NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced its results of operations for the quarter and six months ended
June 30, 2005.
Results for the quarter ended June 30, 2005:
Net income was $22.4 million for the quarter ended June 30, 2005,
compared to $31.0 million for the same quarter last year. Net income
available for common shareholders was $20.5 million, or $0.30 per share,
for the quarter ended June 30, 2005, compared to $28.8 million, or
$0.43 per share, for the same quarter last year. Net income and net
income available for common shareholders for the quarter ended June 30,
2005, includes a $7.3 million, or $0.11 per share, loss on asset
impairment.
Funds from operations (FFO) for the quarter ended June 30, 2005 were
$67.2 million, or $0.98 per share. This compares to FFO for the quarter
ended June 30, 2004 of $59.5 million, or $0.89 per share.
The weighted average number of common shares outstanding totaled 68.4
million and 67.2 million for the quarters ended June 30, 2005 and 2004,
respectively.
Results for the six months ended June 30, 2005:
Net income was $51.1 million for the six months ended June 30, 2005,
compared to $60.5 million for the same period last year. Net income
available for common shareholders was $47.3 million, or $0.70 per share,
for the six months ended June 30, 2005, compared to $51.9 million, or
$0.79 per share, for the same period last year. Net income and net
income available for common shareholders for the six months ended June
30, 2005, includes a $7.3 million, or $0.11 per share, loss on asset
impairment.
Funds from operations (FFO) for the six months ended June 30, 2005
were $128.1 million, or $1.89 per share. This compares to FFO for the
six months ended June 30, 2004 of $116.5 million, or $1.77 per share.
The weighted average number of common shares outstanding totaled 67.8
million and 65.8 million for the six months ended June 30, 2005 and
2004, respectively.
Financing Activities:
In May 2005, HPT amended its previously existing $350 million
unsecured revolving credit facility. The available borrowing amount
increased to $750 million and the maturity date extended to June 2009,
with an option to extend the maturity by one additional year. The annual
interest rate payable for drawn amounts under the facility was reduced
from LIBOR plus 1.35% to LIBOR plus 0.80%. Various other changes were
made in the facility. In certain circumstances, the amount of unsecured
borrowings available under this facility may be increased to $1.5
billion.
On June 5, 2005, we sold 4,500,000 of our common shares of beneficial
interest at a price of $44.39 per share in a public offering. On June
24, 2005, we sold an additional 200,000 common shares of beneficial
interest at a price of $44.39 pursuant to an over allotment option
granted to the underwriters. Net proceeds from both these sales, after
underwriting and other offering expenses, were $199,233. We used these
proceeds to reduce borrowings outstanding under our revolving credit
facility.
Conference Call:
On Thursday, August 4, 2005, 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 June 30, 2005.
The conference call telephone number is (800) 289-0569. Participants
calling from outside the United States and Canada should dial (913)
981-5542. 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 August 10, 2005. To hear the replay, dial (719)
457-0820. The replay pass code is 3566493.
A live audio webcast of the conference call will also be available in
a listen only mode on HPT's web site. 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 Second Quarter 2005 Supplemental Operating and Financial Data is available for download at HPT's web site.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which owns 298 hotels located in 38 states, Puerto Rico and
Canada. HPT is headquartered in Newton, Massachusetts.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Hotel operating revenues
(1) $181,059 $125,846 $326,106 $241,919
Rental income 31,890 32,378 62,955 65,014
FF&E reserve income (2) 4,838 4,882 9,237 9,340
Interest income 294 125 530 269
--------- --------- --------- ---------
Total revenues 218,081 163,231 398,828 316,542
--------- --------- --------- ---------
Expenses:
Hotel operating expenses
(1) 132,344 86,486 232,769 164,320
Interest (including
amortization of deferred
financing costs of $945,
686, 1,679 and $1,372,
respectively) 17,591 12,406 33,020 25,245
Depreciation and
amortization 31,639 28,749 62,462 57,445
General and
administrative 6,796 4,807 12,160 9,207
Loss on asset impairment
(3) 7,300 -- 7,300 --
--------- --------- --------- ---------
Total expenses 195,670 132,448 347,711 256,217
Income before gain on sale of
real estate 22,411 30,783 51,117 60,325
Gain on sale of real
estate -- 203 -- 203
--------- --------- --------- ---------
Net income 22,411 30,986 51,117 60,528
Preferred distributions (1,914) (2,151) (3,828) (5,846)
Excess of liquidation
preference over carrying
value of preferred shares (4) -- -- -- (2,793)
--------- --------- --------- ---------
Net income available for
common shareholders $20,497 $28,835 $47,289 $51,889
========= ========= ========= =========
Calculation of FFO (5):
Net income available for common
shareholders $20,497 $28,835 $47,289 $51,889
Add: FF&E deposits not in net
income (2) 498 463 997 893
Depreciation and
amortization 31,639 28,749 62,462 57,445
Loss on asset impairment
(3) 7,300 -- 7,300 --
Excess of liquidation
preference over carrying
value of preferred shares
(4) -- -- -- 2,793
Deferred percentage rent
(6) 967 667 1,887 1,267
Deferred hotel operating
income (7) 6,302 1,013 8,151 2,463
Less:
Gain on sale of real
estate -- (203) -- (203)
-------- --------- --------- ---------
Funds from operations ("FFO") $67,203 $59,524 $128,086 $116,547
======== ========= ========= =========
Weighted average common shares
outstanding 68,357 67,188 67,783 65,802
======== ========= ========= =========
Per common share amounts:
Net income available for
common shareholders $0.30 $0.43 $0.70 $0.79
FFO (5) $0.98 $0.89 $1.89 $1.77
Common distributions
declared $0.72 $0.72 $1.44 $1.44
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) At June 30, 2005, each of our 298 hotels was included in one of
ten combinations of hotels of which 189 are leased to one of our taxable
REIT subsidiaries and managed by an independent hotel operating
company, 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. The pro forma operating
results for all 189 of our managed hotels assuming acquisition of the
hotels and commencement of the management agreements as of January 1,
2004, are as follows (includes amounts for periods prior to our
ownership of some of these hotels and for periods when some of these
hotels were leased by us to third parties):
Pro forma Pro forma
Quarter Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Hotel operating revenues $183,308 $169,554 $347,166 $324,962
Hotel operating expenses 123,503 118,233 240,364 233,344
Certain of our managed hotels had net operating results that were
less than the minimum returns due to us by $336 in the second quarter of
2004, and $267 and $4,610, in the first six months of 2005 and 2004,
respectively. These amounts are included in our consolidated statement
of income as a net reduction to hotel operating expenses in each period
because the minimum returns were funded by our managers. In the second
quarter of 2005, all our managed hotel combinations had net operating
results that were more than the minimum returns due to us.
(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 additional
rent. 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 in our
consolidated statement of income.
(3) In June 2005, we authorized Carlson Hotels Worldwide, or Carlson,
to pursue the sale of our Prime Hotel(SM)in Atlanta, GA. In connection
with this decision we recorded a $7,300 loss on asset impairment to
reduce the carrying value of the hotel to its estimated net realizable
value less cost to sell. Under the terms of our management agreement
with Carlson the annual minimum return due to us for the combination of
hotels which now includes this Prime Hotel(SM) will be reduced by an
amount equal to 7% of the net proceeds we realize from the sale of the
hotel. We are presently in discussions with Carlson regarding the
purchase of a replacement property which may be added to this
combination.
(4) On April 12, 2004, we redeemed all of our outstanding 9 1/2%
Series A Preferred Shares at their liquidation preference of $25 per
share, plus accumulated and unpaid dividends. We deducted the $2,793
excess of the liquidation preference of the redeemed shares over their
carrying amount from net income in determining net income available to
common shareholders in the calculation of earnings per share in the 2004
first quarter when the redemption was approved by our board of
trustees.
(5) 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 6) and
deferred hotel operating income (see note 7) and exclude loss on asset
impairment (see note 3) and the excess of liquidation preference over
carrying value of redeemed preferred shares (see note 4). 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, impairment charges 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 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 performance.
(6) In calculating net income we recognize percentage rental income
received for the first, second and third quarters in the fourth quarter
when all contingencies are met and the income is earned. Although we
defer recognition of this revenue for purposes of calculating net
income, we include these amounts in the calculation of FFO during the
first three quarters of the year.
(7) Our rights to share in the operating results of our managed
hotels in excess of the minimum returns due to us are generally
determined based upon annual calculations. Our managed hotels generated
net operating results that were $6,302 and $1,013, in the second quarter
of 2005 and 2004, respectively, and $8,151 and $2,463, in the first six
months of 2005 and 2004, respectively, more than the minimum returns
due to us. We recognize income in excess of our minimum returns in the
fourth quarter when all contingencies are met and the income is earned.
Although we defer recognition of this revenue for purposes of
calculating net income, we include these amounts in the calculation of
FFO during the first three quarters of the year.
Hospitality Properties Trust
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except share data)
June 30, December 31,
2005 2004
----------- -----------
(Unaudited)
ASSETS
------
Real estate properties, at cost:
Land $ 503,250 $ 460,748
Buildings, improvements and equipment 3,090,248 2,720,242
----------- -----------
3,593,498 3,180,990
Accumulated depreciation (571,520) (556,517)
----------- -----------
3,021,978 2,624,473
Cash and cash equivalents 10,065 15,894
Restricted cash (FF&E Reserve escrow) 37,421 38,511
Other assets, net 23,495 10,547
----------- -----------
$ 3,092,959 $ 2,689,425
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving credit facility $ -- $ 72,000
Senior notes, net of discounts 921,361 621,679
Mortgage payable 3,796 3,826
Security deposits 185,304 175,304
Accounts payable and other liabilities 93,553 77,782
Due to affiliate 2,958 2,661
Dividends payable 1,914 50,300
----------- -----------
Total liabilities 1,208,886 1,003,552
----------- -----------
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, 71,904,728 and 67,203,228
issued and outstanding, respectively 719 672
Additional paid-in capital 2,059,185 1,859,936
Cumulative net income 1,132,286 1,081,169
Cumulative preferred distributions (55,508) (51,680)
Cumulative common distributions (1,335,915) (1,287,530)
----------- -----------
Total shareholders' equity 1,884,073 1,685,873
----------- -----------
$ 3,092,959 $ 2,689,425
=========== ===========
Hospitality Properties Trust
Timothy A. Bonang
617-796-8149
Manager of Investor Relations
www.hptreit.com