News for the Hospitality Executive
$21.8 million up from $20.5 million in the Preceding Year Quarter
RevPAR increased 1.5 percent at its twenty premium hotels in North America
Hotel Operating Statistics
BETHESDA, Md., July 22, 2008 - DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced results of operations for its second fiscal quarter 2008, which ended on June 13, 2008. The Company is a lodging focused real estate investment trust that owns twenty premium hotels in North America.
Second Quarter 2008 Highlights
Mr. McCarten added, "Lodging is a cyclical business, and we are currently in the most difficult phase of that cycle. With low or negative GDP growth, reduced airline capacity, and declining corporate profits, the lodging industry will likely generate negative revenue growth for the balance of 2008. Despite these headwinds, we believe that DiamondRock is well positioned. Anticipating the slowdown, we have purposely maintained one of the lowest levels of leverage in the industry. With a high quality portfolio of hotels and a stellar balance sheet, DiamondRock is poised to weather the downturn and opportunistically deploy its capital to create shareholder value."
Mr. McCarten concluded, "As we previously announced, on September 1st, Mark W. Brugger will become our Chief Executive Officer. I think he will bring energy, creativity and good judgment to this role, enabling DiamondRock to continue to make the correct strategic decisions in the current difficult economy. I intend to continue to work closely with Mark as the Chairman of the Board of Directors and Mark will continue to be supported by the same executive team that helped launch the Company."
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 Margins," "FFO," "Adjusted FFO" and "same-store."
For the second quarter ended June 13, 2008, the Company reported the following:
For the period from January 1, 2008 to June 13, 2008, the Company reported the following:
Excluding the Chicago Marriott Downtown, which underwent a $35 million renovation and associated disruption earlier this year, same-store RevPAR for the year-to-date increased 2.7% and same-store Hotel Adjusted EBITDA margins for the year-to-date decreased 91 basis points.
Operating Results Compared to Prior Guidance
The following is a chart showing our actual second quarter 2008 results compared to our guidance for the second quarter 2008:
Q2 2008 Guidance Actual Q2 2008
The Board of Directors has authorized the Company to repurchase up to 4.8 million shares of its common stock. As of July 21, 2008, the Company has purchased 2.8 million shares of its common stock under the Board authorization at an average price of $10.74.
As of the end of the second quarter, the Company had total assets of approximately $2.1 billion. Cash and cash equivalents were $59.1 million, including $34.1 million of restricted cash.
As of the end of the second quarter, the Company had total debt of approximately $855.1 million, comprised of limited recourse, property-specific mortgages and $32.0 million outstanding under its $200 million senior unsecured credit facility. The Company's debt has a weighted average interest rate of 5.5 percent and a weighted average maturity of 6.9 years as of June 13, 2008. Eight of the Company's 20 hotels were unencumbered by mortgage debt as of June 13, 2008.
As of the end of the second quarter, the Company continued to own 100% of its properties directly and has never issued operating partnership units or preferred stock.
The Company is providing guidance, 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 Securities and Exchange Commission.
In the current economic environment, we believe that it is difficult to forecast future results. With the soft economy impacting leisure and business travelers, compounded by reductions in airline capacity, we currently believe that room demand in several of our key markets will be lower than our revised expectations at the end of the first quarter. As a result, we currently expect full year RevPAR growth to be in the range of negative 1 to negative 3 percent. The Chicago Marriott Downtown, which underwent a $35 million renovation this year, negatively impacts the full year RevPAR projections by approximately 1 percentage point in 2008.
Based on our current expectations for RevPAR growth for the full year, we project:
On June 24, 2008, a cash dividend of $0.25 per share was paid to shareholders of record as of June 13, 2008, the last day of our second fiscal quarter.
Major Capital Expenditures
DiamondRock has and continues to make significant capital investments in its hotels. In 2008, the Company plans to commence or complete approximately $70 to $80 million of capital improvements at its hotels. The Company spent $36.8 million on capital improvements at its hotels from January 1, 2008 to June 13, 2008. The most significant capital projects for 2008 are as follows:
Chicago Marriott Downtown: The Company has substantially completed a $35 million renovation of the hotel. The project included a complete renovation of all the meeting and ballrooms, adding 17,000 square feet of new meeting space, reconcepting and relocating the restaurant, expanding the lobby bar and creating a Marriott "great room" in the lobby. The project began during the third quarter of 2007 and was substantially completed in April 2008. The estimated disruption of approximately $2 million to Hotel Adjusted EBITDA, mainly associated with the ballroom renovations, primarily impacted the first quarter of 2008.
The Company will host a conference call to discuss its second quarter 2008 results and its 2008 guidance on Wednesday, July 23, 2008, at 10:00 am Eastern Time (ET). To participate in the live call, investors are invited to dial 1-888-713-4218 (for domestic callers) or 617-213-4870 (for international callers). The participant passcode is 57914861. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company's website at http://www.drhc.com. A replay of the webcast will also be archived on the website for one year.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of premium hotel properties. DiamondRock owns 20 hotels with approximately 9,600 guestrooms. For further information, please visit DiamondRock Hospitality Company's website at http://www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to complete planned renovation on budget; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions; our ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, the manager of the majority of our hotel properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its domestic managed hotels. In contrast, Marriott International for its non-domestic hotels (including Frenchman's Reef), Noble Management Group, LLC, our manager of the Westin Atlanta North, Vail Resorts, our manager of the Vail Marriott, Hilton Hotels Corporation, our manager of the Conrad Chicago, and Westin Hotel Management, L.P., our manager of the Westin Boston Waterfront report results on a monthly basis. Additionally, the Company, as a REIT, is required by tax law to report results on a calendar year. As a result, the Company has adopted the reporting periods used by Marriott International for its domestic hotels, except that the fiscal year always ends on December 31 to comply with REIT rules. The first three fiscal quarters end on the same day as Marriott International's fiscal quarters but our fourth quarter ends on December 31 and our full year results, as reported in our statement of operations, always include the same number of days as the calendar year.
Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years.
While the reporting calendar we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report any results for Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, or for the Westin Boston Waterfront for the month of operations that ends after our fiscal quarter-end because neither Vail Resorts, Noble Management Group, LLC, Hilton Hotels Corporation, Westin Hotel Management, L.P., nor Marriott International make mid-month results available to us. As a result, our quarterly results of operations include results from Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, and the Westin Boston Waterfront as follows: first quarter (January and February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.
Four of the Company's hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, Salt Lake City Downtown Marriott, and the Westin Boston Waterfront. In addition, part of a parking structure at a fifth hotel and two golf courses at two additional hotels are also subject to ground leases. In accordance with GAAP, the Company records rent expense on a straight-line basis for ground leases that provide minimal rental payments that increase in pre-established amounts over the remaining term of the ground lease. For the second fiscal quarter 2008, contractual cash rent payable on the ground leases totaled $0.5 million and the Company recorded approximately $2.3 million in ground rent expense. The non-cash portion of ground rent expense recorded for the second fiscal quarter 2008 was $1.8 million.
DiamondRock Hospitality Company
|Also See:||DiamondRock Hospitality Company Names Mark W. Brugger Chief Executive Officer / July 2008|
|DiamondRock Hospitality Acquires a 2,330 room Portfolio of Four Hotels for $315 million / June 2005|