Summary Of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 |
Accounting Policies [Abstract] | ' |
Summary Of Significant Accounting Policies | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation: |
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in conformity with the rules and regulations of the SEC applicable to interim financial information. As such, certain information and footnote disclosures normally included in complete annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in SHR’s annual report on Form 10-K for the year ended December 31, 2013. |
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Basis of Consolidation: |
The accompanying unaudited condensed consolidated financial statements include the accounts of SHR, its subsidiaries and other entities in which the Company has a controlling interest. If SH Funding determines that it is the holder of a variable interest in a variable interest entity (VIE), and it is the primary beneficiary, then SH Funding will consolidate the entity. At March 31, 2014, SH Funding consolidated one VIE, the entity that owns the JW Marriott Essex House Hotel (see note 5). For entities that are not considered VIEs, SH Funding consolidates those entities it controls. At March 31, 2014, SH Funding owned a 53.5% controlling interest in the entity that owns the Hyatt Regency La Jolla hotel, which is consolidated in the accompanying condensed consolidated financial statements. It accounts for those entities over which it has a significant influence but does not control using the equity method of accounting. At March 31, 2014, SH Funding owned interests in the Hotel del Coronado (Hotel del Coronado Venture), the Four Seasons Residence Club Punta Mita (RCPM), and the Lot H5 Venture (see note 6), which are unconsolidated affiliates in the accompanying condensed consolidated financial statements that are accounted for using the equity method of accounting. |
All significant intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates: |
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Restricted Cash and Cash Equivalents: |
At March 31, 2014 and December 31, 2013, restricted cash and cash equivalents included $34,533,000 and $38,629,000, respectively, that will be used for property and equipment replacement in accordance with hotel management or lease agreements. At March 31, 2014 and December 31, 2013, restricted cash and cash equivalents also included reserves of $47,165,000 and $37,287,000, respectively, required by loan and other agreements. |
Income Taxes: |
SHR has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Tax Code). As a REIT, SHR generally will not be subject to U.S. federal income tax if it distributes 100% of its annual taxable income to its shareholders and complies with certain other requirements. As a REIT, SHR is subject to a number of organizational and operational requirements. If it fails to qualify as a REIT in any taxable year, SHR will be subject to U.S. federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. Even if it qualifies for taxation as a REIT, it may be subject to foreign, state and local income taxes and to U.S. federal income tax and excise tax on its undistributed income. In addition, taxable income from SHR’s taxable REIT subsidiaries is subject to federal, foreign, state and local income taxes. Also, the foreign countries where the Company has operations do not recognize REITs under their respective tax laws. Accordingly, the Company is subject to tax in those jurisdictions. |
Deferred tax assets and liabilities are established for net operating loss carryforwards and temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the net operating loss carryforwards are utilized and when the temporary differences reverse. The Company evaluates uncertain tax positions in accordance with applicable accounting guidance. A valuation allowance for deferred tax assets is provided if the Company believes all or some portion of the deferred tax asset may not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated realizability of the related deferred tax asset is included in earnings. |
For the three months ended March 31, 2014 and 2013, income tax expense is summarized as follows (in thousands): |
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| Three Months Ended March 31, | | | | |
| 2014 | | 2013 | | | | |
Current tax expense - United States | $ | (219 | ) | | $ | (13 | ) | | | | |
Deferred tax benefit - United States | 180 | | | — | | | | | |
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Total income tax expense | $ | (39 | ) | | $ | (13 | ) | | | | |
Per Share Data: |
The Company uses the two-class method to calculate per share data for common stock and participating securities. Under the two-class method, net earnings are allocated to common stock and participating securities as if all of the net earnings for the period had been distributed. Unvested share-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing per share data pursuant to the two-class method. The Company's restricted stock units (RSUs) are considered participating securities because they contain non-forfeitable rights to dividend equivalents. To the extent the Company has undistributed earnings, it will follow the two-class method of computing per share data. |
Basic income (loss) per common share is computed by dividing the net income (loss) attributable to SHR common shareholders by the weighted average shares of common stock outstanding during each period. Diluted income (loss) per common share is computed by dividing the net income (loss) attributable to SHR common shareholders as adjusted for the impact of dilutive securities, if any, by the weighted average shares of common stock outstanding plus potentially dilutive securities. Dilutive securities may include RSUs, performance-based RSUs, options to purchase shares of SHR common stock (Options), and noncontrolling interests that have an option to exchange their interests to shares of SHR common stock. No effect is shown for securities that are anti-dilutive. Potentially dilutive shares are determined using the more dilutive of either the two-class method or the treasury stock method. The following table sets forth the components of the calculation of net income (loss) attributable to SHR common shareholders for the three months ended March 31, 2014 and 2013 (in thousands): |
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| Three Months Ended March 31, | | | | |
| 2014 | | 2013 | | | | |
Numerator - Basic: | | | | | | | |
Income (loss) from continuing operations attributable to SHR | $ | 69,155 | | | $ | (19,396 | ) | | | | |
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Preferred shareholder dividends | (6,115 | ) | | (6,041 | ) | | | | |
Preferred stock redemption(a) | (3,709 | ) | | — | | | | | |
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Undistributed earnings allocated to participating securities - basic | (695 | ) | | — | | | | | |
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Income (loss) from continuing operations attributable to SHR common shareholders - basic | 58,636 | | | (25,437 | ) | | | | |
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Discontinued operations attributable to SHR | 157,827 | | | 1,989 | | | | | |
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Net income (loss) attributable to SHR common shareholders - basic | $ | 216,463 | | | $ | (23,448 | ) | | | | |
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Numerator - Diluted: | | | | | | | |
Income (loss) from continuing operations attributable to SHR common shareholders - basic | $ | 58,636 | | | $ | (25,437 | ) | | | | |
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Undistributed earnings allocated to participating securities - basic | 695 | | | — | | | | | |
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Undistributed earnings allocated to participating securities - diluted | (647 | ) | | — | | | | | |
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Adjustment for noncontrolling interests in consolidated affiliates (see note 5) | (3,131 | ) | | (3,524 | ) | | | | |
Income (loss) from continuing operations attributable to SHR common shareholders - diluted | 55,553 | | | (28,961 | ) | | | | |
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Discontinued operations attributable to SHR | 157,827 | | | 1,989 | | | | | |
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Net income (loss) attributable to SHR common shareholders - diluted | $ | 213,380 | | | $ | (26,972 | ) | | | | |
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Denominator: | | | | | | | |
Weighted average shares of common stock – basic (b) | 206,983 | | | 206,981 | | | | | |
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Effect of dilutive securities: | | | | | | | |
Noncontrolling interests in consolidated affiliates (see note 5) | 10,087 | | | 11,729 | | | | | |
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Performance-based RSUs | 2,298 | | | — | | | | | |
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Weighted average shares of common stock – diluted | 219,368 | | | 218,710 | | | | | |
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(a) In March 2014, SHR publicly announced its intention to redeem all of the outstanding shares of its 8.50% Series A Cumulative Redeemable Preferred Stock (Series A Preferred Stock) on April 3, 2014 (see note 9). SHR became obligated to redeem the Series A Preferred Stock at the time it made the announcement and reclassified the Series A Preferred Stock from equity to a preferred stock redemption liability on the condensed consolidated balance sheet and recorded the balance at fair value. For purposes of calculating per share amounts for the three months ended March 31, 2014, the difference between the fair value of the preferred stock redemption liability of $103,704,000 and the carrying amount of the shares of the Series A Preferred Stock redeemed of $99,995,000 is an adjustment to net income attributable to SHR common shareholders. The full impact of the Series A Preferred Stock redemption on the calculation of net income attributable to SHR common shareholder was reflected in the first quarter of 2014. |
(b) Includes RSUs and stock units payable under a previous deferral program of 1,302 and 2,579 at March 31, 2014 and 2013, respectively, that have vested but have not yet been issued to shares of common stock. |
Securities that could potentially dilute basic income (loss) per share in the future that are not included in the computation of diluted income (loss) per share because they are anti-dilutive as of March 31, 2014 and 2013 are as follows (in thousands): |
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| Computation For Three Months Ended March 31, | | | | | | |
| 2014 | | 2013 | | | | | | |
Noncontrolling interests in SHR's operating partnership | 797 | | | 853 | | | | | | | |
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RSUs, performance-based RSUs, and Options | 658 | | | 3,214 | | | | | | | |
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Accumulated Other Comprehensive Loss: |
The Company’s accumulated other comprehensive loss (OCL) results from mark to market of certain derivative financial instruments and unrealized gains or losses on foreign currency translation adjustments (CTA). The following tables provide the changes in accumulated OCL for the three month periods ended March 31, 2014 and 2013 (in thousands): |
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| Derivative and Other Activity | | CTA | | Accumulated OCL |
Balance at January 1, 2014 | $ | (20,616 | ) | | $ | (20,829 | ) | | $ | (41,445 | ) |
Other comprehensive loss before reclassifications | (200 | ) | | (111 | ) | | (311 | ) |
Amounts reclassified from accumulated OCL | 533 | | | 18,895 | | | 19,428 | |
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Net other comprehensive income | 333 | | | 18,784 | | | 19,117 | |
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Balance at March 31, 2014 | $ | (20,283 | ) | | $ | (2,045 | ) | | $ | (22,328 | ) |
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| Derivative and Other Activity | | CTA | | Accumulated OCL |
Balance at January 1, 2013 | $ | (38,454 | ) | | $ | (20,417 | ) | | $ | (58,871 | ) |
Other comprehensive (loss) income before reclassifications | (256 | ) | | 774 | | | 518 | |
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Amounts reclassified from accumulated OCL | 5,245 | | | — | | | 5,245 | |
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Net other comprehensive income | 4,989 | | | 774 | | | 5,763 | |
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Balance at March 31, 2013 | $ | (33,465 | ) | | $ | (19,643 | ) | | $ | (53,108 | ) |
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The reclassifications out of accumulated OCL for the three months ended March 31, 2014 and 2013 are as follows (in thousands): |
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| | Amounts Reclassified from Accumulated OCL | | | |
Details about Accumulated OCL Components | | 2014 | | 2013 | | Statement of Operations Line Item | |
Activity related to cash flow hedges | | $ | 533 | | | $ | 5,245 | | | Interest expense | |
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Activity related to CTA | | $ | 18,895 | | | $ | — | | | Income from discontinued operations, net of tax | |
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New Accounting Guidance: |
In April 2014, the Financial Accounting Standards Board issued new guidance which amends the requirements for reporting discontinued operations. Under the guidance, only disposals that represent a strategic shift that has (or will have) a major effect on the entity's results of operations would qualify as discontinued operations. In addition, the guidance expands the disclosure requirements for disposals that meet the definition of a discontinued operation and requires entities to disclose information about disposals of individually significant components. The provisions are effective in the first quarter of 2015, with early adoption permitted for any annual or interim period for which an entity's financial statements have not yet been made available for issuance. The Company will apply the guidance prospectively to disposal activity occurring after the effective date of this guidance. |