangeable Senior Debentures (b)

    $ 3,459     $ 3,180  

Mortgage debt

      2,109       2,205  

Exchangeable Subordinated Debentures (c)

      492       —    

Other

      100       101  
    
 

Total debt

      6,160       5,486  

Accounts payable and accrued expenses

      121       108  

Liabilities associated with assets held for sale

      —         2  

Other

      151       166  
    
 

Total liabilities

      6,432       5,762  
    
 

Interest of minority partners of Host Marriott L.P.

      124       130  

Interest of minority partners of other consolidated partnerships

      94       89  

Company-obligated mandatorily redeemable exchangeable preferred securities of a subsidiary whose sole assets are exchangeable subordinated debentures due 2026 (“Exchangeable Preferred Securities”) (c)

      —         475  

Shareholders’ equity

                 

Cumulative redeemable preferred stock (liquidation preference $354 million), 50 million shares authorized; 14.1 million shares issued and outstanding

      339       339  

Common stock, par value $.01, 750 million shares authorized; 321.6 million shares and 320.3 million shares issued and outstanding, respectively

      3       3  

Additional paid-in capital

      2,619       2,617  

Accumulated other comprehensive income

      26       28  

Deficit

      (891 )     (851 )
    
 

Total shareholders’ equity

      2,096       2,136  
    
 

Total liabilities and shareholders’ equity

    $ 8,746     $ 8,592  
    
 
(a) Our consolidated balance sheet as of March 26, 2004 has been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K.

 

(b) Amount includes $494 million in 77/8% Series B senior notes redeemed on April 15, 2004.

 

(c) We adopted Financial Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46) in 2003. Under FIN 46, our limited purpose trust subsidiary that was formed to issue trust-preferred securities (the

 

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HOST MARRIOTT CORPORATION

Consolidated Balance Sheets (a)

(unaudited, in millions, except share amounts)

 

Exchangeable Preferred Securities Trust) was accounted for on a consolidated basis as of December 31, 2003 since we were the primary beneficiary under FIN 46.

 

In December 2003, the FASB issued a revision to FIN 46, which we refer to as FIN 46R. Under FIN 46R, we are not the primary beneficiary and we are required to deconsolidate the accounts of the Exchangeable Preferred Securities Trust. We adopted the provisions of FIN 46R on January 1, 2004. As a result, we recorded the $492 million in debentures (the Exchangeable Subordinated Debentures) issued by the Exchangeable Preferred Securities Trust and eliminated the $475 million of Exchangeable Preferred Securities that were previously classified in the mezzanine section of our consolidated balance sheet. The difference of $17 million is our investment in the Exchangeable Preferred Securities Trust, which is included in “Investments in affiliates” on our consolidated balance sheet. Additionally, we classified the related dividend payment of approximately $7 million as interest expense. We elected not to restate prior periods and the adoption of FIN 46R had no effect on our net loss, loss per diluted share or financial covenants under our senior notes indenture.

 

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HOST MARRIOTT CORPORATION

Consolidated Statements of Operations (a)

(unaudited, in millions, except per share amounts)

 

     Quarter ended
  
     March 26,
2004
     March 28,
2003
  

Revenues

                 

Rooms

    $ 473     $ 452  

Food and beverage

      257       242  

Other

      50       52  
    
 

Total hotel sales

      780       746  

Rental income (b)

      29       27  

Other income

      —         2  
    
 

Total revenues

      809       775  
    
 

Expenses

                 

Rooms

      119       111  

Food and beverage

      190       180  

Hotel departmental expenses

      216       206  

Management fees

      32       32  

Other property-level expenses (b)

      69       70  

Depreciation and amortization

      83       84  

Corporate expenses

      13       13  
    
 

Total expenses

      722       696  
    
 

Operating profit

      87       79  

Interest income

      3       3  

Interest expense, including interest expense for the Exchangeable Subordinated Debentures in 2004 (c)

      (118 )     (110 )

Net gains on property transactions

      1       1  

Minority interest income (expense)

      (3 )     1  

Equity in losses of affiliates

      (5 )     (6 )

Dividends on Exchangeable Preferred Securities (c)

      —         (7 )
    
 

Loss before income taxes

      (35 )     (39 )

Benefit from income taxes

      3       4  
    
 

Loss from continuing operations

      (32 )     (35 )

Income from discontinued operations (d)

      1       1  
    
 

Net loss

      (31 )     (34 )

Less: dividends on preferred stock

      (9 )     (9 )
    
 

Net loss available to common shareholders

    $ (40 )   $ (43 )
    
 

Basic and diluted loss per common share

    $ (.12 )   $ (.16 )
    
 
(a) Our consolidated statements of operations for the quarter ended March 26, 2004 and March 28, 2003 have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K.

 

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HOST MARRIOTT CORPORATION

Consolidated Statements of Operations (a)

(unaudited, in millions, except per share amounts)

 

(b) Rental income and expense are as follows:

 

     Quarter ended
    

March 26,

2004

   

March 28,

2003

Rental income

              

Full-service

    $ 12    $ 10

Limited service and office buildings

      17      17
    
  
     $ 29    $ 27
    
  

Rental and other expenses (included in other property-level expenses)

              

Full-service

    $ 2    $ 1

Limited service and office buildings

      18      17
    
  
     $ 20    $ 18
    
  

 

(c) See discussion of new accounting standard in footnote (b) to the consolidated balance sheet. Interest expense for the first quarter of 2004 also includes approximately $12 million for the payment of call premiums and the acceleration of deferred financing costs on debt redemptions and repayments.

 

(d) Reflects the results of operations and gain (loss) on sale, net of the related income tax, for six properties sold in the first quarter of 2004 and eight properties sold in 2003.

 

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HOST MARRIOTT CORPORATION

Earnings (Loss) per Common Share

(unaudited, in millions, except per share amounts)

 

     Quarter ended March 26, 2004
     Quarter ended March 28, 2003
  
    

Income (loss)

(Numerator)

    

Shares

(Denominator)

   

Per Share

Amount

    

Income (loss)

(Numerator)

    

Shares

(Denominator)

   

Per Share

Amount

  

Net loss

    $ (31 )   321.0    $ (.09 )   $ (34 )   264.3    $ (.13 )

Dividends on preferred stock

      (9 )   —        (.03 )     (9 )   —        (.03 )
    
 
  
 
 
  

Basic and diluted loss available to common shareholders per share (a)

    $ (40 )   321.0    $ (.12 )   $ (43 )   264.3    $ (.16 )
    
 
  
 
 
  
(a) Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interests to common OP Units and the Exchangeable Subordinated Debentures. No effect is shown for any securities that are anti-dilutive.

 

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HOST MARRIOTT CORPORATION

Other Financial and Operating Data

(unaudited, in millions, except per share)

 

     March 26,
2004
     December 31,
2003
  

Equity

                 

Common shares outstanding

      321.6       320.3  

Common shares and minority held common OP Units outstanding

      344.6       343.8  

Preferred OP Units outstanding

      .02       .02  

Class A Preferred shares outstanding

      4.1       4.1  

Class B Preferred shares outstanding

      4.0       4.0  

Class C Preferred shares outstanding

      6.0       6.0  

Class D Preferred shares outstanding

      .03       .03  

Security pricing

                 

Common (a)

    $ 12.26     $ 12.32  

Class A Preferred (a)

    $ 27.09     $ 26.74  

Class B Preferred (a)

    $ 26.72     $ 27.00  

Class C Preferred (a)

    $ 27.99     $ 27.26  

Exchangeable Preferred Securities (b)

    $ 50.69     $ 51.00  

Exchangeable Senior Debentures (c)

    $ 997.50     $ —    

Dividends per share

                 

Common

    $ —       $ —    

Class A Preferred

    $ .625     $ 2.50  

Class B Preferred

    $ .625     $ 2.50  

Class C Preferred

    $ .625     $ 2.50  

Class D Preferred

    $ .625     $ 1.88  

Debt

                 

Percentage of fixed rate debt

      86 %     85 %

Weighted average interest rate (d)

      7.1 %     7.7 %

Weighted average debt maturity (d)

      6.8 years       5.5 years  

Credit facility, outstanding balance (capacity of $250 million)

    $ —       $ —    

Other Financial Data

                 

Construction in progress

    $ 75     $ 56  
    

 

Quarter ended

  
     March 26,
2004
     March 28,
2003
  

Hotel Operating Statistics for All Full-Service Properties

                 

Average Daily Rate

    $ 150.41     $ 145.90  

Average Occupancy

      70.8 %     68.7 %

RevPAR

    $ 106.42     $ 100.20  

 

(a) Share prices are the closing price on the consolidated balance sheet date, as reported by the New York Stock Exchange, for the common and preferred stock.

 

(b) Market price as of March 26, 2004 as quoted by Bloomberg L.P. As of March 26, 2004, we have reclassified these securities to debt on our consolidated balance sheet. See footnote (b) to the consolidated balance sheet.

 

(c) Market price as of March 26, 2004 as quoted by Bloomberg L.P. Quoted price reflects the price of a single $1,000 debenture, which is exchangeable for common stock upon the incurrence of certain events.

 

(d) Amounts include the Exchangeable Subordinated Debentures in 2004. See footnote (b) to the consolidated balance sheet. Excluding the Exchangeable Subordinated Debentures, our weighted average interest rate was 7.1% and our weighted average debt maturity was 5.4 years.

 

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