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
FEBRUARY 5, 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 February 5, 1998 announcing fourth 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 February 5, 1998
ITEM 8. CHANGE IN FISCAL YEAR.
None.
2
<PAGE>
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
FEBRUARY 5, 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 45% INCREASE
IN 1997 NET INCOME
COMPANY ALSO ANNOUNCES NINE AIRPORT CONTRACT RENEWALS/WINS
BETHESDA, MD, FEBRUARY 5, 1998 -- Host Marriott Services [NYSE:HMS]
today reported annual net income for the fifty-two weeks of 1997 of $20.8
million, or $0.57 per share, an increase of 45% compared to net income of $14.3
million, or $0.40 per share, for the fifty-three weeks of 1996. Earnings before
interest expense, taxes, depreciation, amortization and other non-cash items
(EBITDA) was $129.1 million for 1997, an increase of 8% over EBITDA of $119.4
million reported for 1996. Revenues for 1997 totaled $1.28 billion, an increase
of 1% over 1996. Excluding the effect of the extra week of operations during
1996, net income, EBITDA, and revenues increased by 61%, 10%, and 2%,
respectively.
William W. McCarten, President and Chief Executive Officer, noted, "Our
financial performance was strong during 1997. We successfully renewed a number
of important contracts and we have invested in several operating initiatives
that we believe will result in continued profitability improvements. Finally, we
have added resources to pursue two new markets - shopping mall food courts and
European airport concessions and opened two new food court projects."
The company's operating profit increased by 8% during 1997 to $67.1
million from $62.3 million for 1996. The operating profit margin improved to
5.2% for 1997 from 4.9% a year ago. Excluding the noncomparable effect of the
extra week of operations in 1996, operating profit increased by 12% during 1997.
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EXHIBIT 20
PAGE 2 OF 4
ADD 1
HOST MARRIOTT SERVICES REPORTS 45% INCREASE IN 1997 NET INCOME
Contributing to the company's growth in net income for the year was a
reduction in the income tax provision. The company's income tax provision
includes a $1.9 million benefit recorded during the third quarter of 1997 to
recognize the utilization of certain tax credits previously projected to expire
unrealized.
The company reported net income of $1.1 million, or $0.03 per share,
for the fourth quarter of 1997, which included only sixteen weeks, compared to
net income of $0.9 million, or $0.03 per share, for the fourth quarter of 1996,
which included seventeen weeks. The company's operating profit was $12.6 million
for the fourth quarter of 1997, which was level with the same quarter a year
ago. EBITDA was $33.1 million for the fourth quarter of 1997, an increase of 8%
over EBITDA of $30.6 million reported for the fourth quarter of 1996. Excluding
the noncomparable effect of the extra week of operations in the fourth quarter
of 1996, operating profit, EBITDA, and revenues for the fourth quarter of 1997
increased by 21%, 17%, and 5%, respectively.
During the fourth quarter of 1997, the company determined that its
investment in one of its airport food and beverage concessions contracts was
partially impaired as defined by accounting standard SFAS No. 121. The partial
impairment, stemming from construction cost overruns and weak operating
performance, resulted in the company recording a $4.2 million non-cash, pretax
charge against earnings.
Also during the fourth quarter of 1997, the company reversed
substantially all of its remaining restructuring reserve, which resulted in a
$3.9 million pretax reduction in other operating expenses. The reserve was
originally created in 1995 when the company recorded a pretax restructuring
charge of $14.5 million, which was primarily comprised of involuntary employee
termination benefits and lease cancellation penalty fees and related costs.
Airport concession revenues grew by $2.0 million during 1997. Excluding
the effects of a few noncomparable contracts (new contracts, contracts with
significant changes in scope of operation and contracts undergoing significant
construction of new facilities) and the extra week of operations in 1996,
revenues at comparable domestic airport locations, which represent over 90% of
the company's total domestic airport revenues, grew by $43.6 million, or 5.9%,
during 1997 reflecting an estimated 3.7% growth in passenger enplanements and a
2.2% increase in revenues per enplaning passenger.
Travel plaza revenues during 1997 were level with a year ago. Traffic
growth and moderate price increases were offset by one less week of operations
during 1997. Excluding the effect of the extra week of operations in 1996,
travel plaza revenues grew by 1.7% during 1997.
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EXHIBIT 20
PAGE 3 OF 4
ADD 2
HOST MARRIOTT SERVICES REPORTS 45% INCREASE IN 1997 NET INCOME
Revenues in the shopping mall and entertainment business line were up
9% over a year ago. The outstanding performance of the Ontario Mills Mall food
court which opened in November of 1996 and the openings of the food courts at
the Grapevine Mills Mall and the Vista Ridge Mall in late 1997 resulted in a
five-fold increase in shopping mall food court revenues. This dramatic rise was
partially offset by decreases in revenues associated with the expiration in late
1996 of a food and beverage stadium contract and the company's 1996 planned exit
from several off-airport merchandise contracts.
In a separate press release dated today, the company announced that it
had received food and beverage contract renewals at four domestic airport
locations including Chicago-O'Hare International Airport, Detroit Metropolitan
Wayne County Airport, Sacramento International Airport and Maine's Portland
International Airport, as well as one combined food and beverage and merchandise
renewal at the Little Rock International Airport and a merchandise contract
renewal at the Ontario International Airport in California. In addition, the
company was awarded a new domestic airport contract at the Southwest Florida
International Airport in Fort Myers and several international concession
facilities at Kuala Lumpur International Airport and Vancouver International
Airport.
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 23,000 employees in five
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 operate under license agreements
with branded partners such as Burger King, Starbucks Coffee, Pizza Hut, Chili's,
T.G.I. Friday's, Cinnabon, TCBY "Treats," Sbarro, Taco Bell, Cheers, California
Pizza Kitchen, Tie Rack and The Body Shop.
CERTAIN MATTERS DISCUSSED WITHIN THIS NEWS RELEASE ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 AND AS SUCH MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER
FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF HOST
MARRIOTT SERVICES TO BE DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH
HOST MARRIOTT SERVICES BELIEVES THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS, IT CAN GIVE NO
ASSURANCE THAT ITS EXPECTATIONS WILL BE ATTAINED. THESE RISKS ARE DETAILED FROM
TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
--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>
SIXTEEN SEVENTEEN FIFTY-TWO FIFTY-THREE
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
1/2/98 1/3/97 (A) 1/2/98 1/3/97 (A)
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
OPERATING SUMMARY
REVENUES $ 388.2 $ 392.9 $ 1,284.6 $ 1,277.8
OPERATING COSTS AND EXPENSES
Operating costs 375.3 380.3 1,217.2 1,215.5
Write-downs of long lived assets 4.2 --- 4.2 ---
Reversal of restructuring charges (3.9) --- (3.9) ---
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
Total Operating Costs and Expenses 375.6 380.3 1,217.5 1,215.5
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
OPERATING PROFIT 12.6 12.6 67.1 62.3
Interest expense (12.2) (12.6) (39.8) (40.3)
Interest income 1.2 1.4 3.7 2.5
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
INCOME BEFORE INCOME TAXES 1.6 1.4 31.0 24.5
Provision for income taxes (B) 0.5 0.5 10.2 10.2
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
NET INCOME $ 1.1 $ 0.9 $ 20.8 $ 14.3
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
INCOME PER COMMON SHARE
Basic $ 0.03 $ 0.03 $ 0.60 $ 0.43
Diluted $ 0.03 $ 0.03 $ 0.57 $ 0.40
Weighted Average Common Shares Outstanding
Basic 34.5 34.1 34.6 33.4
Diluted 36.6 36.2 36.5 35.6
EBITDA $ 33.1 $ 30.6 $ 129.1 $ 119.4
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
REVENUES BY BUSINESS LINE
Airports $ 278.8 $ 284.4 $ 913.5 $ 911.5
Travel Plazas 89.2 92.0 312.5 312.4
Shopping Malls and Entertainment 20.2 16.5 58.6 53.9
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
Total revenues $ 388.2 $ 392.9 $ 1,284.6 $ 1,277.8
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
OPERATING PROFIT BY BUSINESS LINE (C)
Airports $ 25.1 $ 24.4 $ 94.3 $ 87.7
Travel Plazas 2.9 4.1 22.3 22.2
Shopping Malls and Entertainment 2.1 0.7 5.1 4.2
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
Total operating profit $ 30.1 $ 29.2 $ 121.7 $ 114.1
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
PERIOD END BALANCE SHEET DATA JANUARY 2, JANUARY 3,
1998 1997
------------------ ------------------
Cash and cash equivalents $ 78.0 $ 104.2
Total assets 548.0 580.5
Long-term debt 405.8 407.4
- ------------------------------------------------------- ------------------ ------------------ ----------------- ------------------
<FN>
(A) Certain minor reclassifications were made to the prior year financial
statements to conform to the 1997 presentation.
(B) The company's provision for income taxes includes a $1.9 million benefit
recorded in the third quarter to recognize certain tax credits that were
previously considered unrealizable.
(C) Before general and administrative expenses.
</FN>
</TABLE>
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