UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended March 31, 2015
OR
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission File Number: 001-14625 (Host Hotels & Resorts, Inc.)
0-25087 (Host Hotels & Resorts, L.P.)
HOST HOTELS & RESORTS, INC.
HOST HOTELS & RESORTS, L.P.
(Exact name of registrant as specified in its charter)
|
Maryland (Host Hotels & Resorts, Inc.) Delaware (Host Hotels & Resorts, L.P.) (State or Other Jurisdiction of Incorporation or Organization) |
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53-008595 52-2095412 (I.R.S. Employer Identification No.) |
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6903 Rockledge Drive, Suite 1500 Bethesda, Maryland (Address of Principal Executive Offices) |
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20817 (Zip Code) |
(240) 744-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Host Hotels & Resorts, Inc. |
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Yes þ |
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No ¨ |
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Host Hotels & Resorts, L.P. |
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Yes þ |
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No ¨ |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Host Hotels & Resorts, Inc. |
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Yes þ |
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No ¨ |
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Host Hotels & Resorts, L.P. |
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Yes þ |
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No ¨ |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Host Hotels & Resorts, Inc. |
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Large accelerated filer þ |
Accelerated filer ¨ |
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Non-accelerated filer (Do not check if a smaller reporting company) ¨ |
Smaller reporting company ¨ |
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Host Hotels & Resorts, L.P. |
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Large accelerated filer ¨ |
Accelerated filer ¨ |
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Non-accelerated filer (Do not check if a smaller reporting company) þ |
Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Host Hotels & Resorts, Inc. |
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Yes ¨ |
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No þ |
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Host Hotels & Resorts, L.P. |
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Yes ¨ |
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No þ |
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As of April 29, 2015 there were 757,674,729 shares of Host Hotels & Resorts, Inc.’s common stock, $.01 par value per share, outstanding.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q of Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. Unless stated otherwise or the context requires otherwise, references to “Host Inc.” mean Host Hotels & Resorts, Inc., a Maryland corporation, and references to “Host L.P.” mean Host Hotels & Resorts, L.P., a Delaware limited partnership, and its consolidated subsidiaries, in cases where it is important to distinguish between Host Inc. and Host L.P. We use the terms “we” or “our” or “the company” to refer to Host Inc. and Host L.P. together, unless the context indicates otherwise.
Host Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”). Host Inc. owns properties and conducts operations through Host L.P., of which Host Inc. is the sole general partner and of which it holds approximately 99% of the partnership interests (“OP units”). The remaining OP units are owned by various unaffiliated limited partners. As the sole general partner of Host L.P., Host Inc. has the exclusive and complete responsibility for Host L.P.’s day-to-day management and control. Management operates Host Inc. and Host L.P. as one enterprise. The management of Host Inc. consists of the same persons who direct the management of Host L.P. As general partner with control of Host L.P., Host Inc. consolidates Host L.P. for financial reporting purposes, and Host Inc. does not have significant assets other than its investment in Host L.P. Therefore, the assets and liabilities of Host Inc. and Host L.P. are substantially the same on their respective condensed consolidated financial statements and the disclosures of Host Inc. and Host L.P. also are substantially similar. For these reasons, we believe that the combination into a single report of the quarterly reports on Form 10-Q of Host Inc. and Host L.P. results in benefits to management and investors.
The substantive difference between Host Inc.’s and Host L.P.’s filings is the fact that Host Inc. is a REIT with public stock, while Host L.P. is a partnership with no publicly traded equity. In the condensed consolidated financial statements, this difference primarily is reflected in the equity (or partners’ capital for Host L.P.) section of the consolidated balance sheets and in the consolidated statements of equity (or partners’ capital for Host L.P.). Apart from the different equity treatment, the condensed consolidated financial statements of Host Inc. and Host L.P. nearly are identical.
This combined Form 10-Q for Host Inc. and Host L.P. includes, for each entity, separate interim financial statements (but combined footnotes), separate reports on disclosure controls and procedures and internal control over financial reporting and separate CEO/CFO certifications. In addition, with respect to any other financial and non-financial disclosure items required by Form 10-Q, any material differences between Host Inc. and Host L.P. are discussed separately herein. For a more detailed discussion of the substantive differences between Host Inc. and Host L.P. and why we believe the combined filing results in benefits to investors, see the discussion in the combined Annual Report on Form 10-K for the year ended December 31, 2014 under the heading “Explanatory Note.”
i
HOST HOTELS & RESORTS, INC. AND HOST HOTELS & RESORTS, L.P.
INDEX
PART I. FINANCIAL INFORMATION
ii
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2015 and December 31, 2014
(in millions, except share and per share amounts)
|
|
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March 31, 2015 |
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December 31, 2014 |
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||
|
|
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(unaudited) |
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ASSETS |
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|||||||
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Property and equipment, net |
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$ |
10,495 |
|
|
$ |
10,575 |
|
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Due from managers |
|
|
149 |
|
|
|
70 |
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Advances to and investments in affiliates |
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|
387 |
|
|
|
433 |
|
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Deferred financing costs, net |
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33 |
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|
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35 |
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Furniture, fixtures and equipment replacement fund |
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169 |
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129 |
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Other |
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292 |
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281 |
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Cash and cash equivalents |
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485 |
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|
684 |
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Total assets |
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$ |
12,010 |
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$ |
12,207 |
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|
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|
|
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LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY |
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Debt |
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|
|
|
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Senior notes, including $390 million and $386 million, respectively, net of discount, of Exchangeable Senior Debentures |
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$ |
2,888 |
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|
$ |
2,884 |
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Credit facility, including the $500 million term loan |
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|
685 |
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|
704 |
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Mortgage debt |
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395 |
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|
|
404 |
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Total debt |
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3,968 |
|
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|
3,992 |
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Accounts payable and accrued expenses |
|
|
224 |
|
|
|
298 |
|
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Other |
|
|
304 |
|
|
|
324 |
|
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Total liabilities |
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4,496 |
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4,614 |
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|
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|
|
|
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Non-controlling interests - Host Hotels & Resorts, L.P. |
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191 |
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225 |
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Host Hotels & Resorts, Inc. stockholders’ equity: |
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Common stock, par value $.01, 1,050 million shares authorized, 756.3 million shares and 755.8 million shares issued and outstanding, respectively |
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8 |
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8 |
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Additional paid-in capital |
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8,519 |
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8,476 |
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Accumulated other comprehensive loss |
|
|
(87 |
) |
|
|
(50 |
) |
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Deficit |
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(1,151 |
) |
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(1,098 |
) |
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Total equity of Host Hotels & Resorts, Inc. stockholders |
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7,289 |
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7,336 |
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Non-controlling interests—other consolidated partnerships |
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34 |
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32 |
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Total equity |
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7,323 |
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7,368 |
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Total liabilities, non-controlling interests and equity |
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$ |
12,010 |
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$ |
12,207 |
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See notes to condensed consolidated statements.
1
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter ended March 31, 2015 and 2014
(unaudited, in millions, except per share amounts)
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Quarter ended March 31, |
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|||||
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2015 |
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2014 |
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||
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REVENUES |
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Rooms |
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$ |
818 |
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$ |
808 |
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Food and beverage |
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|
403 |
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|
405 |
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Other |
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96 |
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|
96 |
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Total revenues |
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1,317 |
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1,309 |
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EXPENSES |
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Rooms |
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220 |
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226 |
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Food and beverage |
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283 |
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284 |
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Other departmental and support expenses |
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321 |
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315 |
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Management fees |
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52 |
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50 |
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Other property-level expenses |
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98 |
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97 |
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Depreciation and amortization |
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175 |
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172 |
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Corporate and other expenses |
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24 |
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34 |
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Gain on insurance settlements |
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— |
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(3 |
) |
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Total operating costs and expenses |
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1,173 |
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1,175 |
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OPERATING PROFIT |
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144 |
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134 |
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Interest income |
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1 |
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1 |
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Interest expense |
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(51 |
) |
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(58 |
) |
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Gain on sale of assets |
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4 |
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112 |
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Loss on foreign currency transactions and derivatives |
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(1 |
) |
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— |
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Equity in losses of affiliates |
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(2 |
) |
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(8 |
) |
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INCOME BEFORE INCOME TAXES |
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95 |
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181 |
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Benefit for income taxes |
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9 |
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4 |
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NET INCOME |
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104 |
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|
185 |
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Less: Net income attributable to non-controlling interests |
|
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(6 |
) |
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(6 |
) |
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NET INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, INC. |
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$ |
98 |
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$ |
179 |
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Basic earnings per common share |
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$ |
.13 |
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$ |
.24 |
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Diluted earnings per common share |
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$ |
.13 |
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$ |
.24 |
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See notes to condensed consolidated statements.
2
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Quarter ended March 31, 2015 and 2014
(unaudited, in millions)
|
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Quarter ended March 31, |
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2015 |
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2014 |
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NET INCOME |
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$ |
104 |
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$ |
185 |
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
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Foreign currency translation and other comprehensive |
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(47 |
) |
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7 |
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Change in fair value of derivative instruments |
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15 |
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— |
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Amounts reclassified from other comprehensive income (loss) |
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(5 |
) |
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— |
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
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(37 |
) |
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7 |
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COMPREHENSIVE INCOME |
|
|
67 |
|
|
|
192 |
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Less: Comprehensive income attributable to non-controlling interests |
|
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(6 |
) |
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(6 |
) |
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COMPREHENSIVE INCOME ATTRIBUTABLE TO HOST HOTELS & |
|
$ |
61 |
|
|
$ |
186 |
|
See notes to condensed consolidated statements.
3
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended March 31, 2015 and 2014
(unaudited, in millions)
|
|
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Quarter ended March 31, |
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|||||
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2015 |
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2014 |
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||
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OPERATING ACTIVITIES |
|
|
|
|
|
|
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Net income |
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$ |
104 |
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|
$ |
185 |
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Adjustments to reconcile to cash provided by operations: |
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|
|
|
|
|
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Depreciation and amortization |
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175 |
|
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|
172 |
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Amortization of finance costs, discounts and premiums, net |
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6 |
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6 |
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Non-cash loss on extinguishment of debt |
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— |
|
|
|
1 |
|
|
Stock compensation expense |
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5 |
|
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4 |
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Deferred income taxes |
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(13 |
) |
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|
(11 |
) |
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Gain on sale of assets |
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(4 |
) |
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(112 |
) |
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Loss on foreign currency transactions and derivatives |
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1 |
|
|
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— |
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Equity in losses of affiliates |
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2 |
|
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8 |
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Change in due from managers |
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(75 |
) |
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(58 |
) |
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Distributions from equity investments |
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4 |
|
|
|
— |
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Changes in other assets |
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|
13 |
|
|
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(6 |
) |
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Changes in other liabilities |
|
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(45 |
) |
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|
(18 |
) |
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Cash provided by operating activities |
|
|
173 |
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
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INVESTING ACTIVITIES |
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|
|
|
|
|
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Proceeds from sales of assets, net |
|
|
33 |
|
|
|
274 |
|
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Return of investment |
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|
— |
|
|
|
25 |
|
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Acquisitions |
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— |
|
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(73 |
) |
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Advances to and investments in affiliates |
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— |
|
|
|
(14 |
) |
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Capital expenditures: |
|
|
|
|
|
|
|
|
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Renewals and replacements |
|
|
(125 |
) |
|
|
(76 |
) |
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Redevelopment and acquisition-related investments |
|
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(45 |
) |
|
|
(14 |
) |
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Change in furniture, fixtures and equipment ("FF&E") replacement fund |
|
|
(30 |
) |
|
|
12 |
|
|
Cash provided by (used in) investing activities |
|
|
(167 |
) |
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
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Repayment of credit facility |
|
|
— |
|
|
|
(225 |
) |
|
Repurchase/redemption of senior notes |
|
|
— |
|
|
|
(150 |
) |
|
Mortgage debt and other prepayments and scheduled maturities |
|
|
— |
|
|
|
(301 |
) |
|
Issuance of common stock |
|
|
1 |
|
|
|
1 |
|
|
Dividends on common stock |
|
|
(197 |
) |
|
|
(98 |
) |
|
Distributions to non-controlling interests |
|
|
(2 |
) |
|
|
(1 |
) |
|
Change in restricted cash for financing activities |
|
|
— |
|
|
|
(1 |
) |
|
Cash used in financing activities |
|
|
(198 |
) |
|
|
(775 |
) |
|
Effects of exchange rate changes on cash held |
|
|
(7 |
) |
|
|
1 |
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(199 |
) |
|
|
(469 |
) |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
684 |
|
|
|
861 |
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
485 |
|
|
$ |
392 |
|
See notes to condensed consolidated statements
4
HOST HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended March 31, 2015 and 2014
(unaudited)
Supplemental disclosure of cash flow information (in millions)
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
Interest paid - periodic interest expense |
|
$ |
44 |
|
|
$ |
48 |
|
|
Interest paid - debt extinguishments |
|
|
— |
|
|
|
2 |
|
|
Total interest paid |
|
$ |
44 |
|
|
$ |
50 |
|
|
Income taxes paid |
|
$ |
1 |
|
|
$ |
8 |
|
See notes to condensed consolidated statements.
5
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2015 and December 31, 2014
(in millions)
|
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
||
|
|
|
(unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|||||||
|
Property and equipment, net |
|
$ |
10,495 |
|
|
$ |
10,575 |
|
|
Due from managers |
|
|
149 |
|
|
|
70 |
|
|
Advances to and investments in affiliates |
|
|
387 |
|
|
|
433 |
|
|
Deferred financing costs, net |
|
|
33 |
|
|
|
35 |
|
|
Furniture, fixtures and equipment replacement fund |
|
|
169 |
|
|
|
129 |
|
|
Other |
|
|
292 |
|
|
|
281 |
|
|
Cash and cash equivalents |
|
|
485 |
|
|
|
684 |
|
|
Total assets |
|
$ |
12,010 |
|
|
$ |
12,207 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, LIMITED PARTNERSHIP INTERESTS OF THIRD PARTIES AND CAPITAL |
|
|||||||
|
Debt |
|
|
|
|
|
|
|
|
|
Senior notes, including $390 million and $386 million, respectively, net of discount, of Exchangeable Senior Debentures |
|
$ |
2,888 |
|
|
$ |
2,884 |
|
|
Credit facility, including the $500 million term loan |
|
|
685 |
|
|
|
704 |
|
|
Mortgage debt |
|
|
395 |
|
|
|
404 |
|
|
Total debt |
|
|
3,968 |
|
|
|
3,992 |
|
|
Accounts payable and accrued expenses |
|
|
224 |
|
|
|
298 |
|
|
Other |
|
|
304 |
|
|
|
324 |
|
|
Total liabilities |
|
|
4,496 |
|
|
|
4,614 |
|
|
|
|
|
|
|
|
|
|
|
|
Limited partnership interests of third parties |
|
|
191 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
Host Hotels & Resorts, L.P. capital: |
|
|
|
|
|
|
|
|
|
General partner |
|
|
1 |
|
|
|
1 |
|
|
Limited partner |
|
|
7,375 |
|
|
|
7,385 |
|
|
Accumulated other comprehensive loss |
|
|
(87 |
) |
|
|
(50 |
) |
|
Total Host Hotels & Resorts, L.P. capital |
|
|
7,289 |
|
|
|
7,336 |
|
|
Non-controlling interests—consolidated partnerships |
|
|
34 |
|
|
|
32 |
|
|
Total capital |
|
|
7,323 |
|
|
|
7,368 |
|
|
Total liabilities, limited partnership interest of third parties and capital |
|
$ |
12,010 |
|
|
$ |
12,207 |
|
See notes to condensed consolidated statements.
6
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter ended March 31, 2015 and 2014
(unaudited, in millions, except per unit amounts)
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
REVENUES |
|
|
|
|
|
|
|
|
|
Rooms |
|
$ |
818 |
|
|
$ |
808 |
|
|
Food and beverage |
|
|
403 |
|
|
|
405 |
|
|
Other |
|
|
96 |
|
|
|
96 |
|
|
Total revenues |
|
|
1,317 |
|
|
|
1,309 |
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
Rooms |
|
|
220 |
|
|
|
226 |
|
|
Food and beverage |
|
|
283 |
|
|
|
284 |
|
|
Other departmental and support expenses |
|
|
321 |
|
|
|
315 |
|
|
Management fees |
|
|
52 |
|
|
|
50 |
|
|
Other property-level expenses |
|
|
98 |
|
|
|
97 |
|
|
Depreciation and amortization |
|
|
175 |
|
|
|
172 |
|
|
Corporate and other expenses |
|
|
24 |
|
|
|
34 |
|
|
Gain on insurance settlements |
|
|
— |
|
|
|
(3 |
) |
|
Total operating costs and expenses |
|
|
1,173 |
|
|
|
1,175 |
|
|
OPERATING PROFIT |
|
|
144 |
|
|
|
134 |
|
|
Interest income |
|
|
1 |
|
|
|
1 |
|
|
Interest expense |
|
|
(51 |
) |
|
|
(58 |
) |
|
Gain on sale of assets |
|
|
4 |
|
|
|
112 |
|
|
Loss on foreign currency transactions and derivatives |
|
|
(1 |
) |
|
|
— |
|
|
Equity in losses of affiliates |
|
|
(2 |
) |
|
|
(8 |
) |
|
INCOME BEFORE INCOME TAXES |
|
|
95 |
|
|
|
181 |
|
|
Benefit for income taxes |
|
|
9 |
|
|
|
4 |
|
|
NET INCOME |
|
|
104 |
|
|
|
185 |
|
|
Less: Net income attributable to non-controlling interests |
|
|
(5 |
) |
|
|
(4 |
) |
|
NET INCOME ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P. |
|
$ |
99 |
|
|
$ |
181 |
|
|
Basic earnings per common unit |
|
$ |
.13 |
|
|
$ |
.24 |
|
|
Diluted earnings per common unit |
|
$ |
.13 |
|
|
$ |
.24 |
|
See notes to condensed consolidated statements.
7
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Quarter ended March 31, 2015 and 2014
(unaudited, in millions)
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
NET INCOME |
|
$ |
104 |
|
|
$ |
185 |
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
|
|
|
|
Foreign currency translation and other comprehensive income (loss) of unconsolidated affiliates |
|
|
(47 |
) |
|
|
7 |
|
|
Change in fair value of derivative instruments |
|
|
15 |
|
|
|
— |
|
|
Amounts reclassified from other comprehensive income (loss) |
|
|
(5 |
) |
|
|
— |
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
|
|
(37 |
) |
|
|
7 |
|
|
COMPREHENSIVE INCOME |
|
|
67 |
|
|
|
192 |
|
|
Less: Comprehensive income attributable to non-controlling interests |
|
|
(5 |
) |
|
|
(4 |
) |
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO HOST HOTELS & |
|
$ |
62 |
|
|
$ |
188 |
|
See notes to condensed consolidated statements.
8
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended March 31, 2015 and 2014
(unaudited, in millions)
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
104 |
|
|
$ |
185 |
|
|
Adjustments to reconcile to cash provided by operations: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
175 |
|
|
|
172 |
|
|
Amortization of finance costs, discounts and premiums, net |
|
|
6 |
|
|
|
6 |
|
|
Non-cash loss on extinguishment of debt |
|
|
— |
|
|
|
1 |
|
|
Stock compensation expense |
|
|
5 |
|
|
|
4 |
|
|
Deferred income taxes |
|
|
(13 |
) |
|
|
(11 |
) |
|
Gain on sale of assets |
|
|
(4 |
) |
|
|
(112 |
) |
|
Loss on foreign currency transactions and derivatives |
|
|
1 |
|
|
|
— |
|
|
Equity in losses of affiliates |
|
|
2 |
|
|
|
8 |
|
|
Change in due from managers |
|
|
(75 |
) |
|
|
(58 |
) |
|
Distributions from equity investments |
|
|
4 |
|
|
|
— |
|
|
Changes in other assets |
|
|
13 |
|
|
|
(6 |
) |
|
Changes in other liabilities |
|
|
(45 |
) |
|
|
(18 |
) |
|
Cash provided by operating activities |
|
|
173 |
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Proceeds from sales of assets, net |
|
|
33 |
|
|
|
274 |
|
|
Return of investment |
|
|
— |
|
|
|
25 |
|
|
Acquisitions |
|
|
— |
|
|
|
(73 |
) |
|
Advances to and investments in affiliates |
|
|
— |
|
|
|
(14 |
) |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Renewals and replacements |
|
|
(125 |
) |
|
|
(76 |
) |
|
Redevelopment and acquisition-related investments |
|
|
(45 |
) |
|
|
(14 |
) |
|
Change in furniture, fixtures and equipment ("FF&E") replacement fund |
|
|
(30 |
) |
|
|
12 |
|
|
Cash provided by (used in) investing activities |
|
|
(167 |
) |
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Repayment of credit facility |
|
|
— |
|
|
|
(225 |
) |
|
Repurchase/redemption of senior notes |
|
|
— |
|
|
|
(150 |
) |
|
Mortgage debt and other prepayments and scheduled maturities |
|
|
— |
|
|
|
(301 |
) |
|
Issuance of common OP units |
|
|
1 |
|
|
|
1 |
|
|
Distributions on common OP units |
|
|
(199 |
) |
|
|
(99 |
) |
|
Change in restricted cash for financing activities |
|
|
— |
|
|
|
(1 |
) |
|
Cash used in financing activities |
|
|
(198 |
) |
|
|
(775 |
) |
|
Effects of exchange rate changes on cash held |
|
|
(7 |
) |
|
|
1 |
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(199 |
) |
|
|
(469 |
) |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
684 |
|
|
|
861 |
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
485 |
|
|
$ |
392 |
|
See notes to condensed consolidated statements
9
HOST HOTELS & RESORTS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended March 31, 2015 and 2014
(unaudited)
Supplemental disclosure of cash flow information (in millions):
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
Interest paid - periodic interest expense |
|
$ |
44 |
|
|
$ |
48 |
|
|
Interest paid - debt extinguishments |
|
|
— |
|
|
|
2 |
|
|
Total interest paid |
|
$ |
44 |
|
|
$ |
50 |
|
|
Income taxes paid |
|
$ |
1 |
|
|
$ |
8 |
|
See notes to condensed consolidated statements.
10
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
1. |
Organization |
Description of Business
Host Hotels & Resorts, Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”), with its operations conducted solely through Host Hotels & Resorts, L.P. and its subsidiaries. Host Hotels & Resorts, L.P., a Delaware limited partnership, operates through an umbrella partnership structure, with Host Hotels & Resorts, Inc., a Maryland corporation, as its sole general partner. In the notes to these condensed consolidated financial statements, we use the terms “we” or “our” to refer to Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. together, unless the context indicates otherwise. We also use the term “Host Inc.” specifically to refer to Host Hotels & Resorts, Inc. and the term “Host L.P.” specifically to refer to Host Hotels & Resorts, L.P. in cases where it is important to distinguish between Host Inc. and Host L.P. As of March 31, 2015, Host Inc. holds approximately 99% of Host L.P.’s OP units.
Consolidated Portfolio
As of March 31, 2015, our consolidated portfolio, primarily consisting of luxury and upper upscale hotels, is located in the following countries:
|
|
Hotels |
|
|
|
United States |
|
97 |
|
|
Australia |
|
1 |
|
|
Brazil |
|
3 |
|
|
Canada |
|
2 |
|
|
Chile |
|
2 |
|
|
Mexico |
|
1 |
|
|
New Zealand |
|
7 |
|
|
Total |
|
113 |
|
International Joint Ventures
We own a non-controlling interest in a joint venture in Europe (“Euro JV”) that owns hotels in two separate funds. We own a 32.1% interest in the first fund (“Euro JV Fund I”) (10 hotels) and a 33.4% interest in the second fund (“Euro JV Fund II”) (9 hotels).
As of March 31, 2015, the Euro JV owned hotels located in the following countries:
|
|
Hotels |
|
|
|
Belgium |
|
3 |
|
|
France |
|
4 |
|
|
Germany |
|
2 |
|
|
Italy |
|
3 |
|
|
Poland |
|
1 |
|
|
Spain |
|
2 |
|
|
Sweden |
|
1 |
|
|
The Netherlands |
|
2 |
|
|
United Kingdom |
|
1 |
|
|
Total |
|
19 |
|
In addition, our joint venture in Asia (“Asia/Pacific JV”), in which we own a 25% non-controlling interest, owns one hotel in Australia and a non-controlling interest in an entity that owns three operating hotels and four additional hotels in various stages of development in India.
11
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
2. |
Summary of Significant Accounting Policies |
We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10–K for the year ended December 31, 2014.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In our opinion, the accompanying financial statements reflect all adjustments necessary to present fairly our financial position as of March 31, 2015, and the results of our operations and cash flows for the quarters ended March 31, 2015 and 2014, respectively. Interim results are not necessarily indicative of full year performance because of the impact of seasonal variations.
Reclassifications
Certain prior year financial statement amounts have been reclassified to conform with the current year presentation. In particular, gain on sale of assets, which previously was presented net of tax following income from continuing operations on our statement of operations, has been reclassified to be included in income before income taxes following guidance issued by the SEC upon adoption of ASU 2014-08, Reporting for Discontinued Operations.
New Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for annual reporting periods beginning after December 15, 2015. Upon adoption of the standard we will reclassify deferred financing costs, net from total assets to be shown net of debt in the liabilities section of our balance sheet. Adoption of this standard will only affect the presentation of our balance sheet.
In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. The ASU amends the consolidation guidance for variable interest entities (VIEs) and general partners' investments in limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. The ASU is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the effect of the ASU on our consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which affects virtually all aspects of an entity’s revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2016, however in April 2015, the FASB proposed to defer the effective date to December 15, 2017. We have not yet completed our assessment of the effect of the new standard on our financial statements, including possible transition alternatives.
12
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
3. |
Earnings Per Common Share (Unit) |
Host Inc. Earnings Per Common Share
Basic earnings per common share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of Host Inc. common stock outstanding. Diluted earnings per common share is computed by dividing net income attributable to common stockholders, as adjusted for potentially dilutive securities, by the weighted average number of shares of Host Inc. common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, other non-controlling interests that have the option to convert their limited partnership interests to common OP units and convertible debt securities. No effect is shown for any securities that are anti-dilutive. We have 9.2 million OP units which are convertible into 9.4 million common shares which are not included in Host Inc.’s calculation of earnings per share as their effect is not dilutive. The calculation of basic and diluted earnings per common share is shown below (in millions, except per share amounts):
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
Net income |
|
$ |
104 |
|
|
$ |
185 |
|
|
Less: Net income attributable to non-controlling interests |
|
|
(6 |
) |
|
|
(6 |
) |
|
Net income attributable to Host Inc. |
|
|
98 |
|
|
|
179 |
|
|
Assuming conversion of exchangeable senior debentures |
|
|
— |
|
|
|
7 |
|
|
Diluted income attributable to Host Inc. |
|
$ |
98 |
|
|
$ |
186 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
756.0 |
|
|
|
754.9 |
|
|
Assuming weighted average shares for conversion of exchangeable senior debentures |
|
|
— |
|
|
|
29.9 |
|
|
Assuming distribution of common shares granted under the comprehensive stock plans, less shares assumed purchased at market |
|
|
0.3 |
|
|
|
0.3 |
|
|
Diluted weighted average shares outstanding (1) |
|
|
756.3 |
|
|
|
785.1 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
.13 |
|
|
$ |
.24 |
|
|
Diluted earnings per common share |
|
$ |
.13 |
|
|
$ |
.24 |
|
|
___________ |
|
|
|
|
|
|
|
|
|
(1) |
There were approximately 31 million potentially dilutive shares for the quarter ended March 31, 2015 related to our exchangeable senior debentures, which shares were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the period. |
13
HOST HOTELS & RESORTS, INC., HOST HOTELS & RESORTS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Host L.P. Earnings Per Common Unit
Basic earnings per common unit is computed by dividing net income attributable to common unitholders by the weighted average number of common units outstanding. Diluted earnings per common unit is computed by dividing net income attributable to common unitholders, as adjusted for potentially dilutive securities, by the weighted average number of common units outstanding plus other potentially dilutive securities. Dilutive securities may include units distributed to Host Inc. to support Host Inc. common shares granted under comprehensive stock plans, other non-controlling interests that have the option to convert their limited partnership interests to common OP units and convertible debt securities. No effect is shown for any securities that are anti-dilutive. The calculation of basic and diluted earnings per unit is shown below (in millions, except per unit amounts):
|
|
|
Quarter ended March 31, |
|
|||||
|
|
|
2015 |
|
|
2014 |
|
||
|
Net income |
|
$ |
104 |
|
|
$ |
||