HOST MARRIOTT L P - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 20, 2003.

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission file number 0-25087

HOST MARRIOTT, L.P.

(Exact Name of Registrant as specified in its Charter)

Delaware		52-2095412
(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). ¨ Yes x No

Class

Units outstanding

July 15, 2003

Units of limited partnership interest

292,145,121

INDEX

		Page No.

	PART 1. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets—June 20, 2003 and December 31, 2002	3

	Condensed Consolidated Statements of Operations—Quarter Ended and Year-to-Date June 20, 2003 and June 14, 2002	4

	Condensed Consolidated Statements of Cash Flows—Year-to-Date June 20, 2003 and June 14, 2002	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	34

	PART II. OTHER INFORMATION AND SIGNATURE

Item 2.	Changes in Securities and Use of Proceeds	34

Item 6.	Exhibits and Reports an Form 8-K	35

Item 1.

Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

June 20, 2003 and December 31, 2002

(in millions)

	June 20, 2003		December 31, 2002
	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		501		518
Restricted cash		130		133
Cash and cash equivalents		312		361

Total assets		8,247		8,311

LIABILITIES AND SHAREHOLDERS’ EQUITY
Debt
Senior notes	$	3,249	$	3,247
Mortgage debt		2,335		2,289
Convertible debt obligation to Host Marriott Corporation		492		492
Other		102		102

		6,178		6,130
Accounts payable and accrued expenses		112		118
Other liabilities		202		252

Total Liabilities		6,492		6,500

Minority interest		91		92
Limited partnership interests of third parties at redemption value (representing 27.1 million units and 27.7 million units at June 20, 2003 and December 31, 2002, respectively)		239		245
Partners’ Capital
General partner		1		1
Cumulative redeemable preferred limited partner		339		339
Limited partner		1,075		1,136
Accumulated other comprehensive income (loss)		10		(2	)

Total partners’ capital		1,425		1,474

	$	8,247	$	8,311

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter Ended and Year-to-Date June 20, 2003 and June 14, 2002

(unaudited, in millions, expect per unit amounts)

	Quarter ended						Year-to-date
	June 20, 2003			June 14, 2002			June 20, 2003			June 14, 2002
	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	)		(4	)		(3	)		(9	)
Interest income		2			4			5			7
Interest expense		(115	)		(114	)		(234	)		(226	)
Net gains on property transactions		2			1			3			2
Equity in earnings (losses) of affiliates		(3	)		1			(9	)		(3	)

INCOME (LOSS) BEFORE INCOME TAXES		(10	)		36			(52	)		28
Provision for income taxes		(6	)		(11	)		(2	)		(15	)

INCOME (LOSS) FROM CONTINUING OPERATIONS		(16	)		25			(54	)		13
Income from discontinued operations		—			1			—			14

NET INCOME (LOSS)		(16	)		26			(54	)		27
Less: Distributions on preferred units		(9	)		(9	)		(18	)		(18	)

NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS	$	(25	)	$	17		$	(72	)	$	9

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON UNIT:
Continuing operations	$	(.08	)	$	.06		$	(.24	)	$	(.02	)
Discontinued operations		—			—			—			.05

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON UNIT	$	(.08	)	$	.06		$	(.24	)	$	.03

See notes to condensed consolidated financial statements.

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
	June 20, 2003			June 14, 2002
OPERATING ACTIVITIES
Net income (loss)	$	(54	)	$	27
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		3			9
Changes in other assets		7			(8	)
Changes in other liabilities		(17	)		(5	)

Cash provided by operations		99

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