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 18, 2004.
OR
| ¨ | 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, 2004 | |
| Units of limited partnership interest |
369,895,721 |
1
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements (unaudited): |
|||
| Condensed Consolidated Balance Sheets-June 18, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| Condensed Consolidated Statements of Cash Flows-Year-to-Date Ended June 18, 2004 and June 20, 2003 |
5 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition |
16 | ||
| Item 3. |
31 | |||
| Item 4. |
31 | |||
| PART II. OTHER INFORMATION AND SIGNATURE | ||||
| Item 2. |
Issuer Purchases of Equity Securities | 31 | ||
| Item 6. |
32 | |||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
June 18, 2004 and December 31, 2003
(unaudited, in millions, except per unit amounts)
| June 18, 2004 |
December 31, 2003 | |||||
| ASSETS |
||||||
| Property and equipment, net |
$ | 7,031 | $ | 7,085 | ||
| Assets held for sale |
— | 73 | ||||
| Notes and other receivables |
54 | 54 | ||||
| Due from managers |
92 | 62 | ||||
| Investments in affiliates |
66 | 74 | ||||
| Deferred financing costs, net |
75 | 82 | ||||
| Furniture, fixtures and equipment replacement fund |
156 | 144 | ||||
| Other |
148 | 134 | ||||
| Restricted cash |
124 | 116 | ||||
| Cash and cash equivalents |
771 | 764 | ||||
| Total assets |
$ | 8,517 | $ | 8,588 | ||
| LIABILITIES AND PARTNERS’ CAPITAL |
||||||
| Debt |
||||||
| Senior notes, including $490 million, net of discount, of Exchangeable Senior Debentures as of June 18, 2004 |
$ | 2,884 | $ | 3,180 | ||
| Mortgage debt |
2,094 | 2,205 | ||||
| Convertible Subordinated Debentures |
492 | 492 | ||||
| Other |
99 | 101 | ||||
| Total debt |
5,569 | 5,978 | ||||
| Accounts payable and accrued expenses |
93 | 108 | ||||
| Liabilities associated with assets held for sale |
— | 2 | ||||
| Other |
160 | 166 | ||||
| Total liabilities |
5,822 | 6,254 | ||||
| Minority interest |
88 | 89 | ||||
| Limited partnership interests of third parties at redemption value (representing 22.7 million units and 23.5 million units at June 18, 2004 and December 31, 2003, respectively) |
279 | 290 | ||||
| Partner’s Capital |
||||||
| General partner |
1 | 1 | ||||
| Cumulative redeemable preferred limited partner (liquidation preference $453.5 million) |
436 | 339 | ||||
| Limited partner |
1,867 | 1,587 | ||||
| Accumulated other comprehensive income |
24 | 28 | ||||
| Total partner’s capital |
2,328 | 1,955 | ||||
| Total liabilities and partners’ capital |
$ | 8,517 | $ | 8,588 | ||
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter and Year-to-Date Ended June 18, 2004 and June 20, 2003
(unaudited, in millions, except per unit amounts)
| Quarter ended |
Year-to-date ended |
|||||||||||||||
| June 18, 2004 |
June 20, 2003 |
June 18, 2004 |
June 20, 2003 |
|||||||||||||
| REVENUES |
||||||||||||||||
| Rooms |
$ | 544 | $ | 482 | $ | 1,013 | $ | 930 | ||||||||
| Food and beverage |
300 | 267 | 554 | 507 | ||||||||||||
| Other |
59 | 55 | 110 | 107 | ||||||||||||
| Total hotel sales |
903 | 804 | 1,677 | 1,544 | ||||||||||||
| Rental income |
24 | 24 | 53 | 51 | ||||||||||||
| Other income |
— | — | — | 2 | ||||||||||||
| Total revenues |
927 | 828 | 1,730 | 1,597 | ||||||||||||
| EXPENSES |
||||||||||||||||
| Rooms |
132 | 116 | 249 | 226 | ||||||||||||
| Food and beverage |
215 | 192 | 404 | 371 | ||||||||||||
| Hotel departmental expenses |
241 | 217 | 456 | 421 | ||||||||||||
| Management fees |
39 | 35 | 71 | 67 | ||||||||||||
| Other property-level expenses |
71 | 76 | 140 | 145 | ||||||||||||
| Depreciation and amortization |
83 | 81 | 165 | 165 | ||||||||||||
| Corporate expenses |
12 | 12 | 25 | 25 | ||||||||||||
| Total expenses |
793 | 729 | 1,510 | 1,420 | ||||||||||||
| OPERATING PROFIT |
134 | 99 | 220 | 177 | ||||||||||||
| Interest income |
2 | 2 | 5 | 5 | ||||||||||||
| Interest expense |
(131 | ) | (115 | ) | (249 | ) | (232 | ) | ||||||||
| Net gains on property transactions |
4 | 2 | 5 | 3 | ||||||||||||
| Loss on foreign currency and derivative contracts |
— | (1 | ) | — | (2 | ) | ||||||||||
| Minority interest income (expense) |
3 | (1 | ) | (3 | ) | (3 | ) | |||||||||
| Equity in losses of affiliates |
(3 | ) | (3 | ) | (8 | ) | (9 | ) | ||||||||
| INCOME (LOSS) BEFORE INCOME TAXES |
9 | (17 | ) | (30 | ) | (61 | ) | |||||||||
| Provision for income taxes |
(11 | ) | (6 | ) | (8 | ) | (2 | ) | ||||||||
| LOSS FROM CONTINUING OPERATIONS |
(2 | ) | (23 | ) | (38 | ) | (63 | ) | ||||||||
| Income from discontinued operations |
20 | 7 | 22 | 9 | ||||||||||||
| NET INCOME (LOSS) |
18 | (16 | ) | (16 | ) | (54 | ) | |||||||||
| Less: Distributions on preferred units |
(10 | ) | (9 | ) | (19 | ) | (18 | ) | ||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS |
$ | 8 | $ | (25 | ) | $ | (35 | ) | $ | (72 | ) | |||||
| BASIC AND DILUTED EARNINGS (LOSS) PER COMMON UNIT |
$ | .02 | $ | (.08 | ) | $ | (.10 | ) | $ | (.24 | ) | |||||
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year-to-Date Ended June 18, 2004 and June 20, 2003
(unaudited, in millions)
| June 18, 2004 |
June 20, 2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (16 | ) | $ | (54 | ) | ||
| Adjustments to reconcile to cash provided by operations: |
||||||||
| Depreciation and amortization |
165 | 165 | ||||||
| Discontinued operations: |
||||||||
| Gain on dispositions |
(19 | ) | — | |||||
| Depreciation |
1 | 9 | ||||||
| Amortization of deferred financing costs |
16 | 9 | ||||||
| Income taxes |
2 | (20 | ) | |||||
| Net gains on property transactions |
(5 | ) | (3 | ) | ||||
| Equity in losses of affiliates |
8 | 9 | ||||||
| Minority interest expense |
3 | 3 | ||||||
| Changes in other assets |
(57 | ) | (5 | ) | ||||
| Changes in other liabilities |
(16 | ) | (17 | ) | ||||
| Cash provided by operations |
82 | 96 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Acquisitions |
(89 | ) | (3 | ) | ||||
| Deposits for hotel acquisitions |
(9 | ) | — | |||||
| Proceeds from sale of assets, net |
155 | 25 | ||||||
| Distributions received from equity investments |
1 | 3 | ||||||
| Capital expenditures: |
||||||||
| Renewals and replacements |
(84 | ) | (86 | ) | ||||
| Development |
(9 | ) | (3 | ) | ||||
| Other investments |
(2 | ) | (5 | ) | ||||
| Cash used in investing activities |
(37 | ) | (69 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Issuance of debt, including the Exchangeable Senior Debentures, net of financing costs |
483 | (1 | ) | |||||
| Issuance of common units |
301 | — | ||||||
| Issuance of Class E preferred units |
97 | — | ||||||
| Scheduled principal repayments |
(29 | ) | (24 | ) | ||||
| Debt prepayments |
(860 | ) | (32 | ) | ||||
| Distributions on preferred units |
(18 | ) | (18 | ) | ||||
| Distributions to minority | ||||||||