CHICAGO, Aug. 5 /PRNewswire-FirstCall/ -- Strategic Hotels &
Resorts (NYSE: BEE)
today reported results for the second quarter ended June 30, 2009.
Second Quarter Recap
- Comparable funds from operations (Comparable
FFO) was a loss of $0.03 per diluted share compared with income of
$0.48 per diluted share in the prior year.
- Quarterly Comparable EBITDA was $33.6 million compared with
$74.1 million in the prior year.
- North American total revenue per available room
(Total RevPAR) decreased 28.7 percent and revenue per available room
(RevPAR) decreased 30.6 percent driven by a 9.6 percentage point
decrease in occupancy and a 20.7 percent decrease in average daily rate
(ADR). Non-rooms revenue declined by 26.4 percent.
- The company's two Mexican properties were
adversely impacted by events surrounding the H1N1 virus outbreak.
Excluding these hotels, North American Total RevPAR would have
decreased 25.5 percent and RevPAR would have decreased 27.3 percent.
- European Total RevPAR decreased 28.0 percent
(14.0 percent in constant dollars) and RevPAR decreased 25.2 percent
(10.8 percent in constant dollars).
- North American gross operating profit (GOP) and
EBITDA margins contracted 810 basis points and 950 basis points,
respectively. Excluding the company's Mexican assets, North American
GOP and EBITDA margins would have contracted 690 basis points and 820
basis points, respectively.
Chief Executive Officer Laurence Geller remarked,
"We have recently seen some improvement in certain leading indicators
and an overall increase in confidence pertaining to future economic
conditions. Nevertheless, our financial results continue to be heavily
influenced by the lingering recession and general weakness in the hotel
industry, which is particularly acute in higher-end assets. While we
saw declines in every segment of our business, the falloff in group
activity was especially costly as we were forced to replace lost group
occupancy with discounted transient business, leading to a significant
decline in average rates and sharp contraction in profit margins.
During this challenging period we remained
vigilant in controlling costs and, despite the drop in rates, are
pleased to have achieved our stated objective of limiting our
portfolio's year-over-year percentage decline in EBITDA relative to its
percentage decline in revenue to under a two-to-one ratio. We also
continue to make progress on lowering corporate overhead costs as we
reported corporate expenses of $5.5 million for the quarter, a 28
percent reduction from a year ago."
Financial Results
The company reported second quarter 2009 financial
results as follows:
- Net loss attributable to common shareholders
was $86.0 million, or $1.14 per diluted share, compared with net income
attributable to common shareholders of $10.6 million, or $0.14 per
diluted share, for the second quarter of 2008.
- Comparable EBITDA was $33.6 million compared
with $74.1 million for the second quarter of 2008.
- FFO was a loss of $52.8 million, or $0.70 per
diluted share, compared with income of $40.6 million, or $0.53 per
diluted share, in the second quarter of 2008. Comparable FFO was a loss
of $2.5 million, or $0.03 per diluted share, compared with income of
$36.4 million, or $0.48 per diluted share, in the second quarter of
2008.
The company reported financial results for the six
month period ending June 30, 2009 as follows:
- Net loss attributable to common shareholders
was $129.2 million, or $1.72 per diluted share, compared with net
income attributable to common shareholders of $2.6 million, or $0.04
per diluted share, for the six month period ending June 30, 2008.
- Comparable EBITDA was $56.3 million compared
with $129.8 million for the six month period ending June 30, 2008.
- FFO was a loss of $63.4 million, or $0.84 per
diluted share, compared with income of $59.9 million, or $0.79 per
diluted share, in the six months ending June 30, 2008. Comparable FFO
was a loss of $13.9 million, or $0.18 per diluted share, compared with
income of $58.9 million, or $0.77 per diluted share, in the six month
period ending June 30, 2008.
Impairment Losses and Other Charges
Second quarter 2009 results include impairment of
goodwill and other charges totaling $49.8 million, including impairment
of goodwill of $41.9 million and write-offs of $7.9 million related to
the abandonment of certain capital projects.
These one-time charges have been excluded from
Comparable EBITDA, FFO and FFO per share metrics.
Liquidity
As of the end of the second quarter, the company
had $398.4 million available on its $400.0 million bank credit facility
against $261.3 million total outstanding, leaving $137.1 million of
liquidity. Certain financial covenants limit availability on the
facility, including cash flow generated by five borrowing base assets,
calculated on a trailing twelve month basis. These hotels include the
Four Seasons in Mexico City and Punta Mita, both of which have been
impacted by the H1N1 virus outbreak during the second quarter, security
concerns associated with traveling to Mexico and general economic
weakness. As a result, availability on the facility is projected to be
further restricted in future quarters, thus putting increased pressure
on the company's liquidity position.
Mr. Geller commented, "The spread, and perceived
threat, of the H1N1 virus had a serious negative impact on our two
Mexican assets. RevPAR at these hotels declined 57.7% during the second
quarter and EBITDA decreased $7.2 million from the prior period. We are
cognizant of the restrictions this puts on the availability on our bank
credit facility and constantly monitor our liquidity position."
Subsequent Event
The company entered into a joint venture agreement
on its existing 60-acre ocean front land parcel near the Four Seasons
Punta Mita Resort in Nayarit, Mexico with Cantiles de Mita, S.A. de
C.V., a wholly owned subsidiary of DINE, the master developer of Punta
Mita and original seller of the land parcel. In exchange for a 50
percent interest in the land, the company is released from its final
installment payment of $17.5 million due in August 2009 and receives a
preferred position which entitles the company to receive the first
$12.0 million of distributions generated from the project with any
excess distributions split equally among the partners.
Earnings Call
The company will conduct its second quarter 2009
conference call for investors and other interested parties on August 6,
2009 at 10:00 a.m. Eastern Time (ET). Interested individuals are
invited to listen to the call by telephone at 888-713-4214 (toll
international: 617-213-4866) with pass code 19665792. To participate on
the web cast, log on to http://www.strategichotels.com orhttps://www.theconferencingservice.com/prereg/key.process?key=PEXWEGEC3 15 minutes before the call
to download the necessary software. For those unable to listen to the
call live, a taped rebroadcast will be available beginning at 1:00 p.m.
ET on August 6, 2009, through 11:59 p.m. ET on August 13, 2009. To
access the replay, dial 888-286-8010 (toll international: 617-801-6888)
and request replay pin number 67405958. A replay of the call will also
be available on the Internet at http://www.strategichotels.com orhttp://www.earnings.com for 30 days after the
call.
The company also produces supplemental financial
data that includes detailed information regarding its operating
results. This supplemental data is considered an integral part of this
earnings release. These materials are available on the Strategic Hotels
& Resorts' website at www.strategichotels.com within the second
quarter information section.
Portfolio Definitions
North American hotel comparisons for the second
quarter 2009 are derived from the company's hotel portfolio at June 30,
2009, consisting of properties in which operations are included in the
consolidated results of the company.
European hotel comparisons for the second quarter
2009 are derived from the company's European owned and leased hotel
properties at June 30, 2009.
About the Company
Strategic Hotels & Resorts, Inc. is a real
estate investment trust (REIT) which owns and provides value-enhancing
asset management of high-end hotels and resorts in the United States,
Mexico and Europe. The company currently has ownership interests in 19
properties with an aggregate of 8,358 rooms. For a list of current
properties and for further information, please visit the company's
website athttp://www.strategichotels.com.
This press release contains forward-looking
statements about Strategic Hotels & Resorts (the "Company"). Except
for historical information, the matters discussed in this press release
are forward-looking statements subject to certain risks and
uncertainties. Actual results could differ materially from the
Company's projections. Factors that may contribute to these differences
include, but are not limited to the following: economic conditions
generally and in the real estate market specifically, including further
deterioration of the current global economic downturn and the extent of
its effect on business and leisure travel and the lodging industry;
demand for hotel rooms in our current and proposed market areas;
outbreak of contagious diseases such as the H1N1 virus; our liquidity
and refinancing demands; availability of capital; the recovery of
financing markets and our ability to obtain or refinance debt; our
ability to comply with covenants contained in our debt facilities;
rising interest rates and operating costs; rising insurance premiums;
cash available for capital expenditures; competition; ability to
dispose of existing properties in a manner consistent with our
disposition strategy and liquidity needs; delays and cost overruns in
construction and development; demand for hotel condominiums; marketing
challenges associated with entering new lines of business; risks
related to natural disasters; the effect of threats of terrorism and
increased security precautions on travel patterns and hotel bookings;
the outbreak of hostilities and international political instability;
legislative or regulatory changes, including changes to laws governing
the taxation of REITs; and changes in generally accepted accounting
principles, policies and guidelines applicable to REITs.
Additional risks are discussed in the Company's
filings with the Securities and Exchange Commission, including those
appearing in the Company's most recent form 10-K and subsequent 10-Qs.
Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can
give no assurance that its expectations will be attained. The
forward-looking statements are made as of the date of this press
release, and we undertake no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information,
future events or otherwise.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Rooms $104,627 $148,320 $201,213 $278,600
Food and beverage 60,644 91,157 117,750 170,281
Other hotel operating revenue 26,179 29,074 51,970 56,228
------ ------ ------ ------
191,450 268,551 370,933 505,109
Lease revenue 1,169 1,402 2,289 2,689
----- ----- ----- -----
Total revenues 192,619 269,953 373,222 507,798
------- ------- ------- -------
Operating Costs and Expenses:
Rooms 28,902 35,448 56,191 68,573
Food and beverage 44,129 59,777 86,956 116,520
Other departmental expenses 54,143 64,216 109,381 126,778
Management fees 7,659 11,047 14,422 20,656
Other hotel expenses 13,933 15,317 27,715 31,359
Lease expense 4,159 4,534 8,125 8,861
Depreciation and amortization 35,211 30,197 69,314 57,800
Impairment losses and other
charges 49,755 - 50,214 -
Corporate expenses 5,456 7,566 15,880 14,996
----- ----- ------ ------
Total operating costs and
expenses 243,347 228,102 438,198 445,543
------- ------- ------- -------
Operating (loss) income (50,728) 41,851 (64,976) 62,255
Interest expense (26,259) (22,662) (50,225) (45,504)
Interest income 98 459 512 1,054
Loss on early extinguishment
of debt - - (883) -
Equity in earnings of joint
ventures 432 1,582 571 803
Foreign currency exchange
(loss) gain (1,109) 4,687 906 1,478
Other income (expenses), net 82 (177) 43 (439)
--- ---- --- ----
(Loss) income before income taxes,
distributions in excess of
noncontrolling interest capital,
loss on sale of noncontrolling
interests in hotel properties
and discontinued operations (77,484) 25,740 (114,052) 19,647
Income tax expense (682) (6,435) (782) (6,647)
Distributions in excess of
noncontrolling interest
capital - (784) - (784)
--- ---- --- ----
(Loss) income before loss on
sale of noncontrolling interests
in hotel properties and
discontinued operations (78,166) 18,521 (114,834) 12,216
Loss on sale of noncontrolling
interests in hotel properties - (41) - (46)
--- --- --- ---
(Loss) income from continuing
operations (78,166) 18,480 (114,834) 12,170
Income from discontinued
operations, net of tax - 2,068 - 7,268
--- ----- --- -----
Net (loss) income (78,166) 20,548 (114,834) 19,438
Net loss (income) attributable
to the noncontrolling interests
in SHR's operating partnership 1,007 (254) 1,453 (252)
Net income attributable to
the noncontrolling interests
in consolidated affiliates (1,101) (2,006) (348) (1,109)
------ ------ ---- ------
Net (loss) income attributable
to SHR (78,260) 18,288 (113,729) 18,077
Preferred shareholder dividends (7,722) (7,722) (15,443) (15,443)
------ ------ ------- -------
Net (loss) income attributable
to SHR common shareholders $(85,982) $10,566 $(129,172) $2,634
======== ======= ========= ======
Basic (Loss) Income Per Share:
(Loss) income from continuing
operations attributable to
SHR common shareholders $(1.14) $0.11 $(1.72) $(0.06)
Income from discontinued
operations attributable to
SHR common shareholders - 0.03 - 0.10
--- ---- --- ----
Net (loss) income
attributable to SHR common
shareholders $(1.14) $0.14 $(1.72) $0.04
====== ===== ====== =====
Weighted average common
shares outstanding 75,381 75,000 75,166 74,991
====== ====== ====== ======
Diluted (Loss) Income Per Share:
(Loss) income from continuing
operations attributable to
SHR common shareholders $(1.14) $0.11 $(1.72) $(0.06)
Income from discontinued
operations attributable to
SHR common shareholders - 0.03 - 0.10
--- ---- --- ----
Net (loss) income attributable
to SHR common shareholders $(1.14) $0.14 $(1.72) $0.04
====== ===== ====== =====
Weighted average common
shares outstanding 75,381 75,048 75,166 74,991
====== ====== ====== ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
June 30, December 31,
2009 2008
---- ----
Assets
Investment in hotel properties, net $2,369,540 $2,383,860
Goodwill 80,081 120,329
Intangible assets, net of accumulated
amortization of $4,003 and $3,096 35,254 32,277
Investment in joint ventures 81,938 82,122
Cash and cash equivalents 69,432 80,954
Restricted cash and cash equivalents 20,229 37,358
Accounts receivable, net of allowance for
doubtful accounts of $2,512 and $2,203 64,734 70,945
Deferred financing costs, net of accumulated
amortization of $8,885 and $6,655 14,871 10,375
Deferred tax assets 37,612 38,260
Other assets 47,184 52,687
------ ------
Total assets $2,820,875 $2,909,167
========== ==========
Liabilities and Shareholders' Equity
Liabilities:
Mortgages and other debt payable $1,317,258 $1,301,535
Exchangeable senior notes, net of discount 167,241 165,155
Bank credit facility 260,500 206,000
Accounts payable and accrued expenses 197,534 281,918
Deferred tax liabilities 33,654 34,236
Deferred gain on sale of hotels 102,227 104,251
------- -------
Total liabilities 2,078,414 2,093,095
Noncontrolling interests in SHR's operating
partnership 4,555 5,330
Equity:
SHR's shareholders' equity:
8.50% Series A Cumulative Redeemable
Preferred Stock ($0.01 par value;
4,488,750 shares issued and outstanding;
liquidation preference $25.00 per share) 108,206 108,206
8.25% Series B Cumulative Redeemable
Preferred Stock ($0.01 par value;
4,600,000 shares issued and outstanding;
liquidation preference $25.00 per share) 110,775 110,775
8.25% Series C Cumulative Redeemable
Preferred Stock ($0.01 par value;
5,750,000 shares issued and outstanding;
liquidation preference $25.00 per share) 138,940 138,940
Common shares ($0.01 par value;
150,000,000 common shares authorized;
75,167,096 and 74,410,012 common shares
issued and outstanding) 750 744
Additional paid-in capital 1,232,971 1,228,774
Accumulated deficit (823,992) (710,263)
Accumulated other comprehensive loss (55,418) (93,637)
------- -------
Total SHR's shareholders' equity 712,232 783,539
Noncontrolling interests in consolidated
affiliates 25,674 27,203
------ ------
Total equity 737,906 810,742
------- -------
Total liabilities and equity $2,820,875 $2,909,167
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS
Supplemental Financial Data
(in thousands, except per share information)
June 30, 2009
-------------
Pro Rata Share Consolidated
-------------- ------------
Capitalization
--------------
Common shares outstanding 75,167 75,167
Operating partnership units outstanding 971 971
Stock options outstanding 885 885
Restricted stock units outstanding 861 861
--- ---
Combined shares, options and units outstanding 77,884 77,884
Common stock price at end of period $1.11 $1.11
----- -----
Common equity capitalization $86,451 $86,451
Preferred equity capitalization (at $25.00
face value) 370,236 370,236
Consolidated debt (excludes discount on
exchangeable senior notes) 1,757,758 1,757,758
Pro rata share of unconsolidated debt 282,825 -
Pro rata share of consolidated debt (107,065) -
Cash and cash equivalents (69,432) (69,432)
------- -------
Total enterprise value $2,320,773 $2,145,013
========== ==========
Net Debt / Total Enterprise Value 80.3% 78.7%
Preferred Equity / Total Enterprise Value 16.0% 17.3%
Common Equity / Total Enterprise Value 3.7% 4.0%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investment in the Hotel del Coronado
(in thousands)
On January 9, 2006, we purchased a 45% interest in the joint venture that
owns the Hotel del Coronado. We account for this investment using the
equity method of accounting.
Three Months Ended Six Months Ended
June 30, June 30,
---------- ----------
2009 2008 2009 2008
---- ---- ---- ----
Total revenues (100%) $30,006 $39,411 $58,198 $74,269
Property EBITDA (100%) $9,441 $14,703 $17,947 $26,151
Equity in earnings of joint venture
(SHR 45% ownership)
Property EBITDA $4,248 $6,616 $8,076 $11,768
Depreciation and amortization (1,922) (1,747) (3,825) (3,647)
Interest expense (1,970) (3,577) (4,031) (7,988)
Other income (expense), net 41 (6) (142) (34)
Income taxes (13) (38) 200 302
--- --- --- ---
Equity in earnings of joint venture $384 $1,248 $278 $401
==== ====== ==== ====
EBITDA Contribution from investment
in Hotel del Coronado
Equity in earnings of joint venture $384 $1,248 $278 $401
Depreciation and amortization 1,922 1,747 3,825 3,647
Interest expense 1,970 3,577 4,031 7,988
Income taxes 13 38 (200) (302)
--- --- ---- ----
EBITDA Contribution for investment in
Hotel del Coronado $4,289 $6,610 $7,934 $11,734
====== ====== ====== =======
FFO Contribution from investment in
Hotel del Coronado
Equity in earnings of joint venture $384 $1,248 $278 $401
Depreciation and amortization 1,922 1,747 3,825 3,647
----- ----- ----- -----
FFO Contribution for investment in
Hotel del Coronado $2,306 $2,995 $4,103 $4,048
====== ====== ====== ======
Interest Spread over Loan
Debt Rate LIBOR Amount Maturity
---- ---- ----- ------ --------
CMBS Mortgage and
Mezzanine 2.39% 208 bp $610,000 January 2011 (a)
Revolving Credit
Facility 2.81% 250 bp 18,500 January 2011 (a)
------
628,500
Cash and cash equivalents (50,446)
-------
Net Debt $578,054
========
(a) Includes extension options.
Effective LIBOR Notional
Cap Date Cap Rate Amount Maturity
--- ---- -------- ------ --------
CMBS Mortgage and
Mezzanine Loan and
Revolving Credit
Facility Cap January 2009 5.0% $630,000 May 2009
CMBS Mortgage and
Mezzanine Loan and
Revolving Credit
Facility Cap June 2009 3.0% $630,000 January 2010
CMBS Mortgage and
Mezzanine Loan and
Revolving Credit
Facility Cap February 2010 5.0% $630,000 January 2011
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------- ----------
2009 2008 2009 2008
---- ---- ---- ----
Paris Marriott Champs Elysees:
Property EBITDA $4,645 $6,092 $7,252 $10,096
Revenue (a) $4,645 $6,092 $7,252 $10,096
Lease Expense (2,985) (3,213) (5,847) (6,272)
Less: Deferred Gain on Sale Leaseback (1,146) (1,315) (2,246) (2,579)
------ ------ ------ ------
Adjusted Lease Expense (4,131) (4,528) (8,093) (8,851)
---- ------ ----- ------
EBITDA Contribution from Leasehold $514 $1,564 $(841) $1,245
==== ====== ===== ======
Marriott Hamburg:
Property EBITDA $1,422 $1,668 $2,775 $3,229
Revenue (a) $1,169 $1,402 $2,289 $2,689
Lease Expense (1,174) (1,321) (2,278) (2,589)
Less: Deferred Gain on Sale Leaseback (53) (61) (104) (119)
--- --- ---- ----
Adjusted Lease Expense (1,227) (1,382) (2,382) (2,708)
---- --- ---- ----
EBITDA Contribution from Leasehold $(58) $20 $(93) $(19)
==== === ==== ====
Total Leaseholds:
Property EBITDA $6,067 $7,760 $10,027 $13,325
Revenue (a) $5,814 $7,494 $9,541 $12,785
Lease Expense (4,159) (4,534) (8,125) (8,861)
Less: Deferred Gain on Sale Leaseback (1,199) (1,376) (2,350) (2,698)
------ ------ ------ ------
Adjusted Lease Expense (5,358) (5,910) (10,475) (11,559)
---- ------ ----- ------
EBITDA Contribution from Leasehold $456 $1,584 $(934) $1,226
==== ====== ===== ======
June 30, December 31,
Security Deposits (b): 2009 2008
---- ----
Paris Marriott Champs Elysees $13,568 $15,507
Marriott Hamburg 7,015 6,984
----- -----
Total $20,583 $22,491
======= =======
(a) For the three and six months ended June 30, 2009 and 2008, Revenue
for the Paris Marriott Champs Elysees represents Property EBITDA. For the
three and six months ended June 30, 2009 and 2008, Revenue for the
Marriott Hamburg represents lease revenue.
(b) The security deposits are recorded in other assets on the consolidated
balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
In addition to REIT hotel income, five other non-GAAP financial measures
are presented for the Company that we believe are useful to management and
investors as key measures of our operating performance: Funds from
Operations (FFO); FFO - Fully Diluted; Comparable FFO; Earnings Before
Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and
Comparable EBITDA. A reconciliation of these measures to net loss
attributable to SHR common shareholders, the most directly comparable GAAP
measure, is set forth in the following tables.
We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, which adopted a
definition of FFO in order to promote an industry-wide standard measure of
REIT operating performance. NAREIT defines FFO as net income (or loss)
(computed in accordance with GAAP) excluding losses or gains from sales of
depreciable property plus real estate-related depreciation and
amortization, and after adjustments for our portion of these items related
to unconsolidated partnerships and joint ventures. We also present FFO -
Fully Diluted, which is FFO plus income or loss on income attributable to
convertible noncontrolling interests. We also present Comparable FFO,
which is FFO - Fully Diluted excluding the impact of any gains or losses
on early extinguishment of debt, impairment losses, foreign currency
exchange gains or losses and other non-recurring charges. We believe that
the presentation of FFO, FFO - Fully Diluted and Comparable FFO provides
useful information to management and investors regarding our results of
operations because they are measures of our ability to fund capital
expenditures and expand our business. In addition, FFO is widely used in
the real estate industry to measure operating performance without regard
to items such as depreciation and amortization. We also present
Comparable FFO per diluted share as a non-GAAP measure of our performance.
We calculate Comparable FFO per diluted share for a given operating period
as our Comparable FFO (as defined above) divided by the weighted average
of fully diluted shares outstanding. Comparable FFO per diluted share, in
accordance with NAREIT, is adjusted for the effects of dilutive
securities. Dilutive securities may include shares granted under
share-based compensation plans, operating partnership units and
exchangeable debt securities. No effect is shown for securities that are
anti-dilutive.
EBITDA represents net loss attributable to SHR common shareholders
excluding: (i) interest expense, (ii) income tax expense, including
deferred income tax benefits and expenses applicable to our foreign
subsidiaries and income taxes applicable to sale of assets; and (iii)
depreciation and amortization. EBITDA also excludes interest expense,
income tax expense and depreciation and amortization of our equity method
investments. EBITDA is presented on a full participation basis, which
means we have assumed conversion of all convertible noncontrolling
interests of our operating partnership into our common stock and includes
preferred dividends. We believe this treatment of noncontrolling
interests provides more useful information for management and our
investors and appropriately considers our current capital structure. We
also present Comparable EBITDA, which eliminates the effect of realizing
deferred gains on our sale leasebacks, as well as the effect of gains or
losses on sales of assets, early extinguishment of debt, impairment
losses, foreign currency exchange gains or losses and other non-recurring
charges. We believe EBITDA and Comparable EBITDA are useful to management
and investors in evaluating our operating performance because they provide
management and investors with an indication of our ability to incur and
service debt, to satisfy general operating expenses, to make capital
expenditures and to fund other cash needs or reinvest cash into our
business. We also believe they help management and investors meaningfully
evaluate and compare the results of our operations from period to period
by removing the impact of our asset base (primarily depreciation and
amortization) from our operating results. Our management also uses EBITDA
and Comparable EBITDA as measures in determining the value of acquisitions
and dispositions.
We caution investors that amounts presented in accordance with our
definitions of FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA may not be comparable to similar measures disclosed by
other companies, since not all companies calculate these non-GAAP measures
in the same manner. FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA should not be considered as an alternative measure of
our net loss or operating performance. FFO, FFO - Fully Diluted,
Comparable FFO, EBITDA, and Comparable EBITDA may include funds that may
not be available for our discretionary use due to functional requirements
to conserve funds for capital expenditures and property acquisitions and
other commitments and uncertainties. Although we believe that FFO, FFO -
Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA can enhance
your understanding of our financial condition and results of operations,
these non-GAAP financial measures, when viewed individually, are not
necessarily a better indicator of any trend as compared to comparable GAAP
measures such as net loss attributable to SHR common shareholders. In
addition, you should be aware that adverse economic and market conditions
might negatively impact our cash flow. Below, we have provided a
quantitative reconciliation of FFO, FFO - Fully Diluted, Comparable FFO,
EBITDA, and Comparable EBITDA to the most directly comparable GAAP
financial performance measure, which is net loss attributable to SHR
common shareholders, and provide an explanatory description by footnote of
the items excluded from FFO, FFO - Fully Diluted, and EBITDA.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net (Loss) Income Attributable to SHR Common
Shareholders to EBITDA and Comparable EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net (loss) income attributable
to SHR common shareholders $(85,982) $10,566 $(129,172) $2,634
Depreciation and amortization -
continuing operations 35,211 30,197 69,314 57,800
Depreciation and amortization -
discontinued operations - 461 - 1,151
Interest expense - continuing
operations 26,259 22,662 50,225 45,504
Income taxes - continuing
operations 682 6,435 782 6,647
Income taxes - discontinued
operations - (265) - (175)
Noncontrolling interests (1,007) 254 (1,453) 252
Adjustments from consolidated
affiliates (a) (2,741) (2,601) (4,305) (4,272)
Adjustments from unconsolidated
affiliates 3,925 5,608 7,824 11,597
Preferred shareholder dividends 7,722 7,722 15,443 15,443
----- ----- ------ ------
EBITDA (15,931) 81,039 8,658 136,581
Realized portion of deferred
gain on sale leasebacks (1,199) (1,376) (2,350) (2,698)
Loss (gain) on sale of assets -
continuing operations 7 (17) 5 (134)
Loss (gain) on sale of assets -
discontinued operations - 2 - (414)
Loss on sale of noncontrolling
interests in hotel properties - 41 - 46
Impairment losses and other
charges 49,755 - 50,214 -
Impairment losses and other
charges - adjustments from
consolidated affiliates (169) - (169) -
Foreign currency exchange loss
(gain) (b) 1,109 (4,687) (906) (1,478)
Hyatt Regency La Jolla
noncontrolling interest (a) - (1,703) - (2,883)
Distributions in excess of
noncontrolling interest capital - 784 - 784
Loss on early extinguishment of
debt - - 883 -
--- --- --- ---
Comparable EBITDA $33,572 $74,083 $56,335 $129,804
======= ======= ======= ========
(a) The noncontrolling interest partner's share of the Hyatt Regency La
Jolla's property EBITDA is not deducted from net income attributable to
SHR common shareholders under GAAP accounting rules for the three and six
months ended June 30, 2008. Under new accounting rules effective
January 1, 2009, the noncontrolling interest partner's share of the Hyatt
Regency La Jolla's property EBITDA is included in adjustments from
consolidated affiliates for the three and six months ended June 30, 2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by foreign
subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net (Loss) Income Attributable to SHR Common
Shareholders to Funds From Operations (FFO), FFO - Fully Diluted
and Comparable FFO
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net (loss) income attributable
to SHR common shareholders $(85,982) $10,566 $(129,172) $2,634
Depreciation and amortization -
continuing operations 35,211 30,197 69,314 57,800
Depreciation and amortization -
discontinued operations - 461 - 1,151
Corporate depreciation (304) (300) (608) (592)
Loss (gain) on sale of assets -
continuing operations 7 (17) 5 (134)
Loss (gain) on sale of assets -
discontinued operations - 2 - (414)
Loss on sale of noncontrolling
interests in hotel properties - 41 - 46
Realized portion of deferred
gain on sale leasebacks (1,199) (1,376) (2,350) (2,698)
Deferred tax expense on
realized portion of deferred
gain on sale leasebacks 358 410 701 804
Noncontrolling interests
adjustments (472) (415) (929) (802)
Adjustments from consolidated
affiliates (a) (1,860) (1,361) (3,692) (2,636)
Adjustments from unconsolidated
affiliates 1,954 1,747 3,889 3,647
----- ----- ----- -----
FFO (52,287) 39,955 (62,842) 58,806
Convertible noncontrolling
interests (535) 669 (524) 1,054
---- --- ---- -----
FFO - Fully Diluted (52,822) 40,624 (63,366) 59,860
Impairment losses and other
charges 49,755 - 50,214 -
Impairment losses and other
charges - adjustments from
consolidated affiliates (169) - (169) -
Foreign currency exchange loss
(gain), net of tax (b) 761 (3,838) (1,416) 78
Hyatt Regency La Jolla
noncontrolling interest (a) - (1,193) - (1,782)
Distributions in excess of
noncontrolling interest
capital - 784 - 784
Loss on early extinguishment
of debt - - 883 -
--- --- --- ---
Comparable FFO $(2,475) $36,377 $(13,854) $58,940
======= ======= ======== =======
Comparable FFO per diluted share $(0.03) $0.48 $(0.18) $0.77
====== ===== ====== =====
Weighted average diluted shares 75,381 76,024 75,166 76,129
====== ====== ====== ======
(a) The noncontrolling interest partner's share of the Hyatt Regency
La Jolla's property FFO is not deducted from net income attributable to
SHR common shareholders under GAAP accounting rules for the three and six
months ended June 30, 2008. Under new accounting rules effective
January 1, 2009, the noncontrolling interest partner's share of the Hyatt
Regency La Jolla's property EBITDA is included in adjustments from
consolidated affiliates for the three and six months ended June 30, 2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by foreign
subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
Interest Loan
Debt Rate Spread (a) Amount Maturity (b)
---- ---- --------- ------ -----------
Punta Mita land parcel
promissory note N/A N/A $17,257 August 2009
Bank credit facility 4.06% 375 bp 260,500 March 2011
Westin St. Francis 1.01% 70 bp 220,000 August 2011
Fairmont Scottsdale 0.87% 56 bp 180,000 September 2011
InterContinental Chicago 1.37% 106 bp 121,000 October 2011
InterContinental Miami 1.04% 73 bp 90,000 October 2011
InterContinental Prague (c) 2.30% 120 bp (c) 145,902 March 2012
Loews Santa Monica Beach
Hotel 0.94% 63 bp 118,250 March 2012
Ritz-Carlton Half Moon Bay 0.98% 67 bp 76,500 March 2012
Exchangeable senior notes,
net of discount (d) 3.50% Fixed 167,241 April 2012
Fairmont Chicago 1.01% 70 bp 123,750 April 2012
Hyatt Regency La Jolla 1.31% 100 bp 97,500 September 2012
Marriott London
Grosvenor Square (e) 2.29% 110 bp (e) 127,099 October 2013
-------
$1,744,999
==========
(a) Spread over LIBOR (0.31% at June 30, 2009).
(b) Includes extension options, excluding the conditional one-year
extension option on the bank credit facility.
(c) Principal balance of euro 104,000,000 at June 30, 2009. Spread over
three-month EURIBOR (1.10% at June 30, 2009).
(d) Reflects the cash coupon.
(e) Principal balance of 77,250,000 pounds Sterling at June 30, 2009.
Spread over three-month GBP LIBOR (1.19% at June 30, 2009).
U.S. Interest Rate Swaps
Fixed
Pay Rate
Against Notional
Swap Effective Date LIBOR Amount Maturity
------------------- ----- ------ --------
April 2005 4.59% $75,000 April 2012
June 2005 4.12% 50,000 June 2012
June 2006 5.50% 75,000 June 2013
August 2006 5.42% 100,000 August 2013
March 2007 4.84% 100,000 July 2012
March 2009 0.70% 50,000 September 2009
March 2009 0.78% 50,000 December 2009
March 2009 0.90% 75,000 April 2010
March 2009 1.12% 50,000 December 2010
March 2009 1.38% 50,000 August 2011
March 2009 0.64% 50,000 September 2009
March 2009 1.02% 50,000 December 2010
March 2009 0.64% 50,000 December 2009
March 2009 1.04% 100,000 February 2011
March 2009 1.22% 50,000 August 2011
---- ------
2.60% $975,000
==== ========
European Interest Rate Swap
Fixed
Pay Rate
Against GBP
Swap Effective Date LIBOR (f) Notional Amount Maturity
------------------- -------- --------------- --------
October 2007 3.22% - 5.72% 77,250 pounds Sterling October 2013
Fixed
Pay Rate
Against
Swap Effective Date EURIBOR Notional Amount Maturity
------------------- ------- --------------- --------
September 2008 4.53% euro 104,000 March 2012
Forward-Starting Interest Rate Swaps
Fixed
Pay Rate
Against Notional
Swap Effective Date LIBOR Amount Maturity
------------------- ----- ------ --------
September 2009 4.90% $100,000 September 2014
December 2009 4.96% 100,000 December 2014
April 2010 5.42% 75,000 April 2015
December 2010 5.23% 100,000 December 2015
February 2011 5.27% 100,000 February 2016
-------
$475,000
========
At June 30, 2009, future scheduled debt principal payments (including
non-conditional extension options) are as follows:
Years ended December 31, Amount
------------------------ ------
2009 $17,257
2010 7,766
2011 879,266
2012 736,537
2013 116,932
Thereafter -
---
1,757,758
Less discount on
exchangeable senior notes (12,759)
-------
Total $1,744,999
==========
Percent of fixed rate debt including U.S. and European swaps 82.1%
Weighted average interest rate including U.S. and European
swaps (g) 3.63%
Weighted average maturity of fixed rate debt (debt with maturity
of greater than one year) 3.77
(f) In April 2009, we modified the GBP LIBOR interest rate swap
agreement, which adjusts the fixed pay rate from 5.72% to 3.22% for the
period from January 15, 2009 through January 17, 2011.
(g) Excludes the amortization of deferred financing costs, amortization of
the discount on the exchangeable senior notes and the amortization of the
interest rate swap costs.
