Newton, MA (February 10, 2004): Hospitality Properties Trust
(NYSE:HPT) today announced its results of operations for the quarter and
year-ended December 31, 2003, as follows:
(amounts in thousands, except per share amounts)
Quarter Ended Year Ended
December 31, December 31,
------------------ -------------------
2003 2002 2003 2002
--------- -------- --------- ---------
Net income $144,132 $38,736 $238,213 $142,202
Net income available for common
shareholders $140,437 $36,508 $223,433 $134,630
Funds from operations ("FFO") $61,807 $62,414 $233,075 $247,544
Weighted average common shares
outstanding 62,587 62,547 62,576 62,538
Common distributions declared $45,063 $45,034 $180,242 $179,504
Per common share amounts:
Net income available for
common shareholders $2.24 $0.58 $3.57 $2.15
Funds from operations ("FFO") $0.99 $1.00 $3.72 $3.96
Common distributions declared $0.72 $0.72 $2.88 $2.87
Net income and net income available for common shareholders for the
quarter and year ended December 31, 2003, include a $107,516, or $1.72
per share, gain on lease terminations.
Hospitality Properties Trust is a real estate investment trust, or
REIT, headquartered in Newton, Massachusetts, which invests in hotels.
HPT owns 286 hotels located in 38 states.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
-------------- -----------------
2003 2002 2003 2002
------- ------- -------- --------
Revenues (1):
Minimum rent $55,874 $62,224 $216,125 $245,197
Percentage rent 1,128 2,291 1,128 2,291
Hotel operating revenues 68,801 19,410 209,299 79,328
FF&E reserve income (2) 4,203 4,892 18,335 21,600
Interest income 63 19 398 290
Gain on lease
terminations (3) 107,516 -- 107,516 --
------- ------- -------- --------
Total revenues 237,585 88,836 552,801 348,706
------- ------- -------- --------
Expenses (1):
Hotel operating expenses 48,695 11,910 145,863 50,515
Interest (including
amortization of deferred
financing costs of
$683, $644, $2,536
and $2,650, respectively) 12,626 10,419 44,536 42,424
Depreciation and
amortization 27,732 24,296 104,807 96,474
General and administrative 4,400 3,475 16,800 15,491
Loss on early extinguishment
of debt (4) -- -- 2,582 1,600
------- ------- -------- --------
Total expenses 93,453 50,100 314,588 206,504
------- ------- -------- --------
Net income 144,132 38,736 238,213 142,202
Preferred distributions (3,695) (2,228) (14,780) (7,572)
------- ------- -------- --------
Net income available for
common shareholders $140,437 $36,508 $223,433 $134,630
======= ======= ======== ========
----------------------------------------------------------------------
Calculation of FFO (5):
Net income available for
common shareholders $140,437 $36,508 $223,433 $134,630
Add: FF&E deposits not
in net income (2) 2,004 3,507 9,769 14,840
Depreciation and
amortization 27,732 24,296 104,807 96,474
Loss on early
extinguishment of
debt (4) -- -- 2,582 1,600
Less: Previously recognized
percentage rent
in FFO (6) (850) (1,897) -- --
Gain on lease
terminations (107,516) -- (107,516) --
------- ------- -------- --------
Funds from operations
("FFO") $61,807 $62,414 $233,075 $247,544
======= ======= ======== ========
----------------------------------------------------------------------
Weighted average common
shares outstanding 62,587 62,547 62,576 62,538
======= ======= ======== ========
Per common share amounts:
Net income available for
common shareholders $2.24 $0.58 $3.57 $2.15
FFO (5) $0.99 $1.00 $3.72 $3.96
Common distributions
declared $0.72 $0.72 $2.88 $2.87
----------------------------------------------------------------------
See Notes at end of release.
Hospitality Properties Trust
Hotel Revenue Data
------------------
The following table summarizes the hotel operating statistics
reported to us by our third party tenants and managers for 283 hotels
(38,204 rooms) that were open for a full year as of January 1, 2003.
Fourth Quarter Year Ended
---------------------- ----------------------
2003 2002 Change 2003 2002 Change
------- ------- ------ ------- ------- ------
Average Daily Rate
("ADR") $77.56 $78.92 -1.7% $77.50 $79.08 -2.0%
Occupancy 67.2% 67.6% -0.4 pts 69.9% 71.7% -1.8 pts
Revenue Per Available
Room ("RevPAR") $52.12 $53.35 -2.3% $54.17 $56.70 -4.5%
Key Balance Sheet Data
----------------------
(in thousands)
Dec. 31, Dec. 31,
2003 2002
----------- -----------
Cash and cash equivalents $6,428 $7,337
=========== ===========
Real Estate, at cost $3,179,507 $2,762,322
=========== ===========
Debt, net of discount
Floating rate - Credit Facility, due
2005 $201,000 $--
Fixed rate - 7.00% Senior Notes, due
2008 149,888 149,861
Fixed rate - 8.50% Senior Notes, due
2009 -- 150,000
Fixed rate - 9.125% Senior Notes, due
2010 49,960 49,953
Fixed rate - 8.30% Mortgage payable, due
2011 3,881 --
Fixed rate - 6.85% Senior Notes, due
2012 124,240 124,151
Fixed rate - 6.75% Senior Notes, due
2013 297,157 --
----------- -----------
Total Debt $826,126 $473,965
=========== ===========
Book Equity
9.5% Series A Preferred (3,000,000
shares outstanding) $72,207 $72,207
8.875% Series B Preferred (3,450,000
shares outstanding) 83,306 83,306
Common (62,587,079 and 62,547,348 shares
outstanding, respectively) 1,490,015 1,489,507
----------- -----------
Total Equity $1,645,528 $1,645,020
=========== ===========
Additional Data
---------------
(in thousands, except percentages and ratios)
Dec.31, Dec.31,
2003 2002
---------- ----------
Leverage Ratios
---------------
Total Debt / Total Assets 29.9% 19.7%
Total Debt / Real Estate, at cost 26.0% 17.2%
Total Debt / Total Book Capitalization 33.4% 22.4%
Variable Rate Debt / Total Book Capitalization 8.1% --
Year Ended
Cash Flow Data December 31,
-------------- ---------------------
2003 2002
---------- ----------
Cash flow provided by (used in):
Operating activities $219,405 $210,245
Investing activities $(371,610) $(142,311)
Financing activities $151,296 $(99,559)
----------------------------------------------------------------------
See Notes at end of release.
Hospitality Properties Trust
(1) All of our 286 hotels are leased to or managed by third parties;
we do not operate hotels. At January 1, 2004, we have 115 leased hotels
and 171 managed hotels. All of our managed hotels are leased to our
taxable REIT subsidiary, or TRS, or its subsidiaries. Our consolidated
statement of income includes hotel operating revenue and expenses from
hotels managed for us, and only rental income for leased hotels. Certain
of our managed hotels which are leased to our TRS generated net
operating results that were $7,032 and $2,648 less than the minimum
return due to us for the 2003 and 2002 fourth quarter, respectively, and
$6,922 and $5,822 less than the minimum return due to us for the years
ended December 31, 2003 and 2002, respectively. These amounts were
funded by our managers and are reflected as a reduction in hotel
operating expenses. On July 1, 2003, Prime Hospitality Corp. defaulted
on its lease for 24 hotels we own. Effective January 1, 2004, we
terminated this lease and entered a new management agreement with Prime
for these hotels and 12 other hotels we own. The lease termination
agreement provides that the security deposit we held be reduced for
shortfalls in minimum rent payments to us of $6,719 for the period July
1, 2003 to December 31, 2003, and this non-cash amount is included in
our minimum rent revenues for the quarter and year ended December 31,
2003.
(2) Various percentages of total sales at most of our hotels are
escrowed as reserves for future renovations or refurbishment, or
FF&E Reserve escrows. We own the FF&E Reserve escrows for some
of the hotels leased to third parties. We have a security and remainder
interest in the FF&E Reserve escrows for the remaining hotels leased
to third parties. When we own the escrow, at hotels leased to third
parties, generally accepted accounting principles require that payments
into the escrow be reported as additional rent. When we have a security
and remainder interest in the escrow accounts, at hotels leased to third
parties, deposits are not included in revenue but are included in FFO.
(3) Represents the gains recorded in the 2003 fourth quarter as a
result of the termination of our two leases with Wyndham International,
Inc. for 12 and 15 hotels, respectively, and the termination of our
lease with Candlewood Hotel Company, Inc. for 64 hotels. Subsequently,
all of these hotels are operated under management agreements with new
operators that require payment to us of minimum returns. The gain on
lease terminations results primarily from our retention of security and
guarantee deposits, and the transfer by our former tenants to us of
FF&E escrow accounts and hotel tenant improvements.
(4) Represents the write off of unamortized deferred financing costs related to early extinguishment of debt.
(5) We compute FFO as shown in the calculation above. Our calculation
of FFO differs from the NAREIT definition because we include FF&E
deposits not included in net income (see note 2) and deferred percentage
rent (see note 6) and exclude loss on early extinguishment of debt not
settled in cash and gain on lease terminations (see note 3). We consider
FFO to be an appropriate measure of performance for a REIT, along with
net income and cash flow from operating, investing and financing
activities. We believe that FFO provides useful information to investors
because by excluding the effects of certain historical costs, such as
depreciation expense and losses on early extinguishment of debt, it may
facilitate comparison of current operating performance among REITs. FFO
does not represent cash generated by operating activities in accordance
with generally accepted accounting principles, or GAAP, and should not
be considered an alternative to net income or cash flow from operating
activities as a measure of financial performance or liquidity. FFO is an
important factors considered by our board of trustees when determining
the amount of distributions to shareholders. Other important factors
include, but are not limited to, requirements to maintain our status as a
REIT, limitations in our revolving bank credit facility and public debt
covenants, the availability of debt and equity capital to us and our
expectation of our future performance.
(6) We recognize percentage rental income received for the first,
second and third quarters in the fourth quarter. Although recognition of
revenue is deferred for purposes of calculating net income, the
calculations of FFO included these amounts during the first three
quarters.
Contact:
John G. Murray
President
Mark L. Kleifges
CFO
(617) 964-8389
www.hptreit.com