SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
JULY 14, 1998
HOST MARRIOTT SERVICES CORPORATION
DELAWARE 1-14040 52-1938672
- ------------------------ ----------- ----------------
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification Number)
6600 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 380-7000
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
None.
ITEM 5. OTHER EVENTS.
News Release dated July 14, 1998 announcing second quarter results and
containing forward looking statements
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
None.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBIT NO.
20 News Release dated July 14, 1998
ITEM 8. CHANGE IN FISCAL YEAR.
None.
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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 duly authorized.
HOST MARRIOTT SERVICES CORPORATION
JULY 14, 1998 /S/ BRIAN W. BETHERS
- --------------- -------------------------------------------------
Date Brian W. Bethers
Senior Vice President and Chief Financial Officer
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EXHIBIT 20
PAGE 1 OF 4
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION:
MEDIA INQUIRIES:
WENDY WATKINS: (301) 380-7903
INVESTOR RELATIONS:
SHARON WHITING: (301) 380-7215
HTTP://WWW.HMSCORP.COM
1-888-380-HOST
HOST MARRIOTT SERVICES REPORTS 22% GAIN IN SECOND QUARTER NET INCOME
BETHESDA, MD, JULY 14, 1998 -- Host Marriott Services [NYSE:HMS] today
reported net income for the second quarter of 1998 of $6.2 million, or $0.17 per
diluted share, compared to net income of $5.1 million, or $0.14 per diluted
share, for the second quarter of 1997. Earnings before interest expense, taxes,
depreciation, amortization and other non-cash items (EBITDA) was $33.4 million
for the second quarter of 1998, an increase of 9% over EBITDA of $30.7 million
reported for the second quarter of 1997. Revenues for the second quarter of 1998
totaled $322.6 million, an increase of $30.0 million, or 10% over the second
quarter of 1997.
The company's reported net income for the first two quarters of 1998
increased to $2.3 million, or $0.06 per diluted share, compared to net income of
$0.8 million, or $0.02 per diluted share, for the first two quarters of 1997.
EBITDA grew to $49.4 million for the first two quarters of 1998, an increase of
8% over the comparable period in 1997. Revenues totaled $599.9 million for the
first two quarters of 1998, which represents an 8% increase over the comparable
period in 1997.
William W. McCarten, President and Chief Executive Officer, noted, "I
am very pleased with the double digit growth achieved on both the top and bottom
lines in the second quarter of 1998. With many travel industry associations
forecasting record summer travel, I am confident that the earnings momentum
generated during the first half of the year will carry over into our seasonally
strong third quarter, keeping us on track to achieve our earnings growth target
for the full year."
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EXHIBIT 20
PAGE 2 OF 4
ADD 1
HOST MARRIOTT SERVICES REPORTS 22% GAIN IN SECOND QUARTER NET INCOME
The company's operating profit increased by 11% during the second
quarter of 1998 to $18.5 million from $16.6 million for the second quarter of
1997, increasing the operating profit margin slightly. Operating profit
increased to $20.5 million for the first two quarters of 1998 from $17.9 million
in 1997, an increase of 15%. The company's operating profit margin for the first
two quarters of 1998 increased by 20 basis points over the same period of 1997.
Overall, airport concession revenues grew by 12% or $24.5 million
during the second quarter of 1998. Revenues at comparable domestic airports grew
by 11% during the second quarter of 1998, reflecting an estimated 3% growth in
passenger enplanements and an 8% increase in revenues per enplaned passenger.
Comparable domestic airport revenues exclude the effects of new contracts,
contracts that were not renewed, contracts with significant changes in scope of
operation and contracts undergoing significant construction of new facilities.
Revenues at comparable domestic airports comprise almost 90% of the company's
total domestic airport revenues. Operating profit during the second quarter in
the airport business line increased by 20% to $25.4 million. An increase in the
operating profit margin of 70 basis points resulted from the strong performance
of the airport's domestic food and beverage operations.
Travel plaza revenues increased by $2.7 million or 4% for the second
quarter of 1998. An increase in tollroad traffic due to low gasoline prices, as
well as moderate increases in menu prices, resulted in solid revenue growth in
this business line. For the second quarter, operating profit in the travel plaza
business line was down slightly.
Revenues for the second quarter of 1998 in the shopping mall and
entertainment business line were up 22% over a year ago. The openings of the
Grapevine Mills Mall and the Vista Ridge Mall food courts in late 1997
contributed significantly to the increase. Operating profit for the second
quarter in the shopping mall and entertainment business line declined by $700
thousand compared to the same period a year ago. The decrease in operating
profit primarily resulted from start-up costs, including the amortization of
pre-opening costs, associated with new operating locations.
During the second quarter and in a separate press release dated today,
the company announced several recent development achievements. Today's
announcement included food and beverage contract extensions at Jacksonville
International Airport in Florida and at Terminal 3 of John F. Kennedy
International Airport in New York. The company also won a new contract to
operate retail concessions in the North Terminal at San Francisco International
Airport. In addition, the company
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EXHIBIT 20
PAGE 3 OF 4
ADD 2
HOST MARRIOTT SERVICES REPORTS 22% GAIN IN SECOND QUARTER NET INCOME
announced a planned expansion at Chicago O'Hare International Airport with the
recent approval for a new 8,000 square foot business center at the airport. The
new business center will have integrated business work stations, conference
rooms and a 24 hour copy and computer center. Prior announcements covered two
important development wins at Miami International Airport and at Forest City
Ratner Companies' 42nd Street Retail/Entertainment Complex.
Host Marriott Services, with its worldwide headquarters in Bethesda,
Maryland, is the leading food, beverage and retail concessionaire at nearly 200
travel and entertainment venues, with approximately 24,000 employees in six
countries around the globe. Host Marriott Services is best known for its custom
solutions business approach that combines internationally known brands with
regional favorites in airports, travel plazas, shopping malls and entertainment
attractions. Many of the company's concessions are operated under license
agreements with branded partners such as Burger King, Starbucks Coffee, Pizza
Hut, Chili's, Cinnabon, TCBY "Treats," Sbarro, Taco Bell, Cheers, California
Pizza Kitchen, Cool Planet, Tie Rack and The Body Shop.
* * *
NOTE: THE COMPANY'S RESULTS OF OPERATIONS ARE SIGNIFICANTLY AFFECTED BY
THE VARIOUS TRAVEL AND SHOPPING SEASONS. VACATION TRAFFIC IS GENERALLY THE
STRONGEST IN THE SUMMER VACATION MONTHS, PARTICULARLY FROM MEMORIAL DAY THROUGH
LABOR DAY, WHICH HAS HISTORICALLY PRODUCED SEASONALLY STRONG THIRD QUARTER
EARNINGS. SHOPPING MALL FOOD COURT CUSTOMER TRAFFIC IS GENERALLY THE BUSIEST
DURING THE FALL AND WINTER HOLIDAY SEASON.
THIS PRESS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF FEDERAL SECURITIES LAWS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS
CONCERNING THE COMPANY'S OUTLOOK FOR 1998 AND BEYOND; THE GROWTH IN TOTAL
REVENUE FOR 1998 AND SUBSEQUENT YEARS; BUSINESS STRATEGIES AND ANTICIPATED
RESULTS AND SIMILAR STATEMENTS CONCERNING EVENTS AND EXPECTATIONS THAT ARE NOT
HISTORICAL FACTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS
AND UNCERTAINTIES, INCLUDING THE EFFECTS OF SEASONALITY, AIRLINE AND TOLLROAD
INDUSTRY FUNDAMENTALS, GENERAL ECONOMIC CONDITIONS (INCLUDING THE CURRENT
ECONOMIC DOWNTURN IN ASIA), THE POTENTIAL ADVERSE IMPACT OF THE YEAR 2000 ISSUE
ON OPERATIONS, COMPETITIVE FORCES WITHIN THE FOOD, BEVERAGE AND RETAIL
CONCESSIONS INDUSTRIES, AND THE AVAILABILITY OF CASH FLOW TO FUND FUTURE CAPITAL
EXPENDITURES. FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN, AND INVESTORS
MUST RECOGNIZE THAT ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY THE STATEMENTS.
--Table Follows--
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EXHIBIT 20
PAGE 4 OF 4
HOST MARRIOTT SERVICES CORPORATION
CONSOLIDATED OPERATING RESULTS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE TWELVE TWENTY-FOUR TWENTY-FOUR
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JUNE 19, JUNE 20, JUNE 19, JUNE 20,
1998 1997 (A) 1998 1997 (A)
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
OPERATING SUMMARY
REVENUES $ 322.6 $ 292.6 $ 599.9 $ 555.7
OPERATING COSTS AND EXPENSES 304.1 276.0 579.4 537.8
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
OPERATING PROFIT 18.5 16.6 20.5 17.9
Interest expense (9.2) (9.2) (18.4) (18.4)
Interest income 0.6 1.0 1.3 1.8
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
INCOME BEFORE INCOME TAXES 9.9 8.4 3.4 1.3
Provision for income taxes 3.7 3.3 1.1 0.5
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
NET INCOME $ 6.2 $ 5.1 $ 2.3 $ 0.8
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
INCOME PER COMMON SHARE
Basic $ 0.18 $ 0.15 $ 0.07 $ 0.02
Diluted $ 0.17 $ 0.14 $ 0.06 $ 0.02
Weighted Average Common Shares Outstanding
Basic 34.0 34.7 34.2 34.6
Diluted 35.7 36.2 35.9 36.2
EBITDA $ 33.4 $ 30.7 $ 49.4 $ 45.6
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
REVENUES BY BUSINESS LINE
Airports $ 231.3 $ 206.8 $ 439.0 $ 404.7
Travel Plazas 75.5 72.8 130.7 125.5
Shopping Malls and Entertainment 15.8 13.0 30.2 25.5
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
Total revenues $ 322.6 $ 292.6 $ 599.9 $ 555.7
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
OPERATING PROFIT BY BUSINESS LINE (B)
Airports $ 25.4 $ 21.2 $ 44.1 $ 38.1
Travel Plazas 5.8 5.9 2.1 2.3
Shopping Malls and Entertainment 0.8 1.5 1.4 2.0
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
Total operating profit $ 32.0 $ 28.6 $ 47.6 $ 42.4
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
PERIOD END BALANCE SHEET DATA JUNE 19, 1998 June 20, 1997
------------------- ------------------
Cash and cash equivalents $ 53.2 $ 67.9
Total assets 536.7 550.2
Long-term debt 406.0 406.8
- -------------------------------------------------------- ------------------- ------------------ ------------------ -----------------
<FN>
(A) Certain minor reclassifications were made to the prior year financial
statements to conform to the 1998 presentation.
(B) Before general and administrative expenses.
</FN>
</TABLE>
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