DiamondRock Hospitality Company Reports Third Quarter 2010 Results
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DiamondRock Hospitality Company Reports Third Quarter 2010 Results
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Catégorie : Monde - Économie du secteur
- Chiffres et études
Ceci est un communiqué de presse sélectionné par notre comité éditorial et mis en ligne gratuitement le 20-10-2010
DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced results of operations for its third fiscal quarter ended September 10, 2010. The Company is a lodging focused real estate investment trust that owns twenty-three premium hotels in North America and holds a senior loan secured by another premium hotel.
Third Quarter 2010 Highlights
-- Acquisition of Hilton Garden Inn Chelsea: The Company acquired the
169-room Hilton Garden Inn Chelsea located in New York, New York for a
total investment of $69 million.
-- Acquisition of Renaissance Charleston: The Company acquired the 166-room
Renaissance Charleston Historic District Hotel in Charleston, South
Carolina for a total investment of $40 million.
-- New Credit Facility: The Company amended and restated its $200 million
senior unsecured revolving credit facility that now matures in 2014,
including a one year extension option.
-- Frenchman's Reef Capital Investment Program: The Company is introducing
plans to undertake a comprehensive $45 million renovation and
repositioning of the Frenchman's Reef & Morning Star Marriott Beach
Resort.
-- Pro Forma RevPAR: The Company's Pro Forma RevPAR was $113.38, an
increase of 5.0 percent from the comparable period in 2009. Pro Forma
RevPAR is calculated assuming the Company owned all of its 23 hotels for
the entire third quarters of 2010 and 2009.
-- Pro Forma Hotel Adjusted EBITDA Margins: The Company's Pro Forma Hotel
Adjusted EBITDA margin was 23.75% an increase of 33 basis points from
the comparable period in 2009. Pro Forma Hotel Adjusted EBITDA margin
is calculated assuming the Company owned all of its 23 hotels for the
entire third quarters of 2010 and 2009.
-- Adjusted EBITDA: The Company's Adjusted EBITDA was $33.0 million.
-- Adjusted FFO: The Company's Adjusted FFO was $22.4 million and Adjusted
FFO per diluted share was $0.15.
Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company, stated, "The positive third quarter results reaffirm our conviction that a sustainable lodging recovery continues to build momentum. Our results would have been even stronger but for difficult comparisons at the Westin Boston, which held back our RevPAR growth by 180 basis points and profit margins by 100 basis points. However, our 2010 acquisitions performed exceptionally well. The Hilton Minneapolis and the Hilton Garden Inn New York City both had robust RevPAR increases of over 20%. Our third acquisition, the Renaissance Charleston had strong RevPAR growth of 13% during the quarter. DiamondRock is well positioned to actively pursue additional attractive acquisition opportunities as a result of our strong balance sheet, new corporate revolver, thirteen unencumbered hotels, and over $90 million of unrestricted corporate cash at year end."
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." Moreover, the discussions of "Pro Forma RevPAR" and "Pro Forma Hotel Adjusted EBITDA Margins" assume the Company owned all of its 23 hotels since January 1, 2009. All other discussions of RevPAR and Hotel Adjusted EBITDA Margins assume that the three acquired hotels were owned by the Company for the period of 2009 comparable to its 2010 ownership period.
For the third quarter beginning June 19, 2010 and ended September 10, 2010, the Company reported the following:
-- Pro Forma RevPAR increase of 5.0% and Pro Forma Hotel Adjusted EBITDA
margins increase of 33 basis points.
-- Revenues of $151.1 million compared to $137.8 million for the comparable
period in 2009.
-- Adjusted EBITDA of $33.0 million compared to $27.5 million for the
comparable period in 2009.
-- Adjusted FFO and Adjusted FFO per diluted share of $22.4 million and
$0.15, respectively, compared to $21.0 million and $0.19, respectively,
for the comparable period in 2009.
-- Net loss of $3.5 million (or $0.02 per diluted share) compared to net
income of $0.8 million (or $0.01 per diluted share) for the comparable
period in 2009.
The Boston Westin, which had a difficult prior year comparison due to gaining 15 percent market share during the 2009 third quarter, negatively impacted the Company's Pro Forma RevPAR growth by 180 basis points and the change in Pro Forma Hotel Adjusted EBITDA margins by approximately 100 basis points.
Including new acquisitions only for the Company's 2010 ownership period, third quarter RevPAR increased 4.4 percent (from $107.25 to $111.94) from the comparable period in 2009, driven by a 1.5 percentage point increase in occupancy (from 73.5 percent to 75.0 percent) and a 2.3 percent increase in the average daily rate (from $145.93 to $149.35). Hotel Adjusted EBITDA margins increased 35 basis points (from 23.10% to 23.45%) from the comparable period in 2009.
For the period from January 1, 2010 to September 10, 2010, the Company reported the following:
-- Pro Forma RevPAR increase of 3.3% and Pro Forma Hotel Adjusted EBITDA
margins increase of 42 basis points.
-- Revenues of $415.1 million compared to $400.0 million for the comparable
period in 2009.
-- Adjusted EBITDA of $87.3 million compared to $80.5 million for the
comparable period in 2009.
-- Adjusted FFO and Adjusted FFO per diluted share of $56.0 million and
$0.40, respectively, compared to $60.6 million and $0.60, respectively,
for the comparable period in 2009.
-- Net loss of $11.0 million (or $0.08 per diluted share) compared to $2.1
million (or $0.02 per diluted share) for the comparable period in 2009.
Including new acquisitions only for the Company's 2010 ownership period, year-to-date RevPAR increased 2.7 percent (from $105.51 to $108.34) from the comparable period in 2009, driven by a 2.3 percent increase in occupancy (from 69.0 percent to 71.3 percent) partially offset by a 0.7 percent decrease in the average daily rate (from $152.98 to $151.94). Year-to-date Hotel Adjusted EBITDA margins increased 17 basis points (from 23.02% to 23.19%) from the comparable period in 2009.
2010 Acquisitions
On June 17, 2010, the Company acquired the 821-room Hilton Minneapolis in Minneapolis, Minnesota, for total consideration of approximately $157 million. The Minneapolis hotel market continued its dynamic growth in the third quarter with Hilton Minneapolis RevPAR growth of approximately 20%. The growth outlook for this hotel remains strong as evidenced by the 2011 booking pace up over 12% compared to the same time last year.
On August 6, 2010, the Company acquired the 166-room Renaissance Charleston Historic District Hotel in Charleston, South Carolina for total consideration of approximately $40 million. The "off-market" acquisition was sourced through the Company's strategic sourcing relationship with Marriott International, Inc. The hotel is located in Charleston's historic district and is proximate to historical attractions, shopping and dining in downtown Charleston. The hotel experienced RevPAR growth in the third quarter of approximately 13%. In addition, the demand from Boeing continued to accelerate during the third quarter as the construction on the Dreamliner production plant in Charleston progressed.
On September 8, 2010, the Company acquired the 169-room Hilton Garden Inn Chelsea located in New York City for total consideration of approximately $69 million. The Company retained the existing manager subject to a new, short-term management agreement. The hotel is recently constructed and opened during the fourth quarter of 2007. The hotel benefited from the continuing resurgence in the New York City hotel market, with RevPAR growth of over 20% in the third quarter. Moreover, the hotel's outlook for the fourth quarter is very strong, as evidenced by the forecasted fourth quarter RevPAR growth of over 20%.
New Line of Credit
On August 6, 2010, the Company amended and restated its $200 million senior unsecured revolving credit facility for a new term of 36 months. The interest rate for the credit facility ranges from 275 to 375 basis points over LIBOR, depending on the Company's leverage. The credit facility has a LIBOR floor of 100 basis points. The facility may be increased to $275 million with the lenders' consent. The Company may extend the maturity date of the credit agreement for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions.
Frenchman's Reef Capital Investment Program
The Company recently completed a comprehensive evaluation of a major capital investment program at the Frenchman's Reef & Morning Star Marriott Beach Resort. The Company plans to undertake a $45 million renovation and repositioning program in order to enhance all aspects of the guest experience. The Company expects the project to improve the operating performance of the hotel, which is expected to generate an internal rate of return on investment greater than 20%.
The repositioning program is projected to include the following key elements:
-- Reinvented Pool - The Company is planning a major redesign of the pool
with state of the art features, including multiple pools, cascading
waterfalls, bali beds, a sundeck and a new swim-up bar to provide a
premium resort experience.
-- Guestroom Renovation - Each of the guestrooms and bathrooms is expected
to feature new modern design elements to enhance lighting, comfort and
feel. The renowned interior design firm, Leo Daly, is the designer for
the new guestrooms and bathrooms.
-- Spa Upgrade and Expansion - The Company plans to reinvent and double the
size of the existing spa. The plans incorporate the creation of a
dedicated spa pool, additional treatment rooms, and visual and sensual
elements appropriate for a resort spa experience.
-- Infrastructure Improvements - The Company intends to invest $15 million
to comprehensively redesign the mechanical plant to allow the hotel to
generate its own electricity, improve air flow in common spaces and
replace packaged terminal air conditioners in the guestrooms with a
central system. These enhancements are expected to greatly reduce the
energy consumption and cost per kilowatt hour and generate a significant
return on investment while dramatically improving guest comfort.
-- Other Resort Upgrades - In addition to the above, the Company intends to
provide for upgrades to the food and beverage outlets, renovation of the
main ballroom, balcony upgrades, renovations to the boat dock and
improvements to other facilities designed to enhance the guest
experience.
The Company expects the majority of the renovation and repositioning will occur during the summer of 2011 when the Company will close two of the resort's four buildings (approximately 300 guestrooms) during the seasonally slow period between May and September. During this time, the Company expects renovation disruption to operations resulting from the partial closure, decreasing the Company's EBITDA by several million dollars compared to the comparable period in 2010.
The Company intends to fund the renovation and repositioning program from available corporate cash and borrowings under its credit facility. Marriott International has agreed pursuant to a non-binding term sheet to fund a portion of the expense, demonstrating its commitment to Frenchman's Reef. In addition to the funding from Marriott and existing escrow reserves, the Company expects its total cash expenditure to be approximately $35 million over the next two years.
Elements of the renovation and repositioning program began during the Company's fiscal third quarter 2010. In order to take advantage of the low occupancy summer months, the Company started several projects in the Sea Cliff tower in August 2010, including installation of a new roof, tile surrounds in the guest bathrooms and balcony upgrades. The hotel was damaged by Hurricane Earl, which hit the U.S. Virgin Islands during the Sea Cliff construction. The remediation costs related to the damage caused by Hurricane Earl were below the Company's insurance policy deductible for damages from a named windstorm event. The Company accrued $1.4 million during the third quarter for remediation costs from Hurricane Earl damage, which is being added back to Adjusted EBITDA and Adjusted FFO due to the unusual nature of these costs.
Frenchman's Reef Tax Agreement
The Company was party to a tax agreement with the USVI that reduced the income tax rate for Frenchman's Reef to approximately 4%. This agreement expired in February 2010, at which time the income tax rate increased to 37.4%. On October 9, 2010, the USVI Economic Development Authority recommended the approval of the extension of our tax agreement for a period of 5 years, retroactive to February 2010 and subject to another renewal in February 2015. The extension is expected to be sent to the Governor of USVI for final approval and execution. If the agreement is not extended, Frenchman's Reef will continue to be subject to an income tax rate of 37.4%.
Allerton Mortgage Loan
The Company continues to pursue the foreclosure proceedings initially filed in April 2010 which would result in DiamondRock owning the hotel. However, no assurance can be given that the foreclosure proceedings will be successful. The matter may be resolved without foreclosure if the borrower repays the senior loan in full. Recognition of interest income on the Allerton loan is dependent upon having a reasonable expectation about the timing and amount of cash payments expected to be collected from the borrower. Due to the uncertainty of the timing and amount of cash payments expected, the Company is not accruing any interest income on the Allerton loan. However, the Company includes all cash received from the senior loan on the Allerton in its calculations of Adjusted EBITDA and Adjusted FFO. As of the end of the third quarter, the Company had received cash interest payments from the borrower totaling $1.3 million. Subsequent to the end of the third quarter, the Company received an additional $0.5 million in cash interest payments. The Company's 2010 Adjusted EBITDA and Adjusted FFO guidance assumes $2.5 million of cash received as payment of interest on the Allerton loan.
Balance Sheet
As of the end of the third quarter, the Company has approximately $61.3 million of unrestricted cash on hand and $782.7 million of debt outstanding, which consists solely of fixed rate, property-specific mortgage debt with no near-term maturities. Thirteen of the Company's 23 hotels are unencumbered by mortgage debt and the Company's $200 million senior unsecured credit facility is unused. The Company currently forecasts to end the year with approximately $90 million of unrestricted corporate cash.
The Company continues to maintain its straightforward capital structure. As of September 10, 2010, the Company had no preferred equity outstanding and continued to own 100% of its properties directly.
Outlook and Guidance
The Company is providing guidance, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the Securities and Exchange Commission. The RevPAR guidance assumes that the acquired hotels were owned by the Company for the prior year comparable periods.
For the fourth quarter 2010, the Company expects:
-- RevPAR growth of 5.0 percent to 7.5 percent.
-- Adjusted EBITDA of $47 million to $50 million.
-- Adjusted FFO of $30 million to $32 million.
-- Adjusted FFO per share of $0.19 to $0.21 based on 154.6 million diluted
weighted average shares.
For the full year 2010, the Company increased its guidance as follows:
-- RevPAR growth of 3 percent to 5 percent.
-- Adjusted EBITDA of $135 million to $138 million.
-- Adjusted FFO of $88 million to $90 million, which assumes income tax
expense to range from $1.5 million to $2.5 million.
-- Adjusted FFO per share of $0.61 to $0.62 based on 144.4 million diluted
weighted average shares.
Earnings Call
The Company will host a conference call to discuss its third quarter results on Tuesday, October 19, 2010, at 10:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 888-713-4215 (for domestic callers) or 617-213-4847 (for international callers). The participant passcode is 20971758. 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.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of premium hotel properties. The Company owns 23 hotels with over 10,700 rooms and holds the senior loan on a 443-room hotel. For further information, please visit DiamondRock Hospitality Company's website at www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "believe," "expect," "intend," "project," "forecast," "plan" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at the Company's hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company's indebtedness; relationships with property managers; the ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; risks associated with the foreclosure proceedings on the Allerton Hotel; risks associated with the planned renovation and repositioning of the Frenchman's Reef & Morning Star Marriott Beach Resort and other risk factors contained in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
Reporting Periods for Statement of Operations
The results reported in the Company's consolidated statements of operations are based on results of its hotels reported by hotel managers. The Company's hotel managers use different reporting periods. Marriott International, the manager of most of the Company's properties, uses a fiscal year ending on the Friday closest to December 31 and reports 12 weeks of operations for the first three quarters and 16 or 17 weeks for the fourth quarter of the year for its domestic managed hotels. In contrast, Marriott International for its non-domestic hotels (including Frenchman's Reef), Davidson Hotel Company, manager of the Westin Atlanta North, Vail Resorts, manager of the Vail Marriott, Hilton Hotels Corporation, manager of the Conrad Chicago and the Hilton Minneapolis, Westin Hotel Management, L.P., manager of the Westin Boston Waterfront and Alliance Hospitality Management, manager of the Hilton Garden Inn Chelsea report results on a monthly basis. Additionally, the Company, as a REIT, is required by U.S. federal tax laws to report results on a calendar year basis. As a result, the Company has adopted the reporting periods used by Marriott International for its domestic hotels, except that the fiscal year always ends on December 31 to comply with REIT rules. The first three fiscal quarters end on the same day as Marriott International's fiscal quarters but the fourth quarter ends on December 31 and full year results, as reported in the statement of operations, always include the same number of days as the calendar year.
Two consequences of the reporting cycle the Company has adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) the first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years.
While the reporting calendar the Company adopted is more closely aligned with the reporting calendar used by the manager of most of its properties, one final consequence of the calendar is the Company is unable to report any results for Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, Westin Boston Waterfront, Hilton Minneapolis or Hilton Garden Inn Chelsea for the month of operations that ends after its fiscal quarter-end because none of Vail Resorts, Davidson Hotel Company, Hilton Hotels Corporation, Westin Hotel Management, L.P., Alliance Hospitality Management and Marriott International make mid-month results available. As a result, the quarterly results of operations include results from Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, Westin Boston Waterfront, Hilton Minneapolis and Hilton Garden Inn Chelsea as follows: first quarter (January and February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.
Ground Leases
Five of the Company's hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, Salt Lake City Downtown Marriott, Westin Boston Waterfront and Hilton Minneapolis. In addition, part of a parking structure at a sixth hotel and the golf courses at two additional hotels are also subject to ground leases. In accordance with U.S. generally accepted accounting principles, the Company records rent expense on a straight-line basis for ground leases that provide minimal rental payments that increase in pre-established amounts over the remaining term of the ground lease. For the third quarter 2010, contractual cash rent payable on the ground leases totaled $1.5 million and the Company recorded approximately $3.1 million in ground rent expense. The non-cash portion of ground rent expense recorded for the third quarter 2010 was $1.5 million.
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 10, 2010 and December 31, 2009
(in thousands, except share amounts)
ASSETS
September 10, December 31,
2010 2009
-------------- -------------
(Unaudited)
Property and equipment, at
cost $2,446,205 $2,171,311
Less: accumulated
depreciation (367,890) (309,224)
-------- --------
2,078,315 1,862,087
Deferred financing costs, net 6,040 3,624
Restricted cash 48,242 31,274
Due from hotel managers 70,172 45,200
Note receivable 59,365 -
Favorable lease assets, net 42,880 37,319
Prepaid and other assets 56,110 58,607
Cash and cash equivalents 61,281 177,380
------ -------
Total assets $2,422,405 $2,215,491
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Mortgage debt $782,656 $786,777
Senior unsecured credit
facility - -
--- ---
Total debt 782,656 786,777
Deferred income related to
key money, net 19,373 19,763
Unfavorable contract
liabilities, net 84,181 82,684
Due to hotel managers 41,529 29,847
Dividends declared and unpaid - 41,810
Accounts payable and accrued
expenses 84,063 79,104
------ ------
Total other liabilities 229,146 253,208
------- -------
Stockholders' Equity:
Preferred stock, $.01 par
value; 10,000,000 shares
authorized; no shares issued
and outstanding - -
Common stock, $.01 par value;
200,000,000 shares
authorized; 154,570,543 and
124,299,423 shares issued
and outstanding at September
10, 2010 and December 31,
2009, respectively 1,546
1,243
Additional paid-in capital 1,557,002 1,311,053
Accumulated deficit (147,945) (136,790)
-------- --------
Total stockholders' equity 1,410,603 1,175,506
--------- ---------
Total liabilities and
stockholders' equity $2,422,405 $2,215,491
========== ==========
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended September 10, 2010 and September 11,
2009 and
the Periods from January 1, 2010 to September 10, 2010 and January 1,
2009 to September 11, 2009
(in thousands, except per share amounts)
Fiscal Quarter Fiscal Quarter
Ended Ended
September 10, September 11,
2010 2009
(Unaudited) (Unaudited)
Revenues:
Rooms $99,703 $88,318
Food and
beverage 43,370 40,836
Other 8,040 8,646
Total revenues 151,113 137,800
Operating
Expenses:
Rooms 26,979 23,912
Food and
beverage 30,534 29,068
Management fees 5,080 4,907
Other hotel
expenses 55,613 50,161
Impairment of
favorable
lease asset - -
Depreciation
and
amortization 21,297 18,866
Hotel
acquisition
costs 899 -
Corporate
expenses 3,948 3,675
Total operating
expenses 144,350 130,589
Operating
profit 6,763 7,211
Other Expenses
(Income):
Interest income (283) (82)
Interest
expense 11,240 11,090
Total other
expenses 10,957 11,008
Loss before
income taxes (4,194) (3,797)
Income tax
benefit
(expense) 660 4,558
Net (loss)
income $(3,534) $761
Earnings (loss)
per share:
Basic and
diluted
earnings
(loss) per
share $(0.02) $0.01
Period from Period from
January 1, January 1, 2009
2010 to to
September 10, September 11,
2010 2009
(Unaudited) (Unaudited)
Revenues:
Rooms $267,081 $253,661
Food and
beverage 126,620 122,423
Other 21,364 23,866
Total revenues 415,065 399,950
Operating
Expenses:
Rooms 71,510 66,868
Food and
beverage 86,748 85,969
Management fees 13,634 13,243
Other hotel
expenses 152,232 146,701
Impairment of
favorable
lease asset - 1,286
Depreciation
and
amortization 59,278 57,312
Hotel
acquisition
costs 1,236 -
Corporate
expenses 10,859 11,094
Total operating
expenses 395,497 382,473
Operating
profit 19,568 17,477
Other Expenses
(Income):
Interest income (650) (265)
Interest
expense 30,455 33,673
Total other
expenses 29,805 33,408
Loss before
income taxes (10,237) (15,931)
Income tax
benefit
(expense) (803) 13,856
Net (loss)
income $(11,040) $(2,075)
Earnings (loss)
per share:
Basic and
diluted
earnings
(loss) per
share $(0.08) $(0.02)
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods from January 1, 2010 to September 10, 2010 and
January 1, 2009 to September 11, 2009
(in thousands)
Period from Period from
January 1, 2010 January 1,
to 2009 to
September 10, September
2010 11, 2009
Cash flows from operating activities: (Unaudited) (Unaudited)
Net loss $(11,040) $(2,075)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Real estate depreciation 59,278 57,312
Corporate asset depreciation as
corporate expenses 110 101
Non-cash ground rent 5,104 5,350
Non-cash financing costs as interest 804 556
Non-cash reversal of penalty
interest (3,134) -
Impairment of favorable lease asset - 1,286
Amortization of unfavorable contract
liabilities (1,203) (1,190)
Amortization of deferred income (390) (391)
Stock-based compensation 2,794 3,892
Changes in assets and liabilities:
Prepaid expenses and other assets 2,482 (1,982)
Restricted cash (3,892) (1,700)
Due to/from hotel managers (11,765) 4,958
Accounts payable and accrued expenses 3,368 (16,235)
Net cash provided by operating
activities 42,516 49,882
Cash flows from investing activities:
Hotel capital expenditures (16,154) (17,735)
Hotel acquisitions (265,998) -
Purchase of mortgage loan (60,615) -
Cash received from mortgage loan 1,250 -
Change in restricted cash (11,290) (2,702)
Net cash used in investing activities (352,807) (20,437)
Cash flows from financing activities:
Repayments of credit facility - (57,000)
Proceeds from mortgage debt - 43,000
Repayment of mortgage debt - (40,528)
Scheduled mortgage debt principal
payments (4,121) (2,972)
Repurchase of common stock (3,961) (309)
Proceeds from sale of common stock,
net 209,817 134,878
Payment of financing costs (3,220) (1,008)
Payment of cash dividends (4,323) (80)
Net cash provided by financing
activities 194,192 75,981
Net (decrease) increase in cash and
cash equivalents (116,099) 105,426
Cash and cash equivalents, beginning
of period 177,380 13,830
Cash and cash equivalents, end of
period $61,281 $119,256
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $33,381 $35,905
Cash paid for income taxes $642 $901
Non-GAAP Financial Measures
The Company uses the following four non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) EBITDA, (2) FFO, (3) Adjusted EBITDA and (4) Adjusted FFO.
EBITDA represents net (loss) income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company believes EBITDA is useful to an investor in evaluating its operating performance because it helps investors evaluate and compare the results of its operations from period to period by removing the impact of the Company's capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization) from its operating results. The Company also uses EBITDA as one measure in determining the value of hotel acquisitions and dispositions.
Historical (in 000s)
---------------------
Fiscal Quarter Ended Period From
-------------------- -----------
September September January 1, January 1,
10, 11, 2010 2009
to September to September
2010 2009 10, 11,
---- ---- 2010 2009
--- ---
Net income (loss) $(3,534) $761 $(11,040) $(2,075)
Interest expense 11,240 11,090 30,455 33,673
Income tax expense
(benefit) (660) (4,558) 803 (13,856)
Depreciation and
amortization 21,297 18,866 59,278 57,312
------ ------ ------ ------
EBITDA $28,343 $26,159 $79,496 $75,054
======= ======= ======= =======
Quarter 4 Forecast 2010 (in Full Year Forecast 2010 (in
000s) 000s)
--------------------------- ---------------------------
Low End High End Low End High End
------- -------- ------- --------
Net income
(loss) $(2,850) $150 $(11,477) $(8,477)
Interest
expense 15,000 15,000 45,500 45,500
Income tax
expense
(benefit) 2,000 3,000 1,500 2,500
Depreciation
and
amortization 30,000 29,000 89,000 88,000
------ ------ ------ ------
EBITDA $44,150 $47,150 $124,523 $127,523
======= ======= ======== ========
The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net (loss) income determined in accordance with GAAP, excluding gains (losses) from sales of property, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its results.
Historical (in 000s)
---------------------
Fiscal Quarter Ended Period From
-------------------- -----------
September September January 1, January 1,
10, 11, 2010 2009
to September to September
2010 2009 10, 11,
---- ---- 2010 2009
--- ----
Net income (loss) $(3,534) $761 $(11,040) $(2,075)
Real estate
related
depreciation and
amortization 21,297 18,866 59,278 57,312
------ ------ ------ ------
FFO $17,763 $19,627 $48,238 $55,237
======= ======= ======= =======
FFO per share
(basic and
diluted) $0.11 $0.18 $0.34 $0.54
===== ===== ===== =====
Quarter 4 Forecast 2010 (in Full Year Forecast 2010 (in
000s) 000s)
--------------------------- ---------------------------
Low End High End Low End High End
------- -------- ------- --------
Net income
(loss) $(2,850) $150 $(11,477) $(8,477)
Real estate
related
depreciation
and
amortization 30,000 29,000 89,000 88,000
------ ------ ------ ------
FFO $27,150 $29,150 $77,523 $79,523
======= ======= ======= =======
FFO per
share
(basic and
diluted) $0.18 $0.19 $0.54 $0.55
===== ===== ===== =====
The Company also evaluates its performance by reviewing Adjusted EBITDA and Adjusted FFO because it believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding the Company's ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), is beneficial to a complete understanding of the Company's operating performance. The Company adjusts EBITDA and FFO for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDA and Adjusted FFO:
-- Non-Cash Ground Rent: The Company excludes the non-cash expense incurred
from straight lining the rent from its ground lease obligations and the
non-cash amortization of its favorable lease assets.
-- The impact of the non-cash amortization of the unfavorable contract
liabilities recorded in conjunction with the Company's acquisitions of
the Bethesda Marriott Suites and the Chicago Marriott Downtown. The
amortization of the unfavorable contract liabilities does not reflect
the underlying performance of the Company.
-- Cumulative effect of a change in accounting principle: Infrequently, the
Financial Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to
reflect the cumulative effect of a change in accounting principle. The
Company excludes these one-time adjustments because they do not reflect
its actual performance for that period.
-- Gains from Early Extinguishment of Debt: The Company excludes the effect
of gains recorded on the early extinguishment of debt because it
believes that including them in EBITDA and FFO is not consistent with
reflecting the ongoing performance of its hotels.
-- Impairment Losses: The Company excludes the effect of impairment losses
recorded because it believes that including them in EBITDA and FFO is
not consistent with reflecting the ongoing performance of its assets.
In addition, the Company believes that impairment charges are similar to
depreciation expense, which is also excluded from EBITDA and FFO.
-- Gains or Losses on Dispositions: The Company excludes the effect of
gains or losses on dispositions from EBITDA because it believes that
including them is not consistent with reflecting the ongoing performance
of its remaining assets. In addition, gains and losses on dispositions
are excluded from the calculation of FFO in accordance with NAREIT
standards.
-- Acquisition Costs: The Company excludes acquisition transaction costs
expensed during the period because it believes that including these
costs in EBITDA and FFO is not consistent with the underlying
performance of the Company.
-- Mortgage Loan Interest Payments Received: The Company includes cash
payments received on its senior loan secured by the Allerton Hotel in
Adjusted EBITDA and Adjusted FFO. GAAP requires the Company to record
the cash received from the borrower as a reduction of its basis in the
mortgage loan due to the uncertainty over the timing and amount of cash
payments on the loan. The Company believes that these cash payments
reflect its return on its investment in the mortgage loan and should be
included in Adjusted EBITDA and Adjusted FFO as they relate to the
operating performance of the Company.
-- Other Non-Cash and / or Unusual Items: The Company excludes the effect
of certain non-cash and/or unusual items because it believes that
including these costs in EBITDA and FFO is not consistent with the
underlying performance of the Company. The Company excluded the
remediation costs incurred in connection with the Hurricane Earl damage
to Frenchman's Reef & Morning Star Marriott Beach Resort due to the
unusual nature of the hurricane damage.
Historical (in 000s)
---------------------
Fiscal Quarter Ended Period From
-------------------- -----------
September September January 1, January 1,
10, 11, 2010 2009
to September to September
2010 2009 10, 11,
---- ---- 2010 2009
--- ----
EBITDA $28,343 $26,159 $79,496 $75,054
Non-cash
ground rent 1,538 1,781 5,104 5,350
Non-cash
amortization
of unfavorable
contract
liabilities (409) (397) (1,203) (1,190)
Hurricane
remediation
expense 1,391 - 1,391 -
Mortgage loan
cash payments 1,250 - 1,250 -
Acquisition
costs 899 - 1,236 -
Impairment of
favorable
lease asset - - - 1,286
--- --- --- -----
Adjusted EBITDA $33,012 $27,543 $87,274 $80,500
======= ======= ======= =======
Quarter 4 Forecast 2010 (in Full Year Forecast 2010 (in
000s) 000s)
--------------------------- ---------------------------
Low End High End Low End High End
------- -------- ------- --------
EBITDA $44,150 $47,150 $124,523 $127,523
Non-cash
ground
rent 2,000 2,000 7,100 7,100
Non-cash
amortization
of
unfavorable
contract
liabilities (400) (400) (1,750) (1,750)
Hurricane
remediation
expense - - 1,391 1,391
Mortgage
loan cash
payments 1,250 1,250 2,500 2,500
Acquisition
costs - - 1,236 1,236
Adjusted
EBITDA $47,000 $50,000 $135,000 $138,000
======= ======= ======== ========
Historical (in 000s)
---------------------
Fiscal Quarter Ended Period From
-------------------- -----------
September September January 1, January 1,
10, 11, 2010 2009
to September to September
2010 2009 10, 11,
---- ---- 2010 2009
---- ---
FFO $17,763 $19,627 $48,238 $55,237
Non-cash
ground rent 1,538 1,781 5,104 5,350
Non-cash
amortization
of unfavorable
contract
liabilities (409) (397) (1,203) (1,190)
Hurricane
remediation
expense 1,391 - 1,391 -
Mortgage loan
cash payments 1,250 - 1,250 -
Acquisition
costs 899 - 1,236 -
Impairment of
favorable
lease asset - - - 1,286
--- --- --- -----
Adjusted FFO $22,432 $21,011 $56,016 $60,683
======= ======= ======= =======
Adjusted FFO
per share
(basic and
diluted) $0.15 $0.19 $0.40 $0.60
===== ===== ===== =====
Quarter 4 Forecast 2010 (in Full Year Forecast 2010 (in
000s) 000s)
--------------------------- ---------------------------
Low End High End Low End High End
------- -------- ------- --------
FFO $27,150 $29,150 $77,523 $79,523
Non-cash
ground
rent 2,000 2,000 7,100 7,100
Non-cash
amortization
of
unfavorable
contract
liabilities (400) (400) (1,750) (1,750)
Hurricane
remediation
expense - - 1,391 1,391
Mortgage
loan cash
payments 1,250 1,250 2,500 2,500
Acquisition
costs - - 1,236 1,236
Adjusted
FFO $30,000 $32,000 $88,000 $90,000
======= ======= ======= =======
Adjusted
FFO per
share
(basic
and
diluted) $0.19 $0.21 $0.61 $0.62
===== ===== ===== =====
Pro Forma Financial Information
The following table presents selected consolidated quarterly financial information on a pro forma basis. The pro forma financial information below includes the operating results for all of the Company's 23 hotels as if they were owned since January 1, 2009.
Consolidated Pro Forma Quarterly Results
----------------------------------------
Quarter 1, Quarter 2, Quarter 3,
2010 2010 2010
----------- ----------- -----------
RevPAR $93.85 $116.51 $113.38
RevPAR Change from 2009 (3.0%) 6.5% 5.0%
Revenues (in thousands) $121,579 $168,544 $157,506
Hotel Adjusted EBITDA
(in thousands) $23,173 $44,964 $37,415
Hotel Adjusted EBITDA
Margin 19.06% 26.68% 23.75%
Hotel Adjusted EBITDA
Margin Change from 2009 (75 bps) 110 bps 33 bps
Available Rooms 825,343 926,516 926,516
Certain Definitions
In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable lease assets, the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown and the Renaissance Charleston and the unusual hurricane damage at the Frenchman's Reef & Morning Star Marriott Beach Resort. Hotel EBITDA represents hotel net income excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.
DIAMONDROCK HOSPITALITY COMPANY
HOTEL OPERATIONAL DATA
Schedule of Property Level Results
(in thousands)
(unaudited)
Fiscal Fiscal %
Quarter Quarter Change
Ended Ended
September 10, September 11,
2010 2009 (1)
Revenues:
Rooms $99,703 $95,532 4.4%
Food and beverage 43,370 43,684 (0.7)%
Other 8,040 9,166 (12.3)%
Total revenues 151,113 148,382 1.8%
Operating
Expenses:
Rooms 26,979 25,619 5.3%
Food and beverage 30,534 30,812 (0.9)%
Other direct
departmental 4,551 4,936 (7.8)%
General and
administrative 13,622 12,897 5.6%
Utilities 6,946 6,489 7.0%
Repairs and
maintenance 7,188 7,105 1.2%
Sales and
marketing 11,398 10,733 6.2%
Base management
fees 4,088 3,945 3.6%
Incentive
management fees 992 1,277 (22.3)%
Property taxes 4,879 5,869 (16.9)%
Ground rent 3,068 3,559 (13.8)%
Other fixed
expenses 3,961 2,509 57.9%
Total operating
expenses 118,206 115,750 2.1%
Hotel EBITDA $32,907 $32,632 0.8%
Non-cash ground
rent 1,538 2,040 (24.6)%
Non-cash
amortization of
unfavorable
contract
liabilities (409) (397) 3.0%
Hurricane expense 1,391 - 100%
Hotel Adjusted
EBITDA $35,427 $34,275 3.4%
%
Period from Period from Change
January 1, January 1,
2010 to 2009 to
September 10,
2010 September
11, 2009 (1)
Revenues:
Rooms $267,081 $260,875 2.4%
Food and beverage 126,620 125,272 1.1%
Other 21,364 24,387 (12.4)%
Total revenues 415,065 410,534 1.1%
Operating
Expenses:
Rooms 71,510 68,570 4.3%
Food and beverage 86,748 87,714 (1.1)%
Other direct
departmental 12,573 13,653 (7.9)%
General and
administrative 37,766 36,425 3.7%
Utilities 17,694 17,296 2.3%
Repairs and
maintenance 20,031 20,132 (0.5)%
Sales and
marketing 30,816 29,582 4.2%
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