BETHESDA, Md., July 26 /PRNewswire-FirstCall/ -- DiamondRock Hospitality Company (the "Company") today announced results of operations for its second fiscal quarter, which ended on June 16, 2006. DiamondRock Hospitality Company is a self-advised real estate investment trust ("REIT") that is an owner and acquirer of premium hotels in North America.
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Second Quarter 2006 Highlights
* RevPAR: Same-store revenue per available room ("RevPAR") increased 11.6
percent over the comparable period in 2005.
* Hotel Profit Margins: Same-store hotel adjusted earnings before interest
expense, taxes, depreciation and amortization ("EBITDA") margins
increased 322 basis points.
* Adjusted EBITDA: The Company's Adjusted EBITDA was $38.4 million.
* Adjusted FFO: The Company generated adjusted funds from operations
("Adjusted FFO") of $27.3 million and Adjusted FFO per share of $0.39.
* Dividend: The Company paid a quarterly dividend of $0.18 per share
during the second quarter.
* Successful Equity Raise: The Company raised net proceeds of $238.2
million in connection with a follow-on equity offering.
* Acquisition of Westin Atlanta North: The Company acquired the 369-room
Westin Atlanta North for $61.5 million from Starwood Hotels & Resorts
Worldwide.
William W. McCarten, chairman and chief executive officer, stated, "Our second quarter results were outstanding and demonstrate the continued strength of the lodging recovery and our portfolio quality. Performance was particularly strong in New York, California, downtown Chicago and the Caribbean. Ten of our seventeen hotels reported double digit RevPAR growth and margin expansion was excellent. We remain confident about our outlook for the balance of the year."
Comparison with Prior Second Quarter Guidance
Prior Second Qtr Actual Second Qtr
Guidance Results
RevPAR Growth 9% to 10% 11.6 %
Hotel Adjusted EBITDA
Margins 110 to 150 basis points 322 basis points
Adjusted EBITDA $33 to $35 million $38.4 million
Adjusted FFO $22.5 to $24.5 million $27.3 million
Adjusted FFO/Share $0.33 to $0.36 per share $0.39 per share
Operating results at the Oak Brook Hills Marriott Resort were well below expectations. However, the shortfall was offset by $1.1 million of contractual yield support from the hotel manager which contributed 87 basis points to our Hotel Adjusted EBITDA margins in the second quarter.
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 Margin," "FFO," "Adjusted FFO" and "Same Store." Moreover, the discussions of RevPAR, Adjusted EBITDA and Hotel Adjusted EBITDA Margin assume that the acquired hotels were owned by the Company for the comparable periods of 2005.
For the second quarter, beginning March 25, 2006 and ended June 16, 2006, the Company reported the following:
* Revenues of $125 million compared to $33.5 million in revenues for the
comparable period in 2005.
* Net income of $13.9 million (or $0.20 per diluted share) compared to net
loss of $5.8 million (or $0.20 per diluted share) for the comparable
period in 2005.
* Adjusted EBITDA was $38.4 million compared to Adjusted EBITDA of $8.0
million for the comparable period in 2005.
* Adjusted FFO and Adjusted FFO per share were $27.3 million and $0.39,
respectively, compared to Adjusted FFO and Adjusted FFO per share of
$3.8 million and $0.13 for the comparable period in 2005.
Same-store RevPAR (which includes all of our hotels except for the newly opened Buckhead SpringHill Suites) for the second quarter increased 11.6 percent from $116.86 to $130.44 as compared to the same period in 2005, driven by a 10.2 percent increase in the average daily rate and a 1 percentage point increase in occupancy from 75.8 percent to 76.8 percent. Same-store hotel adjusted EBITDA margins for our hotels increased 322 basis points (from 28.56 percent to 31.78 percent) over the same period in the prior year.
Year-to-date, beginning January 1, 2006 and ended June 16, 2006, the Company reported the following:
* Revenues of $208.1 million compared to $59.9 million in revenues for the
comparable period in 2005.
* Net income of $18.3 million (or $0.30 per diluted share) compared to net
loss of $11.1 million (or $0.44 per diluted share) for the comparable
period in 2005.
* Adjusted EBITDA was $59.3 million compared to Adjusted EBITDA of $11.6
million for the comparable period in 2005.
* Adjusted FFO of $42.4 million compared to Adjusted FFO of $4.5 million
for the comparable period in 2005.
Same-store RevPAR (which includes all of our hotels except for the newly opened Buckhead SpringHill Suites) for the year-to-date increased 10.9 percent from $110.98 to $123.09 as compared to the same period in 2005, driven by a 10.1 percent increase in the average daily rate and a 0.5 percentage point increase in occupancy from 74.5 percent to 75.0 percent. Year-to-date, same- store hotel adjusted EBITDA margins for our hotels increased 234 basis points (from 27.82 percent to 30.16 percent) over the same period in the prior year.
Balance Sheet
During the second quarter, the Company completed a follow-on equity offering, raising net proceeds of $238.2 million. The Company used a portion of these proceeds to payoff $33 million that was outstanding on its corporate line of credit as well as a $79.5 million bank term loan that had been obtained in connection with the recent acquisition of the 1,192-room Chicago Marriott Downtown.
The Company also refinanced the existing $220 million floating-rate loan assumed in connection with the acquisition of the Chicago Marriott Downtown with a $220 million fixed-rate loan, which bears interest at 5.98 percent and has a term of 10 years.
Additionally, the Company refinanced the existing $23 million floating- rate loan on the Courtyard Fifth Avenue/New York with a $51 million fixed-rate loan, which bears interest at 6.48 percent and has a term of 10 years. The new loan proceeds allowed us to finance out more than 150 percent of our total equity investment in the hotel.
As of the end of the second quarter, the Company had total assets of approximately $1.5 billion, including $108.9 million of cash and cash equivalents.
As of the end of the second quarter, the Company had total debt of approximately $665 million. The debt is comprised entirely of fixed-rate, property specific mortgages with a weighted average interest rate of 5.7 percent and a weighted average maturity of 9 years. Seven of the Company's 17 hotels are unencumbered by mortgage debt.
Additionally, the Company's liquidity is enhanced by a $75 million secured line of credit, which was completely untapped as of the end of the second quarter. With lender consent, the line of credit may be increased to $250 million.
As of the end of the second quarter, the Company continued to own 100% of its properties directly and has issued no operating partnership units or preferred stock.
Outlook
The Company is providing updated guidance, but does not undertake to update it for any developments in our business. Achievement of the anticipated results is subject to the risks disclosed in our filings with the Securities and Exchange Commission.
The guidance below includes the estimated disruption impact of the planned $89 million of renovations of our hotels during 2006. Furthermore, the RevPAR and Hotel Adjusted EBITDA margin guidance are presented on a pro forma basis as they assume that we owned all of our hotels for the comparable prior year periods. However, no part of our guidance includes the results from any hotel that we acquired in 2006 for the period prior to our ownership in 2006 (or the comparable reporting period of 2005).
For the third quarter of 2006, we expect:
* RevPAR to increase 11.0 to 12.0 percent.
* Hotel Adjusted EBITDA Margins to increase 200 to 220 basis points.
* Adjusted EBITDA of $25 million to $27 million.
* Adjusted FFO of $15.5 million to $17.5 million.
* Adjusted FFO per share of $0.22 to $0.25.
* Fully diluted weighted average shares outstanding of 70.8 million.
Note that 2006 quarterly results will be partially impacted by our reporting calendar and by the timing of our 2006 capital expenditures.
Despite meaningful increases in property insurance and taxes and increasing incentive management fees, for the period that we own our hotels in 2006, we expect:
* RevPAR to increase 9.0 to 11.0 percent.
* Hotel Adjusted EBITDA Margins to increase 180 to 220 basis points.
* Adjusted EBITDA of $124 million to $126 million.
* Adjusted FFO of $84 million to $86 million.
* Adjusted FFO per share of $1.27 to $1.30.
* Fully diluted weighted average shares outstanding of 66.1 million.
Comparison with Prior 2006 Guidance
Prior Guidance Revised Guidance
RevPAR Growth 8.5% to 10.5% 9.0% to 11.0%
Hotel Adjusted EBITDA
Margins 160 to 210 basis points 180 to 220 basis points
Adjusted EBITDA $122.0 to $125.0 million $124.0 to $126.0 million
Adjusted FFO $82.5 to $85.5 million $84 to $86 million
Adjusted FFO/Share $1.26 to $1.30 per share $1.27 to $1.30 per share
Dividend for Second Quarter 2006
On June 22, 2006, a cash dividend of $0.18 per share was paid to shareholders of record as of June 16, 2006, the last day of our second quarter.
Major Capital Expenditures
We have and continue to make significant capital investments in our hotels. From January 1, 2006, through the end of the second quarter, we have spent $26 million in cash on capital projects. We have approximately $89 million of planned capital expenditures during 2006. The significant capital projects are as follows:
* Bethesda Marriott Suites: We completed all of the planned guest room
renovations in the first quarter of 2006.
* Courtyard Manhattan Fifth Avenue: We completed the guestroom and
corridor renovation during 2005. The renovation of the lobby and other
public spaces was substantially completed in the second quarter of 2006.
* Courtyard Manhattan Midtown East: During the first quarter, we
substantially completed the renovation of guestrooms, lobby, restaurant
and meeting space.
* Frenchman's Reef & Morning Star Marriott Beach Resort: We completed in
2005 the replacement of case goods in a portion of the guestrooms. We
are currently planning several significant projects at the hotel during
2006, including additional replacement of case goods in select rooms and
the renovation of guestrooms, restaurants, and certain meeting space.
The work is expected to be done in the third and fourth quarter of this
year.
* Los Angeles Airport Marriott: In 2005, we completed a renovation of the
hotel ballroom, conversion of a food outlet to a junior ballroom and
renovation of the hotel bar. Additionally, we are currently completing
a complete room renovation, which we have accelerated from 2007 to 2006.
The project consists of the renovation of the hotel guestrooms and
bathrooms and is being funded, in part, by a $1.5 million non-
recoverable contribution from Marriott International. The renovation is
scheduled to be completed by the end of 2006.
* Oak Brook Hills Marriott Resort: We will begin a significant renovation
in the fourth quarter of 2006. The renovation will include the hotel
guestrooms and bathrooms, the hotel main ballroom and meeting rooms and
the hotel lobby.
* Orlando Airport Marriott: We will begin a significant renovation in
2006. The renovation will include the hotel guestrooms and bathrooms,
the hotel meeting rooms and the hotel lobby. The renovation is
scheduled for the third and fourth quarter of 2006.
* Torrance Marriott: We are currently completing the renovation of the
Torrance Marriott. The initial phase of the project consisted of the
renovation of the hotel guestroom soft goods and bathrooms and the
renovation of the hotel's main ballroom and meeting rooms, which were
completed in January 2006. During the third quarter of 2006, renovations
will include the hotel lobby and the conversion of a food and beverage
outlet to meeting space.
* Vail Marriott: We are currently designing a major renovation of the
hotel ballrooms.
Earnings Call
We will host a conference call to discuss second quarter results and our 2006 guidance on Thursday, July 27, 2006, at 2:00pm Eastern Time (ET). To participate in the live call, investors are invited to dial 1-800-237-9752 (for domestic callers) or 617-847-8706 (for international callers). The participant passcode is 68245282. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company's website at http://www.drhc.com/. A replay of the webcast will also be archived on the website for 30 days.
About the Company
DiamondRock Hospitality Company is a self-advised REIT that is an owner and acquirer of premium hotel properties. We own 17 hotels that are comprised of 7,678 rooms. We have a strategic acquisition sourcing relationship with Marriott International. For further information, please visit our website at http://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 "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "continue" 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 our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to complete planned renovation on budget; our 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; our ability to complete acquisitions; our ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission. Although we believe 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 we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, the manager of the majority of our hotel properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen 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), Noble Management Group, LLC, our manager of the Westin Atlanta North hotel, and Vail Resorts, our manager of the Vail Marriott, report results on a monthly basis. Additionally, the Company, as a REIT, is required by tax law to report results on a calendar year. 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 our fourth quarter ends on December 31 and our full year results, as reported in our statement of operations, always include the same number of days as the calendar year.
Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our 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 we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report any results for Frenchman's Reef, Westin Atlanta North or for the Vail Marriott for the month of operations that ends after our fiscal quarter-end because neither Vail Resorts, Noble Management Group, LLC (the manager of the Westin Atlanta North hotel) nor Marriott International make mid-month results available to us. As a result, our quarterly results of operations include results from Frenchman's Reef, Westin Atlanta North and the Vail Marriott 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.
Yield Support
In connection with entering into certain management agreements with Marriott, Marriott provided the Company with limited operating cash flow guarantees ("yield support") for those hotels. The yield support is designed to protect us from the disruption often associated with changing the hotel's brand or manager or undergoing significant renovations. Across our portfolio, we are entitled to up to $2.5 million of yield support through December 31, 2007 for the Oak Brook Hills Marriott, $1.0 million of yield support through December 31, 2006 at the Orlando Airport Marriott and $100,000 in each of 2006 and 2007 for the Buckhead SpringHill Suites. We currently anticipate that we will recognize all $3.6 million of yield support available for the three hotels in 2006.
Ground Leases
Three of our hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, and Salt Lake City Downtown Marriott. In addition, part of a parking structure at a fourth hotel and two golf courses at two additional hotels are also subject to ground leases. In accordance with GAAP, 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 second quarter 2006, contractual cash rent payable on the ground leases totaled $0.4 million and the Company recorded approximately $2.1 million in ground rent expense. The non-cash portion of ground rent expense recorded for the second fiscal quarter was $1.7 million.
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 16, December 31,
2006 2005
(Unaudited)
Property and equipment, at cost $ 1,369,558,094 $ 899,309,856
Less: accumulated depreciation (43,995,609) (28,747,457)
1,325,562,485 870,562,399
Deferred financing costs, net 3,602,955 2,846,661
Restricted cash 24,850,596 23,109,153
Due from hotel managers 50,301,469 38,964,986
Favorable lease asset, net 10,351,641 10,601,577
Prepaid and other assets 10,750,168 10,495,765
Cash and cash equivalents 108,881,304 9,431,741
Total assets $ 1,534,300,618 $ 966,012,282
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Debt, at face amount $ 662,787,831 $ 428,394,735
Debt premium 2,707,592 2,782,322
Total debt 665,495,423 431,177,057
Deferred income related to key money 10,176,580 10,311,322
Unfavorable contract liabilities, net 88,768,528 5,384,431
Due to hotel managers 28,164,208 22,790,896
Dividends declared and unpaid 12,765,312 8,896,101
Accounts payable and accrued expenses 30,120,132 24,064,047
Total other liabilities 169,994,760 71,446,797
Shareholders' Equity:
Preferred stock, $.01 par value;
10,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, $.01 par value;
100,000,000 shares authorized;
70,139,864 and 50,819,864 shares
issued and outstanding at June 16,
2006 and December 31, 2005,
respectively 701,399 508,199
Additional paid-in capital 731,100,540 491,951,223
Accumulated deficit (32,991,504) (29,070,994)
Total shareholders' equity 698,810,435 463,388,428
Total liabilities and
shareholders' equity $ 1,534,300,618 $ 966,012,282
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Fiscal Period from Period from
Quarter Quarter January 1, January 1,
Ended Ended 2006 2005
June 16, June 17, to June 16, to June 17,
2006 2005 2006 2005
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Rooms $81,273,462 $23,833,517 $135,788,214 $42,501,868
Food and beverage 36,675,546 7,791,155 60,745,508 14,205,252
Other 7,018,328 1,891,044 11,555,764 3,157,377
Total revenues 124,967,336 33,515,716 208,089,486 59,864,497
Operating Expenses:
Rooms 18,134,354 5,598,776 30,968,994 10,586,057
Food and beverage 23,419,881 5,680,917 40,309,176 10,762,154
Management fees 4,780,449 1,210,846 7,696,845 2,109,011
Other hotel expenses 40,065,492 12,746,028 68,972,879 24,360,713
Depreciation and
amortization 12,078,225 4,340,984 21,125,333 8,703,130
Corporate expenses 2,646,364 5,937,309 5,213,252 7,946,739
Total operating
expenses 101,124,765 35,514,860 174,286,479 64,467,804
Operating profit
(loss) 23,842,571 (1,999,144) 33,803,007 (4,603,307)
Other Expenses
(Income):
Interest income (1,207,161) (284,049) (1,390,530) (560,827)
Interest expense 9,324,262 3,630,470 15,131,967 6,484,739
Total other expenses 8,117,101 3,346,421 13,741,437 5,923,912
Income (loss) before
income taxes 15,725,470 (5,345,565) 20,061,570 (10,527,219)
Income tax expense 1,828,790 478,990 1,798,876 558,847
Net income (loss) $13,896,680 $(5,824,555) $18,262,694 $(11,086,066)
Earnings (loss) per
share:
Basic and Diluted $0.20 $(0.20) $0.30 $(0.44)
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from Period from
January 1, 2006 January 1, 2005
to June 16, 2006 to June 17, 2005
Cash flows from operating activities: (Unaudited) (Unaudited)
Net income (loss) $18,262,694 $(11,086,066)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Real estate depreciation 21,125,333 8,703,130
Corporate asset depreciation as
corporate expenses 74,064 33,516
Non-cash straight line ground rent 3,412,369 3,180,110
Non-cash financing costs as interest 515,789 960,062
Market value adjustment to interest
rate caps 16,070 (8,445)
Amortization of debt premium and
unfavorable contract liabilities (503,449) (140,577)
Amortization of deferred income (134,742) (64,559)
Stock-based compensation 1,157,698 4,969,510
Deferred income tax benefit (95,009) 558,847
Changes in assets and liabilities:
Prepaid expenses and other assets (175,464) 1,405,418
Due to/from hotel managers (5,963,171) (3,870,102)
Accounts payable and accrued expenses (183,850) (371,406)
Net cash provided by operating
activities 37,508,332 4,269,438
Cash flows from investing activities:
Hotel acquisitions (145,566,189) (72,153,996)
Hotel capital expenditures (25,959,757) (3,652,016)
Receipt of deferred Key Money - 4,000,000
Change in restricted cash 475,338 879,924
Purchase deposits and
pre-acquisition costs - (10,927,784)
Net cash used in investing
activities (171,050,608) (81,853,872)
Cash flows from financing activities:
Proceeds from mortgage debt 271,000,000 44,000,000
Repayments of debt (325,500,000) (56,948,685)
Draws on senior secured credit facility 24,000,000 -
Proceeds from short-term loan 79,500,000 -
Repayments of senior secured credit
facility (33,000,000) -
Scheduled mortgage debt principal
payments (1,606,904) (1,387,854)
Payment of financing costs (1,272,083) (2,128,371)
Proceeds from sale of common stock 239,229,900 291,799,785
Payment of costs related to sale of
common stock (1,040,877) (1,608,517)
Payment of dividends (18,318,197) -
Net cash provided by financing
activities 232,991,839 273,726,358
Net increase in cash and cash
equivalents $99,449,563 $196,141,924
Cash and cash equivalents, beginning
of period 9,431,741 76,983,107
Cash and cash equivalents, end of
period $108,881,304 $273,125,031
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $14,807,568 $5,962,359
Cash paid for income taxes $926,060 $1,114,363
Assumption of mortgage debt $220,000,000 $-
Capitalized interest $220,772 $-
Non-GAAP Financial Measures
We use the following four non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) EBITDA (2) Adjusted EBITDA, (3) FFO and (4) Adjusted FFO.
EBITDA represents net income (loss) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.
Historical
Fiscal Fiscal
Quarter Ended Quarter Ended
June 16, 2006 June 17, 2005
Net income (loss) $13,896,680 $(5,824,555)
Interest expense 9,324,262 3,630,470
Income tax (benefit) expense 1,828,790 478,990
Depreciation and amortization 12,078,225 4,340,984
EBITDA $37,127,957 $2,625,889
Historical
Period from Period from
January 1, 2006 to January 1, 2005 to
June 16, 2006 June 17, 2005
Net income (loss) $18,262,694 $(11,086,066)
Interest expense 15,131,967 6,484,739
Income tax (benefit) expense 1,798,876 558,847
Depreciation and amortization 21,125,333 8,703,130
EBITDA $56,318,870 $4,660,650
Forecast Third Quarter 2006
Low End High End
Net income $1,200,000 $3,200,000
Interest expense 9,300,000 9,300,000
Income tax expense 200,000 200,000
Depreciation and amortization 13,000,000 13,000,000
EBITDA $23,700,000 $25,700,000
Forecast Full Year 2006
Low End High End
Net income $26,400,000 $28,400,000
Interest expense 36,500,000 36,500,000
Income tax expense 3,500,000 3,500,000
Depreciation and amortization 51,500,000 51,500,000
EBITDA $117,900,000 $119,900,000
Management also evaluates our performance by reviewing Adjusted EBITDA because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:
* Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-
cash amortization of our favorable lease asset.
* The impact of the non-cash amortization of the unfavorable contract
liabilities recorded in conjunction with our 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. We
exclude these one-time adjustments because they do not reflect our
actual performance for that period.
* Impairment Losses: We exclude the effect of impairment losses recorded
because we believe that including them in EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In
addition, we believe that impairment charges are similar to gains
(losses) on dispositions and depreciation expense, both of which are
also excluded from EBITDA.
Historical
Fiscal Fiscal
Quarter Ended Quarter Ended
June 16, 2006 June 17, 2005
EBITDA $37,127,957 $2,625,889
Non-cash ground rent 1,701,176 1,590,055
Initial public offering stock grants - 3,736,250
Non-cash amortization of unfavorable
contract liabilities (396,825) -
Adjusted EBITDA $38,432,308 $7,952,194
Historical
Period from Period from
January 1, 2006 to January 1, 2005 to
June 16, 2006 June 17, 2005
EBITDA $56,318,870 $4,660,650
Non-cash ground rent 3,412,372 3,180,110
Initial public offering stock grants - 3,736,250
Non-cash amortization of unfavorable
contract liabilities (428,718) -
Adjusted EBITDA $59,302,524 $11,577,010
Forecast Third Quarter 2006
Low End High End
EBITDA $23,700,000 $25,700,000
Non-cash ground rent 1,700,000 1,700,000
Non-cash amortization of
unfavorable contract liabilities (400,000) (400,000)
Adjusted EBITDA $25,000,000 $27,000,000
Forecast Full Year 2006
Low End High End
EBITDA $117,900,000 $119,900,000
Non-cash ground rent 7,500,000 7,500,000
Non-cash amortization of
unfavorable contract liabilities (1,400,000) (1,400,000)
Adjusted EBITDA $124,000,000 $126,000,000
We compute FFO in accordance with standards established by NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.
Historical
Fiscal Fiscal
Quarter Ended Quarter Ended
June 16, 2006 June 17, 2005
Net income (loss) $13,896,680 $(5,824,555)
Real estate related depreciation
and amortization 12,078,225 4,340,984
FFO $25,974,905 $(1,483,571)
FFO per Share (Basic and Diluted) $0.37 $(0.05)
Historical
Period from Period from
January 1, 2006 to January 1, 2005 to June
June 16, 17,
2006 2005
Net income (loss) $18,262,694 $(11,086,066)
Real estate related depreciation
and amortization 21,125,333 8,703,130
FFO $39,388,027 $(2,382,936)
Forecast Third Quarter 2006
Low End High End
Net income $1,200,000 $3,200,000
Real estate related depreciation
and amortization 13,000,000 13,000,000
FFO $14,200,000 $16,200,000
Forecast Full Year 2006
Low End High End
Net income $26,400,000 $28,400,000
Real estate related depreciation
and amortization 51,500,000 51,500,000
FFO $77,900,000 $79,900,000
Management also evaluates our performance by reviewing Adjusted FFO because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust FFO for the following items, which may occur in any period, and refer to this measure as Adjusted FFO:
* Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-
cash amortization of our favorable lease asset.
* The impact of the non-cash amortization of the unfavorable contract
liabilities recorded in conjunction with our 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. We
exclude these one-time adjustments because they do not reflect our
actual performance for that period.
* Impairment Losses: We exclude the effect of impairment losses recorded
because we believe that including them in EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In
addition, we believe that impairment charges are similar to gains
(losses) on dispositions and depreciation expense, both of which are
also excluded from EBITDA.
Historical
Fiscal Fiscal
Quarter Ended Quarter Ended
June 16, 2006 June 17, 2005
FFO $25,974,905 $(1,483,571)
Non-cash ground rent 1,701,176 1,590,055
Initial public offering stock grants - 3,736,250
Non-cash amortization of unfavorable
contract liabilities (396,825) -
Adjusted FFO $27,279,256 $3,842,734
Adjusted FFO per Share
(Basic and Diluted) $0.39 $0.13
Historical
Period from Period from
January 1, 2006 to January 1, 2005 to
June 16, 2006 June 17, 2005
FFO $39,388,027 $(2,382,936)
Non-cash ground rent 3,412,372 3,180,110
Initial public offering stock grants - 3,736,250
Non-cash amortization of unfavorable
contract liabilities (428,718) -
Adjusted FFO $42,371,681 $4,533,424
Forecast Third Quarter 2006
Low End High End
FFO $14,200,000 $16,200,000
Non-cash ground rent 1,700,000 1,700,000
Non-cash amortization of unfavorable
contract liabilities (400,000) (400,000)
Adjusted FFO $15,500,000 $17,500,000
Forecast Full Year 2006
Low End High End
FFO $77,900,000 $79,900,000
Non-cash ground rent 7,500,000 7,500,000
Non-cash amortization of unfavorable
contract liabilities (1,400,000) (1,400,000)
Adjusted FFO $84,000,000 $86,000,000
Certain Definitions
In this release, when we discuss our hotels on a "Same Store" basis, we are discussing all of our hotels except the newly built SpringHill Suites Atlanta Buckhead, which we exclude for all periods prior to its opening in July of 2005 and the comparable period in 2006.
In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from Hotel EBITDA the non-cash expense incurred by the hotel due to the straight lining of the rent from our ground lease obligations and the non-cash amortization of our favorable lease asset. Hotel EBITDA represents hotel net income (loss) 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.
Market Capitalization as of June 16, 2006
Enterprise Value June 16, 2006
Common equity capitalization (at 6/16/06 closing price
of $14.49/share) $1,032,948,224
Consolidated debt (excluding debt premium) 662,787,831
Cash and cash equivalents (108,881,304)
Total enterprise value $1,586,854,751
Dividend Per Share
Common dividend declared (holders of record on June
16, 2006) $0.18
Share Reconciliation
Common shares outstanding, held by third parties 65,519,193
Common shares outstanding, held by Marriott International 4,428,571
Common shares outstanding, held by management and directors 192,100
Subtotal 70,139,864
Unvested restricted stock held by management and employees 747,000
Share grants under deferred compensation plan held by
corporate officers 400,108
Combined shares outstanding 71,286,972
Debt Summary at June 16, 2006
(dollars in thousands)
Spread
Interest to Outstanding
Property Rate LIBOR Principal Maturity
Courtyard Manhattan /
Midtown East 5.195% Fixed $43,676 December 2009
Salt Lake City Marriott
Downtown 5.500% Fixed 37,457 December 2014
Courtyard Manhattan / Fifth
Avenue 6.48% Fixed 51,000 May 2016
Marriott Griffin Gate Resort 5.110% Fixed 30,126 January 2010
Bethesda Marriott Suites 7.690% Fixed 19,029 February 2023
Los Angeles Airport Marriott 5.300% Fixed 82,600 June 2015
Marriott Frenchman's Reef 5.440% Fixed 62,500 July 2015
Renaissance Worthington 5.400% Fixed 57,400 June 2015
Orlando Airport Marriott 5.680% Fixed 59,000 December 2015
Chicago Marriott Downtown 5.98% Fixed 220,000 April 2016
Total Debt (excluding Debt
Premium) 662,788
Portfolio Composition and Projected Total Investment
Number 2005
Property Location of Rooms Investment(1)
Atlanta Alpharetta
Marriott Atlanta, GA 318 $ 38,833,000
Westin Atlanta North Atlanta, GA 369
Bethesda Marriott Suites Bethesda, MD 272 42,185,000
Chicago Marriott Downtown Chicago, IL 1,192
Courtyard Manhattan /
Fifth Avenue New York, NY 185 41,832,000
Courtyard Manhattan /
Midtown East New York, NY 307 75,382,000
Frenchman's Reef &
Morning Star Marriott
Beach Resort St. Thomas, USVI 504 76,106,000
Los Angeles Airport
Marriott Los Angeles, CA 1,004 114,681,000
Marriott Griffin Gate
Resort Lexington, KY 408 49,779,000
Oak Brook Hills Marriott
Resort Oak Brook, IL 384 66,165,000
Orlando Airport Marriott Orlando, FL 486 71,154,000
Renaissance Worthington
Hotel Fort Worth Fort Worth, TX 504 80,811,000
Salt Lake City Marriott
Downtown Salt Lake City, UT 510 51,123,000
SpringHill Suites
Atlanta Buckhead Atlanta, GA 220 34,341,000
The Lodge at Sonoma, a
Renaissance Resort
and Spa Sonoma, CA 182 32,430,000
Torrance Marriott Los Angeles County, CA 487 67,421,000
Vail Marriott Mountain
Resort and Spa Vail, CO 346 65,259,000
Total 7,678 $ 907,502,000
2006 Budgeted
2006 Hotel Capital Y/E 2006 Total Projected
Acquisitions Expenditures Projected Investment
Property (2) Investment(3) Per Room
Atlanta Alpharetta
Marriott $ $ 288,000 $ 39,121,000 $ 123,022
Westin Atlanta
North 62,614,000 304,000 62,918,000 170,510
Bethesda Marriott
Suites 5,856,000 48,041,000 176,621
Chicago Marriott
Downtown 308,200,000 2,280,000 310,480,000 260,470
Courtyard Manhattan
/ Fifth Avenue 2,637,000 44,469,000 240,373
Courtyard Manhattan
/ Midtown East 3,287,000 78,669,000 256,251
Frenchman's Reef &
Morning Star
Marriott Beach
Resort 10,836,000 86,942,000 172,504
Los Angeles Airport
Marriott 18,392,000 133,073,000 132,543
Marriott Griffin
Gate Resort 1,927,000 51,706,000 126,730
Oak Brook Hills
Marriott Resort 12,114,000 78,279,000 203,852
Orlando Airport
Marriott 12,196,000 83,350,000 171,502
Renaissance
Worthington Hotel
Fort Worth 3,113,000 83,924,000 166,516
Salt Lake City
Marriott Downtown 3,715,000 54,838,000 107,526
SpringHill Suites
Atlanta Buckhead 42,000 34,383,000 156,286
The Lodge at Sonoma,
a Renaissance
Resort and Spa 509,000 32,939,000 180,984
Torrance Marriott 7,450,000 74,871,000 153,739
Vail Marriott
Mountain Resort and
Spa 3,798,000 69,057,000 199,587
Total $370,814,000 $88,744,000 $1,367,060,000 $ 178,049
(1) As of December 31, 2005.
(2) 2006 Budgeted Capital Expenditures represents capital expenditures
regardless of whether they will be paid for through an escrow account
or owner funding.
(3) Total projected investments for each hotel property is the gross book
value of the hotel as of December 31, 2005 plus budgeted 2006 capital
improvements.
Pro Forma Operating Statistics (1)
ADR Occupancy
2Q 2006 2Q 2005 B/(W) 2Q 2006 2Q 2005 B/(W)
Atlanta Alpharetta $142.19 $133.77 6.3% 66.3% 61.6% 4.8%
Westin Atlanta North(2) $139.96 $131.72 6.3% 62.0% 58.6% 3.4%
Bethesda Marriott
Suites $176.58 $166.95 5.8% 83.4% 84.5% (1.0%)
Buckhead SpringHill
Suites $116.87 N/A N/A 70.4% N/A N/A
Chicago Marriott $209.66 $194.03 8.1% 81.2% 79.0% 2.2%
Courtyard Fifth Avenue $246.79 $200.35 23.2% 91.9% 93.2% (1.3%)
Courtyard Midtown East $251.89 $221.77 13.6% 91.5% 90.5% 1.0%
Frenchman's Reef(2) $241.42 $213.22 13.2% 89.6% 87.1% 2.5%
Griffin Gate Marriott $142.11 $132.25 7.5% 69.4% 74.4% (5.0%)
Los Angeles Airport $117.90 $103.78 13.6% 75.5% 73.8% 1.8%
Oak Brook Hills(3) $126.68 $122.45 3.4% 63.0% 63.1% (0.2%)
Orlando Airport
Marriott $110.45 $101.05 9.3% 79.4% 73.3% 6.1%
Salt Lake City Marriott $125.62 $116.36 8.0% 65.1% 71.8% (6.7%)
Sonoma Renaissance $215.78 $195.26 10.5% 76.7% 77.6% (0.9%)
Torrance Marriott $108.38 $101.40 6.9% 82.9% 78.0% 4.9%
Vail Marriott(2) $225.27 $205.12 9.8% 59.3% 58.4% 0.8%
Renaissance Worthington $169.67 $156.85 8.2% 80.8% 82.5% (1.7%)
RevPAR Hotel Adjusted EBITDA Margin
2Q 2006 2Q 2005 B/(W) 2Q 2006 2Q 2005 B/(W)
Atlanta Alpharetta $94.32 $82.37 14.5% 33.2% 32.1% 1.07%
Westin Atlanta North(2) $86.82 $77.21 12.4% 32.6% 26.5% 6.14%
Bethesda Marriott
Suites $147.32 $141.03 4.5% 34.1% 31.0% 3.08%
Buckhead SpringHill
Suites $82.28 N/A N/A 41.9% N/A N/A
Chicago Marriott $170.21 $153.22 11.1% 32.1% 29.1% 2.99%
Courtyard Fifth Avenue $226.89 $186.80 21.5% 35.8% 35.6% 0.24%
Courtyard Midtown East $230.51 $200.69 14.9% 44.0% 40.7% 3.32%
Frenchman's Reef(2) $216.40 $185.75 16.5% 35.1% 32.8% 2.31%
Griffin Gate Marriott $98.58 $98.35 0.2% 32.8% 33.4% (0.57%)
Los Angeles Airport $89.06 $76.55 16.3% 23.6% 22.6% 0.92%
Oak Brook Hills(3) $79.75 $77.31 3.2% 42.4% 29.1% 13.34%
Orlando Airport
Marriott $87.71 $74.05 18.4% 34.2% 20.3% 13.89%
Salt Lake City
Marriott $81.75 $83.53 (2.1%) 25.5% 25.2% 0.30%
Sonoma Renaissance $165.55 $151.55 9.2% 24.9% 20.2% 4.75%
Torrance Marriott $89.82 $79.08 13.6% 25.0% 21.1% 3.91%
Vail Marriott(2) $133.49 $119.81 11.4% 27.0% 27.0% 0.07%
Renaissance
Worthington $137.10 $129.41 5.9% 29.5% 28.1% 1.35%
(1) In some cases, DiamondRock was not the owner of the hotel during all
or part of the respective quarter. Data provided is based on the best
currently available data.
(2) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter
and include the months of March, April and May.
(3) During 2005, the property was operated on a monthly financial
reporting basis. Therefore, the figures presented for 2005 reflect a
calendar quarter of April 1, 2005 - June 30, 2005.
Hotel Adjusted EBITDA Reconciliation(1)(2)
2nd Quarter 2006
Plus: Plus: Plus: Equals:
Net Non-Cash Hotel
Total Income/ Deprec- Interest Ground Adjusted
Revenues (Loss) iation Expense Rent(2) EBITDA
Atlanta Alpharetta $ 3,832 $ 941 $ 330 $ - $ - $1,271
Westin Atlanta
North(3) $ 1,503 $ 166 $ 325 $ - $ - $ 491
Bethesda Marriott
Suites $ 4,473 $ (920) $ 687 $ 281 $1,474 $1,522
Buckhead SpringHill
Suites $1,682 $ 435 $ 269 $ - $ - $ 704
Chicago Marriott $24,382 $2,573 $2,339 $3,273 $ (365) $7,820
Courtyard Fifth
Avenue $ 3,580 $ 5 $ 391 $ 814 $ 72 $1,282
Courtyard Midtown
East $ 6,176 $1,756 $ 424 $ 539 $ - $2,719
Frenchman's Reef
(3) $16,452 $3,875 $1,084 $ 810 $ - $5,769
Griffin Gate
Marriott $ 7,003 $1,400 $ 530 $ 364 $ 1 $2,295
Los Angeles
Airport $12,730 $ 988 $1,057 $ 955 $ - $3,000
Oak Brook Hills $ 6,316 $1,560 $ 993 $ - $ 125 $2,678
Orlando $ 5,717 $ 256 $ 926 $ 775 $ - $1,957
Salt Lake City
Marriott $ 5,271 $ 237 $ 621 $ 487 $ - $1,346
Sonoma Renaissance $ 4,568 $ 715 $ 423 $ - $ - $1,138
Torrance Marriott $ 5,250 $ 756 $ 557 $ - $ - $1,314
Vail Marriott(3) $ 6,280 $1,159 $ 538 $ - $ - $1,698
Renaissance
Worthington $ 9,750 $1,596 $ 545 $ 731 $ 2 $2,874
(1) In some cases, DiamondRock was not the owner of the hotel during all
or part of the respective quarter. Data provided is based on the best
currently available data.
(2) Where applicable, also includes the amortization of unfavorable
contract or lease liability.
(3) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter
and include the months of March, April and May.
Hotel Adjusted EBITDA Reconciliation (1)(2)
2nd Quarter 2005
Plus: Plus: Plus: Equals:
Net Non-Cash Hotel
Total Income/ Deprec- Interest Ground Adjusted
Revenues (Loss) iation Expense Rent(2) EBITDA
Atlanta Alpharetta $ 3,270 $ 744 $ 307 $ - $ - $1,051
Westin Atlanta
North(3) $ 1,597 $ 423 $ - $ - $ - $ 423
Bethesda Marriott
Suites $ 4,172 $(1,032) $ 496 $ 347 $1,484 $1,295
Buckhead
SpringHill Suites $ - $ (269) $ 269 $ - $ - $ -
Chicago Marriott $22,202 $ 6,458 $ - $ - $ - $6,458
Courtyard Fifth
Avenue $ 2,955 $ 97 $ 498 $ 384 $ 72 $1,051
Courtyard Midtown
East $ 5,436 $ 900 $ 763 $ 550 $ - $2,213
Frenchman's Reef
(3) $13,598 $ 3,015 $ 589 $ 850 $ - $4,454
Griffin Gate
Marriott $ 6,775 $ 1,386 $ 501 $ 372 $ 1 $2,260
Los Angeles
Airport $11,229 $ 593 $ 883 $1,067 $ - $2,543
Oak Brook Hills
(4) $ 7,360 $ 1,124 $ 876 $ - $ 138 $2,138
Orlando(4) $ 5,226 $ (266) $ 555 $ 774 $ - $1,063
Salt Lake City
Marriott $ 5,336 $ 280 $ 565 $ 501 $ - $1,346
Sonoma Renaissance $ 3,989 $ (85) $ 413 $ 477 $ - $ 805
Torrance Marriott $ 4,853 $(1,097) $1,085 $1,037 $ - $1,025
Vail Marriott
(3) $ 5,709 $ 985 $ 554 $ - $ - $1,539
Renaissance
Worthington $ 9,251 $ 1,216 $ 643 $ 741 $ 2 $2,602
(1) In some cases, DiamondRock was not the owner of the hotel during all
or part of the respective quarter. Data provided is based on the best
currently available data.
(2) Where applicable, also includes the amortization of unfavorable
contract or lease liability.
(3) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter
and include the months of March, April and May.
(4) During 2005, the property was operated on a monthly financial
reporting basis. Therefore, the figures presented for 2005 reflect a
calendar quarter of April 1, 2005 - June 30, 2005.
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