CNL HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands, except share and per share data)
June 30, December 31,
2004 2003
ASSETS
Hotel and resort properties, net
$ 4,840,273 $ 3,357,376
Investments in unconsolidated subsidiaries
25,432 30,714
Real estate held for sale
29,588 29,550
Cash and cash equivalents
199,615 147,694
Restricted cash
139,672 60,105
Receivables, net
110,989 55,410
Goodwill
666,258 33,100
Other intangible assets, net
366,870 49,897
Prepaid expenses and other assets
90,719 68,388
Loan costs, net
27,695 18,918
Deferred income taxes, net
35,529 25,826
$ 6,532,640 $ 3,876,978
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable and accrued interest
$ 3,496,299 $ 1,650,277
Line of credit
24,073 24,073
Accounts payable and accrued expenses
165,624 68,909
Other liabilities
69,889 24,290
Due to related parties
17,206 11,570
Member deposits
202,125
--
Total liabilities
3,975,216 1,779,119
Commitments and contingencies
Minority interests
152,706 157,118
Stockholders' equity:
Preferred
stock, without par value (1).
Authorized and unissued 1,500 shares
-- --
Excess shares, $.02 par value per
share (1).
Authorized
and unissued 31,500 shares
-- --
Common stock, $.02 par value per share
(1).
Authorized
225,000 shares; issued
153,428 and
121,876 shares,
respectively;
outstanding 152,236
and 121,121
shares, respectively
3,046 2,424
Capital in excess of par value
2,727,576 2,164,275
Accumulated distributions in excess
of net income
(321,447) (222,334)
Accumulated other comprehensive loss
(4,457) (3,624)
Total stockholders' equity
2,404,718 1,940,741
$ 6,532,640 $ 3,876,978
(1) All share amounts reflect the effect
of the reverse stock split.
CNL HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands, except share and per share data)
Quarter Ended
Six Months Ended
June 30,
June 30,
2004 2003 (1)
2004 2003 (1)
Revenues:
Room
$218,382 $67,982
$370,561 $128,214
Food and beverage
99,070 20,734
148,862 38,485
Other hotel and resort operating
departments 54,557 5,668
68,533 11,446 Rental income from operating
leases 9,380
7,913 18,496
15,729
Gain on sale of securities
8,026 --
8,026 --
Credit enhancement
revenue
2,992 3,667
9,368 6,412
Interest and other
income
1,604 1,554
3,951 2,870
394,011 107,518
627,797 203,156
Expenses:
Room
50,945 15,661
87,557 29,277
Food and beverage
66,513 15,733
103,337 28,095
Other hotel and resort
operating departments
31,087 3,211
39,333 7,084
Property operations
66,307 20,268
112,121 36,472
Repairs and
maintenance
15,331 4,624
25,883 8,507
Hotel and resort
management fees
10,515 3,557
17,673 6,308
Sales and marketing
21,937 6,750
37,418 12,565
Interest and loan cost
amortization
43,838 11,199
69,956 19,703
General operating
and administrative
7,128 3,519
12,125 5,654
Asset management fees
to related party
7,300 2,640
12,246 4,983
Depreciation and
amortization
45,334 14,575
76,224 27,278
Loss on extinguish-
ments of debt
14,037 --
14,037 --
380,272 101,737
607,910 185,926
Income from continuing
operations before
equity in losses of
unconsolidated
subsidiaries, minority
interests and income
tax (expense) benefit
13,739 5,781
19,887 17,230
Equity in losses of
unconsolidated
subsidiaries
(3,397) (4,796)
(6,032) (8,489)
Minority interests
(3,685) (2)
(5,937) (1,321)
Income from continuing
operations before
income tax (expense)
benefit
6,657 983
7,918 7,420
Income tax (expense) benefit
(309) --
811 --
Income from continuing
operations
6,348 983
8,729 7,420
Income from discontinued
operations
984 --
1,573 --
Net income
$7,332 $983
$10,302 $7,420
Earnings per share
of common stock
(basic and diluted)(2):
Continuing operations
$0.04 $0.01
$0.06 $0.10
Discontinued operations $0.01
$-- $0.01
$--
$0.05 $0.01
$0.07 $0.10
Weighted average number
of shares of Common
stock outstanding (2):
Basic and diluted
151,550 76,834
143,613 71,904
(1) Historical financial statements
have been restated for the effect of adopting Statement of Financial Accounting
Standards Interpretation No. 46, "Consolidation of Variable Interest Entities."
(2) All share and per share amounts
reflect the effect of the reverse stock split.
The following is a reconciliation
of net income to FFO and FFO per diluted share for the quarter and six
months ended June 30 (in thousands except share and per share data):
Quarter
Six Months
Ended June 30,
Ended June 30,
2004 (1) 2003 (2) 2004
(1) 2003 (2)
Net income
$7,332 $983
$10,302 $7,420
Adjustments:
Effect of
unconsolidated
subsidiaries
3,573 3,441
7,143 6,712 Effect of minority
interest (3,009)
(1,399) (6,048)
(2,622)
Depreciation
and
amortization
of
real
estate assets 42,855 14,575
73,695 27,278
Funds from operations $50,751
$17,600 $85,092
$38,788
Funds from operations
per share (basic and
diluted) (3)
$0.33 $0.23
$0.59 $0.54
Weighted average shares
(basic and diluted)(3) 151,550
76,834 143,613
71,904
The following is a reconciliation
of net income to EBITDA for the quarter and six months ended June 30 (in
thousands):
Quarter
Six Months
Ended June 30,
Ended June 30,
2004 (1) 2003 (2) 2004
(1) 2003 (2)
Net income
$7,332 $983
$10,302 $7,420
Adjustments:
Interest and loan
cost amortization
43,838 11,199
69,956 19,703
Income tax expense (benefit)
309 --
(811) --
Depreciation and
amortization
45,334 14,575
76,224 27,278
EBITDA
$96,813 $26,757 $155,671
$54,401
(1) Results of operations for the quarter
and six months ended June 30, 2004 does not include $4.5 million in net
cash flows received for member deposits.
(2) Historical financial statements
have been restated for the effect of adopting Statement of Financial Accounting
Standards Interpretation No. 46, "Consolidation of Variable Interest Entities."
(3) All share and per share amounts
reflect the effect of the reverse stock split.
Notes to Financial Information
Non-GAAP Financial Measures
We have included in this press release
certain non-GAAP financial measures
which are not calculated and presented in accordance
with Generally Accepted Accounting Principles ("GAAP") within the meaning
of applicable SEC rules. The measures include RevPAR, ADR, FFO, FFO
per diluted share, EBITDA and EBITDA margin. The following discussion
defines these terms and why we feel they are helpful in understanding our
performance.
Property Operating Data
Our results of operations are highly
dependent upon the operations of our
hotel and resort properties. To evaluate the financial
condition and operating performance of our properties, management regularly
reviews operating statistics such as revenue per available room ("RevPAR"),
average daily room rate ("ADR") and occupancy. RevPAR is a commonly
used measure within the lodging industry to evaluate hotel and resort operations.
We define RevPAR as (i.) the average daily room rate, or ADR, charged,
multiplied by (ii.) the average daily occupancy achieved. We define ADR
by dividing room revenue by the total number of rooms occupied by hotel
and resort guests on a paid basis during the applicable period. RevPAR
does not include revenue from food and beverage, telephone services or
other guest services generated by the property. Although RevPAR does not
include these ancillary revenues, we consider this measure to be the leading
indicator of core revenues for many hotels and resorts. We closely monitor
what causes changes in RevPAR because changes that result from occupancy
as compared to those that result from room rate have different implications
on overall revenue levels, as well as incremental operating profit. For
example, increases in occupancy at a hotel or resort may lead to increases
in ancillary revenues, such as food and beverage and other hotel and resort
amenities, as well as additional incremental costs (including housekeeping
services, utilities and room amenity costs). RevPAR increases due to higher
room rates would not result in these additional room-related costs. For
this reason, while operating profit would typically increase when occupancy
rises, RevPAR increases due to higher room rates would have a greater impact
on our profitability. The data available to make comparisons is limited
by the amount, timing and extent of recent acquisitions we have made.
Funds From Operations
We consider FFO (and FFO per diluted
share) to be an indicative measure of
operating performance due to the significant effect of
depreciation of real estate assets on net income. We calculate FFO in accordance
with standards established by the National Association of Real Estate Investment
Trusts, or NAREIT, which defines FFO as net income or loss determined in
accordance with GAAP, excluding gains or losses from sales of property
plus depreciation and amortization (excluding amortization of deferred
financing costs) of real estate assets, and after adjustments for the portion
of these items related to our unconsolidated partnerships and joint ventures.
In October 2003, NAREIT issued additional guidance modifying the definition
of FFO. The first modification revised the treatment of asset impairment
losses and impairment losses incurred to write-down assets to their fair
value at the date assets are classified as held for sale, to include such
losses in FFO. Previously, such losses were excluded from FFO consistent
with the treatment of gains and losses on property sales. The second modification
clarified the treatment of original issue costs and premiums paid on preferred
stock redemptions to deduct such costs and premiums in determining FFO
available to common stockholders. This modification was consistent with
the recently clarified treatment of these costs under GAAP. We adopted
the modifications to the definition of FFO effective with our reported
results for the first quarter of 2004. To date, we have had no losses or
other impairments on asset sales. In calculating FFO, net income
is determined in accordance with GAAP and includes the noncash effect of
scheduled rent increases throughout the lease terms. This is a GAAP convention
requiring real estate companies to report rental revenue based on the average
rent per year over the life of the leases. We believe that by excluding
the effect of depreciation, amortization and gains or losses from sales
of real estate, all of which are based on historical costs and which may
be of limited relevance in evaluating current performance, FFO can facilitate
comparisons of operating performance between periods and between other
equity REITs. We also believe FFO captures trends in occupancy rates, rental
rates and operating costs. FFO was developed by NAREIT as a relative measure
of performance and liquidity of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on the basis
determined under GAAP, which assumes that the value of real estate diminishes
predictably over time. In addition, we believe FFO is frequently used by
securities analysts, investors and other interested parties in the evaluation
of equity REITs, particularly in the lodging industry. However, FFO (i.)
does not represent cash generated from operating activities determined
in accordance with GAAP (which, unlike FFO, generally reflects all cash
effects of transactions and other events that enter into the determination
of net income), (ii.) is not necessarily indicative of cash flow available
to fund cash needs and (iii.) should not be considered as an alternative
to net income determined in accordance with GAAP as an indication of our
operating performance. FFO, as presented, may not be comparable to similarly
titled measures reported by other equity REITs. Accordingly, we believe
that in order to facilitate a clear understanding of our consolidated historical
operating results, FFO should be considered only as supplemental information
and only in conjunction with our net income as reported in the accompanying
consolidated financial statements and notes thereto.
EBITDA
Earnings before interest expense,
income taxes, depreciation and
amortization EBITDA is defined as income (losses) from
continuing operations excluding: (i.) interest expense, (ii.) income tax
benefit or expense; and (iii.) depreciation and amortization. We believe
EBITDA is useful to us and to an investor as a supplemental measure in
evaluating our financial performance because it excludes expenses that
we believe may not be indicative of our operating performance. By excluding
interest expense, EBITDA measures our financial performance regardless
of how we finance our operations and our capital structure. By excluding
depreciation and amortization expense, which can vary by property based
on factors unrelated to hotel and resort performance, we and our investors
can more accurately assess the financial performance of our portfolio.
Our management also uses EBITDA as one measure in determining the value
of acquisitions and dispositions. In addition, we believe EBITDA is frequently
used by securities analysts, investors and other interested parties in
the evaluation of equity REITs, particularly in the lodging industry. However,
because EBITDA is calculated before recurring cash charges such as interest
expense and taxes and is not adjusted for capital expenditures or other
recurring cash requirements of our business, it does not reflect the amount
of capital needed to maintain our properties nor does it reflect trends
in interest costs due to interest rate changes or increased borrowings.
EBITDA should be considered only as a supplement to net income (computed
in accordance with GAAP) as a measure of our operating performance.
Other equity REITs may calculate EBITDA differently than we do and, accordingly,
our calculation of EBITDA may not be comparable to such other REITs' EBITDA.
Limitations on the Use of Non-GAAP
Financial Measures
RevPAR, ADR, FFO, FFO per diluted
share, EBITDA and EBITDA margin (i.) do
not represent cash generated from operating activities
determined in accordance with GAAP (which, unlike these measures, generally
reflects all cash effects of transactions and other events that enter into
the determination of net income), (ii.) are not necessarily indicative
of cash flow available to fund cash needs and (iii.) should not be considered
as an alternative to net income determined in accordance with GAAP as an
indication of our operating performance. These measures, as presented,
may not be comparable to similarly titled measures reported by other companies.
Accordingly, we believe that in order to facilitate a clear understanding
of our consolidated historical operating results, these measures should
be considered only as supplemental information and only in conjunction
with our net income as reported in the accompanying unaudited consolidated
financial statements and notes thereto.
CNL HOSPITALITY PROPERTIES, Inc.
Property Operating Data Comparable Hotels and Resorts
(1)
Quarter Ended June 30, 2004
Var. (ppt.)
Var. (%)
Hotels Occupancy to 2003
ADR to 2003
Consolidated
Upper Upscale
14 75.9%
6.8 $120.35
2.0%
Upscale
26 75.9
6.3 93.02
6.6
Midscale
5 77.8
2.3 75.50
3.1
Total
Consolidated
45 76.0%
6.3 $106.10
3.9%
Unconsolidated
3 80.7
15.3 156.60
5.5
Subtotal
48 77.0%
8.2 $117.21
5.3%
Triple Net
Lease (2)
12 75.9
10.0 91.56
2.9
Total
60 76.8%
8.5 $112.65
4.8%
Quarter Ended June 30, 2004
Var. (%) EBITDA Var.
(ppt.)
RevPAR to 2003
Margin (3) to 2003
Consolidated
Upper Upscale
$91.35 12.0%
24.8% 3.4
Upscale
70.62 16.3
36.6 2.1
Midscale
58.73 6.2
38.7 1.2
Total Consolidated
$80.66 13.4%
28.7% 3.0
Unconsolidated
126.43 30.1
27.8 6.7
Subtotal
$90.27 17.9%
28.4% 4.2
Triple Net Lease (2)
69.51 18.5
31.5 3.0
Total
$86.53 17.9%
28.8% 4.0
Six Months Ended June 30, 2004
Var. (ppt.)
Var. (%)
Hotels Occupancy
to 2003 ADR
to 2003
Consolidated
Upper Upscale
9 73.6%
5.1 $114.84 (0.8%)
Upscale
26 72.8
4.4 94.56
5.5
Midscale
5 78.2
2.7 75.89
4.8
Total
Consolidated
40 73.5%
4.6 $102.05
2.4%
Unconsolidated
3 79.8
11.3 162.80
7.3
Subtotal
43 75.0%
6.2 $117.34
4.9%
Triple Net
Lease (2)
12 72.9
6.8 92.05
3.1
Total
55 74.6%
6.3 $112.44
4.6%
Six Months Ended June 30, 2004
Var. (%) EBITDA
Var. (ppt.)
RevPAR to 2003
Margin (3) to 2003
Consolidated
Upper Upscale $84.56
6.5% 23.7%
0.6
Upscale
68.87 12.4
36.3 1.9
Midscale
59.33 8.6
38.4 1.4
Total
Consolidated 75.06
9.3% 28.8%
1.3
Unconsolidated 129.96
24.9 28.8
5.2
Subtotal
$88.04 14.3%
28.8% 2.7
Triple Net
Lease (2)
67.10 13.7
30.2 4.3
Total
$83.89 14.2%
29.0% 3.0
(1) We define Comparable hotels and
resorts as properties that we owned at the beginning of and for the entirety
of both periods being compared.
(2) Our operating results include
only lease payments from these properties, as we do not directly participate
in their operating revenues or expenses.
(3) EBITDA Margin is calculated as
EBITDA divided by Total Revenues.
CNL HOSPITALITY PROPERTIES, Inc. Supplemental Property Operating
Data Adjusted Comparable Hotels and Resorts (1)
Quarter Ended June 30, 2004
Var. (ppt.)
Var. (%)
Hotels Occupancy
to 2003 ADR
to 2003
Consolidated
Luxury Resort
5 76.6%
2.8 $258.58
4.6%
Upper Upscale
26 72.6
6.9 124.60
0.7
Upscale
28 75.9
6.1 92.60
6.6
Midscale
31 70.7
(0.5) 74.32
2.6
Total
Consolidated
90 73.5%
4.6 $129.99
3.1%
Unconsolidated
3 80.7
15.3 156.60
5.5
Subtotal
93 74.3%
5.8 $133.13
3.7%
Triple Net
Lease (2)
15 76.0
9.2 91.94
3.0
Total
108 74.5%
6.2 $128.39
3.5%
Quarter Ended June 30, 2004
Var. (%) EBITDA
Var. (ppt.)
RevPAR to 2003 Margin (3)
to 2003
Consolidated
Luxury Resort
$197.99 8.6%
33.9% (0.1)
Upper Upscale
90.42 11.3
24.3 2.0
Upscale
70.32 15.9
36.6 2.0
Midscale
52.57 1.8
30.5 (2.8)
Total Consolidated
$95.55 10.0%
30.0% 0.7
Unconsolidated
126.43 30.1
27.8 6.7
Subtotal
$98.91 12.4%
29.7% 1.4
Triple Net Lease (2)
69.91 17.2
32.5 2.7
Total
$95.64 12.8%
29.9% 1.5
Six Months Ended June 30, 2004
Var. (ppt.)
Var. (%)
Hotels Occupancy
to 2003 ADR
to 2003
Consolidated
Luxury Resort
5 76.8%
3.4 $269.29
1.1%
Upper Upscale
26 70.5
5.5 130.07
(1.3)
Upscale
28 72.9
4.3 94.22
5.4
Midscale
31 68.3
(0.0) 74.84
2.4
Total
Consolidated
90 71.5%
3.8 $135.40
1.2%
Unconsolidated
3 79.8
11.3 162.80
7.3
Subtotal
93 72.4%
4.6 $138.69
2.1%
Triple
Net Lease (2)
15 73.6
6.4 92.86
3.0
Total
108 72.6%
4.8 $133.44
2.1%
Six Months Ended June 30, 2004
Var. (%) EBITDA
Var. (ppt.)
RevPAR to 2003
Margin (3) to 2003
Consolidated
Luxury Resort
$206.82 5.8%
36.8% 0.9
Upper Upscale
91.70 7.1
25.9 0.6
Upscale
68.70 12.0
36.3 1.8
Midscale
51.10 2.3
29.8 (3.0)
Total Consolidated
$96.85 6.9%
31.9% 0.6
Unconsolidated
129.96 24.9
28.8 5.2
Subtotal
$100.45 9.1%
31.5% 1.1
Triple Net Lease (2)
68.34 12.8
31.8 4.0
Total
$96.83 9.4%
31.5% 1.3
(1) We define Adjusted Comparable hotels
and resorts as properties owned as of June 30, 2004, and exclude properties
that were opened or underwent significant renovations during the periods
being compared, changed reporting periods during the periods being compared,
or are held for sale. For Adjusted Comparable hotels and resorts
acquired during the periods being compared, operating data for our non-ownership
period are included.
(2) Our operating results include
only lease payments from these properties, as we do not directly participate
in their operating revenues or expenses.
(3) EBITDA Margin is calculated as
EBITDA divided by Total Revenues. |