DiamondRock Hospitality Company Reports First Quarter 2009 Results
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DiamondRock Hospitality Company Reports First Quarter 2009 Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-05-06
DiamondRock Hospitality Company (the "Company") (NYSE:DRH) today announced results of operations for its first fiscal quarter ended March 27, 2009. The Company is a lodging focused real estate investment trust that owns twenty premium hotels in North America.
First Quarter 2009 Highlights
-- RevPAR: The Company's same-store RevPAR decreased 16.5 percent compared to the same period in 2008.
-- Hotel Adjusted EBITDA Margins: The Company's same-store Hotel Adjusted EBITDA margins decreased 438 basis points compared to the same period in 2008.
-- Adjusted EBITDA: The Company's Adjusted EBITDA was $20.3 million.
-- Adjusted FFO: The Company's Adjusted FFO was $14.8 million and Adjusted FFO per diluted share was $0.16.
-- Successful Equity Raise: The Company issued 17,825,000 shares of its common stock at $4.85 per share after the first quarter, which resulted in net proceeds of $82.1 million.
-- Credit Facility Repayment: The Company repaid the outstanding balance of $52 million on its senior unsecured credit facility after the first quarter and now has $200 million of borrowing capacity.
"The ongoing global economic downturn continues to weigh heavily on the travel industry and its impact is reflected in our first quarter results. However, in light of the challenging environment, we are pleased that overall our hotels gained market share in the quarter and our operators did an excellent job controlling costs leading to Hotel Adjusted EBITDA margins declining only 438 basis points," stated Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company. "Moreover, our successful equity offering last month facilitated the elimination of all corporate debt and uniquely positions DiamondRock to weather the downturn."
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," and "Adjusted FFO."
For the first quarter, beginning January 1, 2009 and ended March 27, 2009, the Company reported the following:
-- Revenues of $118.5 million compared to $132.9 million for the comparable period in 2008.
-- Adjusted EBITDA of $20.3 million compared to $30.2 million for the comparable period in 2008.
-- Adjusted FFO and Adjusted FFO per diluted share of $14.8 million and $0.16, respectively, compared to $23.2 million and $0.24, respectively, for the comparable period in 2008.
-- Net loss of $5.3 million (or $0.06 per diluted share) compared to net income of $5.2 million (or $0.05 per diluted share) for the comparable period in 2008.
RevPAR for the first quarter decreased 16.5 percent (from $118.37 to $98.80) from the comparable period in 2008, driven by a 4.8 percentage point decrease in occupancy (from 68.5 percent to 63.7 percent) and a 10.4 percent decrease in the average daily rate (from $172.91 to $155.00). Hotel Adjusted EBITDA margins decreased 438 basis points from the comparable period in 2008.
The comparisons of the 2009 first fiscal quarter to the 2008 first fiscal quarter are positively impacted by disruption from the first quarter 2008 renovation of the Chicago Marriott. Excluding the Chicago Marriott from our 2009 and 2008 first fiscal quarters would increase our RevPAR contraction from the comparable period in 2008 by approximately 2.4 percentage points and our Hotel Adjusted EBITDA margins by approximately 55 basis points. In addition, the comparisons to 2008 are positively impacted by five additional days in the 2009 first fiscal quarter than as compared to the 2008 first fiscal quarter.
Follow-on Public Equity Offering
On April 17, 2009, the Company completed an additional follow-on public offering of its common stock. The Company sold 17,825,000 shares of common stock, including the underwriters' overallotment of 2,325,000 shares, at an offering price of $4.85 per share. The net proceeds, after deduction of offering costs, were $82.1 million.
Balance Sheet and Liquidity
As of the end of the first fiscal quarter, the Company had total assets of approximately $2.1 billion. Cash and cash equivalents were $42.8 million, including $28.5 million of restricted cash.
Following its equity offering, the Company has $820.4 million of debt outstanding, which consists of property-specific mortgage debt with limited near-term maturities, and cash and cash equivalents of over $60 million, including restricted cash of approximately $28 million. Eight hotels of the Company's 20 hotels are unencumbered by mortgage debt and the Company's $200 million senior unsecured credit facility is unused.
The Company has only two near-term mortgage debt maturities totaling $68 million. The debt maturities include the $40.2 million coming due on the Courtyard Manhattan/Midtown East on December 11, 2009 and the $27.7 million coming due on the Griffin Gate Marriott in January 2010. The Company recently agreed on terms with a lender to provide up to $43 million of mortgage debt with a term of five years and an interest rate of 8.81% on the Courtyard Manhattan/Midtown East. The terms of the loan are still subject to the approval of the lender's credit committee. In addition, the Company is currently assessing the best alternatives to refinance the Griffin Gate Marriott mortgage debt. The most likely alternatives include repaying the mortgage debt with corporate cash or refinancing the mortgage debt with a new mortgage lender.
As of the end of the first fiscal quarter, the Company continued to own 100% of its properties directly and has never issued operating partnership units or preferred stock.
Asset Disposition Update
The Company previously announced that it was considering the sale of one or more of its hotels and had engaged two brokers to market eleven of its hotels. While a number of prospective buyers have toured the hotels and some have submitted bids, to date, the Company has not received any bids that it considers attractive enough to pursue. The Company nevertheless continues to evaluate this process.
Capital Expenditures
DiamondRock has made extensive capital investments in its hotels during 2006 to 2008 and now nearly all of its hotels are fully renovated. As a result, the Company has significantly curtailed capital spending for 2009. In 2009, the Company plans to commence or complete approximately $35 million of capital improvements at its hotels, approximately $10 million of which will be funded from corporate cash. The Company spent approximately $7.3 million on capital improvements at its hotels during the first fiscal quarter, of which approximately $3.1 million was funded from corporate cash. The first quarter capital improvements included the completion of a significant guestroom renovation at the Salt Lake City Marriott, almost all of which was funded by the hotel's escrow funds.
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.
-- For 2009, the Company projects approximately $51 million of debt service based on its current capital structure. The 2009 debt service includes approximately $4.7 million of regularly scheduled principal payments and excludes the $40.2 million maturity of the Courtyard Manhattan/Midtown East mortgage.
-- The Company expects to complete approximately $35 million of capital expenditures during 2009 which will consist of $25 million 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 103.3 million shares, which incorporates its recent equity offering resulting in total shares outstanding of 108.0 million.
Earnings Call
The Company will host a conference call to discuss its first quarter 2009 results on Tuesday, May 5, 2009, at 10:00 am Eastern Time (ET). To participate in the live call, investors are invited to dial 1-888-713-4216 (for domestic callers) or 617-213-4868 (for international callers). The participant passcode is 23573323. 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.
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