HMT Host Hotels and Resorts

/FIRST AND FINAL ADD -- DCW001 -- Host Marriott Corporation Earnings/ HOST MARRIOTT CORPORATION Consolidated Balance Sheets (a) (unaudited, in millions, except share amounts) June 17, December 31, 2005 2004 ASSETS Property and equipment, net $7,229 $7,274 Assets held for sale - 113 Due from managers 110 75 Investments in affiliates 42 69 Deferred financing costs, net 72 70 Furniture, fixtures and equipment replacement fund 151 151 Other 130 168 Restricted cash 167 154 Cash and cash equivalents 404 347 Total assets $8,305 $8,421 LIABILITIES AND STOCKHOLDERS' EQUITY Debt Senior notes, including $492 million and $491 million, net of discount, of Exchangeable Senior Debentures, respectively $3,059 $2,890 Mortgage debt 1,871 2,043 Convertible Subordinated Debentures 492 492 Other 97 98 Total debt 5,519 5,523 Accounts payable and accrued expenses 145 113 Liabilities associated with assets held for sale - 26 Other 173 156 Total liabilities 5,837 5,818 Interest of minority partners of Host Marriott L.P. 118 122 Interest of minority partners of other consolidated partnerships 29 86 Stockholders' equity Cumulative redeemable preferred stock (liquidation preference $250 million), 50 million shares authorized; 10.0 million shares and 14.0 million shares issued and outstanding, respectively 241 337 Common stock, par value $.01, 750 million shares authorized; 353.0 million shares and 350.3 million shares issued and outstanding, respectively 3 3 Additional paid-in capital 2,961 2,953 Accumulated other comprehensive income 13 13 Deficit (897) (911) Total stockholders' equity 2,321 2,395 Total liabilities and stockholders' equity $8,305 $8,421 (a) Our consolidated balance sheet as of June 17, 2005 has been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K. HOST MARRIOTT CORPORATION Consolidated Statements of Operations (a) (unaudited, in millions, except per share amounts) Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Revenues Rooms $597 $526 $1,083 $978 Food and beverage 306 290 557 536 Other 65 58 117 108 Total hotel sales 968 874 1,757 1,622 Rental income (b) 25 24 54 53 Total revenues 993 898 1,811 1,675 Expenses Rooms 139 127 258 240 Food and beverage 218 208 404 390 Hotel departmental expenses 251 232 468 439 Management fees 44 38 78 69 Other property-level expenses (b) 71 70 136 137 Depreciation and amortization 86 80 170 160 Corporate and other expenses 15 12 29 25 Total operating costs and expenses 824 767 1,543 1,460 Operating profit 169 131 268 215 Interest income 5 2 12 5 Interest expense (114) (130) (223) (248) Net gains on property transactions 74 4 77 5 Gain (loss) on foreign currency and derivative contracts - - 2 - Minority interest income (expense) (8) 1 (12) (2) Equity in earnings (losses) of affiliates 3 (3) (1) (8) Income (loss) before income taxes 129 5 123 (33) Provision for income taxes (38) (11) (38) (8) Income (loss) from continuing operations 91 (6) 85 (41) Income from discontinued operations (c) - 23 12 27 Net income (loss) 91 17 97 (14) Less: Dividends on preferred stock (7) (10) (15) (19) Issuance costs of redeemed Class B preferred stock (d) (4) - (4) - Net income (loss) available to common stockholders $80 $7 $78 $(33) Basic earnings (loss) per common share: Continuing operations $0.23 $(0.05) $0.19 $(0.18) Discontinued operations - 0.07 0.03 0.08 Basic earnings (loss) per common share $0.23 $0.02 $0.22 $(0.10) Diluted earnings (loss) per common share: Continuing operations $0.22 $(0.05) $0.19 $(0.18) Discontinued operations - 0.07 0.03 0.08 Diluted earnings (loss) per common share $0.22 $0.02 $0.22 $(0.10) (a) Our consolidated statements of operations presented above have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K. (b) Rental income and expense are as follows: Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Rental income Full-service $7 $6 $18 $18 Limited service and office buildings 18 18 36 35 $25 $24 $54 $53 Rental and other expenses (included in other property-level expenses) Full-service $1 $1 $3 $3 Limited service and office buildings 18 18 36 36 $19 $19 $39 $39 (c) Reflects the results of operations and gain (loss) on sale, net of the related income tax, for four properties sold in the first quarter of 2005 and nine properties sold in 2004. (d) Emerging Issues Task Force Topic D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," requires that the excess of the fair value of the consideration transferred to the holders of preferred stock redeemed over the carrying amount of the preferred stock should be subtracted from net earnings to determine net earnings available to common stockholders in the calculation of earnings per share. On May 20, 2005, the fair value paid to holders of our Class B preferred stock, or $100 million (which was equal to the redemption price and par value) exceeded the carrying value of the preferred stock ($96 million, which was net of $4 million of original issuance costs). Accordingly, the $4 million of original issuance costs has been included in the determination of net income available to common stockholders for the purpose of calculating our second quarter and full-year 2005 basic and diluted earnings per share. HOST MARRIOTT CORPORATION Earnings (Loss) per Common Share (unaudited, in millions, except per share amounts) Quarter ended June 17, 2005 Quarter ended June 18, 2004 Income Per Income Per (loss) Shares Share (loss) Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net income $91 352.7 $0.26 $17 323.1 $0.05 Dividends on preferred stock (7) - (0.02) (10) - (0.03) Issuance costs of redeemed Class B preferred stock (a) (4) - (0.01) - - - Basic income available to common stockholders (b) 80 352.7 0.23 7 323.1 0.02 Assuming distribution of common shares granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.2 - - - - Assuming conversion of minority OP units issuable - 1.8 - - - - Assuming conversion of Exchangeable Senior Debentures 4 27.5 (0.01) - - - Diluted earnings available to common stockholders (b)(c) $84 384.2 $0.22 $7 323.1 $0.02 Year-to-date ended June 17, 2005 Year-to-date ended June 18, 2004 Income Per Income Per (loss) Shares Share (loss) Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Net income (loss) $97 352.3 $0.28 $(14) 322.0 $(0.04) Dividends on preferred stock (15) - (0.05) (19) - (0.06) Issuance costs of redeemed Class B preferred stock (a) (4) - (0.01) - - - Basic income (loss) available to common stockholders (b) 78 352.3 0.22 (33) 322.0 (0.10) Assuming distribution of common shares granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.2 - - - - Diluted earnings (loss) available to common stockholders (b)(c) $78 354.5 $0.22 $(33) 322.0 $(0.10) (a) For discussion on accounting treatment, see footnote (d) to the consolidated statements of operations. (b) Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus other potentially dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interests to common OP Units, the Exchangeable Senior Debentures and the Convertible Subordinated Debentures. No effect is shown for any securities that are anti-dilutive. (c) Our results for the periods presented were significantly affected by certain transactions, which are detailed in the table entitled, "Schedule of Significant Transactions Affecting Earnings per Share and Funds From Operations per Diluted Share." HOST MARRIOTT CORPORATION Comparable Hotel Operating Data (unaudited) Comparable Hotels by Region (a) As of June 17, 2005 No. of No. of Properties Rooms Pacific 20 11,035 Florida 11 7,027 Mid-Atlantic 10 6,720 Atlanta 13 5,940 North Central 13 4,923 South Central 7 4,816 DC Metro 11 4,661 New England 6 3,032 Mountain 5 1,940 International 5 1,953 All Regions 101 52,047 Quarter ended June 17, 2005 Average Average Daily Occupancy Rate Percentages RevPAR Pacific $177.08 77.7% $137.65 Florida 189.76 74.7 141.69 Mid-Atlantic 205.06 83.9 171.98 Atlanta 149.35 68.4 102.13 North Central 133.72 69.2 92.51 South Central 147.60 78.6 115.99 DC Metro 184.57 85.3 157.53 New England 161.94 72.3 117.09 Mountain 119.72 61.7 73.82 International 133.48 73.1 97.63 All Regions 169.86 75.9 128.86 Quarter ended June 18, 2004 Average Average Percent Daily Occupancy Change in Rate Percentages RevPAR RevPAR Pacific $163.29 75.6% $123.39 11.6% Florida 176.88 74.7 132.17 7.2 Mid-Atlantic 184.93 80.6 149.06 15.4 Atlanta 142.84 69.3 98.99 3.2 North Central 122.09 70.3 85.87 7.7 South Central 136.88 79.4 108.64 6.8 DC Metro 166.61 81.0 135.01 16.7 New England 150.52 78.7 118.45 (1.1) Mountain 110.52 58.0 64.08 15.2 International 122.49 74.4 91.18 7.1 All Regions 156.13 75.2 117.35 9.8 As of June 17, 2005 No. of No. of Properties Rooms Pacific 20 11,035 Florida 11 7,027 Mid-Atlantic 10 6,720 Atlanta 13 5,940 North Central 13 4,923 South Central 7 4,816 DC Metro 11 4,661 New England 6 3,032 Mountain 5 1,940 International 5 1,953 All Regions 101 52,047 Year-to-date ended June 17, 2005 Average Average Daily Occupancy Rate Percentages RevPAR Pacific $173.60 76.0% $131.98 Florida 195.76 77.9 152.56 Mid-Atlantic 195.64 79.0 154.47 Atlanta 147.46 68.6 101.18 North Central 127.54 63.3 80.80 South Central 146.03 77.5 113.13 DC Metro 182.89 78.9 144.27 New England 151.22 66.0 99.87 Mountain 124.94 60.4 75.50 International 129.74 71.1 92.25 All Regions 167.32 73.7 123.30 Year-to-date ended June 18, 2004 Average Average Percent Daily Occupancy Change in Rate Percentages RevPAR RevPAR Pacific $163.34 74.1% $121.12 9.0% Florida 181.74 76.7 139.41 9.4 Mid-Atlantic 179.66 75.8 136.09 13.5 Atlanta 142.56 69.5 99.06 2.1 North Central 117.53 65.8 77.33 4.5 South Central 137.83 78.8 108.67 4.1 DC Metro 164.62 75.8 124.76 15.6 New England 141.78 69.7 98.76 1.1 Mountain 112.28 59.1 66.35 13.8 International 119.50 72.4 86.52 6.6 All Regions 155.12 73.1 113.33 8.8 HOST MARRIOTT CORPORATION Comparable Hotel Operating Data (unaudited) Comparable Hotels by Property Type (a) As of June 17, 2005 No. of No. of Properties Rooms Urban 41 25,839 Suburban 34 12,492 Airport 16 16 7,328 Resort/Convention 10 6,388 All Types 101 52,047 Quarter ended June 17, 2005 Average Average Daily Occupancy Rate Percentages RevPAR Urban $182.09 79.0% $143.87 Suburban 134.23 69.7 93.62 Airport 16 122.47 76.4 93.58 Resort/Convention 236.25 74.5 176.04 All Types 169.86 75.9 128.86 Quarter ended June 18, 2004 Average Average Percent Daily Occupancy Change in Rate Percentages RevPAR RevPAR Urban $167.08 77.7% $129.84 10.8% Suburban 123.13 68.7 84.55 10.7 Airport 16 111.92 77.3 86.46 8.2 Resort/Convention 219.77 75.2 165.38 6.4 All Types 156.13 75.2 117.35 9.8 As of June 17, 2005 No. of No. of Properties Rooms Urban 41 25,839 Suburban 34 12,492 Airport 16 7,328 Resort/Convention 10 6,388 All Types 101 52,047 Year-to-date ended June 17, 2005 Average Average Daily Occupancy Rate Percentages RevPAR Urban $177.24 76.2% $135.10 Suburban 132.61 67.2 89.09 Airport 123.25 74.7 92.12 Resort/Convention 238.71 75.0 179.00 All Types 167.32 73.7 123.3 Year-to-date ended June 18, 2004 Average Average Percent Daily Occupancy Change in Rate Percentages RevPAR RevPAR Urban $164.40 75.2% $123.63 9.3% Suburban 122.85 66.6 81.83 8.9 Airport 114.47 75.2 86.04 7.1 Resort/Convention 222.02 74.8 166.05 7.8 All Types 155.12 73.1 113.33 8.8 (a) See the introductory notes to financial information for a discussion of reporting periods and comparable hotel results. HOST MARRIOTT CORPORATION Comparable Hotel Operating Data Schedule of Comparable Hotel Results (a) (unaudited, in millions, except hotel statistics) Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Number of hotels 101 101 101 101 Number of rooms 52,047 52,161 52,047 52,161 Percent change in Comparable Hotel RevPAR 9.8% - 8.8% - Operating profit margin under GAAP (b) 17.0% 14.6% 14.8% 12.8% Comparable hotel adjusted operating profit margin (c) 27.3% 25.3% 25.8% 24.2% Comparable hotel sales Room $ 575 $ 524 $ 1,054 $ 973 Food and beverage 304 290 556 534 Other 64 60 116 110 Comparable hotel sales (d) 943 874 1,726 1,617 Comparable hotel expenses Room 134 126 250 237 Food and beverage 216 208 401 387 Other 38 36 70 67 Management fees, ground rent and other costs 298 283 560 534 Comparable hotel expenses (e) 686 653 1,281 1,225 Comparable hotel adjusted operating profit 257 221 445 392 Non-comparable hotel results, net (f) 13 2 22 9 Office buildings and limited service properties, net (g) - - - (1) Depreciation and amortization (86) (80) (170) (160) Corporate and other expenses (15) (12) (29) (25) Operating profit $ 169 $ 131 $ 268 $ 215 (a) See the introductory notes to the financial information for discussion of non-GAAP measures, reporting periods and comparable hotel results. (b) Operating profit margin under GAAP is calculated as the operating profit divided by the total revenues per the consolidated statements of operations. (c) Comparable hotel adjusted operating profit margin is calculated as the comparable hotel adjusted operating profit divided by the comparable hotel sales per the table above. (d) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel sales is as follows: Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Revenues per the consolidated statements of operations $ 993 $ 898 $1,811 $1,675 Non-comparable hotel sales (45) (18) (74) (35) Hotel sales for the property for which we record rental income, net 13 12 25 23 Rental income for office buildings and limited service hotels (18) (18) (36) (35) Adjustment for hotel sales for comparable hotels to reflect Marriott's fiscal year for Marriott- managed hotels - - - (11) Comparable hotel sales $ 943 $ 874 $1,726 $1,617 (e) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions): Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Operating costs and expenses per the consolidated statements of operations $ 824 $ 767 $1,543 $1,460 Non-comparable hotel expenses (30) (14) (52) (28) Hotel expenses for the property for which we record rental income 11 10 25 24 Rent expense for office buildings and limited service hotels (18) (18) (36) (36) Adjustment for hotel expenses for comparable hotels to reflect Marriott's fiscal year for Marriott- managed hotels - - - (10) Depreciation and amortization (86) (80) (170) (160) Corporate and other expenses (15) (12) (29) (25) Comparable hotel expenses $ 686 $ 653 $1,281 $1,225 (f) Non-comparable hotel results, net, includes the following items: (i) the results of operations of our non-comparable hotels whose operations are included in our consolidated statement of operations as continuing operations and (ii) the difference between the number of days of operations reflected in the comparable hotel results and the number of days of operations reflected in the consolidated statements of operations. For further detail, see "Introductory Notes to Financial Information." (g) Represents rental income less rental expense for limited service properties and office buildings. For further detail, see footnote (b) to the consolidated statements of operations. HOST MARRIOTT CORPORATION Other Financial and Operating Data (unaudited, in millions, except per share amounts) June 17, December 31, 2005 2004 Equity Common shares outstanding 353.0 350.3 Common shares and minority held common OP Units outstanding 373.2 371.3 Preferred OP Units outstanding 0.02 0.02 Class B Preferred shares outstanding (a) - 4.0 Class C Preferred shares outstanding 6.0 6.0 Class D Preferred shares outstanding (a) - 0.03 Class E Preferred shares outstanding 4.0 4.0 Security pricing (per share price) Common (b) $17.57 $17.30 Class B Preferred (a) (b) $- $25.80 Class C Preferred (b) $26.80 $26.37 Class E Preferred (b) $27.32 $27.45 Convertible Preferred Securities (c) $57.50 $57.25 Exchangeable Senior Debentures (d) $1,108.70 $1,156.00 Dividends per share for calendar year Common $0.18 $0.05 Class A Preferred (e) $- $1.38 Class B Preferred $0.87 $2.50 Class C Preferred $1.25 $2.50 Class D Preferred $0.87 $2.50 Class E Preferred $1.11 $1.37 June 17, December 31, 2005 2004 Debt Series B senior notes, with a rate of 7 7/8% due August 2008 $135 $304 Series E senior notes, with a rate of 8 3/8% due February 2006 - 300 Series G senior notes, with a rate of 9 1/4% due October 2007 (f) 238 243 Series I senior notes, with a rate of 9 1/2% due January 2007 (g) 460 468 Series K senior notes, with a rate of 7 1/8% due November 2013 725 725 Series M senior notes, with a rate of 7% due August 2012 (h) 346 346 Series N senior notes, with a rate of 6 3/8% due March 2015 (i) 650 - Exchangeable Senior Debentures, with a rate of 3.25% due April 2024 492 491 Senior notes, with an average rate of 9.7%, maturing through 2012 13 13 Total senior notes 3,059 2,890 Mortgage debt (non-recourse) secured by $3.0 billion of real estate assets, with an average interest rate of 7.7% at June 17, 2005 and December 31, 2004, respectively 1,871 2,043 Credit facility (j) - - Convertible Subordinated Debentures, with a rate of 6 3/4% due December 20, 2026 492 492 Other 97 98 Total debt $5,519 $5,523 Percentage of fixed rate debt 85% 85% Weighted average interest rate 7.0% 7.1% Weighted average debt maturity 7.1 years 6.6 years Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Hotel Operating Statistics for All Full-Service Properties (k) Average daily rate $172.03 $153.04 $169.17 $151.81 Average occupancy 75.5% 75.0% 73.3% 73.0% RevPAR $129.95 $114.85 $123.96 $110.76 (a) On May 20, 2005, we redeemed, at par, all four million shares of our 10% Class B Cumulative Redeemable Preferred stock for approximately $101 million, including accrued dividends and all 33,182 shares of our 10% Class D Cumulative Redeemable Preferred stock. (b) Share prices are the closing price as reported by the New York Stock Exchange. (c) Market price as quoted by Bloomberg L.P. Amount reflects the price of a single $50 security, which is convertible into Host Marriott common stock upon the occurrence of certain events. For further detail, see our most recent Annual Report on Form 10-K. (d) Market price as quoted by Bloomberg L.P. Amount reflects the price of a single $1,000 debenture, which is exchangeable for common stock upon the occurrence of certain events. (e) On August 3, 2004, we redeemed all 4.16 million shares of the outstanding Class A preferred stock at a price of $25.00 per share plus dividends accrued to that date. (f) Includes the fair value of interest rate swap agreements of $(4) million and $1 million as of June 17, 2005 and December 31, 2004, respectively. (g) Includes the fair value of interest rate swap agreements of $10 million and $18 million as of June 17, 2005 and December 31, 2004, respectively. (h) On March 3, 2005, we exchanged all of our 7% Series L senior notes due 2012 for our 7% Series M senior notes due 2012. The terms of the Series L senior notes and the Series M senior notes are substantially identical in all material respects, except that the Series M senior notes are registered under the Securities Act of 1933 and are, therefore, freely transferable by the holders. (i) On July 19, 2005, we exchanged all of our 6 3/8% Series N senior notes for our 6 3/8% Series O senior notes. The terms of the Series O senior notes and the Series N senior notes are substantially identical in all material respects, except that the Series O senior notes are registered under the Securities Act of 1933 and are, therefore, freely transferable by the holders. (j) Our credit facility has an available capacity of $575 million. Currently, there are no amounts outstanding. (k) The operating statistics reflect all consolidated properties as of June 17, 2005 and June 18, 2004, respectively. The operating statistics include the results of operations for four hotels sold in the first quarter of 2005 and nine hotels sold in 2004 prior to their disposition. HOST MARRIOTT CORPORATION Reconciliation of Net Income (Loss) Available to Common Stockholders to Funds From Operations per Diluted Share (unaudited, in millions, except per share amounts) Quarter ended Quarter ended June 17, 2005 June 18, 2004 Per Per Income Share Income Share (loss) Shares Amount (loss) Shares Amount Net income available to common stockholders $80 352.7 $0.23 $7 323.1 $0.02 Adjustments: Gains on dispositions, net of taxes (41) - (0.12) (19) - (0.06) Amortization of deferred gains, net of taxes (2) - - (3) - (0.01) Depreciation and amortization 86 - 0.24 83 - 0.26 Partnership adjustments 3 - 0.01 6 - 0.02 FFO of minority partners of Host LP(a) (7) - (0.02) (5) - (0.02) Adjustments for dilutive securities: Assuming distribution of common shares granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.2 - - 3.2 - Assuming conversion of Exchangeable Senior Debentures(b) 4 27.5 (0.02) 4 27.3 - Assuming conversion of Convertible Subordinated Debentures 7 30.9 (0.01) - - - FFO per diluted share(c)(d) $130 413.3 $0.31 $73 353.6 $0.21 Year-to-date ended Year-to-date ended June 17, 2005 June 18, 2004 Per Per Income Share Income Share (loss) Shares Amount (loss) Shares Amount Net income (loss) available to common stockholders $78 352.3 $0.22 $(33) 322.0 $(0.10) Adjustments: Gains on dispositions, net of taxes (54) - (0.15) (20) - (0.06) Amortization of deferred gains, net of taxes (4) - (0.01) (4) - (0.02) Depreciation and amortization 169 - 0.48 166 - 0.52 Partnership adjustments 8 - 0.02 11 - 0.03 FFO of minority partners of Host LP(a) (11) - (0.03) (8) - (0.02) Adjustments for dilutive securities: Assuming distribution of common shares granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.2 - - 3.3 (0.01) Assuming conversion of Exchangeable Senior Debentures(b) 9 27.5 (0.02) 5 15.1 - Assuming conversion of Convertible Subordinated Debentures 15 30.9 - - - - FFO per diluted share(c)(d) $210 412.9 $0.51 $117 340.4 $0.34 (a) Represents FFO attributable to the minority interests in Host LP. (b) During November 2004, the FASB ratified the Emerging Issues Task Force, or EITF, on EITF Issue No. 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share." EITF 04-8 requires contingently convertible debt instruments to be included in diluted earnings per share, if dilutive, regardless of whether a market price contingency for the conversion of the debt into common shares or any other contingent factor has been met. Prior to this consensus, such instruments were excluded from the calculation until one or more of the contingencies were met. EITF 04-8 is effective for reporting periods ending after December 15, 2004 and requires restatement of prior period earnings per share amounts. As a result, prior year FFO per diluted share has been restated for second quarter and year-to- date 2004 to include the dilutive effect of the conversion of the Exchangeable Senior Debentures. (c) FFO per diluted share in accordance with NAREIT is adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP units held by minority partners, convertible debt securities and other minority interests that have the option to convert their limited partnership interest to common OP units. No effect is shown for securities if they are anti-dilutive. (d) FFO per diluted share for the periods presented was affected by certain transactions, which are detailed in the table entitled, "Schedule of Significant Transactions Affecting Earnings per Share, Funds from Operations per Diluted Share and Adjusted EBITDA." HOST MARRIOTT CORPORATION Schedule of Significant Transactions Affecting Earnings per Share and Funds From Operations per Diluted Share (unaudited, in millions, except per share amounts) Quarter ended Quarter ended June 17, 2005 June 18, 2004 Net Income Net Income (Loss) FFO (Loss) FFO Senior notes redemptions and debt prepayments (a) $ (20) $ (20) $ (32) $ (32) Class B preferred stock redemption (b) (4) (4) - - Gain on CBM Joint Venture LLC sale (c) 42 - - - Gain on hotel dispositions, net of taxes - - 19 - Minority interest income (expense) (d) (1) 1 1 2 Total $ 17 $ (23) $(12) $(30) Per diluted share (e) $0.04 $(0.06) $(0.04) $(0.08) Year-to-date ended Year-to-date ended June 17, 2005 June 18, 2004 Net Income Net Income (Loss) FFO (Loss) FFO Senior notes redemptions and debt prepayments (a) $ (34) $ (34) $ (45) $ (45) Class B preferred stock redemption (b) (4) (4) - - Gain on CBM Joint Venture LLC sale (c) 42 - - - Gain on hotel dispositions, net of taxes 12 - 20 - Minority interest income (expense) (d) (1) 2 1 3 Total $ 15 $ (36) $ (24) $ (42) Per diluted share (e) $0.04 $(0.09) $(0.08) $(0.13) (a) Represents call premiums and the acceleration of original issue discounts and deferred financing costs, as well as incremental interest during the call or prepayment notice period, included in interest expense in the consolidated statements of operations. We recognized these costs in conjunction with the prepayment or refinancing of senior notes and mortgages during all periods presented. (b) Represents the original issuance costs for the Class B preferred stock, which was required to be charged against net income (loss) available to common stockholders in the calculation of earnings (loss) per share in conjunction with the redemption of the Class B preferred stock in the second quarter of 2005. For further detail, see footnote (d) to the consolidated statements of operations. (c) Represents the gain, net of tax, on the sale of 85% of our interest in CBM Joint Venture LLC. (d) Represents the portion of the significant transactions attributable to minority partners in Host LP. (e) Prior year per share amounts were adjusted due to the dilutive effect of the retroactive application of EITF 04-8. See note (b) in the "Reconciliation of Net Income (Loss) Available to Common Stockholders to Funds From Operations per Diluted Share" for further discussion. HOST MARRIOTT CORPORATION Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (unaudited, in millions) Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Net income (loss) $91 $17 $97 $(14) Interest expense 114 130 223 248 Depreciation and amortization 86 80 170 160 Income taxes (a) 38 11 38 8 Discontinued operations (b) - 3 - 6 EBITDA (c) 329 241 528 408 Gains on dispositions (a) (70) (19) (83) (20) Amortization of deferred gains (3) (4) (6) (5) Consolidated partnership adjustments: Minority interest (income) expense 8 (1) 12 2 Distributions to minority partners (3) (3) (3) (4) Equity investment adjustments: Equity in (earnings) losses of affiliates (3) 3 1 8 Distributions received from equity investments - 1 1 1 Adjusted EBITDA of Host LP (c) 258 218 450 390 Distributions to minority interest partners of Host LP (2) - (2) - Adjusted EBITDA of Host Marriott (c) $256 $218 $448 $390 (a) Income taxes and gains on dispositions include $28 million and $70 million for both the second quarter and year-to-date 2005, respectively, due to the sale of 85% of our interest in CBM Joint Venture LLC. (b) Reflects the interest expense, depreciation and amortization and income taxes included in discontinued operations. (c) See the introductory notes to the financial information for discussion of non-GAAP measures. HOST MARRIOTT CORPORATION Reconciliation of Net Income (Loss) Available to Common Stockholders to Funds From Operations per Diluted Share for Third Quarter 2005 Forecasts (a) (unaudited, in millions, except per share amounts) Low-end of Range Third Quarter 2005 Forecast Income Per Share (Loss) Shares Amount Forecast net income (loss) available to common stockholders $(20) 353.3 $(0.05) Adjustments: Depreciation and amortization 83 - 0.23 Gain on dispositions, net of taxes (1) - - Partnership adjustments (2) - (0.01) FFO of minority partners of Host LP (b) (3) - (0.01) Adjustment for dilutive securities: Assuming distribution of common share granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.1 - Assuming conversion of Exchangeable Senior Debentures 4 27.7 - FFO per diluted share (c) $61 383.1 $0.16 High-end of Range Third Quarter 2005 Forecast Income Per Share (Loss) Shares Amount Forecast net income (loss) available to common stockholders $(15) 353.3 $(0.04) Adjustments: Depreciation and amortization 83 - 0.23 Gain on dispositions, net of taxes (1) - - Partnership adjustments (2) - (0.01) FFO of minority partners of Host LP (b) (3) - (0.01) Adjustment for dilutive securities: Assuming distribution of common share granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.1 - Assuming conversion of Exchangeable Senior Debentures 4 27.7 - FFO per diluted share (c) $66 383.1 $0.17 See the notes following the table reconciling net income to EBITDA and Adjusted EBITDA for the full year 2005 forecasts. HOST MARRIOTT CORPORATION Reconciliation of Net Income Available to Common Stockholders to Funds From Operations per Diluted Share for Full Year 2005 Forecasts (a) (unaudited, in millions, except per share amounts) Low-end of Range Full Year 2005 Forecast Income Per Share (Loss) Shares Amount Forecast net income available to common stockholders $96 353.2 $0.28 Adjustments: Depreciation and amortization 363 - 1.02 Gain on dispositions, net of taxes (61) - (0.17) Partnership adjustments 9 - 0.03 FFO of minority partners of Host LP (b) (22) - (0.07) Adjustment for dilutive securities: Assuming distribution of common share granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.1 (0.01) Assuming conversion of Exchangeable Senior Debentures 19 27.9 (0.03) Assuming conversion of Convertible Subordinated Debentures 32 30.9 - FFO per diluted share (c) $436 414.1 $1.05 High-end of Range Full Year 2005 Forecast Income Per Share (Loss) Shares Amount Forecast net income available to common stockholders $113 353.2 $0.32 Adjustments: Depreciation and amortization 363 - 1.02 Gain on dispositions, net of taxes (61) - (0.17) Partnership adjustments 10 - 0.03 FFO of minority partners of Host LP (b) (23) - (0.07) Adjustment for dilutive securities: Assuming distribution of common share granted under the comprehensive stock plan less shares assumed purchased at average market price - 2.1 (0.01) Assuming conversion of Exchangeable Senior Debentures 19 27.9 (0.03) Assuming conversion of Convertible Subordinated Debentures 32 30.9 - FFO per diluted share (c) $453 414.1 $1.09 See the notes following the table reconciling net income to EBITDA and Adjusted EBITDA for the full year 2005 forecasts. HOST MARRIOTT CORPORATION Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full Year 2005 Forecasts (a) (unaudited, in millions) Full Year 2005 Low-end High-end of Range of Range Net income $ 130 $ 147 Interest expense 445 445 Depreciation and amortization 364 364 Income taxes 35 37 EBITDA 974 993 Gains on dispositions (90) (90) Consolidated partnership adjustments: Minority interest expense 14 15 Distributions to minority partners (5) (5) Equity investment adjustments: Equity in losses of affiliates 1 1 Distributions received from equity investments 1 1 Adjusted EBITDA of Host LP 895 915 Distributions to minority interest partners of Host LP (6) (6) Adjusted EBITDA of Host Marriott $ 889 $ 909 (a) The amounts shown in these reconciliations are based on management's estimate of operations for 2005. These tables are forward-looking and as such contain assumptions by management based on known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance, or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by this table. General economic conditions, competition and governmental actions will affect future transactions, results, performance and achievements. Although we believe the expectations reflected in this reconciliation are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviations will not be material. Our full year and third quarter 2005 forecasts were based on the following assumptions: * RevPAR will increase 8.0% to 9.0% for the full year and 6.5% to 8.0% for the third quarter for the low and high ends of the forecasted range, respectively. * Comparable hotel adjusted operating profit margins will increase 120 basis points and 150 basis points for the full year for the low and high ends of the forecasted range, respectively. * Approximately $325 million of hotels will be sold during 2005. * Approximately $400 million of acquisitions will be made during 2005. * Approximately $630 million of debt has been, or will be, refinanced or prepaid and approximately $100 million of Class B preferred stock has been redeemed during 2005. Charges, net of the minority interest benefit, totaling approximately $36 million, or $.09 of FFO per diluted share, in call premiums and the acceleration of deferred financing costs associated with the debt repayments and the redemption of the Class B preferred stock will be incurred for the full year. * Fully diluted shares will be 414.1 million for the full year and 383.1 million for the third quarter. (b) Represents FFO attributable to the minority interests in Host LP. (c) FFO per diluted share in accordance with NAREIT is adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interest to common OP Units, the Convertible Subordinated Debentures and the Exchangeable Senior Debentures. No effect is shown for securities if they are anti dilutive. HOST MARRIOTT CORPORATION Forecast Schedule of Comparable Hotel Adjusted Operating Profit Margin (a) (unaudited, in millions, except hotel statistics) Full Year 2005 Low-end High-end of range of range Percent change in Comparable Hotel RevPAR 8.0% 9.0% Operating profit margin under GAAP (b) 13.2% 13.6% Comparable hotel adjusted operating profit margin (c) 23.9% 24.2% Comparable hotel sales Room 2,213 2,234 Other 1,397 1,410 Comparable hotel sales (d) 3,610 3,644 Comparable hotel expenses Rooms and other departmental costs 1,547 1,557 Management fees, ground rent and other costs 1,199 1,204 Comparable hotel expenses (e) 2,746 2,761 Comparable hotel adjusted operating profit 864 883 Non-comparable hotel results, net 75 75 Office buildings and limited service properties, net 4 4 Depreciation and amortization (364) (364) Corporation and other expenses (64) (64) Operating profit $515 $534 (a) See the introductory notes to the financial information for discussion of non-GAAP measure, reporting periods and comparable hotel results. Forecasted comparable hotel results include assumptions on the number of hotels that will be included in our comparable hotel set in 2005. We have assumed that 100 hotels will be classified as comparable as of December 31, 2005, reflecting dispositions in January 2005 and certain other forecasted major renovations. No assurances can be made as to the hotels that will be in the comparable hotel set for 2005. (b) Operating profit margin under GAAP is calculated as the operating profit divided by the forecast total revenues per the consolidated statements of operations. See (d) below for forecasted revenues. (c) Comparable hotel adjusted operating profit margin is calculated as the comparable hotel adjusted operating profit divided by the comparable hotel sales per the table above. We forecasted an increase in margins of 120 to 150 basis points. The comparable hotel adjusted operating profit margin for 2004 was 22.7%, which reflects the results of 100 hotels currently forecasted to be classified as comparable for 2005 as noted above. (d) The reconciliation of forecast total revenues per the consolidated statements of operations to the forecast comparable hotel sales is as follows (in millions): Full Year 2005 Low-end High-end of range of range Revenues per the consolidated statements of operations $3,896 $3,932 Non-comparable hotel sales (253) (255) Hotel sales for the property for which we record rental income, net 50 50 Rental income for office buildings and limited service hotels (83) (83) Comparable hotel sales $3,610 $3,644 (e) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions): Full Year 2005 Low-end High-end of range of range Operating costs and expenses per the consolidated statements of operations $3,381 $3,398 Non-comparable hotel expenses (178) (180) Hotel expenses for the property for which we record rental income 50 50 Rent expense for office buildings and limited service hotels (79) (79) Depreciation and amortization (364) (364) Corporate and other expenses (64) (64) Comparable hotel expenses $2,746 $2,761 HOST MARRIOTT, L.P. Consolidated Statements of Operations (a) (unaudited, in millions, except per unit amounts) Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Revenues Rooms $597 $526 $1,083 $978 Food and beverage 306 290 557 536 Other 65 58 117 108 Total hotel sales 968 874 1,757 1,622 Rental income 25 24 54 53 Total revenues 993 898 1,811 1,675 Expenses Rooms 139 127 258 240 Food and beverage 218 208 404 390 Hotel departmental expenses 251 232 468 439 Management fees 44 38 78 69 Other property-level expenses 71 70 136 137 Depreciation and amortization 86 80 170 160 Corporate and other expenses 15 12 29 25 Total operating costs and expenses 824 767 1,543 1,460 Operating profit 169 131 268 215 Interest income 5 2 12 5 Interest expense (115) (131) (224) (249) Net gains on property transactions 74 4 77 5 Gain (loss) on foreign currency and derivative contracts - - 2 - Minority interest income (expense) (2) 3 (6) (3) Equity in losses of affiliates 3 (3) (1) (8) Income (loss) before income taxes 134 6 128 (35) Provision for income taxes (38) (11) (38) (8) Income (loss) from continuing operations 96 (5) 90 (43) Income from discontinued operations (b) - 23 12 27 Net income (loss) 96 18 102 (16) Less: Distributions on preferred units (7) (10) (15) (19) Issuance costs of redeemed Class B preferred units (4) - (4) - Net income (loss) available to common unitholders $85 $8 $83 $(35) Basic earnings (loss) per common unit: Continuing operations $0.23 $(0.04) $0.19 $(0.18) Discontinued operations - 0.06 0.03 0.08 Basic earnings (loss) per common unit $0.23 $0.02 $0.22 $(0.10) Diluted earnings (loss) per common unit: Continuing operations $0.22 $(0.04) $0.19 $(0.18) Discontinued operations - 0.06 0.03 0.08 Diluted earnings (loss) per common unit $0.22 $0.02 $0.22 $(0.10) (a) Our consolidated statements of operations presented above have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K (b) Reflects the results of operations and gain (loss) on sale, net of the related income tax, for four properties sold in the first quarter of 2005 and nine properties sold in 2004 prior to their disposition. HOST MARRIOTT, L.P. Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA for Host Marriott, L.P. (unaudited, in millions) Quarter ended Year-to-date ended June 17, June 18, June 17, June 18, 2005 2004 2005 2004 Net income (loss) $96 $18 $102 $(16) Interest expense 115 131 224 249 Depreciation and amortization 86 80 170 160 Income taxes (a) 38 11 38 8 Discontinued operations (b) - 3 - 6 EBITDA (c) 335 243 534 407 Gains on dispositions (a) (70) (19) (83) (20) Amortization of deferred gains (3) (4) (6) (5) Consolidated partnership adjustments: Minority interest (income) expense 2 (3) 6 3 Distributions to minority partners (3) (3) (3) (4) Equity investment adjustments: Equity in (earnings) losses of affiliates (3) 3 1 8 Distributions received from equity investments - 1 1 1 Adjusted EBITDA of Host LP(c) $258 $218 $450 $390 (a) Income taxes and gains on dispositions include $28 million and $70 million, for both the second quarter and year-to-date 2005, respectively, due to the sale of 85% of our interest in CBM Joint Venture LLC. (b) Reflects the interest expense, depreciation and amortization and income taxes included in discontinued operations. (c) See the introductory notes to the financial information for discussion of non-GAAP measures. HOST MARRIOTT, L.P. Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full Year 2005 Forecasts for Host Marriott, L.P.(a) (unaudited, in millions) Full Year 2005 Low-end High-end of range of range Net income $137 $155 Interest expense 446 446 Depreciation and amortization 364 364 Income taxes 35 37 EBITDA 982 1,002 Gains on dispositions (90) (90) Consolidated partnership adjustments: Minority interest expense 6 6 Distributions to minority partners (5) (5) Equity investment adjustments: Equity in losses of affiliates 1 1 Distributions received from equity investments 1 1 Adjusted EBITDA of Host LP $895 $915 (a) The amounts shown in these reconciliations are based on management's estimate of operations for 2005. These tables are forward-looking and as such contain assumptions by management based on known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance, or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by this table. General economic condition, competition and governmental actions will affect future transactions, results performance and achievements. Although we believe the expectations in this reconciliation are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviations will not be material. For purposes of the full year forecasts, we have utilized the same, previously detailed assumptions as those utilized for the full year forecasts for Host Marriott Corporation. PRNewswire -- July 20 END FIRST AND FINAL ADD http://www.newscom.com/cgi-bin/prnh/20040324/HOSTMARRIOTTLOGO http://photoarchive.ap.org/ DATASOURCE: Host Marriott Corporation Web site: http://www.hostmarriott.com/

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