Newton, MA (November 3, 2003): Hospitality Properties Trust (NYSE:HPT) today announced its results of operations for the quarter ended September 30, 2003:
(amounts in thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Net income $30,897 $34,645 $94,081 $103,466
Net income available for
common shareholders $27,202 $32,864 $82,996 $98,122
Funds from operations ("FFO") $56,791 $63,248 $171,268 $185,130
Cash available for
distribution ("CAD") $48,171 $53,513 $146,601 $157,149
Common distributions declared $45,063 $45,034 $135,179 $134,470
Per common share amounts:
Net income available for
common shareholders $0.43 $0.53 $1.33 $1.57
Funds from operations ("FFO") $0.91 $1.01 $2.74 $2.96
Common distributions declared $0.72 $0.72 $2.16 $2.15
Weighted average common shares
outstanding 62,587 62,547 62,572 62,535
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 Nine Months Ended
September 30, September 30
2003 2002 2003 2002
Revenues:
Rental income $48,163 $62,544 $160,251 $182,973
Hotel operating
revenues (1) 72,338 21,469 140,498 59,918
FF&E reserve income (2) 4,318 5,773 14,132 16,708
Interest income 44 35 335 271
Total revenues 124,863 89,821 315,216 259,870
Expenses:
Hotel operating
expenses (1) 51,064 14,207 97,168 38,605
Interest (including
amortization of deferred
financing costs of $626
$683, $1,853 and 11,508 10,892 31,910 32,005
$2,006, respectively)
Depreciation and
amortization 26,859 24,258 77,075 72,178
General and administrative 4,535 4,219 12,400 12,016
Loss on early
extinguishment
of debt (3) -- 1,600 2,582 1,600
Total expenses 93,966 55,176 221,135 156,404
Net income 30,897 34,645 94,081 103,466
Preferred distributions (3,695) (1,781) (11,085) (5,344)
Net income available for
common shareholders $27,202 $32,864 $82,996 $98,122
Calculation of FFO (4):
Net income available for
common shareholders $27,202 $32,864 $82,996 $98,122
Add: FF&E deposits not
in net income (2) 2,341 3,935 7,765 11,333
Depreciation and
amortization 26,859 24,258 77,075 72,178
Deferred percentage
rent (5) 389 591 850 1,897
Loss on early
extinguishment
of debt (3) -- 1,600 2,582 1,600
Funds from
operations ("FFO") $56,791 $63,248 $171,268 $185,130
Calculation of CAD (4):
FFO $56,791 $63,248 $171,268 $185,130
Add: Non-cash
expenses (6) 727 1,084 2,002 3,168
Less: FF&E reserve income
and escrows (1) (2) (7,006) (6,884) (18,904) (19,816)
FF&E deposits not in
net income (2) (2,341) (3,935) (7,765) (11,333)
Cash available for
distribution ("CAD") $48,171 $53,513 $146,601 $157,149
Weighted average common
shares outstanding 62,587 62,547 62,572 62,535
Per common share amounts:
Net income available
for common
shareholders $0.43 $0.53 $1.33 $1.57
FFO (4) $0.91 $1.01 $2.74 $2.96
Common distributions
declared $0.72 $0.72 $2.16 $2.15See Notes on page 4.
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 271 hotels (36,759 rooms) that were open for a full year as of January 1, 2003.
Third Quarter Year to Date
2003 2002 Change 2003 2002 Change
Average Daily
Rate ("ADR") $76.76 $78.63 -2.4% $77.68 $79.86 -2.7%
Occupancy 74.5% 75.7% -1.2 pts 72.0% 73.5% -1.5 pts
Revenue Per
Available
Room ("RevPAR") $57.19 $59.52 -3.9% $55.93 $58.70 -4.7%
Key Balance Sheet Data
(in thousands)
Sept. 30, Dec. 31
2003 2002
Cash and cash equivalents $4,418 $7,337
Real Estate, at cost $3,089,006 $2,762,322
Debt, net of discount
Floating rate - Credit Facility, due 2005 $104,000 $--
Fixed rate - 7.00% Senior Notes, due 2008 149,881 149,861
Fixed rate - 8.50% Senior Notes, due 2009 -- 150,000
Fixed rate - 9.125% Senior Notes, due 2010 49,958 49,953
Fixed rate - 6.85% Senior Notes, due 2012 124,218 124,151
Fixed rate - 6.75% Senior Notes, due 2013 297,079 --
Total Debt $725,136 $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 (62,587,078 and 62,547,348 shares
outstanding, respectively) 1,439,704 1,489,507
Total Equity $1,595,217 $1,645,020
Additional Data
(in thousands, except percentages and ratios)
Sept. 30, Dec. 31
2003 2002
Leverage Ratios
Total Debt / Total Assets 27.5% 19.7%
Total Debt / Real Estate, at cost 23.5% 17.2%
Total Debt / Total Book Capitalization 31.3% 22.4%
Variable Rate Debt / Total Book Capitalization 4.5% --
Cash Flow Data Nine Months Ended
September 30
2003 2002
Cash flow provided by (used in):
Operating activities $158,224 $154,767
Investing activities $(264,238) $(140,189)
Financing activities $103,095 $(53,037)
See Notes on page 4.(1) As of September 30, 2003, all of our 274 hotels are leased to or managed by third parties; we do not operate hotels. At September 30, 2003, we have 205 leased hotels and 69 managed hotels compared to 233 leased hotels and 18 managed hotels at September 30, 2002. 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 $171 and $859 less than the minimum return due to us for the 2003 and 2002 third quarter, respectively, and $183 and $3,174 less than the minimum return due to us for the nine months ended September 30, 2003 and 2002 respectively. These amounts were funded by our managers and are reflected as a reduction in hotel operating expenses. The amounts in the following table include the net revenues over expenses for our 69 managed hotels from the date those hotels began to be leased to our TRS.
Quarter Ended Nine Months Ended
September 30, September 30
2003 2002 2003 2002
Hotel operating revenues $ 72,338 $ 21,469 $ 140,498 $ 59,918
Less: Hotel
operating expenses 51,064 14,207 97,168 38,605
Net payments by our
managers to our
subsidiary tenant 21,274 7,262 43,330 21,313
Less: Payments made
into FF&E Reserve escrows 2,688 1,111 4,772 3,108
Net $ 18,586 $ 6,151 $ 38,558 $ 18,205
(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. CAD and EBITDA exclude all FF&E Reserves escrows.
(3) Represents the write off of unamortized deferred financing costs related to early extinguishment of debt.
(4) We compute FFO and CAD 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 note 2) and deferred percentage rent (see note 4) and exclude loss on early extinguishment of debt not settled in cash (see note 5). We consider FFO and CAD to be appropriate measures of performance for a REIT, along with net income and cash flow from operating investing and financing activities. We believe that FFO and CAD provide useful information to investors because by excluding the effects of certain historical costs, such as depreciation expense and losses on early extinguishment of debt, they can facilitate comparison of current operating performance among REITs. FFO and CAD 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 and CAD are two 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.
(5) 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.
(6) Represents the amortization of deferred debt issuance costs and discounts, stock based compensation and expenses settled in shares.
Contact:
John G. Murray
President
Mark L. Kleifge
CFO
(617) 964-8389
www.hptreit.com