2014

DiamondRock Hospitality Company Reports Third Quarter 2013 Results Reaffirms Full Year 2013 Guidance

Announces Completion of The Lexington Hotel Renovation

Announces Agreement to Sell Torrance Marriott South Bay

BETHESDA, Md., Nov. 8, 2013 /PRNewswire/ -- DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 27 premium hotels in the United States, today announced results of operations for the third quarter ended September 30, 2013.

Highlights

  • Comparable RevPAR: The Company's RevPAR increased 5.0% compared to the third quarter 2012 as adjusted to a calendar quarter basis, excluding the Lexington Hotel New York City.
  • RevPAR: The Company's RevPAR was $141.03, an increase of 1.1% from 2012. Excluding the Lexington Hotel New York City, the Company's RevPAR increased 4.8% from 2012.
  • Hotel Adjusted EBITDA Margin: The Company's Hotel Adjusted EBITDA margin was 25.89%, a decrease of 204 basis points from 2012.  Excluding the Lexington Hotel New York City, the Company's Hotel Adjusted EBITDA margin was 27.05%, a decrease of 32 basis points from 2012.
  • Hotel Refinancing: The Company entered into a new $63.0 million non-recourse mortgage loan secured by the Salt Lake City Marriott with a term of seven years and a fixed interest rate of 4.25%. In conjunction with the financing, the Company prepaid the existing $27.3 million mortgage loan secured by the hotel.
  • Non-Core Hotel Disposition: The Company entered into an agreement to sell the 487-room Torrance Marriott South Bay for a contractual sales price of $74 million.  The sale is expected to close during the fourth quarter of 2013.
  • Lexington Hotel: The Lexington Hotel New York City joined Marriott's Autograph Collection in mid-August 2013.  The comprehensive renovation of the hotel is now complete. Since conversion, the hotel has has increased average daily rates approximately $40 from the comparable period of 2012.
  • Adjusted EBITDA: The Company's Adjusted EBITDA was $51.0 million, which was impacted by approximately $5.0 million of renovation disruption.
  • Adjusted FFO: The Company's Adjusted FFO was $35.9 million and Adjusted FFO per diluted share was $0.18.
  • Dividends: The Company declared a quarterly dividend of $0.085 per share during the third quarter.
  • Guidance: The Company is reaffirming its full year 2013 guidance of Adjusted EBITDA of $195 million to $205 million and Adjusted FFO per share of $0.70 to $0.74. The guidance includes $17 million of displaced EBITDA from renovation disruption.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "We are pleased with our third quarter operating results, with Comparable RevPAR growth of 5.0%. Importantly, we continue to execute on our strategic initiatives. Our renovation program passed a major milestone with the completion of the rebranding and repositioning of the Lexington Hotel. The hotel looks fantastic and we are glad to mark the end of the major disruption from our renovation program. On our non-core disposition initiative, we announced today the agreement to sell the Torrance Marriott at a 14x EBITDA multiple. Our efforts this year continue to position the Company for a strong 2014, bolstered by strong group pace and renovation tailwinds."

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" and "Adjusted FFO." "Comparable RevPAR" compares 2013 RevPAR to 2012 Pro Forma RevPAR on a calendar quarter basis.

The year-over-year comparability of the Company's third quarter results is significantly impacted by the change in its reporting calendar.  For the Company's Marriott managed hotels, the 2013 third quarter includes 20 fewer days than the pro forma 2012 third quarter, which results in the 2013 third quarter including approximately 10% fewer available room nights as compared to the pro forma 2012 third quarter.

For the quarter ended September 30, 2013 (92 days), the Company reported the following:

 


Third Quarter



2013



2012 Pro Forma1


Change


ADR

$177.42



$172.61


2.8%


Occupancy

79.5%



80.9%


(140) basis points


RevPAR

$141.03



$139.56


1.1%


Total Revenue

$210.6 million



$228.4 million


(7.8)%


Hotel Adjusted EBITDA Margin

25.89%



27.93%


(204) basis points


Adjusted EBITDA

$51.0 million



$57.2 million


(10.8)%


Adjusted FFO

$35.9 million



$39.7 million


(9.7)%


Adjusted FFO per diluted share

$0.18



$0.21


($0.03)


Net Income (Loss)

$8.6 million



($48.7 million)


$57.3 million


Earnings (Loss) per diluted share

$0.04



($0.26)


$0.30


Diluted Weighted Average Shares

195.9 million



187.0 million


8.9 million shares







1

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 (112 days) and all other hotels from July 1, 2012 to September 30, 2012, (b) assume all of the Company's hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

The Company's operating results for the quarter ended September 30, 2013 were significantly impacted by the renovation at the Lexington Hotel, which displaced approximately 29,000 room nights during the quarter and resulted in approximately $5 million of Hotel Adjusted EBITDA disruption. The renovation was completed in October and total renovation disruption from this project was $14.5 million, approximately $2.0 million higher than previously estimated. 

The following are selected operating results for the Company, excluding the Lexington Hotel:


Third Quarter



2013



2012 Pro Forma1


Change


ADR

$175.30



$170.07


3.1%


Occupancy

81.3%



80.0%


130 basis points


RevPAR

$142.51



$136.03


4.8%


Total Revenue

$201.6 million



$214.5 million


(6.0)%


Hotel Adjusted EBITDA

$54.5 million



$58.7 million


(7.1)%


Hotel Adjusted EBITDA Margin

27.05%



27.37%


(32) basis points




















1

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 (112 days) and all other hotels from July 1, 2012 to September 30, 2012, (b) assume all of the Company's hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

For the nine months ended September 30, 2013, the Company reported the following:

 


Nine Months Ended September 30,



2013



2012 Pro Forma1


Change


ADR

$177.62



$172.91


2.7%


Occupancy

76.5%



77.9%


(140) basis points


RevPAR

$135.84



$134.69


0.9%


Total Revenue

$616.1 million



$606.2 million


1.6%


Hotel Adjusted EBITDA Margin

25.79%



27.06%


(127) basis points


Adjusted EBITDA

$147.6 million



$148.9 million


(0.8)%


Adjusted FFO

$105.8 million



$111.6 million


(5.2)%


Adjusted FFO per diluted share

$0.54



$0.64


($0.10)


Net Income (Loss)

$19.5 million



($22.8 million)


$42.3 million


Earnings (Loss) per diluted share

$0.10



($0.13)


$0.23


Diluted Weighted Average Shares

195.7 million



174.2 million


21.5 million shares




















1

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012, (b) assume all of the Company's hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

The Company's operating results for the nine months ended September 30, 2013 were significantly impacted by the displacement of approximately 84,000 room nights at its three New York City hotels under renovation, the Lexington Hotel, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue. The renovations of the two Courtyards were completed during the second quarter of 2013 and the renovation of the Lexington Hotel was completed in October 2013.  The following are selected operating results for the Company excluding these three hotels:

 


Nine Months Ended September 30,



2013



2012 Pro Forma1


Change


ADR

$172.26



$166.17


3.7%


Occupancy

77.9%



76.3%


160 basis points


RevPAR

$134.21



$126.79


5.9%


Total Revenue

$563.7 million



$535.4 million


5.3%


Hotel Adjusted EBITDA

$153.0 million



$141.7 million


8.0%


Hotel Adjusted EBITDA Margin

27.14%



26.46%


68 basis points




















Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012, (b) assume all of the Company's hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

 

Capital Expenditures

As previously announced, the Company is investing approximately $140 million for capital improvements at its hotels in 2013 and early 2014. As of September 30, 2013, the Company has spent approximately $75.3 million on these capital improvements. The Company currently expects renovation disruption of approximately $17 million of Hotel Adjusted EBITDA during the year ended December 31, 2013, which is reflected in its outlook for 2013. The Company does not expect meaningful disruption during 2014. The following is an update on the most significant capital projects.

Lexington Hotel New York: The Company has completed its comprehensive renovation of the Lexington Hotel, with all 725 guestrooms currently available for sale. The hotel joined Marriott's Autograph Collection during August 2013 and the hotel has increased average daily rates approximately $40 from the comparable period in 2012. Hotel Adjusted EBITDA disruption was approximately $5 million during the third quarter and $14 million year to date.  This disruption is approximately $2 million higher than previously expected due to incremental displacement that occurred during the closing stages of the renovation. The Company estimates the full year 2013 renovation disruption from the project to be approximately $14.5 million, including $0.5 million during the fourth quarter.

The Company has other renovation projects planned for late in 2013 and early 2014, which are not expected to cause material disruption. A description of the most significant projects is as follows:

  • Westin Washington D.C.:  A comprehensive $17 million renovation commenced in October 2013 and is expected to be completed in early 2014. 
  • Westin San Diego: A comprehensive $14.5 million renovation commenced in October 2013 and is expected to be completed in early 2014.
  • Hilton Minneapolis: A $13 million renovation of the guest rooms, guest bathrooms and corridors is expected to commence in November 2013 and be completed in early 2014.
  • Hilton Boston Downtown: A $7 million renovation of the guest rooms, corridors, public areas, and meeting space commenced in October 2013 and is expected to be completed in early 2014.
  • Hilton Burlington:  A $6 million renovation of the lobby, corridors, guest rooms and outdoor space is expected to commence in November 2013 and be completed in early 2014. 

Salt Lake City Marriott Refinancing

The Company entered into a new $63 million mortgage loan secured by the Salt Lake City Marriott in October 2013.  The new loan has a term of seven years and bears interest at a fixed rate of 4.25%. As part of the refinancing, the Company prepaid the $27.3 million mortgage loan previously secured by the hotel, which had a fixed interest rate of 5.5 % and a maturity date of January 2015. The cost of prepaying the loan though defeasance was approximately $1.5 million, which will be added back to Adjusted EBITDA and Adjusted FFO. The Company used the proceeds from the new loan to repay the prior loan and to create additional investment capacity for the acquisition of the Hilton Garden Inn Times Square South in mid-2014.

Sale of Torrance Marriott South Bay

The Company entered into an agreement to sell a non-core hotel, the 487-room Torrance Marriott South Bay, to an unaffiliated third party for proceeds of approximately $76 million, including credit for the hotel's replacement reserve. The sale is expected to close during the fourth quarter of 2013.  The proceeds from the sale will be used to create investment capacity for the acquisition of the Hilton Garden Inn Times Square South in mid-2014.  The Torrance Marriott South Bay generated $5.4 million of Hotel Adjusted EBITDA during the trailing four quarters ending September 30, 2013.

Balance Sheet

As of September 30, 2013, the Company had $43.4 million of unrestricted cash on hand and approximately $1.1 billion of total debt, which consists solely of property-specific mortgage debt.  The Company has no outstanding borrowings on its $200 million senior unsecured credit facility. 

Following the refinancing of the Salt Lake City Marriott, which occurred subsequent to the end of the third quarter, and the sale of the Torrance Marriott, the Company expects to have approximately $145 million of unrestricted cash on hand at December 31, 2013. 

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.085 per share to stockholders of record as of September 30, 2013.  The dividend was paid on October 10, 2013.

Outlook and Guidance

The Company is providing annual guidance for 2013, 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 U.S. Securities and Exchange Commission.  The Company's 2013 RevPAR guidance assumes all of the Company's 27 hotels were owned since January 1, 2012.

The Company is reaffirming its 2013 guidance to reflect the following:

  • Increase of full year renovation disruption to $17 million as a result of incremental displacement at the Lexington Hotel
  • Stronger group performance at the Westin Boston Waterfront and the Chicago Marriott Downtown
  • Impact of the Federal Government shutdown on the Company's Washington DC market hotels during the fourth quarter
  • Sale of Torrance Marriott South Bay at the end of the fourth quarter 2013

The Company expects the full year 2013 results to be as follows:

Metric

Pre-Renovation Guidance

Renovation Disruption

2013 Guidance

Pro Forma RevPAR Growth

4 percent to 6 percent

3 percent

1 percent to 3 percent

Adjusted EBITDA

$212 million to $222 million

$17 million

$195 million to $205 million

Adjusted FFO

$151 million to $158 million

$13 million

$138 million to $145 million

Adjusted FFO per share

(based on 196 million shares)

$0.77 to $0.81

$0.07

$0.70 to $0.74

Earnings Call

The Company will host a conference call to discuss its third quarter results on Friday, November 8, 2013, at 10:00 a.m. Eastern Time (ET).  To participate in the live call, investors are invited to dial 877-415-3180 (for domestic callers) or 857-244-7323 (for international callers).  The participant passcode is 37412479. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company's website at www.drhc.com or www.earnings.com. A replay of the webcast will also be archived on the website for thirty days.

Reporting Calendar Change

Effective January 1, 2013, the Company reports its quarterly results of operations on a calendar cycle. Historically, the Company reported its quarterly results of operations based on the fiscal calendar used by Marriott International. Since the Company is not changing its fiscal year, its 2012 financial information will not be restated in its quarterly filings with the U.S. Securities and Exchange Commission. The following table highlights the periods presented in the Company's 2012 and 2013 reporting calendars. 

Quarter

2012 Calendar (as previously reported)

2013 Calendar

1st

Marriott

January 1 – March 23

All

January 1 – March 31


Non-Marriott

January 1 – February 29



2nd

Marriott

March 24 – June 15

All

April 1 – June 30


Non-Marriott

March 1 – May 31



3rd

Marriott

June 16 – September 7

All

July 1 – September 30


Non-Marriott

June 1 – August 31



4th

Marriott

September 8 – December 31

All

October 1 – December 31


Non-Marriott

September 1 – December 31










The Company cannot fully restate its 2012 operating results because Marriott did not provide 2012 operating results on a daily basis. Hotel operating results incorporated into the Company's financial statements are prepared by its hotel managers. The unavailability of 2012 operating results on a calendar quarter basis for all of the Company's hotels prevented the restatement of the Company's 2012 quarterly financial statements. Instead, in comparing 2013 quarterly results to 2012 results, the Company will (i) use the non-Marriott 2012 results on a calendar quarter basis and (ii) amend the previously reported Marriott 2012 quarterly results as follows:

  • The first quarter of 2012 includes Marriott operating results from January 1 to March 23.
  • The second quarter of 2012 includes Marriott operating results from March 24 to June 15.
  • The third quarter of 2012 includes Marriott operating results from June 16 to October 5.
  • The fourth quarter of 2012 includes the Marriott operating results from October 6 to December 31.

Therefore, the 2013 calendar quarters will have 8 additional days in the first quarter, 7 additional days in the second quarter, 20 fewer days in the third quarter and 5 additional days in the fourth quarter.

The following table reallocates selected 2012 quarterly pro forma operating information as described above into the 2013 reporting calendar.


Quarter 1, 2012

Quarter 2, 2012

Quarter 3, 2012

Quarter 4, 2012

RevPAR

$117.09

$146.48

$139.56

$133.36

Revenues (in thousands)

$167,026

$210,809

$228,371

$196,005

Hotel Adjusted EBITDA (in thousands)

$35,685

$64,564

$63,776

$54,085

% of Full Year

16.4%

29.6%

29.2%

24.8%

Hotel Adjusted EBITDA Margin

21.36%

30.63%

27.93%

27.59%

Available Rooms

1,004,405

1,010,443

1,184,252

1,034,027

About the Company

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations.  The Company owns 27 premium quality hotels with over 11,600 rooms. The Company has strategically positioned its hotels to generally be operated under the leading global brands such as Hilton, Marriott, and Westin. For further information on the Company and its portfolio, 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 development of a hotel by a third-party developer; 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.

 

DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
As of September 30, 2013 and December 31, 2012
(in thousands, except share and per share amounts)



September 30, 2013


December 31, 2012


(unaudited)



ASSETS




Property and equipment, at cost

$

3,207,378



$

3,131,175


Less: accumulated depreciation

(599,343)



(519,721)



2,608,035



2,611,454


Deferred financing costs, net

7,947



9,724


Restricted cash

86,556



76,131


Due from hotel managers

80,690



68,532


Note receivable

49,356



53,792


Favorable lease assets, net

40,194



40,972


Prepaid and other assets (1)

81,000



73,814


Cash and cash equivalents

43,448



9,623


Total assets

$

2,997,226



$

2,944,042


LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities:




Mortgage debt

$

1,060,299



$

968,731


Senior unsecured credit facility



20,000


Total debt

1,060,299



988,731






Deferred income related to key money, net

23,900



24,362


Unfavorable contract liabilities, net

78,633



80,043


Due to hotel managers

55,785



51,003


Dividends declared and unpaid

17,006



15,911


Accounts payable and accrued expenses (2)

94,845



88,879


Total other liabilities

270,169



260,198


Stockholders' Equity:




Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding




Common stock, $0.01 par value; 400,000,000 shares authorized; 195,470,791 and 195,145,707 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively

1,955



1,951


Additional paid-in capital

1,978,505



1,976,200


Accumulated deficit

(313,702)



(283,038)


Total stockholders' equity

1,666,758



1,695,113


Total liabilities and stockholders' equity

$

2,997,226



$

2,944,042














(1)

Includes $39.4 million of deferred tax assets, $26.9 million for the Hilton Garden Inn Times Square purchase deposit, $7.8 million of prepaid expenses and $6.9 million of other assets as of September 30, 2013.

(2)

Includes $57.5 million of deferred ground rent, $11.4 million of deferred tax liabilities, $11.0 million of accrued property taxes, $3.9 million of accrued capital expenditures and $11.0 million of other accrued liabilities as of September 30, 2013.

 

 

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended September 30, 2013 and September 7, 2012 and
the Periods from January 1, 2013 to September 30, 2013 and January 1, 2012 to September 7, 2012
(in thousands, except per share amounts)
(unaudited)



Fiscal Quarter Ended

Period From






January 1, 2013 to
September 30, 2013


January 1, 2012 to
September 7, 2012


September 30, 2013


September 7, 2012











Revenues:








Rooms

$

150,146



$

132,578



$

428,981



$

338,043


Food and beverage

47,522



40,791



149,743



117,415


Other

12,975



10,504



37,407



27,787


Total revenues

210,643



183,873



616,131



483,245


Operating Expenses:








Rooms

40,521



35,428



116,091



92,386


Food and beverage

34,591



30,008



106,475



85,731


Management fees

7,178



5,744



19,410



15,313


Other hotel expenses

75,176



64,098



219,302



171,131


Depreciation and amortization

26,254



22,612



80,280



62,802


Impairment of favorable lease asset



30,376





30,844


Hotel acquisition costs

23



8,314



46



10,345


Corporate expenses

4,932



6,227



18,055



15,711


Total operating expenses

188,675



202,807



559,659



484,263


Operating profit (loss)

21,968



(18,934)



56,472



(1,018)


Other Expenses (Income):








Interest income

(1,660)



(60)



(4,604)



(278)


Interest expense

14,471



12,732



42,511



36,710


Gain on early extinguishment of debt







(144)


Total other expenses, net

12,811



12,672



37,907



36,288


Income (loss) from continuing operations before income taxes

9,157



(31,606)



18,565



(37,306)


Income tax (expense) benefit

(593)



916



944



4,992


Income (loss) from continuing operations

8,564



(30,690)



19,509



(32,314)


Loss from discontinued operations, net of income taxes



(14,089)





(905)


Net income (loss)

8,564



(44,779)



19,509



(33,219)


Earnings (loss) earnings per share:








Continuing operations

$

0.04



$

(0.16)



$

0.10



$

(0.19)


Discontinued operations

0.00



(0.08)



0.00



(0.00)


Basic and diluted earnings (loss) per share

$

0.04



$

(0.24)



$

0.10



$

(0.19)


Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP.  EBITDA, Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.

EBITDA and FFO

EBITDA represents net income 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. In addition, covenants included in our indebtedness use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with GAAP, excluding gains or losses from sales of properties and impairment losses, 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.

Adjustments to EBITDA and FFO

We adjust EBITDA and FFO when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor's complete understanding of our operating performance.  We adjust EBITDA and FFO for the following items:

  • Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets.
  • Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of the favorable management contract assets recorded in conjunction with our acquisitions of the Westin Washington D.C. City Center, Westin San Diego, and Hilton Burlington and the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with our acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Lexington Hotel New York.  The amortization of the favorable and unfavorable contracts does not reflect the underlying operating performance of our hotels.
  • 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 the effect of these one-time adjustments because they do not reflect its actual performance for that period.
  • Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because we believe they do not accurately reflect the underlying performance of the Company.
  • Acquisition Costs:  We exclude acquisition transaction costs expensed during the period because we believe they do not reflect the underlying performance of the Company.
  • Allerton Loan:  In 2012, due to the uncertainty of the timing of the bankruptcy resolution, we excluded both cash interest payments received and the legal costs incurred as a result of the bankruptcy proceedings from our calculation of Adjusted EBITDA and Adjusted FFO.  Due to the settlement of the bankruptcy proceedings and amended and restated loan, we commenced recognizing interest income in 2013, which includes the amortization of the difference between the carrying basis of the old loan and face value of the new loan. Cash payments received during 2010 and 2011 that were included in Adjusted EBITDA and Adjusted FFO and reduced the carrying basis of the loan will be now be deducted from Adjusted EBITDA and Adjusted FFO on a straight-line basis over the anticipated five-year term of the new loan. 
  • Other Non-Cash and /or Unusual Items:  From time to time we incur costs or realize gains that we do not believe reflect the underlying performance of the Company.  Such items include, but are not limited to, pre-opening costs, contract termination fees and severance costs.  In 2012, we excluded the franchise termination fee paid to Radisson and, in 2013, we excluded the severance costs associated with the retirement of our Chief Operating Officer.

In addition, to derive Adjusted EBITDA we exclude gains or losses on sales of properties and impairment losses because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our hotels. Additionally, the gains or losses on sales of properties and impairment losses represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments.  Specifically, we exclude the impact of the non-cash amortization of the debt premium recorded in conjunction with the acquisition of the JW Marriott Denver at Cherry Creek and fair market value adjustments to the Company's interest rate cap agreement.

The following tables are reconciliations of our U.S. GAAP net income to EBITDA and Adjusted EBITDA (in thousands):


Third Quarter

Year To Date




Pro Forma






Pro Forma




2013


2012 (1)


2012 (2)


2013


2012 (3)


2012 (2)

Net income (loss)

$

8,564



$

(48,717)



$

(44,779)



$

19,509



$

(22,762)



$

(33,219)


Interest expense (4)

14,471



16,659



12,732



42,511



40,637



39,007


Income tax expense (benefit) (5)

593



889



(1,063)



(944)



(2,851)



(4,803)


Real estate related depreciation and
    amortization (6)

26,254



31,807



23,060



80,280



80,803



64,149


EBITDA

49,882



638



(10,050)



141,356



95,827



65,134


Non-cash ground rent

1,700



2,005



1,515



5,111



5,199



4,621


Non-cash amortization of favorable
    and unfavorable contract liabilities

(354)



(459)



(432)



(1,063)



(1,093)



(1,296)


Loss (gain) on sale of hotel properties



476



476





(9,541)



(9,541)


Gain on early extinguishment of debt









(144)



(144)


Acquisition costs

23



8,318



8,314



46



10,349



10,345


Reversal of previously recognized
    Allerton income

(291)







(872)






Allerton loan legal fees



1,106



1,106





2,017



2,017


Franchise termination fee









750



750


Impairment losses (7)



45,066



45,066





45,534



45,534


Severance costs







3,065






Adjusted EBITDA

$

50,960



$

57,150



$

45,995



$

147,643



$

148,898



$

117,420




(1)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 and all other hotels from July 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

(2)

As reported in the Company's Quarterly Report on Form 10-Q filed with the SEC on October 15, 2012.

(3)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

(4)

Includes $2.3 million of interest expense reported in discontinued operations for the 2012 year-to-date period (as reported). 

(5)

Includes $0.1 million of income tax expense reported in discontinued operations for the third quarter of 2012 (as reported) and $0.2 million of income tax expense reported in discontinued operations for the 2012 year-to-date period (as reported).

(6)

Includes $0.4 million of depreciation expense reported in discontinued operations for the third quarter of 2012 (as reported) and $1.3 million of depreciation expense reported in discontinued operations for the 2012 year-to-date period (as reported).

(7)

Includes impairment losses of $14.7 million reported in discontinued operations in both the third quarter of 2012 (as reported) and the 2012 year-to-date period (as reported). 

 

 


Full Year Guidance



Pre-Renovation 2013


2013



Low End


High End


Low End


High End

Net income (1)

$

37,098



$

45,098



$

24,098



$

32,098


Interest expense

57,500



57,500



57,500



57,500


Income tax expense (benefit)

3,100



6,100



(900)



2,100


Real estate related depreciation and amortization

107,000



106,000



107,000



106,000


EBITDA

204,698



214,698



187,698



197,698


Non-cash ground rent

6,400



6,400



6,400



6,400


Non-cash amortization of favorable and unfavorable contracts, net

(1,400)



(1,400)



(1,400)



(1,400)


Loss on early extinguishment of debt

1,500



1,500



1,500



1,500


Reversal of previously recognized Allerton income

(1,163)



(1,163)



(1,163)



(1,163)


Write-off of key money

(1,100)



(1,100)



(1,100)



(1,100)


Severance costs

3,065



3,065



3,065



3,065


Adjusted EBITDA

$

212,000



$

222,000



$

195,000



$

205,000




(1)

  Net income includes approximately $6.1 million of interest income related to the Allerton loan.

 

The following tables are reconciliations of our U.S. GAAP net income to FFO and Adjusted FFO (in thousands):

 


Third Quarter

Year To Date



Pro Forma


Pro Forma


2013


2012 (1)


2012 (2)


2013


2012 (3)


2012 (2)

Net income (loss)

$

8,564



$

(48,717)



$

(44,779)



$

19,509



$

(22,762)



$

(33,219)


Real estate related depreciation and
    amortization (4)

26,254



31,807



23,060



80,280



80,803



64,149


Impairment losses (5)



45,066



45,066





45,534



45,534


Loss (gain) on sale of hotel properties



476



476





(9,541)



(9,541)


FFO

34,818



28,632



23,823



99,789



94,034



66,923


Non-cash ground rent

1,700



2,005



1,515



5,111



5,199



4,621


Non-cash amortization of unfavorable
    contract liabilities

(354)



(459)



(432)



(1,063)



(1,093)



(1,296)


Gain on early extinguishment of debt









(144)



(144)


Acquisition costs

23



8,318



8,314



46



10,349



10,345


Reversal of previously recognized
    Allerton income

(291)







(872)






Allerton loan legal fees



1,106



1,106





2,017



2,017


Franchise termination fee









750



750


Severance costs







3,065






Fair value adjustments to debt
    instruments

(42)



98



98



(233)



499



499


Adjusted FFO

$

35,854



$

39,700



$

34,424



$

105,843



$

111,611



$

83,715


Adjusted FFO per share

$

0.18



$

0.21



$

0.18



$

0.54



$

0.64



$

0.48




(1)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 and all other hotels from July 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

(2)

As reported in the Company's Quarterly Report on Form 10-Q filed with the SEC on October 15, 2012.

(3)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

(4)

Includes $0.4 million of depreciation expense reported in discontinued operations for the third quarter of 2012 (as reported) and $1.3 million of depreciation expense reported in discontinued operations for the 2012 year-to-date period (as reported).

(5)

Includes impairment losses of $14.7 million reported in discontinued operations in both the third quarter of 2012 (as reported) and the 2012 year-to-date period (as reported). 

 


Full Year Guidance


Pre-Renovation 2013



2013



Low End



High End



Low End



High End


Net income (1)

$

37,098



$

45,098



$

24,098



$

32,098


Real estate related depreciation and amortization

107,000



106,000



107,000



106,000


FFO

144,098



151,098



131,098



138,098


Non-cash ground rent

6,400



6,400



6,400



6,400


Non-cash amortization of favorable and unfavorable contracts, net

(1,400)



(1,400)



(1,400)



(1,400)


Loss on early extinguishment of debt

1,500



1,500



1,500



1,500


Reversal of previously recognized Allerton income

(1,163)



(1,163)



(1,163)



(1,163)


Write-off of key money

(1,100)



(1,100)



(1,100)



(1,100)


Fair value adjustments to debt instruments

(400)



(400)



(400)



(400)


Severance costs

3,065



3,065



3,065



3,065


Adjusted FFO

$

151,000



$

158,000



$

138,000



$

145,000


Adjusted FFO per share

$

0.77



$

0.81



$

0.70



$

0.74




(1)

   Net income includes approximately $6.1 million of interest income related to the Allerton loan.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

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 and other contracts, the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Lexington Hotel New York. 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. Net debt is calculated as total debt outstanding less unrestricted cash.

 


DIAMONDROCK HOSPITALITY COMPANY
HOTEL OPERATING DATA
Schedule of Property Level Results
(in thousands)
(unaudited)


Third Quarter



Year To Date







Pro Forma



%








Pro Forma



%




2013




2012 (1)



Change




2013




2012 (2)



Change


Revenues:






















Rooms

$

150,146



$

165,272



(9.2)%



$

428,981



$

430,880



(0.4)%


Food and beverage

47,522



50,119



(5.2)%



149,743



140,737



6.4%


Other

12,975



12,980



—%



37,407



34,589



8.1%


Total revenues

210,643



228,371



(7.8)%



616,131



606,206



1.6%


Operating Expenses:












Rooms departmental expenses

$

40,521



$

43,490



(6.8)%



$

116,091



$

113,310



2.5%


Food and beverage departmental expenses

34,591



36,427



(5.0)%



106,475



100,968



5.5%


Other direct departmental

5,901



6,408



(7.9)%



17,579



16,778



4.8%


General and administrative

17,019



17,707



(3.9)%



48,928



48,245



1.4%


Utilities

7,973



8,181



(2.5)%



22,235



21,617



2.9%


Repairs and maintenance

9,395



9,911



(5.2)%



28,184



26,973



4.5%


Sales and marketing

17,648



19,297



(8.5)%



50,802



51,932



(2.2)%


Base management fees

5,098



5,781



(11.8)%



14,860



15,240



(2.5)%


Incentive management fees

2,080



1,971



5.5%



4,550



3,723



22.2%


Property taxes

10,430



9,769



6.8%



31,322



28,236



10.9%


Ground rent

3,758



4,078



(7.8)%



11,239



11,090



1.3%


Other fixed expenses

3,050



3,121



(2.3)%



9,014



8,180



10.2%


Total hotel operating expenses

$

157,464



$

166,141



(5.2)%



$

461,279



$

446,292



3.4%


Hotel EBITDA

53,179



62,230



(14.5)%



154,852



159,914



(3.2)%


Non-cash ground rent

1,700



2,005



(15.2)%



5,111



5,199



(1.7)%


Non-cash amortization of unfavorable contract liabilities

(354)



(459)



(22.9)%



(1,063)



(1,093)



(2.7)%


Hotel Adjusted EBITDA

$

54,525



$

63,776



(14.5)%



$

158,900



$

164,020



(3.1)%


 

(1)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 and all other hotels from July 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 



(2)

Pro forma to (a) include the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012, (b) assume all of the Company's 27 hotels were owned as of January 1, 2012, and (c) exclude the operating results of the hotels sold during 2012. 

 

 

Market Capitalization as of September 30, 2013

(in thousands, except per share data)

 

Enterprise Value






Common equity capitalization (at September 30, 2013 closing price of  $10.67/share)


$

2,092,469


Consolidated debt


1,060,299


Cash and cash equivalents


(43,448)


Total enterprise value


$

3,109,320


Share Reconciliation






Common shares outstanding


195,471


Unvested restricted stock held by management and employees


561


Share grants under deferred compensation plan held by directors


76


Combined shares outstanding


196,108













 

 

Debt Summary as of September 30, 2013

(dollars in thousands)

Property


Interest Rate


Term


Outstanding
Principal



Maturity

Courtyard Manhattan / Midtown East


8.810%


Fixed


$

41,635



October 2014

Salt Lake City Marriott Downtown


5.500%


Fixed


27,401



January 2015

Courtyard Manhattan / Fifth Avenue


6.480%


Fixed


49,742



June 2016

Los Angeles Airport Marriott


5.300%


Fixed


82,600



July 2015

Frenchman's Reef Marriott


5.440%


Fixed


57,933



August 2015

Renaissance Worthington


5.400%


Fixed


54,035



July 2015

Orlando Airport Marriott


5.680%


Fixed


56,986



January 2016

Chicago Marriott Downtown


5.975%


Fixed


209,208



April 2016

Hilton Minneapolis


5.464%


Fixed


95,557



May 2021

JW Marriott Denver at Cherry Creek


6.470%


Fixed


40,056



July 2015

Lexington Hotel New York


LIBOR + 3.00


Variable


170,368



March 2015

Westin Washington D.C. City Center


3.990%


Fixed


72,858



January 2023

The Lodge at Sonoma


3.960%


Fixed


30,784



April 2023

Westin San Diego


3.940%


Fixed


70,503



April 2023

Debt premium (1)






633




Total mortgage debt






$

1,060,299













Senior unsecured credit facility


LIBOR + 1.90


Variable


-



January 2017

Total debt




$

1,060,299






(1)

   Non-cash GAAP adjustment recorded upon the assumption of the mortgage loan secured by the JW Marriott Denver Cherry Creek in 2011.


 



Pro Forma Operating Statistics – Third Quarter (1)




ADR


Occupancy


RevPAR


Hotel Adjusted EBITDA Margin



3Q 2013

3Q 2012

B/(W)


3Q 2013

3Q 2012

B/(W)


3Q 2013

3Q 2012

B/(W)


3Q 2013

3Q 2012

B/(W)

Atlanta Alpharetta


$

146.73


$

138.21


6.2

%


73.6

%

63.5

%

10.1

%


$

108.01


$

87.78


23.0

%


28.62

%

23.70

%

492 bps

Bethesda Marriott Suites


$

149.13


$

160.44


(7.0)

%


57.6

%

68.5

%

(10.9)

%


$

85.83


$

109.89


(21.9)

%


13.37

%

25.91

%

-1254 bps

Boston Westin


$

196.29


$

191.12


2.7

%


83.2

%

85.9

%

(2.7)

%


$

163.22


$

164.20


(0.6)

%


25.01

%

25.93

%

-92 bps

Hilton Boston Downtown


$

242.44


$

230.73


5.1

%


91.5

%

86.2

%

5.3

%


$

221.73


$

198.97


11.4

%


36.90

%

40.12

%

-322 bps

Hilton Burlington


$

187.29


$

187.73


(0.2)

%


90.1

%

87.2

%

2.9

%


$

168.70


$

163.74


3.0

%


48.08

%

46.20

%

188 bps

Renaissance Charleston


$

176.17


$

172.77


2.0

%


89.7

%

85.3

%

4.4

%


$

157.97


$

147.35


7.2

%


29.81

%

33.03

%

-322 bps

Hilton Garden Inn Chelsea


$

239.38


$

221.00


8.3

%


95.8

%

97.8

%

(2.0)

%


$

229.28


$

216.21


6.0

%


46.26

%

43.18

%

308 bps

Chicago Marriott


$

209.24


$

206.46


1.3

%


83.9

%

83.2

%

0.7

%


$

175.45


$

171.76


2.1

%


27.25

%

26.75

%

50 bps

Chicago Conrad


$

225.00


$

218.84


2.8

%


87.2

%

90.5

%

(3.3)

%


$

196.28


$

198.10


(0.9)

%


37.25

%

37.36

%

-11 bps

Courtyard Denver Downtown


$

170.92


$

166.08


2.9

%


88.7

%

87.9

%

0.8

%


$

151.55


$

145.93


3.9

%


47.11

%

47.08

%

3 bps

Courtyard Fifth Avenue


$

275.20


$

273.71


0.5

%


94.3

%

96.1

%

(1.8)

%


$

259.56


$

263.08


(1.3)

%


28.50

%

33.80

%

-530 bps

Courtyard Midtown East


$

277.65


$

269.30


3.1

%


89.0

%

90.6

%

(1.6)

%


$

247.14


$

244.11


1.2

%


35.64

%

35.82

%

-18 bps

Frenchman's Reef


$

186.76


$

176.38


5.9

%


75.3

%

74.9

%

0.4

%


$

140.70


$

132.20


6.4

%


4.85

%

6.14

%

-129 bps

JW Marriott Denver Cherry Creek


$

248.79


$

233.00


6.8

%


84.5

%

80.5

%

4.0

%


$

210.14


$

187.48


12.1

%


33.39

%

32.98

%

41 bps

Los Angeles Airport


$

113.31


$

108.86


4.1

%


92.1

%

88.7

%

3.4

%


$

104.33


$

96.60


8.0

%


19.32

%

17.05

%

227 bps

Hilton Minneapolis


$

152.49


$

150.57


1.3

%


80.5

%

80.2

%

0.3

%


$

122.79


$

120.70


1.7

%


30.23

%

32.12

%

-189 bps

Oak Brook Hills


$

125.36


$

130.24


(3.7)

%


77.0

%

67.9

%

9.1

%


$

96.55


$

88.40


9.2

%


23.89

%

19.57

%

432 bps

Orlando Airport Marriott


$

92.97


$

95.10


(2.2)

%


63.2

%

63.2

%

%


$

58.79


$

60.11


(2.2)

%


8.28

%

13.39

%

-511 bps

Hotel Rex


$

210.75


$

191.62


10.0

%


89.2

%

90.7

%

(1.5)

%


$

187.94


$

173.72


8.2

%


36.90

%

42.07

%

-517 bps

Salt Lake City Marriott


$

140.63


$

139.32


0.9

%


66.8

%

67.5

%

(0.7)

%


$

94.00


$

93.99


%


31.05

%

30.38

%

67 bps

The Lodge at Sonoma


$

300.32


$

272.65


10.1

%


84.6

%

84.6

%

%


$

254.15


$

230.78


10.1

%


33.85

%

31.81

%

204 bps

Torrance Marriott South Bay


$

115.02


$

111.30


3.3

%


91.2

%

86.3

%

4.9

%


$

104.88


$

96.02


9.2

%


25.64

%

27.17

%

-153 bps

Vail Marriott


$

159.09


$

148.81


6.9

%


70.5

%

73.3

%

(2.8)

%


$

112.20


$

109.07


2.9

%


12.37

%

22.35

%

-998 bps

Lexington Hotel New York


$

228.06


$

208.89


9.2

%


51.9

%

95.6

%

(43.7)

%


$

118.47


$

199.77


(40.7)

%


(0.22)

%

36.50

%

-3672 bps

Westin San Diego


$

155.68


$

141.57


10.0

%


89.5

%

89.5

%

%


$

139.38


$

126.70


10.0

%


30.86

%

30.42

%

44 bps

Westin Washington D.C. City Center


$

162.25


$

168.38


(3.6)

%


77.9

%

77.7

%

0.2

%


$

126.35


$

130.88


(3.5)

%


25.16

%

30.01

%

-485 bps

Renaissance Worthington


$

164.34


$

161.05


2.0

%


64.9

%

61.1

%

3.8

%


$

106.70


$

98.35


8.5

%


26.12

%

21.94

%

418 bps

Total


$

177.42


$

172.61


2.8

%


79.5

%

80.9

%

(1.4)

%


$

141.03


$

139.56


1.1

%


25.89

%

27.93

%

-204 bps

Total Excluding Lexington Hotel


$

175.30


$

170.07


3.1

%


81.3

%

80.0

%

1.3

%


$

142.51


$

136.03


4.8

%


27.05

%

27.37

%

-32 bps

(1)

The pro forma operating data includes the operating results for each of the Company's hotels assuming they were owned since January 1, 2012. 3Q 2012 includes the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 (112 days) and all other hotels from July 1, 2012 to September 30, 2012.

 

Pro Forma Operating Statistics – Year to Date (1)




ADR


Occupancy


RevPAR


Hotel Adjusted EBITDA Margin



YTD 2013

YTD 2012

B/(W)


YTD 2013

YTD 2012

B/(W)


YTD 2013

YTD 2012

B/(W)


YTD 2013

YTD 2012

B/(W)

Atlanta Alpharetta


$

148.05


$

139.79


5.9

%


75.5

%

66.4

%

9.1

%


$

111.73


$

92.78


20.4

%


33.88

%

30.52

%

336 bps

Bethesda Marriott Suites


$

164.37


$

165.60


(0.7)

%


60.2

%

66.1

%

(5.9)

%


$

98.88


$

109.45


(9.7)

%


22.84

%

26.67

%

-383 bps

Boston Westin


$

199.77


$

197.67


1.1

%


77.9

%

76.7

%

1.2

%


$

155.57


$

151.69


2.6

%


24.08

%

22.76

%

132 bps

Hilton Boston Downtown


$

221.07


$

218.43


1.2

%


83.3

%

80.3

%

3.0

%


$

184.25


$

175.44


5.0

%


33.01

%

38.51

%

-550 bps

Hilton Burlington


$

161.32


$

159.79


1.0

%


75.3

%

74.7

%

0.6

%


$

121.53


$

119.34


1.8

%


41.21

%

38.38

%

283 bps

Renaissance Charleston


$

190.07


$

183.28


3.7

%


87.7

%

85.5

%

2.2

%


$

166.76


$

156.77


6.4

%


34.36

%

35.24

%

-88 bps

Hilton Garden Inn Chelsea


$

223.23


$

202.42


10.3

%


96.6

%

95.3

%

1.3

%


$

215.62


$

192.90


11.8

%


44.19

%

41.00

%

319 bps

Chicago Marriott


$

205.34


$

199.28


3.0

%


76.6

%

73.9

%

2.7

%


$

157.32


$

147.17


6.9

%


23.37

%

22.45

%

92 bps

Chicago Conrad


$

215.81


$

206.97


4.3

%


82.8

%

80.9

%

1.9

%


$

178.75


$

167.42


6.8

%


31.38

%

29.33

%

205 bps

Courtyard Denver Downtown


$

168.83


$

158.84


6.3

%


84.9

%

85.6

%

(0.7)

%


$

143.40


$

135.98


5.5

%


45.33

%

45.69

%

-36 bps

Courtyard Fifth Avenue


$

266.73


$

260.17


2.5

%


77.3

%

90.2

%

(12.9)

%


$

206.12


$

234.64


(12.2)

%


18.03

%

27.59

%

-956 bps

Courtyard Midtown East


$

263.70


$

257.14


2.6

%


80.2

%

85.8

%

(5.6)

%


$

211.53


$

220.69


(4.2)

%


27.49

%

32.31

%

-482 bps

Frenchman's Reef


$

243.33


$

233.28


4.3

%


84.1

%

80.6

%

3.5

%


$

204.57


$

188.04


8.8

%


21.22

%

21.41

%

-19 bps

JW Marriott Denver Cherry Creek


$

240.79


$

226.64


6.2

%


81.0

%

76.0

%

5.0

%


$

195.05


$

172.22


13.3

%


30.47

%

29.97

%

50 bps

Los Angeles Airport


$

113.56


$

109.53


3.7

%


87.8

%

87.9

%

(0.1)

%


$

99.73


$

96.27


3.6

%


21.21

%

19.33

%

188 bps

Hilton Minneapolis


$

145.04


$

141.08


2.8

%


75.0

%

74.2

%

0.8

%


$

108.79


$

104.69


3.9

%


28.12

%

27.10

%

102 bps

Oak Brook Hills


$

122.79


$

120.60


1.8

%


61.8

%

60.0

%

1.8

%


$

75.83


$

72.34


4.8

%


13.35

%

11.46

%

189 bps

Orlando Airport Marriott


$

100.94


$

105.34


(4.2)

%


75.1

%

72.8

%

2.3

%


$

75.82


$

76.69


(1.1)

%


22.76

%

23.68

%

-92 bps

Hotel Rex


$

189.84


$

177.71


6.8

%


84.9

%

86.6

%

(1.7)

%


$

161.11


$

153.90


4.7

%


32.16

%

36.79

%

-463 bps

Salt Lake City Marriott


$

143.26


$

136.95


4.6

%


69.9

%

68.2

%

1.7

%


$

100.20


$

93.46


7.2

%


33.79

%

31.02

%

277 bps

The Lodge at Sonoma


$

255.28


$

237.74


7.4

%


75.8

%

72.8

%

3.0

%


$

193.49


$

173.05


11.8

%


25.71

%

21.56

%

415 bps

Torrance Marriott South Bay


$

117.06


$

110.49


5.9

%


84.1

%

84.5

%

(0.4)

%


$

98.49


$

93.31


5.6

%


25.49

%

26.13

%

-64 bps

Vail Marriott


$

230.31


$

219.25


5.0

%


71.8

%

68.1

%

3.7

%


$

165.44


$

149.42


10.7

%


30.28

%

29.96

%

32 bps

Lexington Hotel New York


$

200.80


$

196.58


2.1

%


53.7

%

94.6

%

(40.9)

%


$

107.85


$

185.89


(42.0)

%


(4.76)

%

32.45

%

-3721 bps

Westin San Diego


$

154.40


$

150.90


2.3

%


87.2

%

80.8

%

6.4

%


$

134.63


$

122.00


10.4

%


32.40

%

31.27

%

113 bps

Westin Washington D.C. City Center


$

189.21


$

193.40


(2.2)

%


78.0

%

75.0

%

3.0

%


$

147.66


$

145.04


1.8

%


32.22

%

35.63

%

-341 bps

Renaissance Worthington


$

171.00


$

157.94


8.3

%


65.1

%

70.4

%

(5.3)

%


$

111.34


$

111.19


0.1

%


30.86

%

29.39

%

147 bps

Total


$

177.62


$

172.91


2.7

%


76.5

%

77.9

%

(1.4)

%


$

135.84


$

134.69


0.9

%


25.79

%

27.06

%

-127 bps

Total Excluding NY Renovations (2)


$

172.26


$

166.17


3.7

%


77.9

%

76.3

%

1.6

%


$

134.21


$

126.79


5.9

%


27.14

%

26.46

%

68 bps



(1)

The pro forma operating data includes the operating results for each of the Company's hotels assuming they were owned since January 1, 2012. YTD 2012 includes the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012.

(2)

Excludes three hotels in New York City under renovation during the nine months ended September 30, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue.

 

























Hotel Adjusted EBITDA Reconciliation










Third Quarter 2013












Plus:



Plus:



Plus:



Equals:


























Total Revenues




Net Income / (Loss)



Depreciation



Interest Expense



Non-Cash
Adjustments (1)



Hotel Adjusted
EBITDA


Atlanta Alpharetta


$

4,291



$

823


$

405


$


$


$

1,228


Bethesda Marriott Suites


$

3,014



$

(1,530)


$

376


$


$

1,557


$

403


Boston Westin


$

18,878



$

2,595


$

2,124


$


$

2


$

4,721


Hilton Boston Downtown


$

8,020



$

1,476


$

1,441


$


$

42


$

2,959


Hilton Burlington


$

4,960



$

1,518


$

844


$


$

23


$

2,385


Renaissance Charleston


$

2,905



$

493


$

405


$


$

(32)


$

866


Hilton Garden Inn Chelsea


$

3,595



$

1,057


$

606


$


$


$

1,663


Chicago Marriott


$

28,087



$

1,511


$

3,308


$

3,232


$

(396)


$

7,655


Chicago Conrad


$

7,511



$

1,833


$

965


$


$


$

2,798


Courtyard Denver Downtown


$

2,647



$

981


$

266


$


$


$

1,247


Courtyard Fifth Avenue


$

4,449



$

(71)


$

433


$

854


$

52


$

1,268


Courtyard Midtown East


$

7,495



$

1,018


$

675


$

978


$


$

2,671


Frenchman's Reef


$

11,257



$

(1,895)


$

1,611


$

830


$


$

546


JW Marriott Denver Cherry Creek


$

5,954



$

881


$

521


$

586


$


$

1,988


Los Angeles Airport


$

15,326



$

574


$

1,252


$

1,135


$


$

2,961


Minneapolis Hilton


$

13,656



$

958


$

1,944


$

1,359


$

(133)


$

4,128


Oak Brook Hills


$

8,146



$

1,609


$

229


$


$

108


$

1,946


Orlando Airport Marriott


$

3,927



$

(1,319)


$

812


$

832


$


$

325


Hotel Rex


$

1,824



$

442


$

231


$


$


$

673


Salt Lake City Marriott


$

6,538



$

882


$

756


$

392


$


$

2,030


The Lodge at Sonoma


$

6,535



$

1,524


$

370


$

318


$


$

2,212


Torrance Marriott South Bay


$

6,299



$

1,024


$

591


$


$


$

1,615


Vail Marriott


$

5,669



$

89


$

612


$


$


$

701


Lexington Hotel New York


$

9,014



$

(4,396)


$

2,664


$

1,682


$

30


$

(20)


Westin San Diego


$

7,301



$

420


$

1,068


$

718


$

47


$

2,253


Westin Washington D.C. City Center


$

5,895



$

(401)


$

1,055


$

783


$

46


$

1,483


Renaissance Worthington


$

7,450



$

498


$

690


$

756


$

2


$

1,946


Total


$

210,643



$

12,594


$

26,254


$

14,455


$

1,348


$

54,525


Total Excluding Lexington Hotel


$

201,629



$

16,990


$

23,590


$

12,773


$

1,318


$

54,545




(1)

The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of favorable lease assets, and the non-cash amortization of unfavorable contract liabilities.

 

 




Pro Forma Hotel Adjusted EBITDA Reconciliation


























Third Quarter 2012 (1)












Plus:



Plus:



Plus:



Equals:


























Total Revenues




Net Income / (Loss)



Depreciation



Interest Expense



Non-Cash
Adjustments (2)



Hotel Adjusted
EBITDA


Atlanta Alpharetta


$

4,190



$

614


$

379


$


$


$

993


Bethesda Marriott Suites


$

4,608



$

(1,354)


$

636


$


$

1,912


$

1,194


Boston Westin


$

18,506



$

2,190


$

2,607


$


$

2


$

4,799


Hilton Boston Downtown


$

7,078



$

1,489


$

1,309


$


$

42


$

2,840


Hilton Burlington


$

4,781



$

1,413


$

773


$


$

23


$

2,209


Renaissance Charleston


$

3,309



$

660


$

472


$


$

(39)


$

1,093


Hilton Garden Inn Chelsea


$

3,467



$

914


$

583


$


$


$

1,497


Chicago Marriott


$

32,656



$

1,008


$

4,207


$

4,007


$

(487)


$

8,735


Chicago Conrad


$

7,631



$

1,764


$

1,087


$


$


$

2,851


Courtyard Denver Downtown


$

2,538



$

878


$

317


$


$


$

1,195


Courtyard Fifth Avenue


$

5,509



$

182


$

555


$

1,061


$

64


$

1,862


Courtyard Midtown East


$

8,852



$

1,211


$

743


$

1,217


$


$

3,171


Frenchman's Reef


$

10,832



$

(2,365)


$

1,996


$

1,034


$


$

665


JW Marriott Denver Cherry Creek


$

5,476



$

468


$

593


$

745


$


$

1,806


Los Angeles Airport


$

17,141



$

(265)


$

1,796


$

1,392


$


$

2,923


Minneapolis Hilton


$

13,619



$

551


$

2,362


$

1,687


$

(225)


$

4,375


Oak Brook Hills


$

8,769



$

620


$

971


$


$

125


$

1,716


Orlando Airport Marriott


$

4,936



$

(1,295)


$

920


$

1,036


$


$

661


Hotel Rex


$

1,678



$

500


$

206


$


$


$

706


Salt Lake City Marriott


$

7,435



$

842


$

906


$

511


$


$

2,259


The Lodge at Sonoma


$

7,239



$

1,827


$

476


$


$


$

2,303


Torrance Marriott South Bay


$

7,181



$

973


$

978


$


$


$

1,951


Vail Marriott


$

5,896



$

578


$

740


$


$


$

1,318


Lexington Hotel New York


$

13,840



$

(530)


$

3,190


$

2,358


$

33


$

5,051


Westin San Diego


$

6,786



$

1,044


$

973


$


$

47


$

2,064


Westin Washington D.C. City Center


$

6,122



$

649


$

1,142


$


$

46


$

1,837


Renaissance Worthington


$

8,296



$

(15)


$

889


$

943


$

3


$

1,820


Total


$

228,371



$

14,551


$

31,806


$

15,991


$

1,546


$

63,776


Total Excluding Lexington Hotel


$

214,531



$

15,081


$

28,616


$

13,633


$

1,513


$

58,725




(1)

The pro forma operating data includes the operating results for each the Company's hotels assuming they were owned as of January 1, 2012 and includes the operating results of the Company's Marriott-managed hotels from June 16, 2012 to October 5, 2012 and all other hotels from July 1, 2012 to September 30, 2012. 

(2)

The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.

 

 

























Hotel Adjusted EBITDA Reconciliation










Year to Date 2013












Plus:



Plus:



Plus:



Equals:


























Total Revenues




Net Income / (Loss)



Depreciation



Interest Expense



Non-Cash
Adjustments (1)



Hotel Adjusted
EBITDA


Atlanta Alpharetta


$

13,670



$

3,413


$

1,218


$


$


$

4,631


Bethesda Marriott Suites


$

10,249



$

(3,588)


$

1,257


$


$

4,672


$

2,341


Boston Westin


$

57,358



$

7,431


$

6,372


$


$

7


$

13,810


Hilton Boston Downtown


$

19,985



$

2,163


$

4,309


$


$

125


$

6,597


Hilton Burlington


$

10,887



$

1,891


$

2,527


$


$

68


$

4,486


Renaissance Charleston


$

9,203



$

2,065


$

1,192


$


$

(95)


$

3,162


Hilton Garden Inn Chelsea


$

10,201



$

2,955


$

1,553


$


$


$

4,508


Chicago Marriott


$

75,420



$

(665)


$

9,864


$

9,618


$

(1,192)


$

17,625


Chicago Conrad


$

20,051



$

3,491


$

2,801


$


$


$

6,292


Courtyard Denver Downtown


$

7,445



$

2,586


$

789


$


$


$

3,375


Courtyard Fifth Avenue


$

10,488



$

(1,998)


$

1,184


$

2,544


$

161


$

1,891


Courtyard Midtown East


$

18,677



$

328


$

1,874


$

2,932


$


$

5,134


Frenchman's Reef


$

48,571



$

2,970


$

4,864


$

2,473


$


$

10,307


JW Marriott Denver Cherry Creek


$

16,545



$

1,785


$

1,487


$

1,770


$


$

5,042


Los Angeles Airport


$

44,658



$

2,133


$

3,972


$

3,368


$


$

9,473


Minneapolis Hilton


$

38,635



$

1,396


$

5,816


$

4,050


$

(399)


$

10,863


Oak Brook Hills


$

18,037



$

1,330


$

754


$


$

324


$

2,408


Orlando Airport Marriott


$

15,114



$

(1,368)


$

2,332


$

2,476


$


$

3,440


Hotel Rex


$

4,754



$

836


$

693


$


$


$

1,529


Salt Lake City Marriott


$

20,248



$

3,433


$

2,227


$

1,182


$


$

6,842


The Lodge at Sonoma


$

15,980



$

2,336


$

1,103


$

670


$


$

4,109


Torrance Marriott South Bay


$

17,910



$

2,807


$

1,759


$


$


$

4,566


Vail Marriott


$

22,328



$

4,947


$

1,813


$


$


$

6,760


Lexington Hotel New York


$

23,315



$

(15,255)


$

9,010


$

5,044


$

92


$

(1,109)


Westin San Diego


$

22,186



$

2,407


$

3,185


$

1,455


$

141


$

7,188


Westin Washington D.C. City Center


$

20,227



$

(190)


$

4,232


$

2,338


$

138


$

6,518


Renaissance Worthington


$

23,989



$

3,052


$

2,093


$

2,253


$

6


$

7,404


Total


$

616,131



$

32,691


$

80,280


$

42,173


$

4,048


$

158,900


Total Excluding NY Renovations (2)


$

563,651



$

49,616


$

68,212


$

31,653


$

3,795


$

152,984




(1)

The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of favorable lease assets, and the non-cash amortization of unfavorable contract liabilities.

(2)

Excludes three hotels in New York City under renovation during the nine months ended September 30, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue.

 




Pro Forma Hotel Adjusted EBITDA Reconciliation










Year To Date 2012












Plus:



Plus:



Plus:



Equals:


























Total Revenues




Net Income / (Loss)



Depreciation



Interest Expense



Non-Cash
Adjustments (2)



Hotel Adjusted
EBITDA


Atlanta Alpharetta


$

11,676



$

2,585


$

978


$


$


$

3,563


Bethesda Marriott Suites


$

11,485



$

(3,333)


$

1,594


$


$

4,802


$

3,063


Boston Westin


$

54,386



$

5,608


$

6,762


$


$

6


$

12,376


Hilton Boston Downtown


$

18,970



$

3,255


$

3,926


$


$

125


$

7,306


Hilton Burlington


$

10,718



$

1,727


$

2,319


$


$

68


$

4,114


Renaissance Charleston


$

8,807



$

2,033


$

1,168


$


$

(97)


$

3,104


Hilton Garden Inn Chelsea


$

9,244



$

2,333


$

1,457


$


$


$

3,790


Chicago Marriott


$

72,282



$

(2,370)


$

9,850


$

9,962


$

(1,216)


$

16,226


Chicago Conrad


$

18,822



$

2,900


$

2,621


$


$


$

5,521


Courtyard Denver Downtown


$

7,095



$

2,278


$

789


$

175


$


$

3,242


Courtyard Fifth Avenue


$

12,249



$

(827)


$

1,410


$

2,637


$

159


$

3,379


Courtyard Midtown East


$

20,033



$

1,625


$

1,837


$

3,011


$


$

6,473


Frenchman's Reef


$

42,775



$

1,684


$

4,886


$

2,589


$


$

9,159


JW Marriott Denver Cherry Creek


$

14,916



$

1,192


$

1,432


$

1,847


$


$

4,471


Los Angeles Airport


$

44,047



$

576


$

4,484


$

3,453


$


$

8,513


Minneapolis Hilton


$

36,906



$

432


$

5,851


$

4,221


$

(502)


$

10,002


Oak Brook Hills


$

17,676



$

(787)


$

2,437


$


$

375


$

2,025


Orlando Airport Marriott


$

15,407



$

(1,234)


$

2,308


$

2,574


$


$

3,648


Hotel Rex


$

4,490



$

1,035


$

617


$


$


$

1,652


Salt Lake City Marriott


$

18,906



$

2,398


$

2,186


$

1,281


$


$

5,865


The Lodge at Sonoma


$

14,561



$

1,977


$

1,163


$


$


$

3,140


Torrance Marriott South Bay


$

17,526



$

2,129


$

2,450


$


$


$

4,579


Vail Marriott


$

20,121



$

4,219


$

1,809


$


$


$

6,028


Lexington Hotel New York


$

38,568



$

(386)


$

7,914


$

4,887


$

100


$

12,515


Westin San Diego


$

20,096



$

3,223


$

2,920


$


$

142


$

6,285


Westin Washington D.C. City Center


$

19,960



$

3,548


$

3,427


$


$

137


$

7,112


Renaissance Worthington


$

24,484



$

2,635


$

2,207


$

2,346


$

9


$

7,197


Total


$

606,206



$

40,455


$

80,802


$

38,983


$

4,108


$

164,020


Total Excluding NY Renovations (3)


$

535,356



$

40,043


$

69,641


$

28,448


$

3,849


$

141,653




(1)

The pro forma operating data includes the operating results for each of the Company's hotels assuming they were owned since January 1, 2012. YTD 2012 includes the operating results of the Company's Marriott-managed hotels from January 1, 2012 to October 5, 2012 and all other hotels from January 1, 2012 to September 30, 2012.

(2)

The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.

(3)

Excludes three hotels in New York City under renovation during the nine months ended September 30, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue.

 

 

SOURCE DiamondRock Hospitality Company



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