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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) April 3, 2001
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HOST MARRIOTT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
001-14625 53-0085950
(Commission File Number) (I.R.S. Employer Identification Number)
10400 Fernwood Road, Bethesda, Maryland 20817
(Address of Principal Executive Offices) (Zip Code)
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Registrant's Telephone Number, Including Area Code (301) 380-9000
(Former Name or Former Address, if changed since last report.)
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1
Form 8-K
ITEM 5. OTHER EVENTS
Effective January 1, 2001, Host Marriott Corporation ("Host-REIT"),
through its operating partnership Host Marriott, L.P. ("Host LP"), completed a
transaction with Crestline Capital Corporation ("Crestline") for the termination
of the Crestline leases through the purchase of the entities, or "Crestline
Lessee Entities", owning the leasehold interests with respect to 116 of our
full-service hotels for $207 million in cash, including approximately $6 million
of legal fees and transfer taxes. The transaction was consummated by a wholly-
owned subsidiary of Host LP that will elect to be treated as a taxable REIT
subsidiary, or "TRS," for income tax purposes. In connection therewith, we
recorded a non-recurring, pre-tax loss of $207 million during the fourth quarter
of 2000, net of an $82 million tax benefit which we have recorded as a deferred
tax asset, because for income tax purposes, the acquisition is recorded as an
asset that will be amortized over the remaining term of the leases. In addition,
the existing working capital of the respective hotels, valued at $90 million as
of December 31, 2000, including the existing obligations under the working
capital note, was transferred from Crestline to the TRS. Crestline remains the
lessee of one of our full-service properties.
The TRS will pay rent to Host LP, and will be obligated to the managers
for the fees and costs reimbursements under the management agreements. On a
consolidated basis, our results of operations beginning in 2001 will reflect the
revenues and expenses generated by these hotels rather than rental income. As a
result, our 2001 results will not be comparable to the historical reported
amounts for 2000 and 1999. In order to provide a clearer understanding and
comparability of our results of operations we have presented unaudited pro forma
statements of operations by quarter and year-to-date for the two fiscal years
ended December 31, 2000 (see Item 7(b)), adjusted to reflect the acquisition of
the Crestline Lessee Entities as if it occurred on January 1, 1999.
The transaction is permitted as a result of the passage of the REIT
Modernization Act, enacted in December 1999, which amended the tax laws to
permit REITs, effective January 1, 2001, (i) to lease hotels to a subsidiary
that qualifies as a TRS, and (ii) to own all of the voting stock of such TRS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information. (see pg. 3)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
HOST MARRIOTT CORPORATION
By: /s/ Donald D. Olinger
---------------------------------
Donald D. Olinger
Senior Vice President and
Corporate Controller
Date: April 3, 2001
2
Item 7(b). Pro Forma Consolidated Statements of Operations of Host REIT
Because of the significant changes to our corporate structure as a result
of the transaction with Crestline for the termination of the Crestline leases
through the purchase of the entities, or "Crestline Lessee Entities", during
January 2001, management believes that a discussion of our pro forma results of
operations is meaningful and relevant to an investor's understanding of our
present and future operations. The pro forma results of operations set forth
below are based on the unaudited condensed consolidated statements of operations
for the twelve weeks ended March 24, 2000 and March 26, 1999, June 16, 2000 and
June 18, 1999, and September 8, 2000 and September 10, 1999, and the sixteen
weeks ended December 31, 2000 and 1999, and the audited consolidated statements
of operations for the years ended December 31, 2000 and 1999, and are only
adjusted to reflect the January 2001 acquisition of the Crestline Lessee
Entities for $207 million in cash as if the transaction occurred at the
beginning of 1999. The following pro forma results do not include adjustments
for any transactions other than the Crestline lease repurchase and are not
presented in accordance with Article 11 of SEC Regulation S-X.
As a result of the Crestline acquisition, effective January 1, 2001, Host LP
leases 116 of its full-service hotels to its TRS, and therefore, our
consolidated operations with respect to those hotels will represent property-
level revenues and expenses rather than rental income from third-party
lessees. In addition, the net income applicable to the TRS will be subject to
federal and state income taxes.
The non-recurring pre-tax loss of $207 million net of the minority interest
effect of $46 million related to the minority owners' share in the lease
repurchase expense and a tax benefit of $82 million that was recorded in our
historical results of operations for the fourth quarter of 2000 is excluded from
the pro forma results of operations for 2000. In addition, the pro forma
statements of operations reflecting the lease repurchase also include the
following adjustments:
. record hotel-level revenues and expenses and reduce historical rental
income with respect to the 116 properties;
. reduce historical interest income for amounts related to the working
capital note with Crestline;
. reduce historical equity in earnings of affiliates for interest earned
at our non-controlled subsidiary on the related FF&E loans with
Crestline;
. record interest expense related to the additional borrowings from the 9
1/4% Series F senior notes to fund the $207 million cash payment;
. record the minority interest effect related to the outside ownership in
the operating partnership; and
. record the tax provision attributable to the income of the TRS at an
effective rate of 39.5%.
The unaudited pro forma financial information does not purport to represent
what our results of operations or financial condition would actually have been
if the transaction had in fact occurred at the beginning of 1999, or to
project our results of operations or financial condition for any future
period. The unaudited pro forma financial information is based upon available
information and upon assumptions and estimates that we believe are reasonable
under the circumstances. The following unaudited pro forma financial
information should be read in conjunction with our audited financial
statements contained in our annual report on Form 10-K for the fiscal year ended
December 31, 2000 and our unaudited quarterly financial statements contained in
our quarterly reports on Form 10-Q for each quarter within the two fiscal years
ended December 31, 2000.
3
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Twelve Weeks Ended
March 24, 2000
------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 512 $ 512
Food and beverage........................................... - 250 250
Other....................................................... - 64 64
-------- -------- --------
Total hotel property-level revenues....................... - 826 826
Rental income(1)............................................ 173 (136) 37
Net gains on property transactions.......................... 1 - 1
Equity in earnings of affiliates and other.................. 2 (6) (4)
-------- -------- --------
Total revenues............................................ 176 684 860
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 74 - 74
Hotel property-level costs and expenses
Rooms....................................................... - 121 121
Food and beverage........................................... - 183 183
Other....................................................... - 30 30
Management fees............................................. - 51 51
Other property-level costs and expenses..................... 59 170 229
-------- -------- --------
Total operating costs and expenses........................ 133 555 688
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 43 129 172
Minority interest............................................. 11 (16) (5)
Corporate expenses............................................ (10) - (10)
Interest expense.............................................. (96) (5) (101)
Interest income............................................... 9 (1) 8
Dividends on Convertible Preferred Securities................. (7) - (7)
Other......................................................... (6) - (6)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (56) 107 51
Provision for income taxes.................................... (1) (44) (45)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (57) 63 6
Less: Dividends on preferred stock............................ (5) - (5)
Add: Gain on repurchase of Convertible Preferred Securities... 4 - 4
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (58) $ 63 $ 5
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.26) $ .28 $ .02
======== ======== ========
Twelve Weeks Ended
March 26, 1999
------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 494 $ 494
Food and beverage........................................... - 239 239
Other....................................................... - 54 54
-------- -------- --------
Total hotel property-level revenues....................... - 787 787
Rental income(1)............................................ 171 (131) 40
Net gains on property transactions.......................... 12 - 12
Equity in earnings of affiliates and other.................. 1 (4) (3)
-------- -------- --------
Total revenues............................................ 184 652 836
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 68 - 68
Hotel property-level costs and expenses
Rooms....................................................... - 113 113
Food and beverage........................................... - 174 174
Other....................................................... - 30 30
Management fees............................................. - 49 49
Other property-level costs and expenses..................... 58 162 220
-------- -------- --------
Total operating costs and expenses........................ 126 528 654
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 58 124 182
Minority interest............................................. 8 (16) (8)
Corporate expenses............................................ (7) - (7)
Interest expense.............................................. (99) (5) (104)
Interest income............................................... 8 (1) 7
Dividends on Convertible Preferred Securities................. (9) - (9)
Other......................................................... (2) - (2)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (43) 102 59
Provision for income taxes.................................... (1) (42) (43)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (44) 60 16
Less: Dividends on preferred stock............................ - - -
Add: Gain on repurchase of Convertible Preferred Securities... - - -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (44) $ 60 $ 16
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.19) $ .26 $ .07
======== ======== ========
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Twelve Weeks Ended
June 16, 2000
--------------------------------
Lease
Historical Repurchase Pro Forma
---------- -------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 605 $ 605
Food and beverage........................................... - 308 308
Other....................................................... - 73 73
-------- -------- --------
Total hotel property-level revenues....................... - 986 986
Rental income(1)............................................ 183 (150) 33
Net gains on property transactions.......................... 2 - 2
Equity in earnings of affiliates and other.................. 6 (6) -
-------- -------- --------
Total revenues............................................ 191 830 1,021
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 75 - 75
Hotel property-level costs and expenses
Rooms....................................................... - 138 138
Food and beverage........................................... - 218 218
Other....................................................... - 36 36
Management fees............................................. - 62 62
Other property-level costs and expenses..................... 63 193 256
-------- -------- --------
Total operating costs and expenses........................ 138 647 785
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 53 183 236
Minority interest............................................. 11 (24) (13)
Corporate expenses............................................ (10) - (10)
Interest expense.............................................. (97) (5) (102)
Interest income............................................... 8 (1) 7
Dividends on Convertible Preferred Securities................. (7) - (7)
Other......................................................... (6) - (6)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (48) 153 105
Provision for income taxes.................................... (2) (62) (64)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (50) 91 41
Less: Dividends on preferred stock............................ (5) - (5)
Add: Gain on repurchase of Convertible Preferred Securities... - - -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (55) $ 91 $ 36
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.25) $ .41 $ .16
======== ======== ========
Twelve Weeks Ended
June 18, 1999
--------------------------------
Lease
Historical Repurchase Pro Forma
---------- -------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 559 $ 559
Food and beverage........................................... - 277 277
Other...................................................... - 65 65
-------- -------- --------
Total hotel property-level revenues....................... - 901 901
Rental income(1)............................................ 187 (146) 41
Net gains on property transactions.......................... 4 - 4
Equity in earnings of affiliates and other.................. 4 (5) (1)
-------- -------- --------
Total revenues............................................ 195 750 945
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 67 - 67
Hotel property-level costs and expenses
Rooms....................................................... - 128 128
Food and beverage........................................... - 197 197
Other....................................................... - 33 33
Management fees............................................. - 52 52
Other property-level costs and expenses..................... 62 181 243
-------- -------- --------
Total operating costs and expenses........................ 129 591 720
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 66 159 225
Minority interest............................................. 5 (20) (15)
Corporate expenses............................................ (8) - (8)
Interest expense.............................................. (101) (5) (106)
Interest income............................................... 8 (1) 7
Dividends on Convertible Preferred Securities................. (8) - (8)
Other......................................................... (5) - (5)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (43) 133 90
Provision for income taxes.................................... (1) (55) (56)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (44) 78 34
Less: Dividends on preferred stock............................ - - -
Add: Gain on repurchase of Convertible Preferred Securities... - - -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (44) $ 78 $ 34
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.19) $ .34 $ .15
======== ======== ========
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Twelve Weeks Ended
September 8, 2000
------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 554 $ 554
Food and beverage........................................... - 239 239
Other....................................................... - 61 61
-------- -------- --------
Total hotel property-level revenues....................... - 854 854
Rental income(1)............................................ 224 (194) 30
Net gains on property transactions.......................... 1 - 1
Equity in earnings of affiliates and other.................. 5 (6) (1)
-------- -------- --------
Total revenues............................................ 230 654 884
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 75 - 75
Hotel property-level costs and expenses
Rooms....................................................... - 137 137
Food and beverage........................................... - 193 193
Other....................................................... - 31 31
Management fees............................................. - 47 47
Other property-level costs and expenses..................... 66 191 257
-------- -------- --------
Total operating costs and expenses........................ 141 599 740
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 89 55 144
Minority interest............................................. 4 (7) (3)
Corporate expenses............................................ (7) - (7)
Interest expense.............................................. (100) (5) (105)
Interest income............................................... 9 (1) 8
Dividends on Convertible Preferred Securities................. (8) - (8)
Other......................................................... - - -
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (13) 42 29
Provision for income taxes.................................... (4) (19) (23)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (17) 23 6
Less: Dividends on preferred stock............................ (5) - (5)
Add: Gain on repurchase of Convertible Preferred Securities... - - -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (22) $ 23 $ 1
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.10) $ .10 $ .00
======== ======== ========
Twelve Weeks Ended
September 10, 1999
------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 502 $ 502
Food and beverage........................................... - 223 223
Other....................................................... - 58 58
-------- -------- --------
Total hotel property-level revenues....................... - 783 783
Rental income(1)............................................ 188 (162) 26
Net gains on property transactions.......................... - - -
Equity in earnings of affiliates and other.................. 5 (6) (1)
-------- -------- --------
Total revenues............................................ 193 615 808
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 68 - 68
Hotel property-level costs and expenses
Rooms....................................................... - 130 130
Food and beverage........................................... - 178 178
Other....................................................... - 26 26
Management fees............................................. - 42 42
Other property-level costs and expenses..................... 62 178 240
-------- -------- --------
Total operating costs and expenses........................ 130 554 684
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 63 61 124
Minority interest............................................. 8 (7) 1
Corporate expenses............................................ (5) - (5)
Interest expense.............................................. (98) (5) (103)
Interest income............................................... 10 (1) 9
Dividends on Convertible Preferred Securities................. (9) - (9)
Other......................................................... - - -
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. (31) 48 17
Provision for income taxes.................................... (1) (21) (22)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... (32) 27 (5)
Less: Dividends on preferred stock............................ (1) - (1)
Add: Gain on repurchase of Convertible Preferred Securities... - - -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ (33) $ 27 $ (6)
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ (.14) $ .11 $(.03)
======== ======== ========
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Sixteen Weeks Ended
December 31, 2000
-------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 770 $ 770
Food and beverage........................................... - 420 420
Other....................................................... - 90 90
-------- -------- --------
Total hotel property-level revenues....................... - 1,280 1,280
Rental income(1)............................................ 810 (732) 78
Net gains on property transactions.......................... 2 - 2
Equity in earnings of affiliates and other.................. 24 (9) 15
-------- -------- --------
Total revenues............................................ 836 539 1,375
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 107 - 107
Hotel property-level costs and expenses
Rooms....................................................... - 182 182
Food and beverage........................................... - 300 300
Other....................................................... - 43 43
Management fees............................................. - 76 76
Other property-level costs and expenses..................... 84 259 343
-------- -------- --------
Total operating costs and expenses........................ 191 860 1,051
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 645 (321) 324
Minority interest............................................. (98) (3) (101)
Corporate expenses............................................ (15) - (15)
Lease repurchase expense...................................... (207) 207 -
Interest expense.............................................. (140) (1) (141)
Interest income............................................... 14 (1) 13
Dividends on Convertible Preferred Securities................. (10) - (10)
Other......................................................... (11) - (11)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................. 178 (119) 59
Benefit for income taxes...................................... 105 28 133
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... 283 (91) 192
Less: Dividends on preferred stock............................ (5) - (5)
Add: Gain on repurchase of Convertible Preferred Securities... 1 - 1
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ 279 $ (91) $ 188
======== ======== ========
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ 1.26 $ (.41) $ .85
======== ======== ========
Sixteen Weeks Ended
December 31, 1999
-------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ----------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 712 $ 712
Food and beverage........................................... - 390 390
Other....................................................... - 86 86
-------- -------- -----
Total hotel property-level revenues....................... - 1,188 1,188
Rental income(1)............................................ 749 (668) 81
Net gains on property transactions.......................... 12 - 12
Equity in earnings of affiliates and other.................. 4 (8) (4)
-------- -------- ----
Total revenues............................................ 765 512 1,277
-------- -------- -----
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 90 - 90
Hotel property-level costs and expenses
Rooms....................................................... - 171 171
Food and beverage........................................... - 283 283
Other....................................................... - 40 40
Management fees............................................. - 66 66
Other property-level costs and expenses..................... 82 245 327
-------- -------- -----
Total operating costs and expenses........................ 172 805 977
-------- -------- -----
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 593 (293) 300
Minority interest............................................. (103) 40 (63)
Corporate expenses............................................ (14) - (14)
Loss on litigation settlement................................. (40) - (40)
Interest expense.............................................. (132) (5) (137)
Interest income............................................... 13 (1) 12
Dividends on Convertible Preferred Securities................. (11) - (11)
Other......................................................... (9) - (9)
-------- -------- -----
INCOME (LOSS) BEFORE INCOME TAXES............................. 297 (259) 38
Benefit for income taxes...................................... 19 101 120
-------- -------- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS...................... 316 (158) 158
Less: Dividends on preferred stock............................ (5) - (5)
Add: Gain on repurchase of Convertible Preferred Securities... 11 - 11
-------- -------- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ 322 $ (158) $164
======== ======== =====
Basic earnings (loss) per share before extraordinary items
available to common shareholders............................. $ 1.43 $ (.70) $.73
======== ======== =====
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Fiscal Year Ended
December 31, 2000
-------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 2,441 $ 2,441
Food and beverage........................................... - 1,217 1,217
Other....................................................... - 288 288
-------- -------- --------
Total hotel property-level revenues....................... - 3,946 3,946
Rental income(1)............................................ 1,390 (1,212) 178
Net gains on property transactions.......................... 6 - 6
Equity in earnings of affiliates and other.................. 37 (27) 10
-------- -------- --------
Total revenues............................................ 1,433 2,707 4,140
-------- -------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 331 - 331
Hotel property-level costs and expenses
Rooms....................................................... - 578 578
Food and beverage........................................... - 894 894
Other....................................................... - 140 140
Management fees............................................. - 236 236
Other property-level costs and expenses..................... 272 813 1,085
-------- -------- --------
Total operating costs and expenses........................ 603 2,661 3,264
-------- -------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 830 46 876
Minority interest............................................. (72) (50) (122)
Corporate expenses............................................ (42) - (42)
Lease repurchase expense...................................... (207) 207 -
Interest expense.............................................. (433) (16) (449)
Interest income............................................... 40 (4) 36
Dividends on Convertible Preferred Securities................. (32) - (32)
Other......................................................... (23) - (23)
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................... 61 183 244
Benefit (provision) for income taxes.......................... 98 (97) 1
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS............................. 159 86 245
Less: Dividends on preferred stock............................ (20) - (20)
Add: Gain on repurchase of Convertible Preferred Securities... 5 - 5
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ 144 $ 86 $ 230
======== ======== ========
Basic earnings per share before extraordinary items
available to common shareholders............................. $ .65 $ .39 $ 1.04
======== ======== ========
Fiscal Year Ended
December 31, 1999
-------------------------------------
Lease
Historical Repurchase Pro Forma
---------- ---------- ---------
(in millions, except per common share amounts)
REVENUE
Hotel property-level revenues
Rooms....................................................... $ - $ 2,267 $ 2,267
Food and beverage........................................... - 1,129 1,129
Other....................................................... - 263 263
-------- -------- -----
Total hotel property-level revenues....................... - 3,659 3,659
Rental income(1)............................................ 1,295 (1,107) 188
Net gains on property transactions.......................... 28 - 28
Equity in earnings of affiliates and other.................. 14 (23) (9)
-------- -------- ----
Total revenues............................................ 1,337 2,529 3,866
-------- -------- -----
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................. 293 - 293
Hotel property-level costs and expenses
Rooms....................................................... - 542 542
Food and beverage........................................... - 832 832
Other....................................................... - 129 129
Management fees............................................. - 209 209
Other property-level costs and expenses..................... 264 766 1,030
-------- -------- -----
Total operating costs and expenses........................ 557 2,478 3,035
-------- -------- -----
OPERATING PROFIT BEFORE MINORITY INTEREST, CORPORATE EXPENSES,
INTEREST, AND OTHER.......................................... 780 51 831
Minority interest............................................. (82) (3) (85)
Corporate expenses............................................ (34) - (34)
Loss on litigation settlement................................. (40) - (40)
Interest expense.............................................. (430) (20) (450)
Interest income............................................... 39 (4) 35
Dividends on Convertible Preferred Securities................. (37) - (37)
Other......................................................... (16) - (16)
-------- -------- -----
INCOME BEFORE INCOME TAXES.................................... 180 24 204
Benefit (provision) for income taxes.......................... 16 (17) (1)
-------- -------- -----
INCOME BEFORE EXTRAORDINARY ITEMS............................. 196 7 203
Less: Dividends on preferred stock............................ (6) - (6)
Add: Gain on repurchase of Convertible Preferred Securities... 11 - 11
-------- -------- -----
INCOME BEFORE EXTRAORDINARY ITEMS AVAILABLE TO COMMON
SHAREHOLDERS................................................. $ 201 $ 7 $ 208
======== ======== =====
Basic earnings per share before extraordinary items
available to common shareholders............................. $ .89 $ .03 $ .92
======== ======== =====
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(1) In December 1999, the Company retroactively changed its method of
accounting for contingent rental revenues to conform to the Securities and
Exchange Commission's Staff Accounting Bulletin (SAB) No. 101. As a result,
contingent rental revenue is deferred on the balance sheet until certain
revenue thresholds are realized. SAB No. 101 has no impact on full-year
2000 and 1999 revenues, net income, or earnings per share because all
rental revenues considered contingent under SAB No. 101 were earned as of
December 31, 2000 and 1999. The change in accounting principle has no
effect prior to 1999 because percentage rent relates to rental income on
our leases, which began in 1999.