Newton, MA (August 5, 2003): Hospitality Properties Trust (NYSE:HPT) today announced its results of operations for the quarter ended June 30, 2003:
(amounts in thousands, except per share amounts)
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Net income $30,582 $35,490 $63,184 $68,821
Net income available for common
shareholders $26,887 $33,709 $55,794 $65,258
Funds from operations ("FFO") $54,108 $62,495 $114,478 $121,882
Cash available for distribution
("CAD") $46,615 $52,912 $98,431 $103,636
Common distributions declared $45,063 $45,034 $90,117 $89,436
Per common share amounts:
Net income available for
common shareholders $0.43 $0.54 $0.89 $1.04
Funds from operations ("FFO") $0.86 $1.00 $1.83 $1.95
Cash available for
distribution ("CAD") $0.74 $0.85 $1.57 $1.66
Common distributions declared $0.72 $0.72 $1.44 $1.43
Weighted average common shares
outstanding 62,575 62,538 62,565 62,529
Hospitality Properties Trust is a real estate investment trust, or REIT, headquartered in Newton, Massachusetts, which invests in hotels. HPT has investments in 274 hotels located in 38 states.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME, FUNDS FROM OPERATIONS
AND CASH AVAILABLE FOR DISTRIBUTION
(amounts in thousands, except per share data)
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Rental income $50,755 $62,082 $112,088 $120,429
Hotel operating revenues (1) 45,374 20,310 68,160 38,449
FF&E reserve income (2) 5,109 5,669 9,814 10,935
Interest income 76 54 290 236
Total revenues 101,314 88,115 190,352 170,049
Expenses:
Hotel operating expenses (1) 32,058 13,229 46,104 24,398
Interest (including
amortization of deferred
financing costs
of $593, $718, $1,226 and
$1,323, respectively) 9,733 11,066 20,402 21,113
Depreciation and
amortization 25,146 24,186 50,217 47,920
General and administrative 3,795 4,144 7,863 7,797
Loss on early
extinguishment of debt (5) -- -- 2,582 --
Total expenses 70,732 52,625 127,168 101,228
Net income 30,582 35,490 63,184 68,821
Preferred distributions (3,695) (1,781) (7,390) (3,563)
Net income available for
common shareholders $26,887 $33,709 $55,794 $65,258
Calculation of FFO (3):
Net income available for
common shareholders $26,887 $33,709 $55,794 $65,258
Add: FF&E deposits not in
net income (2) 1,874 3,959 5,424 7,398
Depreciation and
amortization 25,146 24,186 50,217 47,920
Deferred percentage
rent (4) 201 641 461 1,306
Loss on early
extinguishment
of debt (5) -- -- 2,582 --
Funds from
operations ("FFO") $54,108 $62,495 $114,478 $121,882
Calculation of CAD (3):
FFO $54,108 $62,495 $114,478 $121,882
Add: Non-cash expenses (6) 424 1,099 1,275 2,084
Less: FF&E reserve income
and escrows (1) (2) (6,043) (6,723) (11,898) (12,932)
FF&E deposits not
in net income (2) (1,874) (3,959) (5,424) (7,398)
Cash available for
distribution ("CAD") $46,615 $52,912 $98,431 $103,636
Weighted average common
shares outstanding 62,575 62,538 62,565 62,529
Per common share amounts:
Net income available for
common shareholders $0.43 $0.54 $0.89 $1.04
FFO (3) $0.86 $1.00 $1.83 $1.95
CAD (3) $0.74 $0.85 $1.57 $1.66
Common distributions
declared $0.72 $0.72 $1.44 $1.43
See Accompanying Notes
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 250 hotels
(34,160 rooms) that were open for a full year as of January 1, 2003.
Second Quarter Year to Date
2003 2002 Change 2003 2002 Change
Average Daily
Rate ("ADR") $77.14 $79.77 -3.3% $78.27 $80.67 -3.0%
Occupancy 73.2% 75.6% -2.4 pts 70.6% 72.3% -1.7 pts
Revenue Per
Available
Room ("RevPAR") $56.48 $60.33 -6.4% $55.29 $58.36 -5.3%
Key Balance Sheet Data
(in thousands)
June 30, December 31,
2003 2002
Real Estate, at cost $2,821,023 $2,762,322
Debt
Floating rate - Credit Facility, due 2005 $155,000 $--
Fixed rate - 7.00% Senior Notes, due 2008 149,874 149,861
Fixed rate - 8.50% Senior Notes, due 2009 -- 150,000
Fixed rate - 9.125% Senior Notes, due 2010 49,957 49,953
Fixed rate - 6.85% Senior Notes, due 2012 124,195 124,151
Fixed rate - 6.75% Senior Notes, due 2013 173,982 --
Total Debt $653,008 $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 (62,575,825 and 62,547,348 shares
outstanding) 1,457,222 1,489,507
Total Equity $1,612,735 $1,645,020
Additional Data
(in thousands, except percentages and ratios)
June 30, December 31,
2003 2002
Leverage Ratios
Total Debt / Total Assets 25.5% 19.7%
Total Debt / Real Estate, at cost 23.1% 17.2%
Total Debt / Total Book Capitalization 28.8% 22.4%
Variable Rate Debt / Total Book Capitalization 6.8% --
Coverage Ratios Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Net Income $30,582 $35,490 $63,184 $68,821
Add: Loss on early
extinguishment of debt -- -- 2,582 --
Interest expense 9,733 11,066 20,402 21,113
Depreciation and
amortization 25,146 24,186 50,217 47,920
Less: FF&E reserve income (6,043) (6,723) (11,898) (12,932)
EBITDA (3) $59,418 $64,019 $124,487 $124,922
EBITDA / Interest expense 6.1x 5.8x 6.1x 5.9x
EBITDA / Interest Expense + 4.4x 5.0x 4.5x 5.1x
Preferred Dividend
Cash Flow Data Six Months Ended June 30,
2003 2002
Cash flow from (used in):
Operating activities $107,385 $101,081
Investing activities $(24,234) $(139,419)
Financing activities $81,271 $(137)
See Accompanying NotesHospitality Properties Trust
(1) All of our hotels are leased to or operated by third-parties; we do not operate hotels. As of June 30, 2003, 52 of our properties are leased to our taxable REIT subsidiary, or TRS, and operated by third parties under three agreements. One agreement includes 35 hotels, which as of June 30, 2003, includes 25 hotels operated by affiliates of Marriott International under long term management contracts and leased to our TRS. Payment obligations due to us for these 25 hotels are pooled with 10 other hotels that continue to be leased by Marriott International until it elects to operate them under the management agreement. Each of these 10 hotels are required to begin to be leased to our TRS and managed by Marriott prior to June 30, 2004. The hotels formerly leased to Marriott International which are now leased to our TRS generated net operating results that were $301 and $720 less than the minimum return due to us for the 2003 and 2002 second quarter, respectively, and $2,527 and $2,315 less than the minimum return due to us for the six months ended 2003 and 2002, respectively. These amounts were funded by Marriott and are reflected as a reduction in hotel operating expenses. On April 1, 2003, Wyndham International defaulted two of our leases for 27 hotels and we retained $33.3 million of security deposits previously paid us by Wyndham. In late April and early May, 2003, we replaced Wyndham as operator of these hotels, and all of these hotels began to be managed by third parties and leased to our TRS. We have recorded no revenue or expenses related to Wyndham's defaults or for the periods from these defaults to the dates Wyndham was replaced as operator of these 27 hotels, pending the outcome of discussions with Wyndham regarding claims which we have against Wyndham or which Wyndham may assert against us as a result of Wyndham's defaults or prior operations. The amounts in the following table include the net revenues over expenses for the 52 hotels leased to our TRS, including amounts after Wyndham was replaced as an operator of our hotels.
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Hotel operating revenues $45,374 $20,310 $68,160 $38,449
Less: Hotel operating
expenses (32,058) (13,229) (46,104) (24,398)
Net payments by our
managers to our
subsidiary tenant 13,316 7,081 22,056 14,051
Less: Payments made into
FF&E Reserve escrows (934) (1,054) (2,084) (1,997)
Net $12,382 $6,027 $19,972 $12,054
(2) Some of our leases with third parties provide that FF&E Reserve escrows are owned by us. Other leases with third parties provide that FF&E Reserve escrows are owned by the tenants and we have a security and remainder interest in the escrow accounts. 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. CAD and EBITDA exclude all FF&E reserves.
(3) We compute FFO, CAD and earnings before interest, taxes, depreciation and amortization, or EBITDA, as shown in the calculations above. Our calculation of FFO differs from the NAREIT definition because we include FF&E deposits not included in net income (See footnote 2) and deferred percentage rent (See footnote 4) and exclude loss on early extinguishment of debt not settled in cash (See footnote 5). We consider FFO, CAD and EBITDA to be appropriate measures of performance or liquidity for a REIT, along with net income and cash flow from operating, investing and financing activities, because they provide investors with an indication of a REIT's operating performance and its ability to incur and service debt, make capital expenditures, pay distributions and fund other cash needs. FFO, CAD and EBITDA do not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered alternatives to net income or cash flow from operating activities as a measure of financial performance or liquidity. FFO, CAD and EBITDA are three 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.
(4) 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 and CAD include amounts received with respect to periods shown.
(5) Represents the write off of unamortized deferred financing costs related to early extinguishment of debt.
(6) Represents: the amortization of deferred debt issuance costs and discounts, and stock based compensation and expenses settled in stock.