CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005
2004
--------------- -------------
Revenue:
Hotel operations:
Rooms
$ 125,995 $
129,992
Food and beverage
51,858 49,110
Other hotel operations
11,384 15,340
Office rental, parking and other
revenue
1,858 1,368
--------------- -------------
Total revenue
191,095 195,810
--------------- -------------
Hotel operating expenses:
Rooms
31,359 31,686
Food and beverage
37,509 36,907
Other hotel operating expenses
7,116 9,475
Office rental, parking and other
expenses
824
585
Other operating expenses:
General and administrative,
hotel
32,105 32,264
General and administrative,
corporate
3,533 3,882
Property operating costs
29,682 29,735
Depreciation and amortization
24,888 25,517
Property taxes, insurance and
other
10,989 16,334
Loss on asset impairments
-
184
--------------- -------------
Operating expenses
178,005 186,569
--------------- -------------
Equity in income/loss of and interest
earned from unconsolidated
affiliates
1,634 1,600
Hurricane business interruption
income
2,281
-
--------------- -------------
Operating income
17,005 10,841
Minority interest
347
946
Interest expense, net
(30,714) (34,502)
Loss on early extinguishments of debt
(60) (5,923)
--------------- -------------
Loss before income taxes and
discontinued operations
(13,422) (28,638)
Income tax (expense) benefit
(22)
524
--------------- -------------
Loss from continuing operations
(13,444) (28,114)
--------------- -------------
Discontinued operations:
Loss from discontinued operations
before income tax benefit
- (12,220)
Income tax benefit
-
89
--------------- -------------
Loss from discontinued operations
- (12,131)
--------------- -------------
Net loss
$ (13,444) $
(40,245)
=============== =============
Basic loss per share:
Loss from continuing operations
$ (0.15) $
(0.41)
Loss from discontinued operations
- (0.18)
--------------- -------------
Net loss per basic share
$ (0.15) $
(0.59)
=============== =============
Diluted loss per share:
Loss from continuing operations
$ (0.15) $
(0.41)
Loss from discontinued operations
- (0.17)
--------------- -------------
Net loss per diluted share
$ (0.15) $
(0.58)
=============== =============
RECONCILIATION
OF NET LOSS TO FUNDS FROM OPERATIONS (a)
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005
2004
Funds From Operations:
Net Loss
$ (13,444) $
(40,245)
Depreciation and amortization
of real estate assets
23,494 24,503
Loss on disposal of assets
- 6,946
Unconsolidated affiliate
adjustments
1,254
-
Minority interest to common
OP
unit holders
(634) (997)
--------------- -------------
Funds from operations
$ 10,670 $
(9,793)
=============== =============
Weighted average number of shares
of common stock outstanding
87,495 68,640
=============== =============
Funds from operations per diluted
share
$ 0.12
$ (0.14)
=============== =============
Funds From Operations, as adjusted:
Funds from operations
$ 10,670 $
(9,793)
Loss on asset impairments
- 5,011
Loss on early extinguishments
of debt
60 5,923
Write off of deferred
financing fees
11 1,266
Minority interest to common
OP unit holders
(1) (387)
--------------- -------------
Funds from operations, as adjusted $
10,740 $ 2,020
=============== =============
Weighted average number of shares of
common stock and common stock
equivalents outstanding
87,495 68,711
=============== =============
Funds from operations per diluted
share, as adjusted
$ 0.12
$ 0.03
=============== =============
(a) See the notes to the financial
information for discussion of
non-GAAP measures.
RECONCILIATION OF NET LOSS TO EBITDA (a)
(In thousands)
Quarter Ended
March 31,
-------------------------------
2005
2004
EBITDA and Adjusted EBITDA:
Loss from continuing operations
$ (13,444) $
(28,114)
Loss from discontinued operations
- (12,131)
--------------- -------------
Net Loss
$ (13,444) $
(40,245)
=============== =============
Loss from continuing operations
$ (13,444) $
(28,114)
Interest expense, net
30,714 34,502
Income tax expense (benefit)
22 (524)
Depreciation and amortization (b)
24,888 25,517
--------------- -------------
EBITDA from continuing operations
42,180 31,381
Loss on asset impairments
-
184
Minority interest
(347) (946)
Loss on early extinguishments
of debt
60 5,923
Equity investment adjustments:
Equity in loss of affiliates
1,370
-
--------------- -------------
Adjusted EBITDA from continuing
operations
$ 43,263 $
36,542
=============== =============
Loss from discontinued operations $
- $ (12,131)
Interest expense, net
- (111)
Income tax benefit
-
(89)
Depreciation and amortization
- 1,643
--------------- -------------
EBITDA from discontinued operations
- (10,688)
Loss on asset impairments
- 4,827
Loss on disposal of assets
- 6,946
--------------- -------------
Adjusted EBITDA from discontinued
operations
$
- $ 1,085
=============== =============
Adjusted EBITDA, total operations $
43,263 $ 37,627
=============== =============
(a) See the notes to the financial
information for discussion of
non-GAAP measures.
(b) Depreciation and amortization includes
the write-off of
deferred financing costs totaling
$1.3 million for the Quarter
Ended March 31, 2004 related to our
early extinguishments of debt
during this period.
HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a)
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005
2004
--------------- -------------
Number of hotels
62
62
Number of rooms
17,684 17,684
Comparable hotel gross operating
profit margin
28.8% 27.4%
Comparable hotel EBITDA margin
20.9% 18.7%
Comparable hotel revenues:
Rooms
$ 114,037 $
110,041
Food and beverage
45,406 43,983
Other hotel operations
8,185 8,330
--------------- -------------
Comparable hotel revenues
(b) 167,628
162,354
--------------- -------------
Comparable hotel expenses:
Room
28,833 28,152
Food and beverage
32,903 33,002
Other
5,726 5,831
General and administrative
28,771 28,140
Property operating costs, less
management fees
23,177 22,686
--------------- -------------
Comparable hotel expenses
(c) 119,410
117,811
--------------- -------------
--------------- -------------
Comparable Hotel Gross Operating
Profit
48,218 44,543
--------------- -------------
Management fees (c)
(4,188) (4,055)
Property taxes, insurance and
other (c)
(9,226) (10,084)
Hurricane business interruption
income
278
-
--------------- -------------
Comparable Hotel EBITDA (d)
$ 35,082 $
30,404
=============== =============
(a) See the notes to the financial
information for discussion of
non-GAAP measures, and comparable
hotel results and statistics.
(b) The reconciliation of total revenues
per the consolidated
statements of operations to the comparable
hotel revenues is as
follows (in thousands):
Quarter Ended
March 31,
-------------------------------
2005
2004
Revenues per the consolidated
statements of operations
$ 191,095 $
195,810
Non-comparable hotel revenues
(21,609) (32,088)
Office rental, parking and other
revenue
(1,858) (1,368)
--------------- -------------
Comparable hotel revenues
$ 167,628 $
162,354
=============== =============
(c) The reconciliation of operating
costs per the consolidated
statements of operations to the comparable
hotel expenses,
management fees, property taxes, insurance,
and other is as
follows (in thousands):
Quarter Ended
March 31,
-------------------------------
2005
2004
Operating expenses per the
consolidated statements of
operations
$ 178,005 $
186,569
Non-comparable hotel expenses
(16,760) (25,036)
General and administrative, corporate
(3,533) (3,882)
Depreciation and amortization
(24,888) (25,517)
Loss on asset impairments
- (184)
--------------- -------------
Comparable hotel expenses,
management fees, property taxes,
insurance, and other
$ 132,824 $
131,950
=============== =============
(d) The reconciliation of comparable
hotel EBITDA to operating
income per the consolidated statements
of operations is as follows
(in thousands):
Quarter Ended
March 31,
-------------------------------
2005
2004
--------------- -------------
Comparable hotel EBITDA
$ 35,082 $
30,404
Non-comparable results, net (e)
4,849 7,052
Office rental, parking and other
revenue
1,858 1,368
General and administrative, corporate
(3,533) (3,882)
Depreciation and amortization
(24,888) (25,517)
Loss on asset impairments
- (184)
Equity in income/loss of and interest
earned from
unconsolidated affiliates
1,634 1,600
Hurricane business interruption
income at non-comparable hotels
2,003
-
--------------- -------------
Operating Income
$ 17,005 $
10,841
=============== =============
(e) Non-comparable results, net represent
all revenues and
expenses, other than those of our
comparable hotels, and specific
revenues and expenses identified above:
office rental, parking and
other revenue and expense; general
and administrative, corporate;
depreciation and amortization; loss
on asset impairments; and
equity in income/loss of and interest
earned from unconsolidated
affiliates.
RECONCILIATION OF NET INCOME
TO EBITDA (HURRICANE PROPERTIES)
(In thousands)
In August and September of 2004, Florida was hit by hurricanes.
Twelve hotels in Florida and the golf course on Sanibel Island were impacted
by varying degrees by the hurricanes. The operations at nine of these hotels
were very significantly affected. Of the nine, the Hilton Clearwater continued
to operate with a number of rooms out of service and the Hilton Cocoa Beach
was initially shutdown then partially reopened in December. These two properties
were open in the first quarter 2005 and included in the 62 comparable hotels.
The following seven hotels were still substantially closed
during the first quarter of 2005: Best Western Sanibel Island, Holiday
Inn Walt Disney World, Sanibel Inn, Seaside Inn, Song of the Sea, South
Seas Resort, and Sundial Beach Resort.
The following is a reconciliation of Net Income to EBITDA
for those seven hotels and Dunes Golf and Tennis Club on Sanibel Island:
Quarter Ended
March 31,
-------------------------------
2005
2004
--------------- -------------
EBITDA:
Net Income (a)
$ 884
$ 3,801
Depreciation and amortization
1,644 2,646
--------------- -------------
EBITDA (a)
$ 2,528 $
6,447
=============== =============
(a) Includes $2.0 million of business
interruption insurance
income at these seven hotels and Dunes
Golf and Tennis Club in
2005; we received an additional $0.3
million of business
interruption income included in the
62 comparable hotels.
DETAILED OPERATING STATISTICS BY
MARKET, REGION AND LOCATION
Comparable hotels, same store basis (a)
1st Quarter 2005
-------------------------------
Market/Region/Location Hotels Rooms
ADR Occ%
RevPAR
---------------------------------------------------------------------
Washington DC Metro (b) 10
2,112 $ 138.62 66.9% $
92.68
New Jersey
4 1,120 $ 127.75 57.7% $
73.77
Southern California (b)
3 1,034 $ 121.03 76.4% $
92.51
Northern California
3 968 $ 112.61 67.8%
$ 76.33
Orlando (c)
2 1,231 $ 100.74 81.0% $
81.61
Tampa /Clearwater
2 922 $ 124.69 81.9%
$ 102.08
Chicago
2 857 $ 99.54 52.3%
$ 52.05
Colorado
2 736 $ 83.25 48.1%
$ 40.07
Atlanta
2 650 $ 93.74 78.3%
$ 73.37
Dallas
2 598 $ 90.01 62.2%
$ 55.99
Houston
2 597 $ 108.14 70.1%
$ 75.82
Other Hotels
28 6,859 $ 99.98 67.2%
$ 67.22
---------------------------------------------------------------------
All Markets
62 17,684 $ 108.69 67.8% $
73.64
---------------------------------------------------------------------
Middle Atlantic (b)
16 3,718 $ 133.83 64.4% $
86.24
South Central
11 3,281 $ 96.40 64.5%
$ 62.22
South Atlantic (c)
12 4,101 $ 109.89 78.3% $
86.01
Pacific (b)
9 2,797 $ 116.37 70.1% $
81.61
North Central
7 1,789 $ 90.10 56.8% $
51.15
Mountain
6 1,798 $ 84.02 64.0% $
53.75
New England
1 200 $ 85.41 67.4%
$ 57.54
---------------------------------------------------------------------
All Regions
62 17,684 $ 108.69 67.8% $
73.64
---------------------------------------------------------------------
Urban (b)
19 4,933 $ 118.71 67.9% $
80.54
Resort (c)
7 2,678 $ 121.65 80.0% $
97.35
Airport (b)
12 3,751 $ 94.82 70.0%
$ 66.35
Suburban
24 6,322 $ 102.59 61.3% $
62.90
---------------------------------------------------------------------
All Locations
62 17,684 $ 108.69 67.8% $
73.64
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
---------------------------------------------------------------------
Comparable Hotels
62 17,684 $ 108.69 67.8% $
73.64
Closed Hurricane Hotels
(d)
7 1,340 n/a
n/a $ 211.92
---------------------------------------------------------------------
Total
69 19,024 n/a
n/a $ 82.48
---------------------------------------------------------------------
1st Quarter 2004
--------------------------------
Market/Region/Location Hotels Rooms
ADR Occ%
RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10
2,112 $ 118.19 70.1% $
82.89
New Jersey
4 1,120 $ 126.09 62.0% $
78.22
Southern California (b)
3 1,034 $ 114.28 76.9% $
87.84
Northern California
3 968 $ 105.35 72.3%
$ 76.18
Orlando (c)
2 1,231 $ 84.87 74.9% $
63.55
Tampa /Clearwater
2 922 $ 105.93 77.5%
$ 82.08
Chicago
2 857 $ 87.09 56.2%
$ 48.96
Colorado
2 736 $ 79.25 57.9%
$ 45.87
Atlanta
2 650 $ 82.49 84.8%
$ 69.97
Dallas
2 598 $ 87.25 59.1%
$ 51.56
Houston
2 597 $ 119.95 76.7%
$ 92.04
Other Hotels
28 6,859 $ 95.71 68.8%
$ 65.89
---------------------------------------------------------------------
All Markets
62 17,684 $ 100.57 69.7% $
70.05
---------------------------------------------------------------------
Middle Atlantic (b)
16 3,718 $ 120.39 67.7% $
81.49
South Central
11 3,281 $ 97.41 65.9%
$ 64.22
South Atlantic (c)
12 4,101 $ 96.82 76.3%
$ 73.89
Pacific (b)
9 2,797 $ 110.67 72.6% $
80.36
North Central
7 1,789 $ 82.85 61.5% $
50.91
Mountain
6 1,798 $ 79.67 67.2% $
53.52
New England
1 200 $ 72.10 79.9%
$ 57.64
---------------------------------------------------------------------
All Regions
62 17,684 $ 100.57 69.7% $
70.05
---------------------------------------------------------------------
Urban (b)
19 4,933 $ 109.07 69.8% $
76.07
Resort (c)
7 2,678 $ 108.31 75.4% $
81.72
Airport (b)
12 3,751 $ 84.00 74.5%
$ 62.55
Suburban
24 6,322 $ 100.61 64.1% $
64.48
---------------------------------------------------------------------
All Locations
62 17,684 $ 100.57 69.7% $
70.05
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
---------------------------------------------------------------------
Comparable Hotels
62 17,684 $ 100.57 69.7% $
70.05
Closed Hurricane Hotels
(d)
7 1,340 $ 250.76 69.7% $
174.86
---------------------------------------------------------------------
Total
69 19,024 $ 110.08 69.7% $
76.69
---------------------------------------------------------------------
Market/Region/Location Hotels Rooms
Percent Change in RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10
2,112 11.8%
New Jersey
4 1,120
-5.7%
Southern California (b)
3 1,034
5.3%
Northern California
3 968
0.2%
Orlando (c)
2 1,231
28.4%
Tampa /Clearwater
2 922
24.4%
Chicago
2 857
6.3%
Colorado
2 736
-12.6%
Atlanta
2 650
4.9%
Dallas
2 598
8.6%
Houston
2 597
-17.6%
Other Hotels
28 6,859
2.0%
----------------------------------------------------------------------
All Markets
62 17,684
5.1%
----------------------------------------------------------------------
Middle Atlantic (b)
16 3,718
5.8%
South Central
11 3,281
-3.1%
South Atlantic (c)
12 4,101
16.4%
Pacific (b)
9 2,797
1.6%
North Central
7 1,789
0.5%
Mountain
6 1,798
0.4%
New England
1 200
-0.2%
----------------------------------------------------------------------
All Regions
62 17,684
5.1%
----------------------------------------------------------------------
Urban (b)
19 4,933
5.9%
Resort (c)
7 2,678
19.1%
Airport (b)
12 3,751
6.1%
Suburban
24 6,322
-2.5%
----------------------------------------------------------------------
All Locations
62 17,684
5.1%
----------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
----------------------------------------------------------------------
Comparable Hotels
62 17,684
5.1%
Closed Hurricane Hotels
(d)
7 1,340
21.2%
----------------------------------------------------------------------
Total
69 19,024
7.5%
----------------------------------------------------------------------
(a) See notes to financial information
for discussion of
comparable hotel operating results
and statistics.
(b) Excludes hotels acquired in 2004.
(c) Excludes hotels substantially closed
during the first quarter
2005 due to the Florida hurricanes.
(d) Estimated RevPAR increase reflects
an assumed weighted average
growth rate of 21.2% based on market
type RevPAR performance at
the seven hotels substantially closed
during the first quarter
2005.
FORECASTED RECONCILIATION OF NET INCOME (LOSS)
TO FUNDS FROM OPERATIONS
(In millions, except per share amounts)
Three Months Ending
June 30, 2005
--------------------------------
Low-end of High-end of
range
range
---------------- --------------
Forecasted Funds from Operations:
Net income (a)
$
- $
3
Adjustments to forecasted net income:
Depreciation and amortization of
real estate assets
25
25
Minority interest to common OP unit
holders
-
-
--------------- -------------
Funds from operations
$ 25
$ 28
Weighted average diluted shares of
common stock and common OP units
outstanding
90
90
--------------- -------------
Funds from operations per diluted
share (a)
$ 0.28
$ 0.31
=============== =============
Year Ending
December 31, 2005
---------------------------------
Low-end of High-end of
range
range
---------------- ---------------
Forecasted Funds from Operations:
Net loss (a)
$ (43)
$ (38)
Adjustments to forecasted net loss:
Depreciation and amortization of
real estate assets
97
97
Minority interest to common OP unit
holders
(1)
(1)
--------------- -------------
Funds from operations
$ 53
$ 58
Weighted average number of shares
of common stock and common OP
units outstanding
90
90
--------------- -------------
Funds from operations per diluted
share (a)
$ 0.59
$ 0.64
=============== =============
(a) Forecasted net income (loss) does
not include any possible
future losses on asset impairments,
gains or losses on the sale of
assets, gains or losses on early extinguishment
of debt, or gains
or losses on property damage insurance
recoveries; therefore,
forecasted funds from operations is
equivalent to forecasted
adjusted funds from operations.
FORECASTED RECONCILIATION
OF NET INCOME (LOSS) TO EBITDA
(In millions)
Three Months Ending
June 30, 2005
---------------------------------
Low-end of High-end of
range
range
---------------- ---------------
EBITDA and Adjusted EBITDA:
Net income (a)
$
- $
3
Interest expense, net
34
34
Depreciation and amortization
26
26
--------------- --------------
EBITDA
60
63
Minority interest to common OP
unit holders
-
-
--------------- --------------
Adjusted EBITDA
$ 60
$ 63
=============== ==============
Year Ending
December 31, 2005
---------------------------------
Low-end of High-end of
range
range
---------------- ---------------
EBITDA and Adjusted EBITDA:
Net loss (a)
$ (43)
$ (38)
Interest expense, net
132
132
Depreciation and amortization
102
102
--------------- -------------
EBITDA
191
196
Minority interest to common OP
unit holders
(1)
(1)
--------------- -------------
Adjusted EBITDA
$ 190
$ 195
=============== =============
(a) Forecasted net income (loss) does
not include any possible
future losses on asset impairments,
gains or losses on the sale of
assets, gains or losses on early extinguishment
of debt, or gains
or losses on property damage insurance
recoveries.
NOTES TO FINANCIAL INFORMATION
Funds From Operations
Substantially all of our non-current assets consist of
real estate, and, in accordance with accounting principles generally accepted
in the United States, or GAAP, those assets are subject to straight-line
depreciation, which reflects the assumption that the value of real estate
assets, other than land, will decline ratably over time. That assumption
is often not true with respect to the actual market values of real estate
assets (and, in particular, hotels), which fluctuate based on economic,
market and other conditions. As a result, management and many industry
investors believe the presentation of GAAP operating measures for real
estate companies to be more informative and useful when other measures,
adjusted for depreciation and amortization, are also presented.
In an effort to address these concerns, the National Association
of Real Estate Investment Trusts, or NAREIT, adopted a definition of Funds
From Operations, or FFO. NAREIT defines FFO as net income (computed in
accordance with GAAP) excluding gains or losses from sales of real estate,
real estate-related depreciation and amortization, and after comparable
adjustments for our portion of these items related to unconsolidated partnerships
and joint ventures. Extraordinary items and cumulative effect of changes
in accounting principles as defined by GAAP are also excluded from the
calculation of FFO. As defined by NAREIT, FFO also does not include reductions
from asset impairment charges. The SEC, however, recommends that FFO include
the effect of asset impairment charges, which is the presentation we have
adopted for all historical presentations of FFO. We believe FFO is an indicative
measure of our operating performance due to the significance of our hotel
real estate assets and provides beneficial information to investors.
Adjusted FFO represents FFO excluding the effects of gains
or losses on early extinguishments of debt, write-offs of deferred financing
costs and, in accordance with the NAREIT definition of FFO, asset impairment
charges. We exclude the effects of gains or losses on early extinguishments
of debt, write-offs of deferred financing costs and asset impairment charges
because we believe that including them in Adjusted FFO does not fully reflect
the operating performance of our remaining assets. We believe Adjusted
FFO is useful for the same reasons we believe that FFO is useful, but we
also believe that Adjusted FFO enables us and the investor to consider
our operating performance without considering the items we exclude from
our definition of Adjusted FFO, which have no cash effect in the periods
considered.
Consolidated Earnings Before Interest, Income Taxes, Depreciation
and Amortization
EBITDA represents consolidated earnings before interest,
income taxes, depreciation and amortization and includes operations from
the assets included in discontinued operations. We further adjust EBITDA
for the effect of capital market transactions that would result in a gain
or loss on early extinguishments of debt, as well as the earnings effect
of asset dispositions and any impairment assessments, resulting in the
measure that we refer to as "Adjusted EBITDA." We exclude the effect of
gains or losses on early extinguishments of debt as well as the earnings
effect of asset dispositions and impairment assessments because we believe
that including them in Adjusted EBITDA does not fully reflect the operating
performance of our remaining assets.
We also believe Adjusted EBITDA provides useful information
to investors regarding our financial condition and results of operations
because Adjusted EBITDA is useful in evaluating our operating performance.
Furthermore, we use Adjusted EBITDA to provide a measure of performance
that can be isolated on an asset by asset basis to determine overall property
performance. We believe that the rating agencies and a number of our lenders
also use Adjusted EBITDA for those purposes. We also use Adjusted EBITDA
as one measure in determining the value of acquisitions and dispositions.
Comparable Hotel Operating Results and Statistics
We present certain operating statistics (i.e., RevPAR,
ADR and average occupancy) and operating results (revenues, expenses and
operating profit) for the periods included in this report on a comparable
hotel basis as supplemental information for investors. We define our comparable
hotels as properties (i) that are owned by us and the operations of which
are included in our consolidated results for the entirety of the reporting
periods being compared, (ii) that have not sustained substantial property
damage during the reporting periods being compared, and (iii) that are
not planned for disposition as of the end of the period. Of the 73 hotels
that we owned as of March 31, 2005, 62 have been classified as comparable
hotels. The operating results of seven hotels significantly affected by
the hurricanes in Florida in August and September 2004 that were substantially
closed in the first quarter 2005, two hotels planned for disposition, and
the two hotels acquired in 2004, that we owned as of March 31, 2005 are
excluded from comparable hotel results for these periods. In addition,
the operating statistics for the quarter ended March 31, 2005 exclude room
nights that were out of service during the periods due to renovations and
the impact of the Florida hurricanes at our 62 comparable hotels.
We present these comparable hotel operating results by
eliminating corporate-level revenues and expenses, as well as depreciation
and amortization and loss on asset impairments. We eliminate corporate-level
revenues and expenses to arrive at property-level results because we believe
property-level results provide investors with supplemental information
into the ongoing operating performance of our hotels and the effectiveness
of management in running our business on a property-level basis. We eliminate
depreciation and amortization because, even though depreciation and amortization
are property-level expenses, these non-cash expenses, which are based on
historical cost accounting for real estate assets, implicitly assume that
the value of real estate assets diminishes over time. Because real estate
values have historically risen or fallen with market conditions, many industry
investors have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves.
We eliminate loss on asset impairments because these non-cash expenses
are primarily related to our non-comparable properties, and do not reflect
the operating performance of our comparable assets.
As a result of the elimination of corporate-level costs
and expenses and depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses or operating
profit and should not be used to evaluate our performance as a whole. Management
compensates for these limitations by separately considering the impact
of these excluded items to the extent that they are material to operating
decisions or assessments of our operating performance. Our consolidated
statements of operations include such amounts, all of which should be considered
by investors when evaluating our performance.
We present these hotel operating results on a comparable
hotel basis because we believe that doing so provides investors and management
with useful information for evaluating the period-to-period performance
of our hotels and facilitates comparisons with other hotel REITs and hotel
owners. In particular, these measures assist management and investors in
distinguishing whether increases or decreases in revenues and/or expenses
are due to growth or decline of operations at comparable hotels (which
represent the vast majority of our portfolio) or from other factors, such
as the effect of acquisitions or dispositions. While management believes
that presentation of comparable hotel results is a "same store" supplemental
measure that provides useful information in evaluating the ongoing performance
of the Company, this measure is not used to allocate resources or to assess
the operating performance of each of these hotels, as these decisions are
based on data for individual hotels and are not based on comparable hotel
results. For these reasons, we believe that comparable hotel operating
results, when combined with the presentation of GAAP operating profit,
revenues and expenses, provide useful information to investors and management.
|
