DiamondRock Hospitality Company
Condensed Consolidated Income Statement for the Fiscal
Quarter
Ended June 17, 2005 and the Period from
January 1, 2005 to June 17, 2005
Fiscal Quarter Period from
Ended January 1, 2005
June 17, 2005 to June 17, 2005
(Unaudited) (Unaudited)
Rooms
$23,833,517 $42,501,868
Food and beverage
7,791,155 14,205,252
Other
1,891,044 3,157,377
Total revenues
33,515,716 59,864,497
Operating Expenses:
Rooms
5,598,776 10,586,057
Food and beverage
5,680,917 10,762,154
Management fees
1,210,846 2,109,011
Other hotel expenses
12,746,028 24,360,713
Depreciation and amortization
4,340,984 8,703,130
Corporate expenses
5,937,309 7,946,739
Total operating expenses
35,514,860 64,467,804
Operating loss
(1,999,144) (4,603,307)
Other Expenses (Income):
Interest income
(284,049) (560,827)
Interest expense
3,630,470 6,484,739
Total other expenses/(income)
3,346,421 5,923,912
Loss before income taxes
(5,345,565) (10,527,219)
Income tax expense
(478,990) (558,847)
Net loss
$(5,824,555) $(11,086,066)
Loss per share:
Basic and diluted
$(0.20) $(0.44)
DiamondRock Hospitality Company
Condensed Consolidated Balance Sheet as of June 17, 2005
and December 31, 2004
ASSETS
June 17, 2005 December 31, 2004 (Unaudited)
Property and equipment, at cost
$ 355,586,800 $ 286,727,306
Less: accumulated depreciation
(9,821,511) (1,084,867)
345,765,289 285,642,439
Deferred financing costs, net
2,512,687 1,344,378
Restricted cash
19,551,276 17,482,515
Due from hotel managers
3,190,795 2,626,262
Purchase deposits and pre-acquisition
costs
11,295,442 3,272,219
Prepaid and other assets
2,350,923 4,340,259
Cash and cash equivalents
273,125,031 76,983,107
Total assets
$ 657,791,443 $ 391,691,179
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Mortgage debt, at face amount
$ 156,439,719 $ 177,827,573
Debt premium
2,869,507 2,944,237
Total debt
159,309,226 180,771,810
Deferred income related to key money
6,425,826 2,490,385
Unfavorable lease liability
5,458,848 5,776,946
Due to hotel managers
680,226 3,985,795
Dividends declared and unpaid
1,693,125
-
Accounts payable and accrued expenses
7,668,851 3,078,825
Total other liabilities
21,926,876 15,331,951
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; 50,815,864
and 21,020,100
shares issued and outstanding
at
June 17, 2005 December 31, 2004,
respectively
508,159 210,201
Additional paid-in capital
489,250,873 197,494,842
Accumulated deficit
(13,203,691) (2,117,625)
Total shareholders' equity
476,555,341 195,587,418
Total liabilities and
shareholders' equity
$ 657,791,443 $ 391,691,179
DiamondRock Hospitality Company
Consolidated Statement of Cash Flows for the Period
from January 1, 2005 to
June 17, 2005
Period from
January 1, 2005 to
June 17, 2005
Cash flows from operating activities:
(Unaudited)
Net loss
$(11,086,066)
Adjustments to reconcile
net loss to net cash provided
by operating activities:
Property depreciation
and amortization
8,703,130
Non-cash straight
line ground rent
3,180,110
Non-cash financing
costs as interest
960,062
Market value
adjustment to interest rate caps
(8,445)
Amortization
of debt premium and unfavorable lease
liability
(140,577)
Amortization
of deferred income and corporate depreciation (64,559)
Stock-based
compensation
4,969,510
Income tax
expense
558,847
Changes in assets and
liabilities:
Prepaid expenses
and other assets
1,438,934
Due to/from
hotel managers
(3,870,102)
Accounts payable
and accrued expenses
(371,406)
Net cash provided by operating
activities
4,269,438
Cash flows from investing activities:
Hotel acquisition and
capital expenditures
(65,806,012)
Receipt of deferred key
money
4,000,000
Cash paid for restricted
cash at acquisition
(10,000,000)
Change in restricted cash
879,924
Purchase deposits and
pre-acquisition costs
(10,927,784)
Net cash used in investing
activities
(81,853,872)
Cash flows from financing activities:
Proceeds from mortgage
debt
44,000,000
Repayments of mortgage
debt
(56,948,685)
Scheduled mortgage debt
principal payments
(1,387,854)
Payment of financing costs
(2,128,371)
Proceeds from sale of
common stock
291,799,785
Payment of costs related
to sale of common stock
(1,608,517)
Net cash provided by financing
activities
273,726,358
Net increase in cash and cash equivalents
196,141,924
Cash and cash equivalents, beginning
of period
76,983,107
Cash and cash equivalents, end of
period
$273,125,031
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest
$5,962,359
Cash paid for income taxes
$1,114,363
Non-GAAP Financial Matters
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 Period from
Quarter Ended January 1, 2005
June 17, 2005 to June 17, 2005
Net loss
$(5,824,555) $(11,086,066)
Interest expense
3,630,470 6,484,739
Income tax expense
478,990
558,847
Depreciation and amortization
4,340,984 8,703,130
EBITDA
$2,625,889 $4,660,650
Forecast Third Quarter 2005
Low End High
End
Net loss
$(2,590,000) $(590,000)
Interest expense
4,600,000 4,600,000
Income tax expense
400,000
400,000
Depreciation and amortization
8,000,000 8,000,000
EBITDA
$10,410,000 $12,410,000
Forecast Full Year 2005
Low End High
End
Net loss
$(14,026,250) $(11,026,250)
Interest expense
17,400,000 17,400,000
Income tax expense
1,500,000 1,500,000
Depreciation and amortization
27,500,000 27,500,000
EBITDA
$32,373,750 $35,373,750
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:
* Straight Line Ground Rent:
We exclude the non-cash expense incurred from straight lining the rent
from our ground lease obligations.
* The impact of fully vested
irrevocable commitments to issue 382,500 shares of stock to our five senior
executive officers made in connection with the initial public offering
and expensed in the second quarter. These were grants and do 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 Period from
Quarter Ended January 1, 2005
June 17, 2005 to June 17, 2005
EBITDA
$2,625,889 $4,660,650
Non-cash ground rent
1,590,055 3,180,110
Initial public offering stock grants
3,736,250 3,736,250
Adjusted EBITDA
$7,952,194 $11,577,010
Forecast Third Quarter 2005
Low End High End
EBITDA
$10,410,000 $12,410,000
Non-cash ground rent
1,590,000 1,590,000
Adjusted EBITDA
$12,000,000 $14,000,000
Forecast Full Year 2005
Low End High End
EBITDA
$32,373,750 $35,373,750
Non-cash ground rent
6,890,000 6,890,000
Initial public offering stock grants
3,736,250 3,736,250
Adjusted EBITDA
$43,000,000 $46,000,000
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 Quarter Period from
Ended January 1, 2005
June 17, 2005 to June 17, 2005
Net loss
$(5,824,555) $(11,086,066)
Real estate related depreciation
and amortization
4,340,984 8,703,130
FFO
$(1,483,571) $(2,382,936)
FFO per Share (Basic and Diluted)
$(0.05)
$(0.10)
Forecast Third Quarter 2005
Low End High End
Net loss
$(2,590,000) $(590,000)
Real estate related depreciation
and amortization
8,000,000 8,000,000
FFO
$5,410,000 $7,410,000
Forecast Full Year 2005
Low End High End
Net loss
$(14,026,250) $(11,026,250)
Real estate related depreciation
and amortization
27,500,000 27,500,000
FFO
$13,473,750 $16,473,750
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:
* Straight Line Ground Rent:
We exclude the non-cash expense incurred from straight lining the rent
from our ground lease obligations.
* The impact of fully vested
irrevocable commitments to issue 382,500 shares of stock to our five senior
executive officers made in connection with the initial public offering
and expensed in the second quarter. The impact of these grants do
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 Period from
Quarter Ended January 1, 2005
June 17, 2005 to June 17, 2005
FFO
$(1,483,571) $(2,382,936)
Non-cash ground rent
1,590,055 3,180,110
Initial public offering stock grants
3,736,250 3,736,250
Adjusted FFO
$3,842,734 $4,533,424
Adjusted FFO per Share (Basic and
Diluted)
$0.13
$0.18
Forecast Third Quarter 2005
Low End High End
FFO
$5,410,000 $7,410,000
Non-cash ground rent
1,590,000 1,590,000
Adjusted FFO
$7,000,000 $9,000,000
Forecast Full Year 2005
Low End High End
FFO
$13,473,750 $16,473,750
Non-cash ground rent
6,890,000 6,890,000
Initial public offering stock grants
3,736,250 3,736,250
Adjusted FFO
$24,100,000 $27,100,000
DiamondRock Hospitality Company
Pro Forma Financial Information for the for the Fiscal
Quarters Ended June 17,
2005 and June 18, 2004 and the Periods from January
3, 2004 to June 18, 2004
and January 1, 2005 to June 17, 2005
The acquired properties are included
in our results of operations from the respective dates of acquisition.
The following unaudited pro forma results of operations reflect these transactions,
with the exception of the SpringHill Suites Buckhead and the Oak Brook
Hills Resort & Conference Center which are excluded from the pro forma
results of operations below, as if each had occurred on the first day of
the fiscal period presented. In our opinion, all significant adjustments
necessary to reflect the effects of the acquisitions have been made; however,
a preliminary allocation of the purchase price to land and buildings was
made, and we will finalize the allocation after all information is obtained.
Period from Period from
Fiscal Fiscal
January 1, January 3,
Quarter Ended Quarter Ended 2005 to
2004 to
June 17, 2005 June 17, 2004 June 17, 2005 June 18, 2004
Revenues
$72,011,528 $66,967,952 $147,010,254 $136,163,997
Hotel level
expenses
54,746,082 52,442,120 109,009,160
104,946,631
Depreciation and
amortization
6,809,929 6,580,323 14,170,855
13,640,398
Corporate expenses 5,850,609
2,103,870 7,946,739
4,200,000
Interest expenses,
net
3,583,204 3,831,069
7,122,599 7,763,401
Income tax benefit
(provision)
1,594,258 (1,163,405) (85,000)
(100,000)
Net income
$2,615,962 $847,165
$8,675,901 $5,513,566
EBITDA
$11,698,886 $12,421,962 $30,615,182
$27,017,365
Adjusted EBITDA $17,025,191
$14,012,017 $37,531,542 $30,197,475
FFO
$9,425,891 $7,427,488 $22,846,756
$19,153,964
Adjusted FFO
$14,752,196 $13,033,793 $29,763,116
$26,350,324
Adjusted FFO per Share
(Basic and Diluted)
$0.51
$1.19
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