Strategis Hotels & Resorts reports Thrid Quarter 2010 Results
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Strategis Hotels & Resorts reports Thrid Quarter 2010 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 2010-11-04
Strengthening Operating Fundamentals Drive Strong Rate Growth and Significant Continued Margin Expansion
Strategic Hotels & Resorts (BEE 4.54, -0.03, -0.66%) today reported results for the third quarter ended September 30, 2010. RevPAR growth was a strong 7.3 percent during the quarter and was largely driven by a 5.4 percent increase in average daily rate. EBITDA margins expanded 240 basis points, excluding the impact of cancellation fees and property-level bonuses.
Third Quarter Highlights
Comparable funds from operations (Comparable FFO) was $0.03 per diluted share compared with a loss of $0.07 per diluted share in the prior year period.
Comparable EBITDA was $33.6 million compared with $31.2 million in the prior year period, an increase of 7.7 percent.
North American revenue per available room (RevPAR) increased 7.3 percent, driven by a 1.3 percentage point increase in occupancy and a 5.4 percent increase in average daily rate (ADR), compared to the third quarter 2009. Total revenue per available room (Total RevPAR) increased 6.0 percent with non-rooms revenue increasing by 4.5 percent between periods.
Total U.S. market share penetration grew throughout the portfolio in both ADR and occupancy. Total U.S. RevPAR penetration improved by 2 percentage points to 112 percent.
European RevPAR increased 10.5 percent (18.9 percent in constant dollars), driven by a 3.6 percentage point increase in occupancy and a 6.0 percent increase in ADR (14.1 percent increase in constant dollars) between periods. European Total RevPAR increased 8.5 percent in the third quarter over the prior year period (17.0 percent in constant dollars). The European portfolio excludes results from the InterContinental Prague, which is currently under contract for sale.
North American EBITDA margins expanded 150 basis points compared to the third quarter of 2009. Excluding cancellation fees and adjusting for an increase in property-level bonus accruals made during the quarter, EBITDA margins expanded 240 basis points in the third quarter.
Chief Executive Officer Laurence Geller remarked, "Our leading edge asset management, continued focus on increasing room rates, productivity improvements, and cost cutting initiatives are all producing strong financial results. Our RevPAR increases and market share growth are compelling given the geographic distribution of our portfolio. We're especially pleased by our adjusted EBITDA to RevPAR growth ratio of three times - a noteworthy confirmation of the success of our ongoing strategy.
"Restructuring our balance sheet and methodically divesting our European portfolio to maximize proceeds remain key priorities for the company. The sale of the InterContinental Prague, the third disposition of a foreign asset in the past 12 months, represents the continuing execution of our balance sheet and strategic plans," commented Geller.
Financial Results
The company reported third quarter 2010 financial results as follows:
Net loss attributable to common shareholders was $39.4 million, or $0.26 per diluted share, compared with net loss attributable to common shareholders of $73.5 million, or $0.97 per diluted share, for the third quarter of 2009.
Comparable EBITDA was $33.6 million compared with $31.2 million for the third quarter of 2009. Excluding a $3.8 million charge related to the company's long-term incentive compensation plan, Comparable EBITDA totaled $37.4 million in the third quarter, a 19.9% increase compared to the third quarter of 2009.
Comparable FFO was $4.9 million, or $0.03 per diluted share, compared with a loss of $5.2 million, or $0.07 per diluted share, in the third quarter of 2009. Excluding the $3.8 million charge related to the company's long-term incentive compensation plan, Comparable FFO totaled $8.8 million, or $0.06 per diluted share in the third quarter.
The company reported financial results for the nine month period ending September 30, 2010 as follows:
Net loss attributable to common shareholders was $127.1 million, or $1.12 per diluted share, compared with a net loss attributable to common shareholders of $202.6 million, or $2.69 per diluted share, for the nine month period ending September 30, 2009.
Comparable EBITDA was $90.7 million compared with $87.5 million for the nine month period ending September 30, 2009. Excluding a $6.9 million charge related to the company's long-term incentive compensation plan, Comparable EBITDA totaled $97.6 million for the nine month period, an 11.5% increase compared to the nine months ending September 30, 2009.
Comparable FFO was a loss of $4.7 million, or $0.04 per diluted share, compared with a loss of $19.0 million, or $0.25 per diluted share, in the nine month period ending September 30, 2009. Excluding the $6.9 million charge related to the company's long-term incentive compensation plan, Comparable FFO totaled $2.2 million, or $0.02 per diluted share for the nine month period ending September 30, 2010.
Other Third Quarter Activity
On September 27, the company announced that a share purchase agreement was signed for the sale of the InterContinental Prague to an investment group led by an affiliate of Westmont Hospitality for total consideration of approximately EUR 110.6 million, or approximately EUR 297,000 per room. The total consideration represents the outstanding amount of the property's third party debt and the current interest rate swap liability related to the third party indebtedness, which was estimated to be approximately EUR 9.0 million as of August 31. In addition, approximately EUR 2.0 million of restricted cash related to the property will be released to the company. The sale, subject to certain closing contingencies, is scheduled to close in the fourth quarter of 2010.
On August 10, the company announced that its Board of Directors appointed Raymond L. (Rip) Gellein, Jr. as Chairman. Mr. Gellein assumed the position from William (Bill) Prezant, who continues to serve as a member of the Board of Directors. Mr. Gellein has served as a member of the board since August 2009 and previously was President of Global Development at Starwood Hotels and Resorts Worldwide, Inc.
Earnings Call
The company will conduct its third quarter 2010 conference call for investors and other interested parties on Thursday, November 4, 2010 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888-713-4205 (toll international:617-213-4862) with pass code 34191290. To participate on the web cast, log on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=176522&eventID=3417189 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning at 1:00 p.m. ET on November 4, 2010, through 11:59 p.m. ET on November 11, 2010. To access the replay, dial 888-286-8010 (toll international:617-801-6888) and request replay pin number 94234941. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.earnings.com for 30 days after the call.
The company also produces supplemental financial data that includes detailed information regarding its operating results. This supplemental data is considered an integral part of this earnings release. These materials are available on the Strategic Hotels & Resorts' website at www.strategichotels.com within the third quarter information section.
Portfolio Definitions
North American hotel comparisons for the third quarter 2010 are derived from the company's hotel portfolio at September 30, 2010, consisting of properties in which operations are included in the consolidated results of the company.
European hotel comparisons for the third quarter 2010 are derived from the company's European owned and leased hotel properties at September 30, 2010, consisting of the Marriott London Grosvenor Square, the Paris Marriott Champs-Elysees, and the Marriott Hamburg. The InterContinental Prague, which is currently under contract for sale, is excluded from the European portfolio comparisons.
About the Company
Strategic Hotels & Resorts, Inc. is a real estate investment trust (REIT) which owns and provides value-enhancing asset management of high-end hotels and resorts in the United States, Mexico and Europe. The company currently has ownership interests in 17 properties with an aggregate of 8,002 rooms. For a list of current properties and for further information, please visit the company's website at http://www.strategichotels.com.
This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the"Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding our future financial results, stabilization in the lodging space, positive trends in the lodging industry and our continued focus on improving profitability. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: demand for hotel rooms in our current and proposed market areas; availability of capital; ability to obtain, refinance or restructure debt or comply with covenants contained in our debt facilities; rising interest rates and operating costs; rising insurance premiums; cash available for capital expenditures; competition; economic conditions generally and in the real estate market specifically, including deterioration of economic conditions and the extent of its effect on business and leisure travel and the lodging industry; ability to dispose of existing properties in a manner consistent with our disposition strategy; risks related to natural disasters; the effect of threats of terrorism and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; legislative or regulatory changes, including changes to laws governing the taxation of REITs; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs.
Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Revenues:
Rooms $105,771 $97,895 $295,647 $281,776
Food and beverage 55,987 52,489 177,830 162,017
Other hotel
operating
revenue 19,065 19,233 58,049 67,736
------ ------ ------ ------
180,823 169,617 531,526 511,529
Lease revenue 1,108 1,224 3,383 3,513
----- ----- ----- -----
Total revenues 181,931 170,841 534,909 515,042
------- ------- ------- -------
Operating Costs
and Expenses:
Rooms 29,191 28,070 83,003 80,057
Food and beverage 42,481 40,505 128,273 121,145
Other
departmental
expenses 51,602 49,017 151,340 148,652
Management fees 5,866 6,030 18,583 19,553
Other hotel
expenses 12,971 12,926 40,798 39,168
Lease expense 4,182 4,355 12,311 12,480
Depreciation and
amortization 32,779 34,421 99,906 98,047
Impairment losses
and other
charges - - - 50,214
Corporate
expenses 8,904 5,020 22,484 19,996
----- ----- ------ ------
Total operating
costs and
expenses 187,976 180,344 556,698 589,312
------- ------- ------- -------
Operating loss (6,045) (9,503) (21,789) (74,270)
Interest expense (22,118) (24,635) (68,488) (70,674)
Interest income 68 176 373 628
Loss on early
extinguishment
of debt (39) - (925) (883)
Loss on early
termination of
derivative
financial
instruments - - (18,263) -
Equity in
earnings of
joint ventures 3,001 1,573 2,900 2,144
Foreign currency
exchange loss (134) (379) (1,399) (1,233)
Other income, net 1,605 125 2,299 168
----- --- ----- ---
Loss before
income taxes and
discontinued
operations (23,662) (32,643) (105,292) (144,120)
Income tax
(expense)
benefit (407) 236 (1,359) (2,515)
---- --- ------ ------
Loss from
continuing
operations (24,069) (32,407) (106,651) (146,635)
(Loss) income
from
discontinued
operations, net
of tax (6,717) (33,481) 2,692 (34,087)
------ ------- ----- -------
Net loss (30,786) (65,888) (103,959) (180,722)
Net loss
attributable to
the
noncontrolling
interests in
SHR's operating
partnership 192 844 879 2,297
Net income
attributable to
the
noncontrolling
interests in
consolidated
affiliates (1,086) (696) (858) (1,044)
------ ---- ---- ------
Net loss
attributable to
SHR (31,680) (65,740) (103,938) (179,469)
Preferred
shareholder
dividends (7,721) (7,721) (23,164) (23,164)
------ ------ ------- -------
Net loss
attributable to
SHR common
shareholders $(39,401) $(73,461) $(127,102) $(202,633)
======== ======== ========= =========
Basic and Diluted
Loss Per Share:
Loss from
continuing
operations
attributable to
SHR common
shareholders $(0.22) $(0.53) $(1.14) $(2.24)
(Loss) income
from
discontinued
operations
attributable to
SHR (0.04) (0.44) 0.02 (0.45)
----- ----- ---- -----
Net loss
attributable to
SHR common
shareholders $(0.26) $(0.97) $(1.12) $(2.69)
====== ====== ====== ======
Weighted average
common shares
outstanding 151,635 75,441 113,237 75,265
======= ====== ======= ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
September December
30, 31,
2010 2009
---- ----
Assets
Investment in hotel properties,
net $1,970,242 $2,162,584
Goodwill 40,359 75,758
Intangible assets, net of
accumulated amortization of
$6,006 and $4,400 33,352 34,046
Assets held for sale 159,902 -
Investment in joint ventures 48,754 46,745
Cash and cash equivalents 65,841 116,310
Restricted cash and cash
equivalents 39,512 22,829
Accounts receivable, net of
allowance for doubtful accounts
of $2,096 and $2,657 48,648 54,524
Deferred financing costs, net of
accumulated amortization of
$14,176 and $12,543 4,915 11,225
Deferred tax assets 32,548 34,244
Other assets 38,407 39,878
------ ------
Total assets $2,482,480 $2,598,143
========== ==========
Liabilities and Equity
Liabilities:
Mortgages payable $1,119,131 $1,300,745
Exchangeable senior notes, net of
discount - 169,452
Bank credit facility 36,000 178,000
Liabilities of assets held for
sale 166,668 -
Accounts payable and accrued
expenses 283,159 236,269
Deferred tax liabilities 1,722 16,940
Deferred gain on sale of hotels 93,206 101,852
------ -------
Total liabilities 1,699,886 2,003,258
Noncontrolling interests in SHR's
operating partnership 4,047 2,717
Equity:
SHR's shareholders' equity:
8.50% Series A Cumulative
Redeemable Preferred Stock
($0.01 par value; 4,488,750
shares
issued and outstanding;
liquidation preference $25.00
per share and $128,911 in the
aggregate) 108,206 108,206
8.25% Series B Cumulative
Redeemable Preferred Stock
($0.01 par value; 4,600,000
shares
issued and outstanding;
liquidation preference $25.00
per share and $131,603 in the
aggregate) 110,775 110,775
8.25% Series C Cumulative
Redeemable Preferred Stock
($0.01 par value; 5,750,000
shares
issued and outstanding;
liquidation preference $25.00
per share and $164,504 in the
aggregate) 138,940 138,940
Common shares ($0.01 par value;
250,000,000 common shares
authorized; 151,301,562 and
75,253,252 common shares issued
and outstanding) 1,513 752
Additional paid-in capital 1,554,677 1,233,856
Accumulated deficit (1,058,181) (954,208)
Accumulated other comprehensive
loss (101,467) (69,341)
-------- -------
Total SHR's shareholders' equity 754,463 568,980
Noncontrolling interests in
consolidated affiliates 24,084 23,188
------ ------
Total equity 778,547 592,168
------- -------
Total liabilities and equity $2,482,480 $2,598,143
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS
Supplemental Financial Data
(in thousands, except per share information)
September 30, 2010
------------------
Pro Rata
Share Consolidated
--------- ------------
Capitalization
--------------
Common shares outstanding 151,302 151,302
Operating partnership units outstanding 955 955
Restricted stock units outstanding 1,071 1,071
----- -----
Combined shares, options and units
outstanding 153,328 153,328
Common stock price at end of period $4.24 $4.24
----- -----
Common equity capitalization $650,111 $650,111
Preferred equity capitalization (at
$25.00 face value) 370,236 370,236
Consolidated debt 1,293,642 1,293,642
Pro rata share of unconsolidated debt 282,825 -
Pro rata share of consolidated debt (107,065) -
Cash and cash equivalents (65,841) (65,841)
------- -------
Total enterprise value $2,423,908 $2,248,148
========== ==========
Net Debt / Total Enterprise Value 57.9% 54.6%
Preferred Equity /Total Enterprise
Value 15.3% 16.5%
Common Equity / Total Enterprise Value 26.8% 28.9%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Discontinued Operations
The results of operations of hotels sold or held for sale are classified
as discontinued operations and segregated in the consolidated statements
of operations for all periods presented. On September 22, 2010, we
entered into an agreement to sell the InterContinental Prague hotel for
estimated consideration of approximately EUR 110.6 million on the signing
date. The sale is scheduled to close in the fourth quarter of
2010. The following hotels were sold during 2009 (in thousands):
Net Sales
Hotel Date Sold Proceeds
----- --------- ---------
Renaissance Paris Hotel Le Parc December 21,
Trocadero 2009 $50,275
Four Seasons Mexico City October 29, 2009 $52,156
The following is a summary of (loss) income from discontinued
operations, net of tax for the three and nine months ended September
30, 2010 and 2009 (in thousands):
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Hotel operating revenues $6,457 $16,142
------ -------
Operating costs and expenses 4,427 11,951
Depreciation and amortization 1,289 3,943
Impairment losses - 30,795
--- ------
Total operating costs and expenses 5,716 46,689
----- ------
Operating income (loss) 741 (30,547)
Interest expense (2,378) (2,268)
Interest income 4 26
Foreign currency exchange (loss) gain (5,094) (814)
Income tax benefit 10 122
Gain on sale (a) - -
--- ---
(Loss) income from discontinued
operations, net of tax $(6,717) $(33,481)
======= ========
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Hotel operating revenues $18,843 $45,163
------- -------
Operating costs and expenses 13,807 35,493
Depreciation and amortization 3,702 9,631
Impairment losses - 30,795
--- ------
Total operating costs and expenses 17,509 75,919
------ ------
Operating income (loss) 1,334 (30,756)
Interest expense (7,716) (6,454)
Interest income 15 86
Foreign currency exchange (loss) gain 7,495 946
Income tax benefit 327 2,091
Gain on sale (a) 1,237 -
----- ---
(Loss) income from discontinued
operations, net of tax $2,692 $(34,087)
====== ========
(a) In the second quarter of 2010, we agreed to accept payment of
$1,850,000 to settle the remaining obligation owed to us by the
purchaser of the Hyatt Regency New Orleans hotel, which was sold in
December 2007. During the nine months ended September 30, 2010, we
recognized a $1,850,000 gain on sale of the hotel, which we had
previously deferred.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investment in the Hotel del Coronado
(in thousands)
On January 9, 2006, we purchased a 45% interest in the
joint venture that owns the Hotel del Coronado. We
account for this investment using the equity method of
accounting.
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Total revenues
(100%) $39,683 $38,424 $94,167 $96,620
Property EBITDA
(100%) $15,593 $14,274 $30,871 $32,221
Equity in earnings
of joint venture
(SHR 45%
ownership)
Property EBITDA $7,017 $6,423 $13,892 $14,499
Depreciation and
amortization (2,015) (1,938) (6,003) (5,763)
Interest expense (1,981) (1,894) (5,711) (5,925)
Other expenses,
net (15) (91) (163) (233)
Income taxes (272) (751) 111 (551)
---- ---- --- ----
Equity in earnings
of joint venture $2,734 $1,749 $2,126 $2,027
====== ====== ====== ======
EBITDA
Contribution from
investment in
Hotel del
Coronado
Equity in earnings
of joint venture $2,734 $1,749 $2,126 $2,027
Depreciation and
amortization 2,015 1,938 6,003 5,763
Interest expense 1,981 1,894 5,711 5,925
Income taxes 272 751 (111) 551
--- --- ---- ---
EBITDA
Contribution from
investment in
Hotel del
Coronado $7,002 $6,332 $13,729 $14,266
====== ====== ======= =======
FFO Contribution
from investment
in Hotel del
Coronado
Equity in earnings
of joint venture $2,734 $1,749 $2,126 $2,027
Depreciation and
amortization 2,015 1,938 6,003 5,763
----- ----- ----- -----
FFO Contribution
from investment
in Hotel del
Coronado $4,749 $3,687 $8,129 $7,790
====== ====== ====== ======
Spread over
Interest
Debt Rate LIBOR Loan Amount Maturity
---- -------- ----- ----------- --------
January
CMBS Mortgage and Mezzanine 2.34% 208 bp $610,000 2011
January
Revolving Credit Facility 2.76% 250 bp 18,500 2011
628,500
Cash and cash equivalents (24,024)
-------
Net Debt $604,476
========
Effective
LIBOR Cap Notional
Cap Date Rate Amount Maturity
--- ---- --------- --------- --------
CMBS Mortgage and Mezzanine January January
Loan 2010 2.0% $630,000 2011
and Revolving Credit
Facility Cap
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Paris Marriott Champs
Elysees:
Property EBITDA $6,784 $6,119 $15,858 $13,371
Revenue (a) $6,784 $6,119 $15,858 $13,371
Lease Expense (3,076) (3,136) (8,915) (8,983)
Less: Deferred Gain on
Sale Leaseback (1,088) (1,202) (3,321) (3,448)
------ ------ ------ ------
Adjusted Lease Expense (4,164) (4,338) (12,236) (12,431)
EBITDA Contribution
from Leasehold $2,620 $1,781 $3,622 $940
====== ====== ====== ====
Marriott Hamburg:
Property EBITDA $1,620 $1,505 $4,369 $4,280
Revenue (a) $1,108 $1,224 $3,383 $3,513
Lease Expense (1,106) (1,219) (3,396) (3,497)
Less: Deferred Gain on
Sale Leaseback (51) (55) (154) (159)
Adjusted Lease Expense (1,157) (1,274) (3,550) (3,656)
EBITDA Contribution
from Leasehold $(49) $(50) $(167) $(143)
==== ==== ===== =====
Total Leaseholds:
Property EBITDA $8,404 $7,624 $20,227 $17,651
Revenue (a) $7,892 $7,343 $19,241 $16,884
Lease Expense (4,182) (4,355) (12,311) (12,480)
Less: Deferred Gain on
Sale Leaseback (1,139) (1,257) (3,475) (3,607)
Adjusted Lease Expense (5,321) (5,612) (15,786) (16,087)
EBITDA Contribution
from Leaseholds $2,571 $1,731 $3,455 $797
====== ====== ====== ====
September December
30, 31,
Security Deposits (b): 2010 2009
---- ----
Paris Marriott Champs
Elysees $14,137 $10,720
Marriott Hamburg 2,590 7,158
Total $16,727 $17,878
======= =======
(a) For the three and nine months ended September 30, 2010 and 2009,
Revenue for the Paris Marriott Champs Elysees represents Property
EBITDA. For the three and nine months ended September 30, 2010 and
2009, Revenue for the Marriott Hamburg represents lease revenue.
(b) The security deposits are recorded in other assets on the
consolidated balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
In addition to REIT hotel income, five other non-GAAP financial measures
are presented for the Company that we believe are useful to management
and investors as key measures of our operating performance: Funds from
Operations (FFO); FFO - Fully Diluted; Comparable FFO; Earnings Before
Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and
Comparable EBITDA. A reconciliation of these measures to net loss
attributable to SHR common shareholders, the most directly comparable
GAAP measure, is set forth in the following tables.
We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, which adopted a
definition of FFO in order to promote an industry-wide standard measure
of REIT operating performance. NAREIT defines FFO as net income (or
loss) (computed in accordance with GAAP) excluding losses or gains from
sales of depreciable property plus real estate-related depreciation and
amortization, and after adjustments for our portion of these items
related to unconsolidated partnerships and joint ventures. We also
present FFO - Fully Diluted, which is FFO plus income or loss on income
attributable to convertible noncontrolling interests. We also present
Comparable FFO, which is FFO - Fully Diluted excluding the impact of
any gains or losses on early extinguishment of debt, impairment losses,
foreign currency exchange gains or losses and other non-recurring
charges. We believe that the presentation of FFO, FFO - Fully Diluted
and Comparable FFO provides useful information to management and
investors regarding our results of operations because they are measures
of our ability to fund capital expenditures and expand our business. In
addition, FFO is widely used in the real estate industry to measure
operating performance without regard to items such as depreciation and
amortization. We also present Comparable FFO per diluted share as a
non-GAAP measure of our performance. We calculate Comparable FFO per
diluted share for a given operating period as our Comparable FFO (as
defined above) divided by the weighted average of fully diluted shares
outstanding. Comparable FFO per diluted share, in accordance with
NAREIT, is adjusted for the effects of dilutive securities. Dilutive
securities may include shares granted under share-based compensation
plans, operating partnership units and exchangeable debt securities. No
effect is shown for securities that are anti-dilutive.
EBITDA represents net loss attributable to SHR common shareholders
excluding: (i) interest expense, (ii) income taxes, including deferred
income tax benefits and expenses applicable to our foreign subsidiaries
and income taxes applicable to sale of assets; and (iii) depreciation
and amortization. EBITDA also excludes interest expense, income taxes
and depreciation and amortization of our equity method investments.
EBITDA is presented on a full participation basis, which means we have
assumed conversion of all convertible noncontrolling interests of our
operating partnership into our common stock and includes preferred
dividends. We believe this treatment of noncontrolling interests
provides more useful information for management and our investors and
appropriately considers our current capital structure. We also present
Comparable EBITDA, which eliminates the effect of realizing deferred
gains on our sale leasebacks, as well as the effect of gains or losses
on sales of assets, early extinguishment of debt, impairment losses,
foreign currency exchange gains or losses and other non-recurring
charges. We believe EBITDA and Comparable EBITDA are useful to
management and investors in evaluating our operating performance because
they provide management and investors with an indication of our ability
to incur and service debt, to satisfy general operating expenses, to
make capital expenditures and to fund other cash needs or reinvest cash
into our business. We also believe they help management and investors
meaningfully evaluate and compare the results of our operations from
period to period by removing the impact of our asset base (primarily
depreciation and amortization) from our operating results. Our
management also uses EBITDA and Comparable EBITDA as measures in
determining the value of acquisitions and dispositions.
We caution investors that amounts presented in accordance with our
definitions of FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA may not be comparable to similar measures disclosed by
other companies, since not all companies calculate these non-GAAP
measures in the same manner. FFO, FFO - Fully Diluted, Comparable FFO,
EBITDA, and Comparable EBITDA should not be considered as an alternative
measure of our net loss or operating performance. FFO, FFO - Fully
Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may include funds
that may not be available for our discretionary use due to functional
requirements to conserve funds for capital expenditures and property
acquisitions and other commitments and uncertainties. Although we
believe that FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA can enhance your understanding of our financial
condition and results of operations, these non-GAAP financial measures,
when viewed individually, are not necessarily a better indicator of any
trend as compared to comparable GAAP measures such as net loss
attributable to SHR common shareholders. In addition, you should be
aware that adverse economic and market conditions might negatively
impact our cash flow. We have provided a quantitative reconciliation of
FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA
to the most directly comparable GAAP financial performance measure,
which is net loss attributable to SHR common shareholders.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
EBITDA and Comparable EBITDA
(in thousands)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Net loss attributable to SHR
common shareholders $(39,401) $(73,461)
Depreciation and
amortization -continuing
operations 32,779 34,421
Depreciation and
amortization -discontinued
operations 1,289 3,943
Interest expense -
continuing operations 22,118 24,635
Interest expense -
discontinued operations 2,378 2,268
Income taxes -continuing
operations 407 (236)
Income taxes -discontinued
operations (10) (122)
Noncontrolling interests (192) (844)
Adjustments from
consolidated affiliates (1,978) (2,508)
Adjustments from
unconsolidated affiliates 4,332 4,612
Preferred shareholder
dividends 7,721 7,721
----- -----
EBITDA 29,443 429
Realized portion of deferred
gain on sale leasebacks (1,139) (1,257)
Loss on sale of assets -
continuing operations - -
Gain on sale of assets -
discontinued operations - -
Impairment losses and other
charges -continuing
operations - -
Impairment losses and other
charges -discontinued
operations - 30,795
Impairment losses and other
charges -adjustments from
consolidated affiliates - -
Loss on early extinguishment
of debt 39 -
Loss on early termination of
derivative financial
instruments - -
Foreign currency exchange
loss -continuing
operations (a) 134 379
Foreign currency exchange
loss (gain) -discontinued
operations (a) 5,094 814
Comparable EBITDA $33,571 $31,160
======= =======
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Net loss attributable to SHR
common shareholders $(127,102) $(202,633)
Depreciation and
amortization -continuing
operations 99,906 98,047
Depreciation and
amortization -discontinued
operations 3,702 9,631
Interest expense -
continuing operations 68,488 70,674
Interest expense -
discontinued operations 7,716 6,454
Income taxes -continuing
operations 1,359 2,515
Income taxes -discontinued
operations (327) (2,091)
Noncontrolling interests (879) (2,297)
Adjustments from
consolidated affiliates (5,596) (6,813)
Adjustments from
unconsolidated affiliates 11,890 12,436
Preferred shareholder
dividends 23,164 23,164
------ ------
EBITDA 82,321 9,087
Realized portion of deferred
gain on sale leasebacks (3,475) (3,607)
Loss on sale of assets -
continuing operations - 5
Gain on sale of assets -
discontinued operations (1,237) -
Impairment losses and other
charges -continuing
operations - 50,214
Impairment losses and other
charges -discontinued
operations - 30,795
Impairment losses and other
charges -adjustments from
consolidated affiliates - (169)
Loss on early extinguishment
of debt 925 883
Loss on early termination of
derivative financial
instruments 18,263 -
Foreign currency exchange
loss -continuing
operations (a) 1,399 1,233
Foreign currency exchange
loss (gain) -discontinued
operations (a) (7,495) (946)
Comparable EBITDA $90,701 $87,495
======= =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
Funds From Operations (FFO), FFO - Fully Diluted and Comparable FFO
(in thousands, except per share data)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Net loss attributable to SHR
common shareholders $(39,401) $(73,461)
Depreciation and
amortization -continuing
operations 32,779 34,421
Depreciation and
amortization -discontinued
operations 1,289 3,943
Corporate depreciation (304) (305)
Loss on sale of assets -
continuing operations - -
Gain on sale of assets -
discontinued operations - -
Realized portion of deferred
gain on sale leasebacks (1,139) (1,257)
Deferred tax expense on
realized portion of
deferred gain on sale
leasebacks 340 375
Noncontrolling interests
adjustments (230) (511)
Adjustments from
consolidated affiliates (1,342) (1,956)
Adjustments from
unconsolidated affiliates 2,047 1,970
----- -----
FFO (5,961) (36,781)
Convertible noncontrolling
interests 38 (333)
--- ----
FFO - Fully Diluted (5,923) (37,114)
Impairment losses and other
charges -continuing
operations - -
Impairment losses and other
charges -discontinued
operations - 30,795
Impairment losses and other
charges -adjustments from
consolidated affiliates - -
Non-cash mark to market of
interest rate swaps 5,597 -
Loss on early extinguishment
of debt 39 -
Loss on early termination of
derivative financial
instruments - -
Foreign currency exchange
loss (a) -continuing
operations 134 379
Foreign currency exchange
loss (gain), net of tax (a)
-discontinued operations 5,083 758
Comparable FFO $4,930 $(5,182)
====== =======
Comparable FFO per diluted
share $0.03 $(0.07)
===== ======
Weighted average diluted
shares 153,093 75,441
======= ======
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Net loss attributable to SHR
common shareholders $(127,102) $(202,633)
Depreciation and
amortization -continuing
operations 99,906 98,047
Depreciation and
amortization -discontinued
operations 3,702 9,631
Corporate depreciation (914) (913)
Loss on sale of assets -
continuing operations - 5
Gain on sale of assets -
discontinued operations (1,237) -
Realized portion of deferred
gain on sale leasebacks (3,475) (3,607)
Deferred tax expense on
realized portion of
deferred gain on sale
leasebacks 1,036 1,076
Noncontrolling interests
adjustments (937) (1,440)
Adjustments from
consolidated affiliates (4,644) (5,648)
Adjustments from
unconsolidated affiliates 6,099 5,859
----- -----
FFO (27,566) (99,623)
Convertible noncontrolling
interests 58 (857)
--- ----
FFO - Fully Diluted (27,508) (100,480)
Impairment losses and other
charges -continuing
operations - 50,214
Impairment losses and other
charges -discontinued
operations - 30,795
Impairment losses and other
charges -adjustments from
consolidated affiliates - (169)
Non-cash mark to market of
interest rate swaps 9,778 -
Loss on early extinguishment
of debt 925 883
Loss on early termination of
derivative financial
instruments 18,263 -
Foreign currency exchange
loss (a) -continuing
operations 1,399 1,233
Foreign currency exchange
loss (gain), net of tax (a)
-discontinued operations (7,520) (1,512)
Comparable FFO $(4,663) $(19,036)
======= ========
Comparable FFO per diluted
share $(0.04) $(0.25)
====== ======
Weighted average diluted
shares 113,237 75,265
======= ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
Loan
Spread
Debt Interest Rate (a) Amount Maturity (b)
---- ------------- ------ ------ ------------
Bank credit
facility 4.01% 375 bp $36,000 March 2011
Fairmont September
Scottsdale 0.82% 56 bp 180,000 2011
InterContinental
Chicago 1.32% 106 bp 121,000 October 2011
InterContinental
Miami 0.99% 73 bp 90,000 October 2011
Loews Santa Monica
Beach Hotel 0.89% 63 bp 118,250 March 2012
Ritz-Carlton Half
Moon Bay 0.93% 67 bp 76,500 March 2012
Hyatt Regency La September
Jolla 1.26% 100 bp 97,500 2012
Marriott London
Grosvenor Square 110 bp
(c) 1.83% (c) 118,131 October 2013
InterContinental 120 bp
Prague (d) 2.09% (d) 138,511 March 2015
Westin St. Francis 6.09% Fixed 220,000 June 2017
Fairmont Chicago 6.09% Fixed 97,750 June 2017
------
$1,293,642
==========
(a) Spread over LIBOR (0.26% at September 30, 2010).
(b) Includes extension options, excluding the conditional one-year
extension option on the bank credit facility.
(c) Principal balance of BPS 75,190,000 at September 30, 2010.
Spread over three-month GBP LIBOR (0.73% at September 30, 2010).
(d) Principal balance of EUR 101,600,000 at September 30, 2010.
Spread over three-month EURIBOR (0.89% at September 30, 2010). The
spread increases to 180 basis points in March 2012 through the
maturity date. As of September 30, 2010, the mortgage debt
outstanding has been reclassified to liabilities of assets held for
sale.
Domestic and European Interest Rate Swaps
Fixed Pay R
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