Host Hotels & Resorts, Inc. Reports Results for Second Quarter 2020
07/30/2020
Risoleo continued, “Although it remains difficult to estimate the timing or magnitude of an economic recovery, we are continuing to take actions to strengthen our business to achieve our key near-term objectives, including improving cash flow and achieving breakeven EBITDA at our hotels. We are working with our operators to drive occupancy and increase revenues while redefining our operating model to generate higher levels of profitability at lower levels of occupancy. As we rise to the unprecedented challenge facing the travel industry today, our hearts and minds remain with all those affected by COVID-19, as well as with the healthcare workers who are making tremendous sacrifices to help save lives and end this crisis.”
OPERATING RESULTS
(unaudited, in millions, except per share and hotel statistics)
Quarter ended |
Percent | Year-to-date ended |
Percent | |||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||
Revenues | $ | 103 | $ | 1,483 | (93.1 | )% | $ | 1,155 | $ | 2,873 | (59.8 | )% | ||||||||||
All owned hotel revenues (pro forma) (1) | 103 | 1,398 | (92.6 | )% | 1,155 | 2,712 | (57.4 | )% | ||||||||||||||
Net income (loss) | (356 | ) | 290 | N/M | (359 | ) | 479 | N/M | ||||||||||||||
EBITDAre and Adjusted EBITDAre (1) | (190 | ) | 460 | N/M | (26 | ) | 867 | N/M | ||||||||||||||
All owned hotel Total RevPAR - Constant US$ | 23.16 | 327.00 | (92.9 | )% | 134.46 | 319.06 | (57.9 | )% | ||||||||||||||
All owned hotel RevPAR - Constant US$ | 14.31 | 204.15 | (93.0 | )% | 80.81 | 198.12 | (59.2 | )% | ||||||||||||||
Diluted earnings (loss) per common share | (0.50 | ) | 0.39 | N/M | (0.50 | ) | 0.64 | N/M | ||||||||||||||
NAREIT FFO and Adjusted FFO per diluted share (1) | (0.26 | ) | 0.53 | N/M | (0.03 | ) | 1.01 | N/M |
__________
N/M = Not meaningful.
(1) NAREIT Funds From Operations (“FFO”) per diluted share, Adjusted FFO per diluted share, EBITDAre, Adjusted EBITDAre and all owned hotel results (pro forma) are non-GAAP (
*Additional detail on the Company’s results, including data for 22 domestic markets and top 40 hotels by Total RevPAR, is available in the Second Quarter 2020 Supplemental Financial Information available on the Company’s website at www.hosthotels.com.
PORTFOLIO HIGHLIGHTS:
- As of
July 30, 2020 , re-opened 19 of the 35 hotels that had suspended operations as ofMay 6, 2020 . - Improved average occupancy by 380 basis points, from 6.9% in April to 10.7% in
June 2020 . - Improved average room rate by over 50%, from
$129 in April to$194 inJune 2020 .
UPDATE ON COVID-19 RESPONSE
In response to the COVID-19 pandemic, the Company and its hotel operators have prioritized preserving financial liquidity and ensuring that its hotels are well positioned for recovery. Actions by the Company in support of these priorities include:
Preserving financial liquidity:
- Reduced portfolio-wide hotel operating costs by approximately 70% in the second quarter compared to the prior year, by suspending operations at certain hotels, furloughs of hotel employees and scaling back operations.
- Reduced hotel labor costs significantly due to the furlough of up to 80% of hotel employees who received healthcare benefits and special pay of
$45 million in the second quarter. The Company accrued$35 million of these second-quarter costs in the first quarter and $32 million of these third-quarter costs in the second quarter.
Balance Sheet, Capital Allocation and Expense Management
- Amended the credit agreement governing the
$1 .5 billion revolving credit facility and two $500 million term loans inJune 2020 , while preserving the Company’s flexibility in making acquisitions and raising capital, subject to certain restrictions. Additional detail on the Company’s second quarter covenant levels is available in the Second Quarter 2020 Supplemental Financial Information available on the Company’s website at www.hosthotels.com. - Suspended the quarterly dividend and stock repurchases.
- Continue to expect reductions in corporate expenses for the full year of 10-15% compared to the prior year. Corporate expenses in the second quarter were unchanged from the prior year due to timing of certain expenses.
Positioning for recovery:
- Continued to take advantage of reduced demand to complete Marriott transformational capital program and other ROI projects. The Company believes the renovations will position these hotels to capture additional revenue during a potential economic recovery.
- Continued to review operating costs at varying levels of occupancy with a focus on modernizing brand standards, streamlining operating departments and accelerating the adoption of cost-saving technology.
The impact of the COVID-19 pandemic on the Company remains fluid and a great deal of uncertainty surrounding the trends and duration of the COVID-19 pandemic remains. The Company, as well as its hotel managers, are monitoring developments on an ongoing basis and may take additional actions in response to future developments to reduce the impact to the Company’s stakeholders.
OPERATING RESULTS
The Company’s prior year presentation of comparable hotel performance is no longer relevant given the impact of COVID-19. Hotel operating results, including RevPAR, are being reported on an
Due to low occupancy levels and/or state mandates, operations remain suspended at 16 hotels in the Company’s portfolio as of
The following presents the monthly hotel operating results for the full portfolio and for the hotels without suspended operations during the periods presented:
Total Portfolio | ||||||||||||||||||||||||
April | May | June | April | May | June | |||||||||||||||||||
Number of hotels | 80 | 80 | 80 | 45 | 45 | 47 | ||||||||||||||||||
Number of rooms | 46,669 | 46,670 | 46,670 | 26,379 | 26,379 | 27,280 | ||||||||||||||||||
Average Occupancy Percentage | 6.9 | % | 8.8 | % | 10.7 | % | 12.1 | % | 15.3 | % | 16.3 | % | ||||||||||||
Average Room Rate | $ | 128.54 | $ | 150.16 | $ | 193.67 | $ | 134.01 | $ | 146.09 | $ | 182.26 | ||||||||||||
RevPAR | $ | 8.92 | $ | 13.29 | $ | 20.77 | $ | 16.16 | $ | 22.37 | $ | 29.71 |
__________
(2) Represents the hotels that were accepting reservations during the entirety of the month. Excludes the 35, 35, and 33 hotels with suspended operations in the months of April, May, and June, respectively.
During the COVID-19 pandemic, the Company has remained keenly focused on monthly operating results and the effect on the long-term liquidity of the Company, and, as a result of the initiatives discussed above, significantly reduced its monthly cash expenditures for the second quarter of 2020. The following presents the second quarter 2020 results (in millions):
April | May | June | Quarter ended |
|||||||||||||
Revenues | $ | 24 | $ | 30 | $ | 49 | $ | 103 | ||||||||
Net loss | (120 | ) | (114 | ) | (122 | ) | (356 | ) | ||||||||
Hotel-level operating loss (3) | (73 | ) | (53 | ) | (37 | ) | (163 | ) |
Significant expenditures for the second quarter included in the Company’s total cash burn are (in millions):
Quarter ended |
||||
GAAP net cash used in operating activities | $ | (172 | ) | |
Cash burn (3) | $ | (399 | ) | |
Components of cash burn: | ||||
Hotel-level operating loss (3) | (163 | ) | ||
Interest payments | (46 | ) | ||
Cash corporate and other expenses | (21 | ) | ||
Capital expenditures | (169 | ) |
__________
(3) Hotel-level operating loss and cash burn are non-GAAP financial measures within the meaning of the rules of the
The Company’s long-term liquidity can be estimated based on the average monthly cash burn using the second quarter performance. In this scenario, the average monthly GAAP cash used in operating activities would be approximately
HOTEL BUSINESS MIX UPDATE
The Company’s customers fall into three broad groups: transient, group and contract business, which accounted for approximately 61%, 35%, and 4%, respectively, of its 2019 room sales.
During the second quarter, demand was primarily driven by drive-to and resort destinations. The following are the results of the Company’s consolidated portfolio transient, group and contract business:
Quarter ended |
Percent change vs. Quarter ended |
|||||||||||||||
Room nights (in thousands) |
Room Revenues (in millions) |
Room nights | Room Revenues | |||||||||||||
Transient business | 198 | $ | 37 | (90.0 | )% | (92.8 | )% | |||||||||
Group business | 134 | 18 | (90.0 | )% | (94.3 | )% | ||||||||||
Contract business | 43 | 6 | (74.1 | )% | (83.3 | )% |
As of
CAPITAL EXPENDITURES
The Company’s capital expenditures spending is expected to range from
Year-to-date ended |
2020 Full Year Forecast | |||||||||||
Actuals | Low-end of range | High-end of range | ||||||||||
ROI - Marriott transformational capital program | $ | 118 | $ | 195 | $ | 200 | ||||||
ROI - All other ROI projects | 88 | 130 | 145 | |||||||||
Total ROI project spend | 206 | 325 | 345 | |||||||||
Renewals and Replacements | 94 | 150 | 175 | |||||||||
Total Capital Expenditures | $ | 300 | $ | 475 | $ | 520 |
Through the second quarter of 2020, the Company completed almost 60% of the total capital expenditure projects planned for the year and expects total spend in the second half of the year to be approximately
The Company has prioritized major capital projects in those assets and markets that are expected to recover faster, such as leisure and drive-to destinations, as well as previously announced major return on investment projects. The Company is utilizing the low occupancy environment to accelerate certain projects and minimize future disruption.
DISPOSITIONS
During the quarter, the Company sold a parcel of land adjacent to The Phoenician hotel for approximately
BALANCE SHEET
The Company maintains a robust balance sheet with the following values at
- Total assets of
$12.2 billion . - Cash balance of approximately
$1.6 billion , FF&E escrow reserves of $154 million, and$750 million of available capacity under the revolver portion of the credit facility, following the June repayment of $750 million. - Debt balance of
$4 .5 billion, with an average maturity of 4.7 years, an average interest rate of 3.0%, and no significant maturities until 2023.
The Company’s quarterly-tested financial covenants in its credit facility were waived beginning
2020 OUTLOOK
Given the global economic uncertainty COVID-19 has created for the travel, airline, lodging and tourism and event industries, among others, the Company cannot provide full year guidance for its operations or fully estimate the effect of COVID-19 on operations. The Company’s results during the second quarter reflected the unprecedented declines resulting from COVID-19. The Company does not expect to see a material improvement in operations until government restrictions have been lifted and business and leisure travelers are comfortable that the risks associated with traveling and contracting COVID-19 are significantly reduced. The Company does not intend to provide further updates unless deemed appropriate.
ABOUT HOST HOTELS & RESORTS
Host Hotels &
Note: This press release contains forward-looking statements within the meaning of federal securities regulations. These forward-looking statements include forecast results and are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “plan,” “predict,” “project,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: the duration and scope of the COVID-19 pandemic and its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence; actions governments, businesses and individuals take in response to the pandemic, including limiting or banning travel; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates, business investment and consumer discretionary spending; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in
* This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.
*** Tables to Follow ***
Host Hotels &
HOST HOTELS & RESORTS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except shares and per share amounts)
ASSETS | ||||||||
Property and equipment, net | $ | 9,613 | $ | 9,671 | ||||
Right-of-use assets | 595 | 595 | ||||||
Due from managers | 6 | 63 | ||||||
Advances to and investments in affiliates | 38 | 56 | ||||||
Furniture, fixtures and equipment replacement fund | 154 | 176 | ||||||
Other | 206 | 171 | ||||||
Cash and cash equivalents | 1,578 | 1,573 | ||||||
Total assets | $ | 12,190 | $ | 12,305 | ||||
LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY | ||||||||
Debt (1) | ||||||||
Senior notes | $ | 2,778 | $ | 2,776 | ||||
Credit facility, including the term loans of |
1,736 | 989 | ||||||
Other debt | 29 | 29 | ||||||
Total debt | 4,543 | 3,794 | ||||||
Lease liabilities | 607 | 606 | ||||||
Accounts payable and accrued expenses | 68 | 263 | ||||||
Other | 169 | 175 | ||||||
Total liabilities | 5,387 | 4,838 | ||||||
Redeemable non-controlling interests - Host Hotels & |
81 | 142 | ||||||
Common stock, par value |
7 | 7 | ||||||
Additional paid-in capital | 7,586 | 7,675 | ||||||
Accumulated other comprehensive loss | (74 | ) | (56 | ) | ||||
Deficit | (802 | ) | (307 | ) | ||||
Total equity of |
6,717 | 7,319 | ||||||
Non-redeemable non-controlling interests—other consolidated partnerships | 5 | 6 | ||||||
Total equity | 6,722 | 7,325 | ||||||
Total liabilities, non-controlling interests and equity | $ | 12,190 | $ | 12,305 | ||||
___________ |
(1) Please see our Second Quarter 2020 Supplemental Financial Information for more detail on our debt balances and financial covenant ratios under our credit facility and senior notes indentures.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | ||||||||||||||||
Rooms | $ | 61 | $ | 931 | $ | 687 | $ | 1,788 | ||||||||
Food and beverage | 11 | 449 | 341 | 882 | ||||||||||||
Other | 31 | 103 | 127 | 203 | ||||||||||||
Total revenues | 103 | 1,483 | 1,155 | 2,873 | ||||||||||||
Expenses | ||||||||||||||||
Rooms | 43 | 226 | 230 | 443 | ||||||||||||
Food and beverage | 39 | 290 | 284 | 575 | ||||||||||||
Other departmental and support expenses | 113 | 334 | 432 | 661 | ||||||||||||
Management fees | (2 | ) | 71 | 28 | 125 | |||||||||||
Other property-level expenses | 70 | 91 | 163 | 183 | ||||||||||||
Depreciation and amortization | 168 | 166 | 332 | 336 | ||||||||||||
Corporate and other expenses(1) | 25 | 25 | 50 | 54 | ||||||||||||
Total operating costs and expenses | 456 | 1,203 | 1,519 | 2,377 | ||||||||||||
Operating profit (loss) | (353 | ) | 280 | (364 | ) | 496 | ||||||||||
Interest income | 1 | 7 | 7 | 15 | ||||||||||||
Interest expense | (40 | ) | (43 | ) | (77 | ) | (86 | ) | ||||||||
Other gains/(losses) | 13 | 57 | 12 | 62 | ||||||||||||
Gain on foreign currency transactions and derivatives | 2 | 1 | 1 | 1 | ||||||||||||
Equity in earnings (losses) of affiliates | (25 | ) | 4 | (21 | ) | 9 | ||||||||||
Income (loss) before income taxes | (402 | ) | 306 | (442 | ) | 497 | ||||||||||
Benefit (provision) for income taxes | 46 | (16 | ) | 83 | (18 | ) | ||||||||||
Net income (loss) | (356 | ) | 290 | (359 | ) | 479 | ||||||||||
Less: Net (income) loss attributable to non-controlling interests | 4 | (4 | ) | 4 | (7 | ) | ||||||||||
Net income (loss) attributable to |
$ | (352 | ) | $ | 286 | $ | (355 | ) | $ | 472 | ||||||
Basic and diluted earnings (loss) per common share | $ | (.50 | ) | $ | .39 | $ | (.50 | ) | $ | .64 | ||||||
___________ |
(1) Corporate and other expenses include the following items:
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
General and administrative costs | $ | 21 | $ | 22 | $ | 43 | $ | 47 | ||||||||
Non-cash stock-based compensation expense | 4 | 3 | 7 | 7 | ||||||||||||
Total | $ | 25 | $ | 25 | $ | 50 | $ | 54 |
Earnings (Loss) per Common Share
(unaudited, in millions, except per share amounts)
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income (loss) | $ | (356 | ) | $ | 290 | $ | (359 | ) | $ | 479 | ||||||
Less: Net (income) loss attributable to non-controlling interests | 4 | (4 | ) | 4 | (7 | ) | ||||||||||
Net income (loss) attributable to |
$ | (352 | ) | $ | 286 | $ | (355 | ) | $ | 472 | ||||||
Basic weighted average shares outstanding | 705.1 | 739.1 | 706.7 | 739.9 | ||||||||||||
Assuming distribution of common shares granted under the comprehensive stock plans, less shares assumed purchased at market | — | .3 | — | .3 | ||||||||||||
Diluted weighted average shares outstanding (1) | 705.1 | 739.4 | 706.7 | 740.2 | ||||||||||||
Basic and diluted earnings (loss) per common share | $ | (.50 | ) | $ | .39 | $ | (.50 | ) | $ | .64 | ||||||
___________ |
(1) Dilutive securities may include shares granted under comprehensive stock plans, preferred operating partnership units (“OP Units”) held by minority partners and other non-controlling interests that have the option to convert their limited partnership interests to common OP Units. No effect is shown for any securities that were anti-dilutive for the period.
All
As of |
Quarter ended |
Quarter ended |
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Location | No. of Properties |
No. of Rooms |
Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Percent Change in RevPAR |
Percent Change in Total RevPAR |
||||||||||||||||||||||||||||||||||||
5 | 1,842 | $ | 278.24 | 17.7 | % | $ | 49.11 | $ | 87.12 | $ | 313.53 | 73.9 | % | $ | 231.56 | $ | 471.22 | (78.8 | )% | (81.5 | )% | |||||||||||||||||||||||||||
4 | 1,983 | 75.47 | 3.7 | 2.77 | 5.82 | 384.31 | 92.3 | 354.62 | 563.56 | (99.2 | ) | (99.0 | ) | |||||||||||||||||||||||||||||||||||
1 | 446 | 469.00 | 28.1 | 131.95 | 219.50 | 414.11 | 84.1 | 348.40 | 753.61 | (62.1 | ) | (70.9 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,276 | 276.13 | 8.3 | 22.86 | 39.35 | 299.54 | 80.6 | 241.56 | 390.25 | (90.5 | ) | (89.9 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,654 | 185.02 | 6.8 | 12.58 | 53.48 | 277.88 | 74.6 | 207.40 | 488.38 | (93.9 | ) | (89.0 | ) | |||||||||||||||||||||||||||||||||||
7 | 4,528 | 175.74 | 4.2 | 7.43 | 14.51 | 267.87 | 82.7 | 221.55 | 313.95 | (96.6 | ) | (95.4 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,726 | 207.67 | 9.9 | 20.48 | 28.05 | 228.49 | 89.1 | 203.54 | 300.39 | (89.9 | ) | (90.7 | ) | |||||||||||||||||||||||||||||||||||
3 | 4,261 | 134.19 | 30.2 | 40.47 | 43.18 | 292.59 | 84.9 | 248.42 | 378.93 | (83.7 | ) | (88.6 | ) | |||||||||||||||||||||||||||||||||||
3 | 3,288 | 181.47 | 2.5 | 4.57 | 17.07 | 257.34 | 83.0 | 213.66 | 394.65 | (97.9 | ) | (95.7 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,682 | 138.09 | 9.6 | 13.23 | 18.55 | 188.81 | 76.7 | 144.87 | 232.21 | (90.9 | ) | (92.0 | ) | |||||||||||||||||||||||||||||||||||
5 | 3,238 | 221.94 | 4.6 | 10.14 | 10.76 | 278.76 | 91.5 | 255.04 | 367.23 | (96.0 | ) | (97.1 | ) | |||||||||||||||||||||||||||||||||||
1 | 1,333 | N/M | 0.0 | 0.29 | 1.94 | 196.98 | 81.0 | 159.65 | 233.90 | (99.8 | ) | (99.2 | ) | |||||||||||||||||||||||||||||||||||
2 | 925 | 163.08 | 7.4 | 12.01 | 18.18 | 189.11 | 79.5 | 150.28 | 251.79 | (92.0 | ) | (92.8 | ) | |||||||||||||||||||||||||||||||||||
1 | 2,004 | N/M | 0.1 | 0.05 | 17.24 | 177.39 | 70.7 | 125.33 | 295.11 | (100.0 | ) | (94.2 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,716 | 112.05 | 13.9 | 15.63 | 20.43 | 181.69 | 74.6 | 135.49 | 193.31 | (88.5 | ) | (89.4 | ) | |||||||||||||||||||||||||||||||||||
2 | 810 | 120.32 | 10.6 | 12.75 | 15.74 | 247.35 | 89.7 | 221.94 | 366.74 | (94.3 | ) | (95.7 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,252 | 129.21 | 7.9 | 10.20 | 15.45 | 214.09 | 77.9 | 166.82 | 280.83 | (93.9 | ) | (94.5 | ) | |||||||||||||||||||||||||||||||||||
2 | 1,315 | 196.68 | 1.1 | 2.26 | 5.68 | 234.35 | 85.1 | 199.47 | 271.52 | (98.9 | ) | (97.9 | ) | |||||||||||||||||||||||||||||||||||
3 | 2,715 | N/M | 0.2 | 0.28 | 2.05 | 272.01 | 87.8 | 238.87 | 324.76 | (99.9 | ) | (99.4 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,340 | 112.47 | 7.9 | 8.87 | 10.96 | 176.07 | 79.4 | 139.88 | 210.69 | (93.7 | ) | (94.8 | ) | |||||||||||||||||||||||||||||||||||
2 | 1,512 | 123.02 | 5.4 | 6.59 | 9.36 | 186.37 | 75.1 | 139.94 | 200.21 | (95.3 | ) | (95.3 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,816 | 110.04 | 9.8 | 10.82 | 13.03 | 237.05 | 82.5 | 195.46 | 278.10 | (94.5 | ) | (95.3 | ) | |||||||||||||||||||||||||||||||||||
Other | 6 | 2,509 | 109.28 | 13.5 | 14.77 | 18.40 | 175.50 | 83.0 | 145.69 | 207.76 | (89.9 | ) | (91.1 | ) | ||||||||||||||||||||||||||||||||||
Domestic | 75 | 45,171 | 165.18 | 8.9 | 14.62 | 23.52 | 252.03 | 82.4 | 207.60 | 332.73 | (93.0 | ) | (92.9 | ) | ||||||||||||||||||||||||||||||||||
International | 5 | 1,499 | 59.79 | 8.4 | 5.02 | 12.44 | 143.72 | 69.7 | 100.16 | 154.14 | (95.0 | ) | (91.9 | ) | ||||||||||||||||||||||||||||||||||
All Locations - Constant US$ | 80 | 46,670 | 161.97 | 8.8 | 14.31 | 23.16 | 249.07 | 82.0 | 204.15 | 327.00 | (93.0 | ) | (92.9 | ) |
All
As of |
Quarter ended |
Quarter ended |
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No. of Properties |
No. of Rooms |
Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Percent Change in RevPAR |
Percent Change in Total RevPAR |
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International | 5 | 1,499 | $ | 59.79 | 8.4 | % | $ | 5.02 | $ | 12.44 | $ | 158.97 | 69.7 | % | $ | 110.79 | $ | 169.04 | (95.5 | )% | (92.6 | )% | ||||||||||||||||||||||||||
Domestic | 75 | 45,171 | 165.18 | 8.9 | 14.62 | 23.52 | 252.03 | 82.4 | 207.60 | 332.73 | (93.0 | ) | (92.9 | ) | ||||||||||||||||||||||||||||||||||
All Locations | 80 | 46,670 | 161.97 | 8.8 | 14.31 | 23.16 | 249.49 | 82.0 | 204.49 | 327.47 | (93.0 | ) | (92.9 | ) |
All
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Year-to-date ended |
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Location | No. of Properties |
No. of Rooms |
Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Percent Change in RevPAR |
Percent Change in Total RevPAR |
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5 | 1,842 | $ | 400.35 | 44.2 | % | $ | 177.03 | $ | 353.01 | $ | 379.76 | 78.4 | % | $ | 297.90 | $ | 586.44 | (40.6 | )% | (39.8 | )% | |||||||||||||||||||||||||||
4 | 1,983 | 451.32 | 39.1 | 176.41 | 259.64 | 410.35 | 90.6 | 371.89 | 573.91 | (52.6 | ) | (54.8 | ) | |||||||||||||||||||||||||||||||||||
1 | 446 | 398.29 | 42.6 | 169.62 | 342.83 | 391.86 | 81.4 | 318.88 | 722.04 | (46.8 | ) | (52.5 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,276 | 425.83 | 39.6 | 168.56 | 268.97 | 355.53 | 83.2 | 295.96 | 455.82 | (43.0 | ) | (41.0 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,654 | 352.56 | 37.0 | 130.34 | 303.21 | 327.86 | 78.6 | 257.82 | 566.03 | (49.4 | ) | (46.4 | ) | |||||||||||||||||||||||||||||||||||
7 | 4,528 | 287.40 | 31.8 | 91.26 | 134.44 | 286.10 | 80.0 | 228.99 | 322.35 | (60.1 | ) | (58.3 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,726 | 215.97 | 39.3 | 84.80 | 124.95 | 226.22 | 87.8 | 198.59 | 294.83 | (57.3 | ) | (57.6 | ) | |||||||||||||||||||||||||||||||||||
3 | 4,261 | 190.39 | 43.1 | 82.11 | 120.16 | 266.94 | 78.5 | 209.56 | 323.62 | (60.8 | ) | (62.9 | ) | |||||||||||||||||||||||||||||||||||
3 | 3,288 | 241.83 | 31.8 | 77.01 | 154.12 | 255.23 | 80.0 | 204.18 | 372.23 | (62.3 | ) | (58.6 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,682 | 185.37 | 36.3 | 67.36 | 107.33 | 208.09 | 76.7 | 159.65 | 252.43 | (57.8 | ) | (57.5 | ) | |||||||||||||||||||||||||||||||||||
5 | 3,238 | 229.66 | 29.3 | 67.21 | 97.24 | 265.11 | 82.5 | 218.62 | 312.73 | (69.3 | ) | (68.9 | ) | |||||||||||||||||||||||||||||||||||
1 | 1,333 | 202.76 | 32.6 | 66.19 | 99.87 | 203.37 | 81.3 | 165.38 | 241.84 | (60.0 | ) | (58.7 | ) | |||||||||||||||||||||||||||||||||||
2 | 925 | 193.61 | 32.9 | 63.66 | 110.25 | 195.04 | 79.2 | 154.54 | 260.36 | (58.8 | ) | (57.7 | ) | |||||||||||||||||||||||||||||||||||
1 | 2,004 | 215.19 | 28.6 | 61.54 | 152.85 | 193.57 | 74.8 | 144.76 | 339.92 | (57.5 | ) | (55.0 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,716 | 163.52 | 37.6 | 61.51 | 91.53 | 182.15 | 75.2 | 136.92 | 197.16 | (55.1 | ) | (53.6 | ) | |||||||||||||||||||||||||||||||||||
2 | 810 | 165.99 | 36.7 | 60.90 | 98.18 | 220.90 | 83.9 | 185.41 | 304.83 | (67.2 | ) | (67.8 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,252 | 196.57 | 30.3 | 59.55 | 98.07 | 212.31 | 71.8 | 152.53 | 260.36 | (61.0 | ) | (62.3 | ) | |||||||||||||||||||||||||||||||||||
2 | 1,315 | 193.49 | 27.6 | 53.38 | 77.51 | 215.31 | 81.3 | 174.95 | 237.90 | (69.5 | ) | (67.4 | ) | |||||||||||||||||||||||||||||||||||
3 | 2,715 | 176.94 | 26.6 | 47.06 | 71.97 | 236.19 | 78.6 | 185.74 | 260.95 | (74.7 | ) | (72.4 | ) | |||||||||||||||||||||||||||||||||||
3 | 1,340 | 154.85 | 29.0 | 44.89 | 68.03 | 169.71 | 72.1 | 122.41 | 184.62 | (63.3 | ) | (63.2 | ) | |||||||||||||||||||||||||||||||||||
2 | 1,512 | 179.31 | 24.2 | 43.38 | 65.75 | 191.24 | 76.2 | 145.81 | 215.02 | (70.3 | ) | (69.4 | ) | |||||||||||||||||||||||||||||||||||
4 | 1,816 | 136.92 | 28.7 | 39.26 | 54.32 | 199.76 | 71.5 | 142.77 | 203.93 | (72.5 | ) | (73.4 | ) | |||||||||||||||||||||||||||||||||||
Other | 6 | 2,509 | 155.53 | 35.4 | 55.07 | 76.39 | 172.13 | 78.1 | 134.38 | 191.51 | (59.0 | ) | (60.1 | ) | ||||||||||||||||||||||||||||||||||
Domestic | 75 | 45,171 | 242.02 | 34.0 | 82.19 | 136.94 | 254.20 | 79.3 | 201.52 | 324.88 | (59.2 | ) | (57.8 | ) | ||||||||||||||||||||||||||||||||||
International | 5 | 1,499 | 127.54 | 30.9 | 39.36 | 59.43 | 139.27 | 68.7 | 95.64 | 143.57 | (58.8 | ) | (58.6 | ) | ||||||||||||||||||||||||||||||||||
All Locations - Constant US$ | 80 | 46,670 | 238.67 | 33.9 | 80.81 | 134.46 | 250.99 | 78.9 | 198.12 | 319.06 | (59.2 | ) | (57.9 | ) |
All
As of |
Year-to-date ended |
Year-to-date ended |
||||||||||||||||||||||||||||||||||||||||||||||
No. of Properties |
No. of Rooms |
Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Average Room Rate |
Average Occupancy Percentage |
RevPAR | Total RevPAR | Percent Change in RevPAR |
Percent Change in Total RevPAR |
|||||||||||||||||||||||||||||||||||||
International | 5 | 1,499 | $ | 127.54 | 30.9 | % | $ | 39.36 | $ | 59.43 | $ | 151.58 | 68.7 | % | $ | 104.09 | $ | 155.00 | (62.2 | )% | (61.7 | )% | ||||||||||||||||||||||||||
Domestic | 75 | 45,171 | 242.02 | 34.0 | 82.19 | 136.94 | 254.20 | 79.3 | 201.52 | 324.88 | (59.2 | ) | (57.8 | ) | ||||||||||||||||||||||||||||||||||
All Locations | 80 | 46,670 | 238.67 | 33.9 | 80.81 | 134.46 | 251.33 | 78.9 | 198.39 | 319.43 | (59.3 | ) | (57.9 | ) |
___________
(1) To facilitate a quarter-to-quarter comparison of our operations, we typically present certain operating statistics and operating results for the periods included in this presentation on a comparable hotel basis. However, due to the COVID-19 pandemic and its effects on operations there is little comparability between periods. For this reason, we are revising our presentation to instead present hotel operating results for all consolidated hotels and, to facilitate comparisons between periods, we are presenting results on a pro forma basis including the following adjustments: (1) operating results are presented for all consolidated properties owned as of
(2)
N/M = Not meaningful
HOST HOTELS & RESORTS, INC.
Schedule of All
(unaudited, in millions, except hotel statistics)
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Number of hotels | 80 | 80 | 80 | 80 | ||||||||||||
Number of rooms | 46,670 | 46,670 | 46,670 | 46,670 | ||||||||||||
Change in hotel Total RevPAR - | ||||||||||||||||
Constant US$ | (92.9 | )% | — | (57.9 | )% | — | ||||||||||
Nominal US$ | (92.9 | )% | — | (57.9 | )% | — | ||||||||||
Change in hotel RevPAR - | ||||||||||||||||
Constant US$ | (93.0 | )% | — | (59.2 | )% | — | ||||||||||
Nominal US$ | (93.0 | )% | — | (59.3 | )% | — | ||||||||||
Operating profit (loss) margin (2) | (342.7 | )% | 18.9 | % | (31.5 | )% | 17.3 | % | ||||||||
All |
(155.3 | )% | 31.9 | % | 1.6 | % | 31.2 | % | ||||||||
Food and beverage profit margin (2) | (254.5 | )% | 35.4 | % | 16.7 | % | 34.8 | % | ||||||||
All |
(254.5 | )% | 35.6 | % | 16.7 | % | 34.9 | % | ||||||||
Net income (loss) | $ | (356 | ) | $ | 290 | $ | (359 | ) | $ | 479 | ||||||
Depreciation and amortization | 168 | 166 | 332 | 336 | ||||||||||||
Interest expense | 40 | 43 | 77 | 86 | ||||||||||||
Provision (benefit) for income taxes | (46 | ) | 16 | (83 | ) | 18 | ||||||||||
Gain on sale of property and corporate level income/expense | 34 | (44 | ) | 51 | (33 | ) | ||||||||||
Pro forma adjustments(3) | — | (25 | ) | — | (40 | ) | ||||||||||
All |
$ | (160 | ) | $ | 446 | $ | 18 | $ | 846 |
Quarter ended |
Quarter ended |
|||||||||||||||||||||||||||
Adjustments | Adjustments | |||||||||||||||||||||||||||
GAAP Results | Depreciation and corporate level items | All |
GAAP Results | Pro forma adjustments(3) | Depreciation and corporate level items | All |
||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Room | $ | 61 | $ | — | $ | 61 | $ | 931 | (62 | ) | $ | — | $ | 869 | ||||||||||||||
Food and beverage | 11 | — | 11 | 449 | (19 | ) | — | 430 | ||||||||||||||||||||
Other | 31 | — | 31 | 103 | (4 | ) | — | 99 | ||||||||||||||||||||
Total revenues | 103 | — | 103 | 1,483 | (85 | ) | — | 1,398 | ||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Room | 43 | — | 43 | 226 | (14 | ) | — | 212 | ||||||||||||||||||||
Food and beverage | 39 | — | 39 | 290 | (13 | ) | — | 277 | ||||||||||||||||||||
Other | 181 | — | 181 | 496 | (33 | ) | — | 463 | ||||||||||||||||||||
Depreciation and amortization | 168 | (168 | ) | — | 166 | — | (166 | ) | — | |||||||||||||||||||
Corporate and other expenses | 25 | (25 | ) | — | 25 | — | (25 | ) | — | |||||||||||||||||||
Total expenses | 456 | (193 | ) | 263 | 1,203 | (60 | ) | (191 | ) | 952 | ||||||||||||||||||
Operating Profit (Loss) - All |
$ | (353 | ) | $ | 193 | $ | (160 | ) | $ | 280 | $ | (25 | ) | $ | 191 | $ | 446 |
Year-to-date ended |
Year-to-date ended |
|||||||||||||||||||||||||||
Adjustments | Adjustments | |||||||||||||||||||||||||||
GAAP Results | Depreciation and corporate level items | All |
GAAP Results | Pro forma adjustments(3) | Depreciation and corporate level items | All |
||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Room | $ | 687 | $ | — | $ | 687 | $ | 1,788 | $ | (111 | ) | $ | — | $ | 1,677 | |||||||||||||
Food and beverage | 341 | — | 341 | 882 | (39 | ) | — | 843 | ||||||||||||||||||||
Other | 127 | — | 127 | 203 | (11 | ) | — | 192 | ||||||||||||||||||||
Total revenues | 1,155 | — | 1,155 | 2,873 | (161 | ) | — | 2,712 | ||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Room | 230 | — | 230 | 443 | (28 | ) | — | 415 | ||||||||||||||||||||
Food and beverage | 284 | — | 284 | 575 | (26 | ) | — | 549 | ||||||||||||||||||||
Other | 623 | — | 623 | 969 | (67 | ) | — | 902 | ||||||||||||||||||||
Depreciation and amortization | 332 | (332 | ) | — | 336 | — | (336 | ) | — | |||||||||||||||||||
Corporate and other expenses | 50 | (50 | ) | — | 54 | — | (54 | ) | — | |||||||||||||||||||
Total expenses | 1,519 | (382 | ) | 1,137 | 2,377 | (121 | ) | (390 | ) | 1,866 | ||||||||||||||||||
Operating Profit (Loss) - All |
$ | (364 | ) | $ | 382 | $ | 18 | $ | 496 | $ | (40 | ) | $ | 390 | $ | 846 |
April | May | June | Quarter ended |
|||||||||||||
Net loss | $ | (120 | ) | $ | (114 | ) | $ | (122 | ) | $ | (356 | ) | ||||
Depreciation and amortization | 54 | 56 | 58 | 168 | ||||||||||||
Interest expense | 14 | 13 | 13 | 40 | ||||||||||||
Benefit for income taxes | (8 | ) | (16 | ) | (22 | ) | (46 | ) | ||||||||
Gain on sale of property and corporate level income/expense | 7 | 11 | 16 | 34 | ||||||||||||
All |
(53 | ) | (50 | ) | (57 | ) | (160 | ) | ||||||||
Benefits for furloughed employees adjustment | (20 | ) | (3 | ) | 20 | (3 | ) | |||||||||
Hotel-level operating loss (1) | $ | (73 | ) | $ | (53 | ) | $ | (37 | ) | $ | (163 | ) |
(1) See the Notes to Financial Information for a discussion of non-GAAP measures and the calculation of all owned hotel pro forma results and hotel-level operating loss, including the limitations on their use. For additional information on hotel EBITDA by location, see the Second Quarter 2020 Supplemental Financial Information posted on our website.
(2) Profit margins are calculated by dividing the applicable operating profit by the related revenue amount. GAAP profit margins are calculated using amounts presented in the condensed consolidated statements of operations. Hotel margins are calculated using amounts presented in the above tables.
(3) Pro forma adjustments represent the following items: (i) the elimination of results of operations of our sold hotels, which operations are included in our condensed consolidated statements of operations as continuing operations and (ii) the addition of results for periods prior to our ownership for hotels acquired during the presented periods. For this presentation, we no longer adjust for certain items such as gains on insurance settlements, the results of our leased office buildings and other non-hotel revenue and expense items, and they are included in the
HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income (Loss) to
EBITDA, EBITDAre and Adjusted EBITDAre (1)
(unaudited, in millions)
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income (loss) (2) | $ | (356 | ) | $ | 290 | $ | (359 | ) | $ | 479 | ||||||
Interest expense | 40 | 43 | 77 | 86 | ||||||||||||
Depreciation and amortization | 168 | 166 | 332 | 336 | ||||||||||||
Income taxes | (46 | ) | 16 | (83 | ) | 18 | ||||||||||
EBITDA(2) | (194 | ) | 515 | (33 | ) | 919 | ||||||||||
Gain on dispositions (3) | (1 | ) | (57 | ) | — | (59 | ) | |||||||||
Equity investment adjustments: | ||||||||||||||||
Equity in (earnings) losses of affiliates | 25 | (4 | ) | 21 | (9 | ) | ||||||||||
Pro rata EBITDAre of equity investments | (20 | ) | 6 | (14 | ) | 16 | ||||||||||
EBITDAre and Adjusted EBITDAre (2) | $ | (190 | ) | $ | 460 | $ | (26 | ) | $ | 867 | ||||||
___________ |
(1) See the Notes to Financial Information for discussion of non-GAAP measures.
(2) Net income (loss), EBITDA, EBITDAre, Adjusted EBITDAre, NAREIT FFO and Adjusted FFO for the quarter ended
(3) Reflects the sale of four hotels in 2019.
HOST HOTELS & RESORTS, INC.
Reconciliation of Diluted Earnings (Loss) per Common Share to
NAREIT and Adjusted Funds From Operations per Diluted Share (1)
(unaudited, in millions, except per share amounts)
Quarter ended |
Year-to-date ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income (loss) (2) | $ | (356 | ) | $ | 290 | $ | (359 | ) | $ | 479 | ||||||
Less: Net (income) loss attributable to non-controlling interests | 4 | (4 | ) | 4 | (7 | ) | ||||||||||
Net income (loss) attributable to |
(352 | ) | 286 | (355 | ) | 472 | ||||||||||
Adjustments: | ||||||||||||||||
Gain on dispositions (3) | (1 | ) | (57 | ) | — | (59 | ) | |||||||||
Depreciation and amortization | 166 | 165 | 331 | 334 | ||||||||||||
Equity investment adjustments: | ||||||||||||||||
Equity in (earnings) losses of affiliates | 25 | (4 | ) | 21 | (9 | ) | ||||||||||
Pro rata FFO of equity investments | (20 | ) | 4 | (17 | ) | 13 | ||||||||||
Consolidated partnership adjustments: | ||||||||||||||||
FFO adjustment for non-controlling partnerships | — | — | (1 | ) | 1 | |||||||||||
FFO adjustments for non-controlling interests of Host L.P. | (2 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||
NAREIT FFO (2) | (184 | ) | 393 | (24 | ) | 749 | ||||||||||
Adjustments to NAREIT FFO: | ||||||||||||||||
Loss on debt extinguishment | 1 | — | 1 | — | ||||||||||||
Adjusted FFO (2) | $ | (183 | ) | $ | 393 | $ | (23 | ) | $ | 749 | ||||||
For calculation on a per share basis (4): | ||||||||||||||||
Diluted weighted average shares outstanding - EPS, NAREIT FFO and Adjusted FFO | 705.1 | 739.4 | 706.7 | 740.2 | ||||||||||||
Diluted earnings (loss) per common share | $ | (.50 | ) | $ | .39 | $ | (.50 | ) | $ | .64 | ||||||
NAREIT FFO and Adjusted FFO per diluted share | $ | (.26 | ) | $ | .53 | $ | (.03 | ) | $ | 1.01 | ||||||
___________ |
(1-3) Refer to the corresponding footnote on the Reconciliation of Net Income (Loss) to EBITDA, EBITDAre and Adjusted EBITDAre.
(4) Diluted earnings (loss) per common share, NAREIT FFO per diluted share and Adjusted FFO per diluted share are adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, preferred OP units held by non-controlling partners and other non-controlling interests that have the option to convert their limited partnership interests to common OP units. No effect is shown for securities if they are anti-dilutive.
HOST HOTELS & RESORTS, INC.
Notes to Financial Information
ALL OWNED HOTEL OPERATING STATISTICS AND RESULTS
To facilitate a quarter-to-quarter comparison of our operations, we typically present certain operating statistics and operating results for the periods included in this presentation on a comparable hotel basis (discussed in “Comparable Hotel Operating Statistics” below). However, due to the COVID-19 pandemic and its effects on operations there is little comparability between periods. For this reason, we are temporarily suspending our comparable hotel presentation and instead present hotel operating results for all consolidated hotels and, to facilitate comparisons between periods, we are presenting results on a pro forma basis, including the following adjustments: (1) operating results are presented for all consolidated hotels owned as of
COMPARABLE HOTEL OPERATING STATISTICS
The following discusses our typical presentation of comparable hotels; however, this method is not being used in the current presentation due to the impact of COVID-19:
To facilitate a quarter-to-quarter comparison of our operations, we typically present certain operating statistics (i.e., Total RevPAR, RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses, hotel EBITDA and associated margins) for the periods included in this report on a comparable hotel basis in order to enable our investors to better evaluate our operating performance.
We define our comparable hotels as those:
(i) that are owned or leased by us at the end of the reporting periods being compared; and
(ii) that have not sustained substantial property damage or business interruption, or undergone large-scale capital projects (as further defined below) during the reporting periods being compared.
The hotel business is capital-intensive and renovations are a regular part of the business. Generally, hotels under renovation remain comparable hotels. A large-scale capital project that would cause a hotel to be excluded from our comparable hotel set is an extensive renovation of several core aspects of the hotel, such as rooms, meeting space, lobby, bars, restaurants and other public spaces. Both quantitative and qualitative factors are taken into consideration in determining if the renovation would cause a hotel to be removed from the comparable hotel set, including unusual or exceptional circumstances such as: a reduction or increase in room count, rebranding, a significant alteration of the business operations, or the closing of the hotel during the renovation.
Historically, we have not included an acquired hotel in our comparable hotel set until the operating results for that hotel have been included in our consolidated results for one full calendar year. For example, we acquired the 1
Hotels that we sell are excluded from the comparable hotel set once the transaction has closed. Similarly, hotels are excluded from our comparable hotel set from the date that they sustain substantial property damage or business interruption or commence a large-scale capital project. In each case, these hotels are returned to the comparable hotel set when the operations of the hotel have been included in our consolidated results for one full calendar year after completion of the repair of the property damage or cessation of the business interruption, or the completion of large-scale capital projects, as applicable.
2020
Effective
CONSTANT US$ AND NOMINAL US$
Operating results denominated in foreign currencies are translated using the prevailing exchange rates on the date of the transaction, or monthly based on the weighted average exchange rate for the period. For comparative purposes, we also present the RevPAR results for the prior year assuming the results of our foreign operations were translated using the same exchange rates that were effective for the comparable periods in the current year, thereby eliminating the effect of currency fluctuation for the year-over-year comparisons. We believe this presentation is useful to investors as it provides clarity with respect to growth in RevPAR in the local currency of the hotel consistent with the way we would evaluate our domestic portfolio. However, the estimated effect of changes in foreign currency has been reflected in the results of net income (loss), EBITDA, Adjusted EBITDAre, diluted earnings (loss) per common share and Adjusted FFO per diluted share. Nominal US$ results include the effect of currency fluctuations, consistent with our financial statement presentation.
NON-GAAP FINANCIAL MEASURES
Included in this press release are certain “non-GAAP financial measures,” which are measures of our historical or future financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable
NAREIT FFO AND NAREIT FFO PER DILUTED SHARE
We present NAREIT FFO and NAREIT FFO per diluted share as non-GAAP measures of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate NAREIT FFO per diluted share as our NAREIT FFO (defined as set forth below) for a given operating period, as adjusted for the effect of dilutive securities, divided by the number of fully diluted shares outstanding during such period, in accordance with NAREIT guidelines. Effective
We believe that NAREIT FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of NAREIT FFO per diluted share, when combined with the primary GAAP presentation of earnings per share, provides beneficial information to investors. By excluding the effect of real estate depreciation, amortization, impairment expense and gains and losses from sales of depreciable real estate, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that such measures can facilitate comparisons of operating performance between periods and with other REITs, even though NAREIT FFO per diluted share does not represent an amount that accrues directly to holders of our common stock. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. As noted by NAREIT in its Funds From Operations White Paper – 2018 Restatement, the primary purpose for including FFO as a supplemental measure of operating performance of a REIT is to address the artificial nature of historical cost depreciation and amortization of real estate and real estate-related assets mandated by GAAP. For these reasons, NAREIT adopted the FFO metric in order to promote a uniform industry-wide measure of REIT operating performance.
Adjusted FFO per Diluted Share
We also present Adjusted FFO per diluted share when evaluating our performance because management believes that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance, in our annual budget process and for our compensation programs. We believe that the presentation of Adjusted FFO per diluted share, when combined with both the primary GAAP presentation of earnings per share and FFO per diluted share as defined by NAREIT, provides useful supplemental information that is beneficial to an investor’s understanding of our operating performance. We adjust NAREIT FFO per diluted share for the following items, which may occur in any period, and refer to this measure as Adjusted FFO per diluted share:
- Gains and Losses on the Extinguishment of Debt – We exclude the effect of finance charges and premiums associated with the extinguishment of debt, including the acceleration of the write-off of deferred financing costs from the original issuance of the debt being redeemed or retired and incremental interest expense incurred during the refinancing period. We also exclude the gains on debt repurchases and the original issuance costs associated with the retirement of preferred stock. We believe that these items are not reflective of our ongoing finance costs.
- Acquisition Costs – Under GAAP, costs associated with completed property acquisitions that are considered business combinations are expensed in the year incurred. We exclude the effect of these costs because we believe they are not reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We exclude the effect of gains or losses associated with litigation recorded under GAAP that we consider outside the ordinary course of business. We believe that including these items is not consistent with our ongoing operating performance.
In unusual circumstances, we also may adjust NAREIT FFO for gains or losses that management believes are not representative of the Company’s current operating performance. For example, in 2017, as a result of the reduction of the
EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and Amortization (“EBITDA”) is a commonly used measure of performance in many industries. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties after removing the impact of the Company’s capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). Management also believes the use of EBITDA facilitates comparisons between us and other lodging REITs, hotel owners that are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO and Adjusted FFO per diluted share, it is widely used by management in the annual budget process and for our compensation programs.
EBITDAre and Adjusted EBITDAre
We present EBITDAre in accordance with NAREIT guidelines, as defined in its
We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is beneficial to an investor’s understanding of our operating performance. Adjusted EBITDAre also is similar to the measure used to calculate certain credit ratios for our credit facility and senior notes. We adjust EBITDAre for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDAre:
- Property Insurance Gains – We exclude the effect of property insurance gains reflected in our consolidated statements of operations because we believe that including them in Adjusted EBITDAre is not consistent with reflecting the ongoing performance of our assets. In addition, property insurance gains could be less important to investors given that the depreciated asset book value written off in connection with the calculation of the property insurance gain often does not reflect the market value of real estate assets.
- Acquisition Costs – Under GAAP, costs associated with completed property acquisitions that are considered business combinations are expensed in the year incurred. We exclude the effect of these costs because we believe they are not reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We exclude the effect of gains or losses associated with litigation recorded under GAAP that we consider outside the ordinary course of business. We believe that including these items is not consistent with our ongoing operating performance.
In unusual circumstances, we also may adjust EBITDAre for gains or losses that management believes are not representative of the Company’s current operating performance. The last such adjustment was a 2013 exclusion of a gain from an eminent domain claim.
Limitations on the Use of NAREIT FFO per Diluted Share, Adjusted FFO per Diluted Share, EBITDA, EBITDAre and Adjusted EBITDAre
We calculate NAREIT FFO per diluted share in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies that do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. In addition, although FFO per diluted share is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. We also calculate Adjusted FFO per diluted share, which is not in accordance with NAREIT guidance and may not be comparable to measures calculated by other REITs. EBITDA, EBITDAre and Adjusted EBITDAre, as presented, may also not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense (for EBITDA, EBITDAre and Adjusted EBITDAre purposes only) and other items have been and will be made and are not reflected in the EBITDA, EBITDAre, Adjusted EBITDAre, NAREIT FFO per diluted share and Adjusted FFO per diluted share presentations. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations and consolidated statements of cash flows in the Company’s quarterly report on Form 10-Q (“Statements of Cash Flows”) include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, NAREIT FFO per diluted share, Adjusted FFO per diluted share, EBITDA, EBITDAre and Adjusted EBITDAre should not be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to make cash distributions. In addition, NAREIT FFO per diluted share and Adjusted FFO per diluted share do not measure, and should not be used as a measure of, amounts that accrue directly to stockholders’ benefit.
Similarly, EBITDAre, Adjusted EBITDAre, NAREIT FFO and Adjusted FFO per diluted share include adjustments for the pro rata share of our equity investments and NAREIT FFO and Adjusted FFO per diluted share include adjustments for the pro rata share of non-controlling partners in consolidated partnerships. Our equity investments consist of interests ranging from 11% to 67% in seven domestic and international partnerships that own a total of 10 properties and a vacation ownership development. Due to the voting rights of the outside owners, we do not control and, therefore, do not consolidate these entities. The non-controlling partners in consolidated partnerships primarily consist of the approximate 1% interest in
We present certain operating results for our hotels, such as hotel revenues, expenses, food and beverage profit, and EBITDA (and the related margins), on a hotel-level pro forma basis as supplemental information for our investors. Our hotel results reflect the operating results of our hotels as discussed in “All Owned Hotel Operating Statistics and Results” above. We present all owned hotel pro forma EBITDA to help us and our investors evaluate the ongoing operating performance of our properties after removing the impact of the Company’s capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization expense). Corporate-level costs and expenses also are removed to arrive at property-level results. We believe these property-level results provide investors with supplemental information about the ongoing operating performance of our hotels. All owned hotel pro forma results are presented both by location and for the Company’s properties in the aggregate. We eliminate depreciation and amortization expense because, even though depreciation and amortization expense are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time. As noted earlier, because real estate values have historically risen or fallen with market conditions, many real estate industry investors have considered presentation of historical cost accounting for operating results to be insufficient.
Because of the elimination of corporate-level costs and expenses, gains or losses on disposition and depreciation and amortization expense, the hotel operating results we present do not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
While management believes that presentation of all owned hotel results is a measure that provides useful information in evaluating our ongoing performance, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on all owned hotel results in the aggregate. For these reasons, we believe all owned hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.
COVID-19 Non-GAAP Reporting Measures
Hotel-level Operating Loss. We present hotel-level operating loss because management believes this metric is helpful to investors to evaluate the monthly operating performance of our properties during the COVID-19 pandemic. We further adjust
Cash Burn. We present cash burn because management believes this metric is helpful to investors to evaluate the company's ability to continue to fund operations during periods where hotels have suspended operations or are operating at very low levels of occupancy due to the COVID-19 pandemic. The Company defines cash burn as net cash from operating activities adjusted for (i) capital expenditures, (ii) changes in short term assets and liabilities and (iii) contributions to equity investments, as further described below. Cash burn is not intended to be, and should not be used as a substitute for GAAP cash flow as it does not reflect the issuance or repurchase of equity, dividends, issuance or repayment of debt, or other investing activities such as the purchase or sale of properties. Adjustments include:
- Capital Expenditures – Capital expenditures are included in the overall cash burn as they represent a significant on-going cash outflow of the Company. While management continually evaluates its capital expenditure program to appropriately balance improving and renewing its hotel portfolio with its overall cash needs; management continues to anticipate capital expenditures to be a significant cash outflow.
- Changes in short term assets and liabilities – The Company eliminates changes in short-term assets and liabilities, including due from managers, other assets and other liabilities, that primarily represent timing of cash inflows and outflows. As a result, cash burn includes income and expenses in better alignment with how these items are reflected on the statement of operations. These generally represent receipts and payments that will be settled within the year and do not reflect the cash savings or liquidity needs of the Company on an on-going basis.
- Contributions to equity investments – The Company includes contributions to equity investments that have been necessary due to the depressed operations for these investments during the COVID-19 pandemic. These are included as investing activities on the Statements of Cash Flows.
The following presents the reconciliation of our second quarter cash used in operating activities per our Statements of Cash Flows to cash burn (in millions):
Quarter ended |
||||
GAAP net cash used in operating activities | $ | (172 | ) | |
Capital expenditures | (169 | ) | ||
Contributions to equity investments | (1 | ) | ||
Timing adjustments | ||||
Change in due from managers | (31 | ) | ||
Change in other assets | (17 | ) | ||
Change in other liabilities | (9 | ) | ||
Cash burn | $ | (399 | ) |
In a scenario in which hotel operational performance remains at the average of second quarter 2020 levels, the following presents the reconciliation of monthly cash used in operating activities to cash burn (in millions):
Monthly average remainder of 2020 | ||||||||
Low | High | |||||||
GAAP net cash used in operating activities | $ | (76 | ) | $ | (73 | ) | ||
Capital expenditures | (38 | ) | (31 | ) | ||||
Timing adjustments | ||||||||
Changes in other assets/other liabilities | 4 | 4 | ||||||
Cash burn | $ | (110 | ) | $ | (100 | ) |
A PDF accompanying this announcement is available at: http://ml.globenewswire.com/Resource/Download/583af8ab-6e77-40a6-bb9e-e8e3a6a3963c
Source: Host Hotels & Resorts, Inc.