Host Marriott Corporation (NYSE: HMT), the nation’s largest lodging real estate
investment trust (REIT), today announced results of operations for the third quarter and thirty-six weeks ended September
6, 2002. The operating environment for the travel and leisure industry remains difficult primarily due to a weak economy
that has resulted in reduced business and leisure travel. Third quarter results include the following:
*The Company’s diluted loss per share was ($.18) and ($.15) for the third quarter and year-to-date 2002,
respectively, versus diluted earnings/(loss) per share of ($.06) and $.21 for the same periods of 2001.
*Total revenues were $789 million and $2,499 million for the third quarter and year-to-date 2002, respectively,
versus $848 million and $2,715 million for the same periods of 2001.
*Comparative Funds From Operations (“FFO”) were $.15 and $.77 per diluted share for the third quarter and year-to-
date 2002, respectively, versus FFO of $.28 and $1.24 per diluted share for the same periods of 2001. FFO for
the third quarter of 2002 includes $.03 per diluted share for the recognition of business interruption insurance
proceeds for the New York Marriott Financial Center and Marriott World Trade Center hotels.
*Earnings before Interest Expense, Income Taxes, Depreciation and Amortization and other non-cash items
(“EBITDA”) was $159 million and $602 million for the third quarter and year-to-date 2002, respectively, versus
$185 million and $697 million for the same periods of 2001.
Comparable RevPAR for the third quarter, which ended on September 6, declined 8.9% while operating profit margins
declined by 4.4 percentage points. If the Company reported on a calendar basis for the quarter, third quarter RevPAR would
have increased approximately 3%. The Company’s third quarter RevPAR decline was the result of a 6.7% reduction in
average room rate and an occupancy decline of 1.7 percentage points. Year-to-date, comparable RevPAR declined 10.4%
(8.1% decline in average room rate combined with an occupancy decline of 1.9 percentage points), while margins declined
by 2.5 percentage points. The Company’s urban, resort and conventions hotels, which contributed 69% of the year-to-date
EBITDA, continue to outperform the overall portfolio with a year-to-date RevPAR decline of 7.6%. For the quarter, these
hotels had a RevPAR decline of 8.1%.
Christopher J. Nassetta, president and chief executive officer, stated, “We are pleased with the results that we have been
able to achieve this year in a difficult environment that has been heavily affected by the decline in business travel resulting
from the weak economy. Our continued efforts to control hotel operating costs and our ability to shift our business mix has
enabled us to meet expectations.”
As of September 6, 2002, the Company had $394 million in cash on hand and $300 million of availability under its credit
facility. The Company has no significant refinancing requirements until 2005 and does not believe that it will need to
borrow under the credit facility during the balance of 2002.
Robert E. Parsons, executive vice president and chief financial officer, stated, “Given the changing economic environment,
we have focused on maintaining our liquidity, recycling capital and upgrading our portfolio. Currently, we are in
discussions with several potential buyers to dispose of as many as eight of our non-core hotels. Proceeds from any
dispositions would be available for investment in our current portfolio, repayment of debt or hotel acquisitions. We remain
well positioned to deal with the difficult economic environment and prepared to take advantage of future opportunities.”
Beginning in the third quarter of 2002, the Company implemented the expense recognition provisions of SFAS No. 123,
“Accounting for Stock-Based Compensation,” with retroactive application to employee stock options granted on or after
January 1, 2002. The Company believes that this change will more accurately reflect the effect of stock options on net
income and is consistent with the Company’s goal of providing transparent reporting of its results. The change had only a
minimal effect on third quarter results and the Company expects only a minimal impact in the fourth quarter of this year.
The Company’s updated guidance for RevPAR for full year 2002 is for a decline of between 4% and 5%. Based upon this
guidance the Company estimates the following:
? FFO per share for the full year should be in the range of $1.05 to $1.10; and
? EBITDA for the full year should be between $860 and $875 million.
The Company’s policy on paying dividends is to distribute the minimum amount necessary to maintain REIT status, which
is generally an amount equal to its taxable income. Based upon the current outlook, the Company expects that the dividend
on its common stock for 2002, if any, would be minimal, although the Company intends to continue to pay dividends on its
QUIPs and preferred shares.
Mr. Nassetta noted, “While the short term outlook is uncertain, we still believe that the intermediate and long-term outlook
for the industry remains very positive. We expect that the supply growth rate for new hotels will remain low over the next
several years. When combined with a strengthening economy, our superior portfolio of high quality, well managed hotels
in premier locations should be well positioned to benefit. This should translate into meaningful growth in RevPAR,
earnings and dividends.”
Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 123 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.
This press release includes various references to Comparative FFO and EBITDA. Comparative FFO represents Funds
From Operations, as defined by the National Association of Real Estate Investment Trusts, adjusted for contingent rental
revenues on hotels leased to third parties and substantial non-recurring items. The Company considers Comparative FFO
and EBITDA to be indicative measures of its operating performance, due to the significance of its long-lived assets and
because such data is considered useful by the investment community to better understand the Company’s results, and can
be used to measure its ability to service debt, fund capital expenditures, and expand its business. However, such
information should not be considered as an alternative to net income, operating profit, cash from operations, or any other
operating or liquidity performance measure prescribed by accounting principles generally accepted in the United States.
Cash expenditures for various long-term assets, interest expense (for EBITDA purposes only) and other items that have
been, and will be, incurred are not reflected in the Comparative FFO and EBITDA presentations. Although FFO and
EBITDA are considered standard benchmarks utilized by the investment community, our Comparative FFO and EBITDA
may not be comparable to similarly titled measures reported by other companies.
Certain matters discussed in this press release are forward-looking statements within the meaning of federal securities
regulations. All forward-looking statements involve known and unknown risks, uncertainties and other factors which may
cause the actual transactions, results, performance or achievements to be materially different from any future transactions,
results, performance or achievements expressed or implied by such forward-looking statements. General economic
conditions, competition, and governmental actions will affect future transactions, results, performance, and achievements.
These risks are presented in detail in the Company’s filings with the Securities and Exchange Commission. Although the
Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it
can give no assurance that the expectations will be attained or that any deviations will not be material. The Company
undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.
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