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 June 20, 2003.
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 |
Commission file number 001-14625
HOST MARRIOTT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 53-0085950 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| 6903 Rockledge Drive, Suite 1500, Bethesda, Maryland | 20817 | |
| (Address of Principal Executive Offices) | (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, and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No
The registrant had 265,019,079 shares of its $0.01 par value common stock outstanding as of July 15, 2003.
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
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| Condensed Consolidated Balance Sheets – June 20, 2003 and December 31, 2002 |
3 | |||
| 4 | ||||
| Condensed Consolidated Statements of Cash Flows – Year-to-Date June 20, 2003 and June 14, 2002 |
5 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition |
13 | ||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 30 | ||
| Item 4. |
Controls and Procedures | 30 | ||
| PART II. OTHER INFORMATION AND SIGNATURE | ||||
| Item 2. |
30 | |||
| Item 4. |
31 | |||
| Item 6. |
31 | |||
2
| Item 1. | Financial Statements |
CONDENSED CONSOLIDATED BALANCE SHEETS
June 20, 2003 and December 31, 2002
(in millions, except per share amounts)
| June 20, 2003 |
December 31, 2002 |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Property and equipment, net |
$ | 7,063 | $ | 7,031 | ||||
| Notes and other receivables |
55 | 53 | ||||||
| Due from managers |
98 | 82 | ||||||
| Investments in affiliates |
88 | 133 | ||||||
| Other assets |
505 | 523 | ||||||
| Restricted cash |
130 | 133 | ||||||
| Cash and cash equivalents |
312 | 361 | ||||||
| Total assets |
$ | 8,251 | $ | 8,316 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Debt |
||||||||
| Senior notes |
$ | 3,249 | $ | 3,247 | ||||
| Mortgage debt |
2,335 | 2,289 | ||||||
| Other |
102 | 102 | ||||||
| 5,686 | 5,638 | |||||||
| Accounts payable and accrued expenses |
112 | 118 | ||||||
| Other liabilities |
202 | 252 | ||||||
| Total liabilities |
6,000 | 6,008 | ||||||
| Minority interest |
214 | 223 | ||||||
| Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary whose sole assets are convertible subordinated debentures due 2026 (“Convertible Preferred Securities”) |
475 | 475 | ||||||
| Shareholders’ equity |
||||||||
| Cumulative redeemable preferred stock (liquidation preference $354 million), 50 million shares authorized; 14.1 million shares issued and outstanding |
339 | 339 | ||||||
| Common stock, par value $.01, 750 million shares authorized; 265.0 million shares and 263.7 million shares issued and outstanding, respectively |
3 | 3 | ||||||
| Additional paid-in capital |
2,106 | 2,100 | ||||||
| Accumulated other comprehensive income (loss) |
10 | (2 | ) | |||||
| Accumulated deficit |
(896 | ) | (830 | ) | ||||
| Total shareholders’ equity |
1,562 | 1,610 | ||||||
| $ | 8,251 | $ | 8,316 | |||||
See Notes to Condensed Consolidated Statements
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended and Year-to-Date June 20, 2003 and June 14, 2002
(unaudited, in millions, except per share amounts)
| Quarter ended |
Year-to-date |
|||||||||||||||
| June 20, 2003 |
June 14, 2002 |
June 20, 2003 |
June 14, 2002 |
|||||||||||||
| REVENUES |
||||||||||||||||
| Rooms |
$ | 512 | $ | 541 | $ | 984 | $ | 1,005 | ||||||||
| Food and beverage |
281 | 288 | 533 | 530 | ||||||||||||
| Other |
57 | 64 | 109 | 119 | ||||||||||||
| Total hotel sales |
850 | 893 | 1,626 | 1,654 | ||||||||||||
| Rental income |
24 | 24 | 51 | 50 | ||||||||||||
| Other income |
— | — | 2 | — | ||||||||||||
| Total revenues |
874 | 917 | 1,679 | 1,704 | ||||||||||||
| OPERATING COSTS AND EXPENSES |
||||||||||||||||
| Rooms |
123 | 129 | 239 | 239 | ||||||||||||
| Food and beverage |
202 | 204 | 389 | 379 | ||||||||||||
| Hotel departmental expenses |
230 | 225 | 445 | 420 | ||||||||||||
| Management fees |
37 | 44 | 70 | 80 | ||||||||||||
| Other property-level expenses |
78 | 71 | 149 | 133 | ||||||||||||
| Depreciation and amortization |
86 | 84 | 174 | 167 | ||||||||||||
| Corporate and other expenses |
13 | 12 | 27 | 29 | ||||||||||||
| Total operating costs and expenses |
769 | 769 | 1,493 | 1,447 | ||||||||||||
| OPERATING PROFIT |
105 | 148 | 186 | 257 | ||||||||||||
| Minority interest income (expense) |
1 | (6 | ) | 2 | (11 | ) | ||||||||||
| Interest income |
2 | 4 | 5 | 7 | ||||||||||||
| Interest expense |
(107 | ) | (106 | ) | (218 | ) | (211 | ) | ||||||||
| Net gains on property transactions |
2 | 1 | 3 | 2 | ||||||||||||
| Equity in earnings (losses) of affiliates |
(3 | ) | 1 | (9 | ) | (3 | ) | |||||||||
| Dividends on Convertible Preferred Securities |
(8 | ) | (8 | ) | (15 | ) | (15 | ) | ||||||||
| INCOME (LOSS) BEFORE INCOME TAXES |
(8 | ) | 34 | (46 | ) | 26 | ||||||||||
| Provision for income taxes |
(6 | ) | (11 | ) | (2 | ) | (15 | ) | ||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS |
(14 | ) | 23 | (48 | ) | 11 | ||||||||||
| Income from discontinued operations |
— | 1 | — | 14 | ||||||||||||
| NET INCOME (LOSS) |
(14 | ) | 24 | (48 | ) | 25 | ||||||||||
| Less: Dividends on preferred stock |
(9 | ) | (9 | ) | (18 | ) | (18 | ) | ||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |
$ | (23 | ) | $ | 15 | $ | (66 | ) | $ | 7 | ||||||
| BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: |
||||||||||||||||
| Continuing operations |
$ | (.09 | ) | $ | .06 | $ | (.25 | ) | $ | (.02 | ) | |||||
| Discontinued operations |
— | — | — | .05 | ||||||||||||
| BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ | (.09 | ) | $ | .06 | $ | (.25 | ) | $ | .03 | ||||||
See Notes to Condensed Consolidated Statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year-to-Date June 20, 2003 and June 14, 2002
(unaudited, in millions)
| Year-to-date |
||||||||
| June 20, 2003 |
June 14, 2002 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ | (48 | ) | $ | 25 | |||
| Adjustments to reconcile to cash provided by operations: |
||||||||
| Non-cash effect of discontinued operations |
— | (12 | ) | |||||
| Depreciation and amortization |
174 | 167 | ||||||
| Income taxes |
(20 | ) | 5 | |||||
| Net gains on property transactions |
(3 | ) | (2 | ) | ||||
| Equity in losses of affiliates |
9 | 3 | ||||||
| Minority interest expense (income) |
(2 | ) | ||||||