Host Marriott Reports 2002 Funds

Host Marriott Corporation (NYSE: HMT), the nation’s largest lodging real estate
investment trust (REIT), today announced results of operations for the fourth quarter and for the year ended December 31,
2002. The full year results continued to reflect the difficult operating environment as the economy remains weak and
business and leisure travel were below historic levels. Full year and fourth quarter results include the following:
- The Company’s diluted loss per share was ($.04) and ($.19) for the fourth quarter and full year 2002, respectively,
versus a diluted loss per share of ($.12) for the fourth quarter of 2001 and diluted earnings per share of $.08 for the
full year 2001.—- Total revenues were $1,181 million and $3,680 million for the fourth quarter and full year 2002, respectively,
versus $1,052 million and $3,767 million, respectively, for the same periods of 2001.—- Comparative Funds from Operations (“Comparative FFO”) were $.34 and $1.11 per diluted share for the fourth
quarter and full year 2002, respectively, versus—- Comparative FFO of $.16 and $1.42, respectively, per diluted share
for the same periods of 2001.
—- Earnings before Interest Expense, Income Taxes, Depreciation and Amortization and other non-cash items
(“EBITDA”) was $261 million and $863 million for the fourth quarter and full year 2002, respectively, versus
$209 million and $906 million, respectively, for the same periods of 2001.
Operating Results:
Comparable RevPAR for the fourth quarter increased 10.6% while operating profit margins were up slightly over the fourth
quarter of 2001. The Company’s fourth quarter RevPAR increase was the result of a significant occupancy increase of 6.4
percentage points and a slight increase in average room rate to $142.46. Full year 2002, comparable RevPAR declined
5.1% (comprised of a 5.9% decline in average room rate, that was partially offset by an occupancy increase of just under
one percentage point), while margins declined less than two percentage points. The Company’s urban, resort and
convention hotels, which contributed 69% of the 2002 hotel EBITDA for our comparable hotels, continue to outperform the
overall portfolio with a full year RevPAR decline of 1.9%. For the quarter, these hotels generated RevPAR growth of
14.9% over the prior year.
Christopher J. Nassetta, president and chief executive officer, stated, “We were pleased to finish a demanding year with
good fourth quarter results. Throughout the year, our hotels demonstrated the ability to offset declines in corporate travel
with additional group business, leading to a slight increase in occupancy for the year. Once occupancies further improve,
we would expect that our properties will be able to reverse recent declines in average rate, allowing us to increase revenues
and benefit from increased operating efficiencies.”
Balance Sheet:
At December 31, 2002, the Company had $361 million in cash on hand and $300 million of availability under its credit
facility. Consistent with the goal of de-leveraging, in January 2003 the Company sold the Ontario Airport Marriott for total
consideration of approximately $26 million, a portion of which was subsequently used to repay $17 million of mortgage
debt. W. Edward Walter, executive vice president and chief financial officer, stated, “Consistent with our financial strategy for
the last 18 months, we will continue to maintain high cash reserves, which combined with limited debt maturities over the
next two years, maximizes our financial flexibility in this challenging operating environment and positions us to be able to
take advantage of opportunities that arise in the future. We expect to pursue additional asset sales during 2003, the proceeds
of which will be utilized to either retire debt or reinvest in our portfolio.”
2003 Outlook:
The Company believes RevPAR for full year 2003 will be flat to down modestly, with margins declining one to two
percentage points. This guidance assumes that operations will continue to deteriorate in the near term as a result of the
threat of imminent war in the Middle East. Based upon this guidance the Company estimates the following:
? FFO per share for the full year should be in the range of $.80 to $.90;
? EBITDA for the full year should be between $770 and $800 million.
Based upon the current outlook, the Company expects that it is unlikely that it will pay a meaningful dividend on its
common stock for 2003.
Mr. Nassetta noted, “The combination of a weak economy, the potential for war in Iraq and threats of terrorism create a
difficult climate for the hotel industry to launch a recovery. We are well prepared to deal with the near term uncertainties,
and expect to take full advantage of the recovery once the long term strength inherent in lodging industry fundamentals
begins to take effect.”
Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 122 upscale
and luxury hotel properties primarily operated under premium brands, such as Marriott, Ritz-Carlton, Hyatt, Four Seasons,
Swiss™tel and Hilton. For further information, please visit the Company’s website at www.hostmarriott.com.
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