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 September 10, 2004.
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 348,478,763 shares of its $0.01 par value common stock outstanding as of October 13, 2004.
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements (unaudited): |
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|
Condensed Consolidated Balance Sheets- |
3 | |||
| 4 | ||||
| 6 | ||||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition |
15 | ||
| Item 3. |
33 | |||
| Item 4. |
33 | |||
| PART II. OTHER INFORMATION AND SIGNATURE | ||||
| Item 1. |
34 | |||
| Item 2. |
34 | |||
| Item 6. |
34 | |||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
September 10, 2004 and December 31, 2003
(unaudited, in million, except per share amounts)
| September 10, 2004 |
December 31, 2003 |
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| ASSETS | ||||||||
| Property and equipment, net |
$ | 7,393 | $ | 7,085 | ||||
| Assets held for sale |
— | 73 | ||||||
| Notes and other receivables |
54 | 54 | ||||||
| Due from managers |
64 | 62 | ||||||
| Investments in affiliates |
78 | 74 | ||||||
| Deferred financing costs, net |
75 | 82 | ||||||
| Furniture, fixtures and equipment replacement fund |
149 | 144 | ||||||
| Other |
128 | 138 | ||||||
| Restricted cash |
126 | 116 | ||||||
| Cash and cash equivalents |
317 | 764 | ||||||
| Total assets |
$ | 8,384 | $ | 8,592 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Debt |
||||||||
| Senior notes, including $491 million, net of discount, of Exchangeable Senior Debentures as of September 10, 2004 |
$ | 2,893 | $ | 3,180 | ||||
| Mortgage debt |
2,080 | 2,205 | ||||||
| Convertible Subordinated Debentures |
492 | — | ||||||
| Other |
99 | 101 | ||||||
| Total debt |
5,564 | 5,486 | ||||||
| Accounts payable and accrued expenses |
134 | 108 | ||||||
| Liabilities associated with assets held for sale |
— | 2 | ||||||
| Other |
140 | 166 | ||||||
| Total liabilities |
5,838 | 5,762 | ||||||
| Interest of minority partners of Host Marriott L.P. |
125 | 130 | ||||||
| Interest of minority partners of other consolidated partnerships |
87 | 89 | ||||||
| Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary whose sole assets are convertible subordinated debentures due 2026 (“Convertible Preferred Securities”) |
— | 475 | ||||||
| Stockholders’ equity |
||||||||
| Cumulative redeemable preferred stock (liquidation preference $350 million and $354 million, respectively), 50 million shares authorized; 14.0 million and 14.1 million shares issued and outstanding, respectively |
337 | 339 | ||||||
| Common stock, par value $.01, 750 million shares authorized; 348.3 million shares and 320.3 million shares issued and outstanding, respectively |
3 | 3 | ||||||
| Additional paid-in capital |
2,928 | 2,617 | ||||||
| Accumulated other comprehensive income |
28 | 28 | ||||||
| Deficit |
(962 | ) | (851 | ) | ||||
| Total stockholders’ equity |
2,334 | 2,136 | ||||||
| Total liabilities and stockholders’ equity |
$ | 8,384 | $ | 8,592 | ||||
See notes to condensed consolidated statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter and Year-to-Date Ended September 10, 2004 and September 12, 2003
(unaudited, in millions, except per share amounts)
| Quarter ended |
Year-to-date ended |
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| September 10, 2004 |
September 12, 2003 |
September 10, 2004 |
September 12, 2003 |
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| REVENUES |
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| Rooms |
$ | 506 | $ | 441 | $ | 1,519 | $ | 1,371 | ||||||||
| Food and beverage |
226 | 209 | 780 | 716 | ||||||||||||
| Other |
57 | 47 | 167 | 154 | ||||||||||||
| Total hotel sales |
789 | 697 | 2,466 | 2,241 | ||||||||||||
| Rental income |
21 | 20 | 74 | 71 | ||||||||||||
| Other income |
— | 10 | — | 12 | ||||||||||||
| Total revenues |
810 | 727 | 2,540 | 2,324 | ||||||||||||
| EXPENSES |
||||||||||||||||
| Rooms |
132 | 119 | 381 | 345 | ||||||||||||
| Food and beverage |
190 | 173 | 594 | 544 | ||||||||||||
| Hotel departmental expenses |
237 | 214 | 693 | 635 | ||||||||||||
| Management fees |
30 | 27 | 101 | 94 | ||||||||||||
| Other property-level expenses |
71 | 70 | 211 | 215 | ||||||||||||
| Depreciation and amortization |
85 | 82 | 250 | 247 | ||||||||||||
| Corporate expenses |
18 | 14 | 43 | 39 | ||||||||||||
| Total expenses |
763 | 699 | 2,273 | 2,119 | ||||||||||||
| OPERATING PROFIT |
47 | 28 | 267 | 205 | ||||||||||||
| Interest income |
3 | 2 | 8 | 7 | ||||||||||||
| Interest expense, including interest expense for the Convertible Subordinated Debentures in 2004 |
(109 | ) | (108 | ) | (357 | ) | (324 | ) | ||||||||
| Net gains on property transactions |
5 | 1 | 10 | 4 | ||||||||||||
| Loss on foreign currency and derivative contracts |
(2 | ) | — | (2 | ) | (2 | ) | |||||||||
| Minority interest income |
4 | 9 | 2 | 11 | ||||||||||||
| Equity in losses of affiliates |
(4 | ) | (4 | ) | (12 | ) | (13 | ) | ||||||||
| Dividends on Convertible Preferred Securities |
— | (7 | ) | — | (22 | ) | ||||||||||
| LOSS BEFORE INCOME TAXES |
(56 | ) | (79 | ) | (84 | ) | (134 | ) | ||||||||
| Benefit for income taxes |
10 | 12 | 2 | 10 | ||||||||||||
| LOSS FROM CONTINUING OPERATIONS |
(46 | ) | (67 | ) | (82 | ) | (124 | ) | ||||||||
| Income (loss) from discontinued operations |
(1 | ) | 3 | 21 | 12 | |||||||||||
| LOSS BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE |
(47 | ) | (64 | ) | (61 | ) | (112 | ) | ||||||||
| Cumulative effect of adoption of SFAS No. 150 |
— | (24 | ) | — | (24 | ) | ||||||||||
| NET LOSS |
(47 | ) | (88 | ) | (61 | ) | (136 | ) | ||||||||
| Less: Dividends on preferred stock |
(9 | ) | (9 | ) | (28 | ) | (27 | ) | ||||||||
| Issuance costs of redeemed Class A preferred stock |
(4 | ) | — | (4 | ) | — | ||||||||||
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ | (60 | ) | $ | (97 | ) | $ | (93 | ) | $ | (163 | ) | ||||
See notes to condensed consolidated statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter and Year-to-Date Ended September 10, 2004 and September 12, 2003
(unaudited, in millions, except per share amounts)
| Quarter ended |
Year-to-date ended |
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| September 10, 2004 |
September 12, 2003 |
September 10, 2004 |
September 12, 2003 |
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| BASIC AND DILUTED LOSS PER COMMON SHARE: |
||||||||||||||||
| Continuing operations |
$ | (.17 | ) | $ | (.27 | ) | $ | (.34 | ) | $ | (.56 | ) | ||||
| Discontinued operations |
— | .01 | .06 | .04 | ||||||||||||
| Cumulative effect of a change in accounting principle |
— | (.09 | ) | — | (.09 | ) | ||||||||||
| BASIC AND DILUTED LOSS PER COMMON SHARE |
$ | (.17 | ) | $ | (.35 | ) | $ | (.28 | ) | $ | (.61 | ) | ||||
See notes to condensed consolidated statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year-to-Date Ended September 10, 2004 and September 12, 2003
(unaudited, in millions)
| September 10, 2004 |
September 12, 2003 |
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| OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (61 | ) | $ | (136 | ) | ||
| Adjustments to reconcile to cash provided by operations: |
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| Depr | ||||||||