Host Marriott reports 9% gain in cash flow

July 30, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Host Marriott Corp. said its cash flow rose 9 percent during the second quarter, and it earned twice as much as it needed to pay interest on the heavy debt load it assumed in the controversial breakup of Marriott Corp. last October.

Host Marriott, which took over Marriott's company-owned hotels and its airport and toll-road concession business, said it earned $99 million before interest, taxes and depreciation during the 12 weeks that ended June 17, up from $91 million a year ago.

The company's net income stayed at the break-even mark Host Marriott would have posted in the second quarter of 1993 had the breakup of Marriott occurred by then.

But like most publicly traded real estate companies, Host Marriott said its net income is unrealistically low. The company said net income does not give an accurate picture of how Host Marriott is doing because accounting rules on depreciation force the company to write down the value of real estate assets that actually are gaining value. The company said the reasons for the cash flow improvements included a 4 percent sales gain for "comparable hotels" since last year, the acquisition of a Fort Lauderdale hotel in January and the decision to buy out its partners in the New York Marriott Marquis.

Chief Executive Stephen Bollenbach said Host Marriott is continuing its strategy to buy high-end hotels, whose prices have been driven down by the recession, and sell lower-cost hotels such as its Fairfield Inn chain that recovered from the economic downturn more quickly. The company believes the cheaper hotels' value has nearly peaked and that they are more vulnerable to competition from new hotels than first-class hotels.

Host Marriott Corp.

.. .. .... .. .. .. .. Ticker .. .. .. .. .. Yesterday's

.. .. .... .. .. .. .. Symbol .. .. .. .. .. Cls. .. .. .. .. Chg.

.. .. .. .. .. .. .. .. HMT .. .. .. .. .. ..11 3/8 .. .. .. .. .. + 5/8

Period ended

06/17/94 .. .. .. .. ..2nd qtr. .. .. .. .. Year ago .. .. .. ..Chg.

Revenue .. .. .. .. .. $359,000 .. .. .. .. $323,000 .. .. ...+11.1%

Net Income .. .. ... .. .. $0* .. .. .. .. .. .. $0* .. .. .. ... --

Primary EPS .. .. . .. .. $0.00* .. .. .. .. $0.00* .. .. .. ... .--

.. .. .. .. .. .. .. .. 24 weeks .. .. .. .. ..Year ago .. .. .. ..Chg.

IRevenue .. .. .. .. .. . $660,000 .. .. .. .. .. $597,000 .. . .. +10.6%

Net Income .. .. .. .. ..$(18,000) .. .. .. .. .$(24,000) .. .. .. . --

Primary EPS .. .. .. .. . $(0.12) .. .. .. .. ... $(0.21).. .. .. .. --

* Reflects the fact that the company reports its net income rounded to the nearest million dollars.

1993 figures are pro forma, assuming that the Oct. 8, 1993, breakup of Marriott Corp. had been in effect during the relevant periods of last year.

=1 Figures in thousands (except per share data.)

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