NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced its results of operations for the quarter and nine months
ended September 30, 2006.
Results for the quarter ended September 30, 2006:
Net income was $36.6 million for the quarter ended September 30,
2006, compared to $30.6 million for the same quarter last year. Net
income available for common shareholders was $34.6 million, or $0.47 per
share, for the quarter ended September 30, 2006, compared to $28.7
million, or $0.40 per share, for the same quarter last year.
Funds from operations (FFO) for the quarter ended September 30, 2006,
were $77.0 million, or $1.05 per share. This compares to FFO for the
quarter ended September 30, 2005, of $69.7 million, or $0.97 per share.
The weighted average number of common shares outstanding totaled 73.6
million and 71.9 million for the quarters ended September 30, 2006 and
2005, respectively.
Results for the nine months ended September 30, 2006:
Net income was $107.2 million for the nine months ended September 30,
2006, compared to $81.7 million for the same period last year. Net
income available for common shareholders was $101.4 million, or $1.40
per share, for the nine months ended September 30, 2006, compared to
$76.0 million, or $1.10 per share, for the same period last year. Net
income and net income available for common shareholders for the nine
months ended September 30, 2005, included a $7.3 million, or $0.11 per
share, loss on asset impairment.
Funds from operations (FFO) for the nine months ended September 30,
2006, were $232.1 million, or $3.20 per share. This compares to FFO for
the nine months ended September 30, 2005, of $197.8 million, or $2.86
per share.
The weighted average number of common shares outstanding totaled 72.5
million and 69.2 million for the nine months ended September 30, 2006
and 2005, respectively.
Portfolio Performance:
For HPT's 308 hotels open during the 2006 and 2005 periods, revenue
per available room, or RevPAR, for the quarter ended September 30, 2006,
versus the same quarter last year increased 7.1% to $72.84. Average
daily rate, or ADR, rose to $97.38 a 8.4% improvement, while occupancy
decreased by 0.9 percentage points to 74.8% from the prior year period.
For HPT's 308 hotels open during the 2006 and 2005 periods RevPAR for
the nine months ended September 30, 2006, versus the same period last
year increased 10.5% to $72.96. ADR rose to $98.33 a 9.9% improvement,
while occupancy increased by 0.4 percentage points to 74.2% from the
prior year period.
Financing Activities:
On July 26, 2006, HPT sold two million common shares of beneficial
interest at a price of $43.66 per share in a public offering. On July
28, 2006, HPT sold an additional 300,000 common shares of beneficial
interest at a price of $43.66 pursuant to an over allotment option
granted to the underwriters. Net proceeds from both these sales of
approximately $95.8 million after underwriting and other offering
expenses were used to repay borrowings outstanding under HPT's revolving
bank credit facility and for general business purposes.
On August 22, 2006, HPT amended and extended the maturity of its $750
million unsecured revolving bank credit facility. As a result of the
amendment, the maturity date was extended to October 24, 2010. HPT has
the option to extend the facility for one additional year. The annual
interest rate payable for drawn amounts under the facility was reduced
to LIBOR plus 55 basis points and certain financial and other covenants
in the facility were amended to reflect current market conditions.
Investing Activities:
On September 18, 2006, HPT announced it had agreed to purchase
TravelCenters of America, Inc. ("TA") from a group of private equity
investors for total consideration of approximately $1.9 billion. TA owns
and operates a cross country network of 162 hospitality and fuel
service areas along the U.S. Interstate Highway System. When this
transaction is closed, HPT intends to spin out the operating assets of
TA, including the franchise agreements, to HPT shareholders in a
distribution to create a separately traded public company ("New TA").
Substantially all of TA's real estate assets will be retained by HPT and
leased to New TA under a long term agreement.
HPT currently expects to close on this transaction in early 2007 and
has arranged a commitment for interim financing from affiliates of
Merrill Lynch & Co. HPT currently anticipates long term financing
for this transaction through the issuance of both debt and equity
securities. The record date for the spin out distribution, the material
terms of the proposed lease from HPT to New TA, pro forma financial
information for HPT and New TA and other information with respect to New
TA are expected to be included in SEC filings to be made in connection
with the spin out distribution. These filings are currently anticipated
to occur before year end 2006.
Conference Call:
On Wednesday, November 1, 2006, at 1:00 p.m. Eastern Time, John
Murray, president and chief operating officer, and Mark Kleifges, chief
financial officer, will host a conference call to discuss the results
for the quarter ended September 30, 2006.
The conference call telephone number is (800) 202-2422. Participants
calling from outside the United States and Canada should dial (913)
981-5592. No pass code is necessary to access the call from either
number. Participants should dial in about 15 minutes prior to the
scheduled start of the call. A replay of the conference call will be
available through Tuesday, November 7, 2006. To hear the replay, dial
(719) 457-0820. The replay pass code is 4990653.
A live audio webcast of the conference call will also be available in
a listen only mode on the company's web site, which is located at www.hptreit.com.
Participants wanting to access the webcast should visit the company's
web site about five minutes before the call. The archived webcast will
be available for replay on HPT's web site for about one week after the
call.
Supplemental Data:
A copy of HPT's Third Quarter 2006 Supplemental Operating and Financial Data is available for download at HPT's web site, www.hptreit.com.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which owns 310 hotels located in 38 states, Puerto Rico and
Canada. HPT is headquartered in Newton, Massachusetts.
WARNING REGARDING FORWARD LOOKING STATEMENTS
SOME OF THE STATEMENTS IN THIS PRESS RELEASE CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. ALSO,
WHENEVER WE USE WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE",
"INTEND", "PLAN", "ESTIMATE" OR SIMILAR EXPRESSIONS, WE ARE MAKING
FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED
UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING
STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS INCLUDE THE
FOLLOWING:
- THIS PRESS RELEASE STATES THAT HPT EXPECTS THE TA TRANSACTION TO
CLOSE IN EARLY 2007. THE CLOSING OF THIS TRANSACTION REQUIRES SEC
CLEARANCE OF A REGISTRATION STATEMENT FOR THE DISTRIBUTION OF NEW TA
SHARES TO HPT SHAREHOLDERS, VARIOUS STATE AND LOCAL REGULATORY APPROVALS
AND VARIOUS APPROVALS FROM THIRD PARTIES TO TA CONTRACTS. HPT CAN
PROVIDE NO ASSURANCE THAT ALL THESE APPROVALS WILL BE OBTAINED. SOME OF
THESE APPROVALS MAY BE DELAYED OR DENIED AND THE EFFECT MAY BE TO DELAY
OR VOID THIS TRANSACTION.
- THIS PRESS RELEASE STATES HPT'S EXPECTATION THAT, IF THE TA
ACQUISITION CLOSES, HPT WILL SPIN OUT NEW TA, WHICH WILL BECOME A
SEPARATELY TRADED COMPANY. THE SPIN OUT OF SHARES OF NEW TA, IS
DEPENDENT ON A REGISTRATION STATEMENT FOR THE NEW TA SHARES BEING
DECLARED EFFECTIVE BY THE SEC AND OTHER FILINGS WITH THE SEC BEING MADE.
THE PREPARATION OF THESE SEC FILINGS IS A COMPLEX PROCESS. HPT
CURRENTLY BELIEVES THE FILING OF THE REGISTRATION STATEMENT CAN BE
COMPLETED BEFORE YEAR END 2006. HOWEVER, THESE FILINGS MAY BE DELAYED
FOR NUMEROUS REASONS, INCLUDING COMPILATION OF THE REQUIRED FINANCIAL
DATA IN THE FORMAT REQUIRED FOR SEC FILINGS. MOREOVER, THE EFFECTIVENESS
OF THE REGISTRATION STATEMENT FOR THE SPIN OFF IS SUBJECT TO COMPLETION
OF THE SEC REVIEW AND COMMENT PROCESS, WHICH HPT DOES NOT CONTROL.
- OTHER RISKS MAY ADVERSELY IMPACT US AND THE FORWARD LOOKING
STATEMENTS IN, OR IMPLIED BY, THIS PRESS RELEASE. PLEASE SEE HPT'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005, UNDER
"ITEM 1A. RISK FACTORS", FOR DESCRIPTION OF SOME OF THESE OTHER RISKS.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, HPT UNDERTAKES NO OBLIGATION TO UPDATE OR
REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues:
Hotel operating revenues (1) $230,412 $184,379 $665,867 $510,485
Rental income 32,924 31,919 98,270 94,874
FF&E reserve income (2) 5,242 4,963 15,505 14,200
Interest income 537 426 1,387 956
--------- --------- --------- ---------
Total revenues 269,115 221,687 781,029 620,515
--------- --------- --------- ---------
Expenses:
Hotel operating expenses (1) 168,906 134,888 485,720 367,657
Interest (including
amortization of deferred
financing costs of $676,
$606, $1,921 and $2,285,
respectively) 20,801 16,056 60,951 49,076
Depreciation and
amortization 36,435 34,462 107,235 96,924
General and administrative 6,410 5,696 19,950 17,856
Loss on asset impairment (3) -- -- -- 7,300
--------- --------- --------- ---------
Total expenses 232,552 191,102 673,856 538,813
--------- --------- --------- ---------
Net income 36,563 30,585 107,173 81,702
Preferred distributions (1,914) (1,914) (5,742) (5,742)
--------- --------- --------- ---------
Net income available for
common shareholders $34,649 $28,671 $101,431 $75,960
========= ========= ========= =========
Calculation of FFO (4):
Net income available for
common shareholders $34,649 $28,671 $101,431 $75,960
Add: FF&E deposits not in net
income (2) 470 490 1,515 1,487
Depreciation and
amortization 36,435 34,462 107,235 96,924
Deferred percentage rent (5) 1,431 1,121 4,607 3,008
Deferred hotel operating
income (6) 3,975 4,928 17,318 13,079
Loss on asset impairment (3) -- -- -- 7,300
--------- --------- --------- ---------
Funds from operations ("FFO") $76,960 $69,672 $232,106 $197,758
========= ========= ========= =========
Weighted average common shares
outstanding 73,613 71,908 72,502 69,173
========= ========= ========= =========
Per common share amounts:
Net income available for
common shareholders $0.47 $0.40 $1.40 $1.10
FFO (4) $1.05 $0.97 $3.20 $2.86
Common distributions
declared $0.74 $0.73 $2.21 $2.17
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) At September 30, 2006, each of our 310 hotels are included in one
of eleven combinations of hotels of which 201 are leased to one of our
taxable REIT subsidiaries and managed by independent hotel operating
companies and 109 are leased to third parties. Our consolidated
statement of income includes hotel operating revenues and expenses of
managed hotels and rental income from our leased hotels.
(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 all
the hotels leased to our taxable REIT subsidiaries and for most 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 FF&E Reserve escrows at hotels
leased to third parties we report payments into the escrow as FF&E
reserve income. When we have a security and remainder interest in the
FF&E Reserve escrows, deposits are not included in revenue but are
included in FFO. We do not report the amounts which are escrowed as
FF&E reserves for our managed hotels as FF&E reserve income.
(3) We recorded a $7,300 loss on asset impairment in the second
quarter of 2005 to reduce the carrying value of our Prime Hotel(SM) in
Atlanta, GA to its net realizable value less cost to sell. We sold the
hotel in September 2005.
(4) We compute FFO as shown. Our calculation of FFO differs from the
NAREIT definition because we include FF&E deposits not included in
net income (see note 2), deferred percentage rent (see note 5) and
deferred hotel operating income (see note 6) and exclude loss on asset
impairment (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, it
may facilitate comparison of current operating performance among REITs.
FFO does not represent cash generated by operating activities in
accordance with 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 among the 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 capital needs and operating performance.
(5) In calculating net income we recognize percentage rental income
received for the first, second and third quarters in the fourth quarter,
which is when all contingencies are met and the income is earned.
Although we defer recognition of this revenue until the fourth quarter
for purposes of calculating net income, we include the amount in the
calculation of FFO for each quarter of the year. The fourth quarter FFO
calculation excludes the amounts recognized during the first three
quarters.
(6) Our share of the operating results of our managed hotels in
excess of the minimum returns due to us are generally determined based
upon annual calculations. We recognize our share of income in excess of
our minimum returns in the fourth quarter, which is when all
contingencies are met and the income is earned. Although we defer
recognition of this income until the fourth quarter for purposes of
calculating net income, we include the estimated amount in the
calculation of FFO for each quarter of the year. The fourth quarter FFO
calculation excludes the amounts recognized during the first three
quarters.
Hospitality Properties Trust
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except share data)
September 30, December 31,
2006 2005
-------------- ------------
(Audited)
ASSETS
------------------------------------------
Real estate properties, at cost:
Land $ 584,199 $ 537,389
Buildings, improvements and equipment 3,423,392 3,089,304
-------------- ------------
4,007,591 3,626,693
Accumulated depreciation (678,303) (613,007)
-------------- ------------
3,329,288 3,013,686
Cash and cash equivalents 17,040 18,568
Restricted cash (FF&E reserve escrow) 29,797 29,063
Other assets, net 46,567 53,290
-------------- ------------
$ 3,422,692 $ 3,114,607
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------
Revolving credit facility $ 13,000 $ 35,000
Senior notes, net of discounts 1,195,982 921,606
Mortgage payable 3,717 3,766
Security deposits 185,366 185,304
Accounts payable and other liabilities 117,256 108,595
Due to affiliate 8,346 2,967
Dividends payable 1,914 1,914
-------------- ------------
Total liabilities 1,525,581 1,259,152
-------------- ------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest,
no par value, 100,000,000 shares
authorized:
Series B preferred shares; 8 7/8%
cumulative redeemable; 3,450,000
shares issued and outstanding,
aggregate liquidation preference
$86,250 83,306 83,306
Common shares of beneficial interest;
$0.01 par value; 100,000,000 shares
authorized, 74,281,951 and 71,920,578,
respectively issued and outstanding 743 719
Additional paid-in capital 2,158,362 2,059,883
Cumulative net income 1,318,245 1,211,072
Cumulative preferred distributions (65,078) (59,336)
Cumulative common distributions (1,598,467) (1,440,189)
-------------- ------------
Total shareholders' equity 1,897,111 1,855,455
-------------- ------------
$ 3,422,692 $ 3,114,607
============== ============
Hospitality Properties Trust
Timothy A. Bonang
617-796-8149
Manager of Investor Relations
www.hptreit.com