Diamond Hospitality Company reports fourth quarter and full year results 2008
|
|
Diamond Hospitality Company reports fourth quarter and full year results 2008
|
Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-03-02
DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced results of operations for its fourth fiscal quarter and the full fiscal year ended December 31, 2008. The Company is a lodging focused real estate investment trust that owns twenty premium hotels in North America. “Our results reflect an increasingly challenging operating environment. Although we expect that 2009 will be difficult, our Company has the attributes to weather the downturn and is poised to deliver long-term growth once the economy begins to recover. Our hotels are high quality, extensively renovated, and in desirable markets,” stated Mark Brugger, Chief Executive Officer of DiamondRock Hospitality Company. He added, “In response to the current environment, we are focused on two goals: preserving profits and increasing liquidity. We are diligently working with our operators to take significant, and in some cases unprecedented, action to control hotel operating costs and to preserve profits in a declining revenue environment. In addition, we are fortunate to have entered the downturn with among the strongest and best structured balance sheets in the industry. We have over $140 million available on our $200 million credit facility and manageable debt maturities between now and 2015; however, we believe that we can make our balance sheet even stronger. In 2009, we are maximizing our liquidity in a number of ways, including reducing our capital expenditures, controlling expenses and reducing our dividend. We remain committed to our longstanding goal of distinguishing DiamondRock from our peers with the strongest balance sheet of any lodging real estate investment trust.” Fourth Quarter 2008 Highlights
RevPAR: The Company’s same-store RevPAR decreased 9.4 percent compared to the same period in 2007.
Hotel Adjusted EBITDA Margins: The Company’s same-store Hotel Adjusted EBITDA margins decreased 327 basis points compared to the same period in 2007.
Adjusted EBITDA: The Company’s Adjusted EBITDA was $54.6 million.
- 2 -
Adjusted FFO: The Company’s Adjusted FFO was $41.5 million and Adjusted FFO per diluted share was $0.46.
Full Year 2008 Highlights
RevPAR: The Company’s same-store RevPAR decreased 3.3 percent compared to the same period in 2007.
Hotel Adjusted EBITDA Margins: The Company’s same-store Hotel Adjusted EBITDA margins decreased 201 basis points compared to the same period in 2007.
Adjusted EBITDA: The Company’s Adjusted EBITDA was $178.8 million.
Adjusted FFO: The Company’s Adjusted FFO was $137.8 million and Adjusted FFO per diluted share was $1.48. Operating Results Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margins,” “FFO,” “Adjusted FFO” and “same-store.” For the fourth quarter ended December 31, 2008, the Company reported the following:
Revenues of $218.0 million compared to $236.1 million for the comparable period in 2007.
Adjusted EBITDA of $54.6 million compared to $67.7 million for the comparable period in 2007.
Adjusted FFO and Adjusted FFO per diluted share of $41.5 million and $0.46, respectively, compared to $47.6 million and $0.50, respectively, for the comparable period in 2007.
Net income of $13.8 million (or $0.15 per diluted share) compared to $25.1 million (or $0.26 per diluted share) for the comparable period in 2007.
Same-store RevPAR for the fourth quarter decreased 9.4 percent from $132.87 to $120.33 for the comparable period in 2007, driven by a 3.6 percentage point decrease in occupancy (from 71.4 percent to 67.8 percent) and a 4.6 percent decrease in the average daily rate (from $186.04 to $177.56). Same-store Hotel Adjusted EBITDA margins for its hotels decreased 327 basis points from the comparable period in the prior year. For the full year 2008, the Company reported the following:
Revenues of $693.2 million compared to $717.4 million for the comparable period in 2007.
- 3 -
Adjusted EBITDA of $178.8 million compared to $202.2 million for the comparable period in 2007.
Adjusted FFO and Adjusted FFO per diluted share of $137.8 million and $1.48, respectively, compared to $145.8 million and $1.55, respectively, for the comparable period in 2007.
Net income of $52.9 million (or $0.56 per diluted share) compared to $68.3 million (or $0.72 per diluted share) for the comparable period in 2007.
Same-store RevPAR for the full year 2008 decreased 3.3 percent from $131.33 to $126.95 for the comparable period in 2007, driven by a 2.2 percentage point decrease in occupancy (from 74.0 percent to 71.8 percent) and a 0.4 percent decrease in the average daily rate (from $177.49 to $176.73). Full year 2008 same-store Hotel Adjusted EBITDA margins for its hotels decreased 201 basis points from the comparable period in the prior year. Operating Results Compared to Prior Guidance The following is a chart showing actual full year 2008 results compared to guidance for the full year 2008:
Full Year 2008 Guidance
Full Year 2008 Results
RevPAR Growth
-1% to -3%
-3.3%
Adjusted EBITDA
$175 to $181 million
$178.8 million
Adjusted FFO
$136 to $140 million
$137.8 million
Adjusted FFO/Share
$1.46 to $1.51 per diluted share
$1.48 per diluted share
Balance Sheet and Liquidity As of year-end, the Company had total assets of approximately $2.1 billion. Cash and cash equivalents were $43.9 million, including $30.1 million of restricted cash. As of December 31, 2008, the Company had $878.4 million of debt outstanding, which consisted of $57 million outstanding on its $200 million senior unsecured credit facility and $821.4 million of property-specific mortgage debt with limited near-term maturities. The Company currently has eight hotels, with an aggregate historic cost of $0.8 billion, which are unencumbered by mortgage debt. As of December 31, 2008, the Company’s debt had a weighted-average interest rate of 5.44% and a weighted-average maturity date of 6.3 years. In addition, 92.9% of the Company’s debt is fixed rate and over 80% of it matures in 2015 or later. The Company has only two near-term mortgage debt maturities totaling $68 million and has a number of options to either repay or refinance that secured debt given the low loan to value ratios of these two properties, the $140 million of availability on the Company’s line of credit and the Company’s ability to borrow on one of its 8 unencumbered assets in its portfolio. During the current recession, the Company’s corporate goals and objectives are focused on preserving and enhancing its liquidity. While there can be no assurance that the Company will be able to accomplish any or all of these steps, it has taken, or is evaluating, a number of steps to achieve these goals. In particular, the Company:
- 4 -
chose to not pay a fourth quarter dividend and intends to pay its next dividend to shareholders of record as of December 31, 2009;
is assessing whether to utilize the Internal Revenue Service's Revenue Procedure 2009-15 in order to pay a portion of its 2009 dividend in shares of our common stock and the remainder in cash;
significantly curtailed capital spending for 2009 and expects to owner fund less than $10 million in capital expenditures in 2009 as compared to more than $25 million in 2008;
is considering the sale of one or more of its hotels;
may issue common stock as appropriate;
amended its senior unsecured credit facility to reduce the risk of default under one of its financial covenants and may seek further amendments to its credit facility to make additional changes to the financial covenants; and
engaged mortgage brokers to determine potential options for additional property-specific mortgage debt or the refinancing of its two mortgages that mature prior to the end of January 2010.
As of year-end, the Company continued to own 100% of its properties directly and has never issued operating partnership units or preferred stock. Outlook The macroeconomic environment lacks sufficient clarity at this time to provide accurate guidance. However, the Company is providing the following relevant information to assist investors and analysts in deriving their own estimates for 2009. In 2008, the Company generated $191 million of Hotel Adjusted EBITDA and, from that amount, contributed $30.3 million to hotel FF&E escrow accounts. For 2009, the Company projects approximately $53 million of debt service based on its current capital structure. The 2009 debt service will include approximately $4.7 million of regularly scheduled principal payments. The Company expects to complete approximately $35 million of capital expenditures during 2009 which will consist of $25 million that will be funded from existing reserve accounts and approximately $10 million funded from corporate cash. The Company expects to incur $16.0 million of corporate G&A in 2009 which includes approximately $10.5 million of cash expenses. The Company’s 2009 weighted average fully diluted shares will be approximately 90.6 million shares based upon its current capital structure.
Dividends
The Company has paid quarterly cash dividends to common shareholders at the discretion of its Board of Directors. In December 2008, the Company announced that it will not pay any further dividends in 2008, and intends to pay its next dividend to shareholders of record as of December 31, 2009. The Company presently intends to pay a 2009 dividend in an amount equal to 100% of the Company’s 2009 taxable income. The Company is currently assessing whether to utilize the
- 5 -
Internal Revenue Service’s Revenue Procedure 2009-15 in order to pay a portion of that dividend in shares of common stock and the remainder in cash. 2008 Impairment During the year ended December 31, 2008, the Company recorded an impairment loss of $0.7 million on the favorable leasehold asset related to its option to develop an addition to our Westin Boston Waterfront on an adjacent parcel of land. This impairment reflects the deterioration of the value of this option from $12.8 million to $12.1 million during the fourth quarter. As of December 31, 2008, the Company has a total of $14.6 million of intangible assets with indefinite useful lives that it regularly assesses for impairment. Major Capital Expenditures DiamondRock has made extensive capital investments in its hotels. In 2008, the Company completed approximately $65 million of capital improvements at its hotels. The most extensive capital projects for 2008 were as follows:
Chicago Marriott Downtown: The Company completed a $35 million renovation of the hotel. Approximately $10 million was paid from corporate funds, with the balance coming from the hotel’s escrow funds and a contribution from Marriott International. The project included a complete renovation of all the meeting and ballrooms, adding 12,000 square feet of new meeting space, reconcepting and relocating the restaurant, expanding the lobby bar and creating a Marriott “great room” in the lobby. The project began during the third quarter of 2007 and was substantially completed in April 2008. The estimated disruption of approximately $2 million to Hotel Adjusted EBITDA, mainly associated with the ballroom renovations, primarily impacted the first quarter of 2008.
Westin Boston Waterfront: The Company completed the construction of additional meeting rooms in the building attached to the hotel. The $19 million project included the creation of over 37,000 square feet of meeting and exhibition space. The project began in the third quarter of 2007 and was substantially completed in the first quarter of 2008.
Chicago Conrad: The Company completed its renovation of the guestrooms and corridors during the first quarter and the upgrade of the front entrance repositioning during the third quarter of 2008.
Salt Lake City Marriott: The Company extensively renovated the guestrooms at the hotel during the fourth quarter of 2008 which was completed in January 2009, almost all of which was be funded by the hotel’s escrow funds.
In 2009, the Company plans to commence or complete approximately $35 million of capital improvements at its hotels, approximately $10.0 million of which will be funded from corporate cash.
- 6 -
Earnings Call
The Company will host a conference call to discuss its fourth quarter and full year 2008 results on Friday, February 27, 2009, at 10:00 am Eastern Time (ET). To participate in the live call, investors are invited to dial 1-888-679-8018 (for domestic callers) or 617-213-4845 (for international callers). The participant passcode is 45731585. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at www.drhc.com. A replay of the webcast will also be archived on the website for one year.
|
|
