Exhibit 99.1
FOR IMMEDIATE RELEASE |
| Contact: |
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| John G. Murray, President or |
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| Mark L. Kleifges, CFO |
|
| (617) 964-8389 |
|
| www.hptreit.com |
HPT Announces 2004 Second Quarter Operating Results
Newton, MA (August 4, 2004): Hospitality Properties Trust (NYSE: HPT) today announced its results of operations for the quarter ended June 30, 2004, as follows:
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| (amounts in thousands, except per share amounts) |
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| Quarter Ended |
| Six Months Ended |
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| 2004 |
| 2003 |
| 2004 |
| 2003 |
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Net income |
| $30,986 |
| $30,582 |
| $60,528 |
| $63,184 |
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Net income available for common shareholders |
| $28,835 |
| $26,887 |
| $51,889 |
| $55,794 |
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Funds from operations (“FFO”) |
| $59,524 |
| $54,108 |
| $116,547 |
| $114,478 |
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Common distributions declared |
| $48,376 |
| $45,063 |
| $90,750 |
| $90,117 |
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Per common share amounts: |
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Net income available for common shareholders |
| $0.43 |
| $0.43 |
| $0.79 |
| $0.89 |
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| �� |
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Funds from operations (“FFO”) |
| $0.89 |
| $0.86 |
| $1.77 |
| $1.83 |
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Common distributions declared |
| $0.72 |
| $0.72 |
| $1.44 |
| $1.44 |
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Weighted average common shares outstanding |
| 67,188 |
| 62,575 |
| 65,802 |
| 62,565 |
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Hospitality Properties Trust is a REIT headquartered in Newton, Massachusetts, which invests in hotels. HPT has investments in 285 hotels located in 38 states.
(end)
3
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
|
| Quarter Ended June 30, |
| Six Months Ended June 30, |
| |||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| |
Revenues: |
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| |
Hotel operating revenues (1) |
| $125,846 |
| $45,374 |
| $241,919 |
| $68,160 |
| |
Rental income |
| 32,378 |
| 50,755 |
| 65,014 |
| 112,088 |
| |
FF&E Reserve income (2) |
| 4,995 |
| 5,109 |
| 9,583 |
| 9,814 |
| |
Interest income |
| 12 |
| 76 |
| 26 |
| 290 |
| |
Total revenues |
| 163,231 |
| 101,314 |
| 316,542 |
| 190,352 |
| |
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Expenses: |
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Hotel operating expenses (1) (3) |
| 86,486 |
| 32,058 |
| 164,320 |
| 46,104 |
| |
Interest (including amortization of deferred financing costs of $686, $593, $1,372 and $1,226, respectively) |
| 12,406 |
| 9,733 |
| 25,245 |
| 20,402 |
| |
Depreciation and amortization |
| 28,749 |
| 25,146 |
| 57,445 |
| 50,217 |
| |
General and administrative |
| 4,807 |
| 3,795 |
| 9,207 |
| 7,863 |
| |
Loss on early extinguishment of debt (4) |
| — |
| — |
| — |
| 2,582 |
| |
Total expenses |
| 132,448 |
| 70,732 |
| 256,217 |
| 127,168 |
| |
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Income before gain on sale of real estate |
| 30,783 |
| 30,582 |
| 60,325 |
| 63,184 |
| |
Gain on sale of real estate |
| 203 |
| — |
| 203 |
| — |
| |
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Net income |
| 30,986 |
| 30,582 |
| 60,528 |
| 63,184 |
| |
Preferred distributions |
| (2,151 | ) | (3,695 | ) | (5,846 | ) | (7,390 | ) | |
Excess of liquidation preference over carrying value of preferred shares (5) |
| — |
| — |
| (2,793 | ) | — |
| |
Net income available for common shareholders |
| $28,835 |
| $26,887 |
| $51,889 |
| $55,794 |
| |
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Calculation of FFO (6): |
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Net income available for common shareholders |
| $28,835 |
| $26,887 |
| $51,889 |
| $55,794 |
| |
Add: | FF&E deposits not in net income (2) |
| 463 |
| 1,874 |
| 893 |
| 5,424 |
|
Depreciation and amortization |
| 28,749 |
| 25,146 |
| 57,445 |
| 50,217 |
| |
Deferred percentage rent (7) |
| 667 |
| 201 |
| 1,267 |
| 461 |
| |
Deferred hotel operating income (8) |
| 1,013 |
| — |
| 2,463 |
| — |
| |
Excess of liquidation preference over carrying value of preferred shares (5) |
| — |
| — |
| 2,793 |
| — |
| |
Loss on early extinguishment of debt (4) |
| — |
| — |
| — |
| 2,582 |
| |
Less: | Gain on sale of real estate |
| (203 | ) | — |
| (203 | ) | — |
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Funds from operations (“FFO”) |
| $59,524 |
| $54,108 |
| $116,547 |
| $114,478 |
| |
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Weighted average common shares outstanding |
| 67,188 |
| 62,575 |
| 65,802 |
| 62,565 |
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Per common share amounts: |
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Net income available for common shareholders |
| $0.43 |
| $0.43 |
| $0.79 |
| $0.89 |
| |
FFO (6) |
| $0.89 |
| $0.86 |
| $1.77 |
| $1.83 |
| |
Common distributions declared |
| $0.72 |
| $0.72 |
| $1.44 |
| $1.44 |
| |
See Notes on page 3.
4
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) As of June 30, 2004, each of our 285 hotels was included in one of eight combinations of hotels which are either leased to one of our taxable REIT subsidiaries and managed by an independent hotel operating company or leased to a third party. At June 30, 2004, we had 177 managed hotels and 108 leased hotels. Our consolidated statement of income includes hotel operating revenues and expenses from managed hotels, and only rental income for our leased hotels. The pro forma operating results for all 177 of our managed hotels assuming acquisition of the hotels and commencement of the management agreements as of January 1, 2003, 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 from us by third parties):
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| Quarter Ended June 30, |
| Six Months Ended June 30, |
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|
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
Hotel operating revenues |
| $132,028 |
| $131,439 |
| $253,919 |
| $253,450 |
|
Hotel operating expenses |
| 87,598 |
| 86,744 |
| 171,335 |
| 170,683 |
|
(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 subsidiary 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, generally accepted accounting principles, or GAAP, require that payments into the escrow are reported 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.
(3) Certain of our managed hotels had net operating results that were less than the minimum returns due to us by $123 and $301 in the 2004 and 2003 second quarters, respectively, and $2,517 and $2,527 in the first six months of 2004 and 2003, respectively. These amounts have been reflected 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.
(4) Represents the write off of unamortized deferred financing costs related to early extinguishment of debt.
(5) On April 15, 2004, we redeemed all of our outstanding Series A Preferred Shares at their liquidation preference of $25 per share, plus accumulated and unpaid dividends. Pursuant to the Securities and Exchange Commission’s clarification on Emerging Issues Task Force Topic D-42, The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock, the $2,793 excess of the liquidation preference of the redeemed shares over their carrying amount was deducted from net income to determine net income available to common shareholders in the calculation of earnings per share.
(6) We compute FFO as shown in the calculation above. 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 7) and deferred hotel operating income (see note 8) and exclude the excess of liquidation preference over carrying value of redeemed preferred shares (see note 5) and loss on early extinguishment of debt not settled in cash (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 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.
(7) 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 calculation of FFO includes this amount.
(8) Our rights to share in the operating results of our managed hotels in excess of minimum returns are generally determined based upon annual calculations. One of our managed hotel combinations generated net operating results that were $1,013 in the 2004 second quarter and $2,463 in the first six months of 2004, more than the minimum return 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 recognition of this income is deferred for purposes of calculating net income, the calculation of FFO includes this amount.
5
Key Balance Sheet Data
(in thousands)
|
| June 30, 2004 |
| December 31, 2003 |
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Cash |
| $3,081 |
| $6,428 |
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Restricted cash (FF&E Reserve escrow) |
| $47,746 |
| $55,755 |
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Real Estate, at cost |
| $3,184,216 |
| $3,179,507 |
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Debt, net of discounts |
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Floating rate - Credit Facility, due 2005 |
| $70,000 |
| $201,000 |
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Fixed rate — 7.00% Senior Notes, due 2008 |
| 149,901 |
| 149,888 |
|
Fixed rate - 9.125% Senior Notes, due 2010 |
| 49,963 |
| 49,960 |
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Fixed rate - 8.3% Mortgage payable, due 2011 |
| 3,853 |
| 3,881 |
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Fixed rate - 6.85% Senior Notes, due 2012 |
| 124,285 |
| 124,240 |
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Fixed rate - 6.75% Senior Notes, due 2013 |
| 297,313 |
| 297,157 |
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Total Debt |
| $695,315 |
| $826,126 |
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Book Equity |
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9.5% Series A Preferred (none and 3,000,000 shares outstanding) |
| $— |
| $72,207 |
|
8.875% Series B Preferred (3,450,000 shares outstanding) |
| 83,306 |
| 83,306 |
|
Common (67,188,579 and 62,587,079 shares outstanding) |
| 1,686,269 |
| 1,490,015 |
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Total Equity |
| $1,769,575 |
| $1,645,528 |
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Additional Data
(in thousands except percentages)
|
| June 30, 2004 |
| December 31, 2003 |
|
Leverage Ratios |
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Total Debt / Total Assets |
| 25.6% |
| 29.9% |
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Total Debt / Real Estate, at cost |
| 21.8% |
| 26.0% |
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Total Debt / Total Book Capitalization |
| 28.2% |
| 33.4% |
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Variable Rate Debt / Total Book Capitalization |
| 2.8% |
| 8.1% |
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| Six Months Ended |
| Six Months Ended |
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Cash Flow Data |
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Cash flow provided by (used in): |
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Operating activities |
| $107,528 |
| $107,385 |
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Investing activities |
| $1,726 |
| $(24,234 | ) |
Financing activities |
| $(112,601 | ) | $81,271 |
|
6
Hotel Revenue Data
The following tables summarize the hotel operating statistics reported to us by our third party tenants and managers for our 285 hotels (excludes one hotel sold in April 2004).
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| No. of |
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Lease/ |
| No. of |
| Rooms/ |
| Quarter Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
Management Agreement |
| Hotels |
| Suites |
| 2004(1) |
| 2003(1) |
| Change |
| 2004(1) |
| 2003(1) |
| Change |
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ADR |
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Host (no. 1) |
| 53 |
| 7,610 |
| $100.09 |
| $95.38 |
| 4.9 | % | $99.99 |
| $96.47 |
| 3.6 | % |
Host (no. 2) |
| 18 |
| 2,178 |
| 94.43 |
| 93.99 |
| 0.5 | % | 94.19 |
| 94.05 |
| 0.1 | % |
Marriott |
| 35 |
| 5,382 |
| 95.19 |
| 92.60 |
| 2.8 | % | 94.67 |
| 92.12 |
| 2.8 | % |
Barcelo Crestline |
| 19 |
| 2,756 |
| 91.81 |
| 88.42 |
| 3.8 | % | 93.34 |
| 91.95 |
| 1.5 | % |
InterContinental (no. 1) (2)(3) |
| 30 |
| 3,694 |
| 89.97 |
| 90.38 |
| -0.5 | % | 89.29 |
| 90.06 |
| -0.9 | % |
InterContinental (no. 2) (2)(3) |
| 76 |
| 9,220 |
| 57.72 |
| 54.86 |
| 5.2 | % | 56.72 |
| 55.61 |
| 2.0 | % |
Prime (3) |
| 36 |
| 5,250 |
| 74.46 |
| 67.80 |
| 9.8 | % | 74.91 |
| 70.19 |
| 6.7 | % |
Homestead |
| 18 |
| 2,399 |
| 49.03 |
| 47.69 |
| 2.8 | % | 49.21 |
| 48.85 |
| 0.7 | % |
Total/Average |
| 285 |
| 38,489 |
| $80.53 |
| $76.45 |
| 5.3 | % | $80.23 |
| $77.52 |
| 3.5 | % |
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OCCUPANCY |
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Host (no. 1) |
| 53 |
| 7,610 |
| 74.2 | % | 63.5 | % | 10.7 | pt | 71.1 | % | 62.4 | % | 8.7 | pt |
Host (no. 2) |
| 18 |
| 2,178 |
| 81.4 | % | 79.7 | % | 1.7 | pt | 78.1 | % | 76.0 | % | 2.1 | pt |
Marriott |
| 35 |
| 5,382 |
| 79.2 | % | 76.3 | % | 2.9 | pt | 75.6 | % | 72.9 | % | 2.7 | pt |
Barcelo Crestline |
| 19 |
| 2,756 |
| 78.8 | % | 70.7 | % | 8.1 | pt | 75.5 | % | 68.7 | % | 6.8 | pt |
InterContinental (no. 1) (2)(3) |
| 30 |
| 3,694 |
| 78.5 | % | 77.7 | % | 0.8 | pt | 75.3 | % | 75.8 | % | -0.5 | pt |
InterContinental (no. 2) (2)(3) |
| 76 |
| 9,220 |
| 70.3 | % | 74.4 | % | -4.1 | pt | 67.8 | % | 71.3 | % | -3.5 | pt |
Prime (3) |
| 36 |
| 5,250 |
| 65.1 | % | 74.4 | % | -9.3 | pt | 64.5 | % | 70.7 | % | -6.2 | pt |
Homestead |
| 18 |
| 2,399 |
| 84.5 | % | 77.7 | % | 6.8 | pt | 81.4 | % | 75.0 | % | 6.4 | pt |
Total/Average |
| 285 |
| 38,489 |
| 74.4 | % | 73.2 | % | 1.2 | pt | 71.7 | % | 70.5 | % | 1.2 | pt |
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RevPAR |
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Host (no. 1) |
| 53 |
| 7,610 |
| $74.27 |
| $60.57 |
| 22.6 | % | $71.09 |
| $60.20 |
| 18.1 | % |
Host (no. 2) |
| 18 |
| 2,178 |
| 76.87 |
| 74.91 |
| 2.6 | % | 73.56 |
| 71.48 |
| 2.9 | % |
Marriott |
| 35 |
| 5,382 |
| 75.39 |
| 70.65 |
| 6.7 | % | 71.57 |
| 67.16 |
| 6.6 | % |
Barcelo Crestline |
| 19 |
| 2,756 |
| 72.35 |
| 62.51 |
| 15.7 | % | 70.47 |
| 63.17 |
| 11.6 | % |
InterContinental (no. 1) (2)(3) |
| 30 |
| 3,694 |
| 70.63 |
| 70.23 |
| 0.6 | % | 67.24 |
| 68.27 |
| -1.5 | % |
InterContinental (no. 2) (2)(3) |
| 76 |
| 9,220 |
| 40.58 |
| 40.82 |
| -0.6 | % | 38.46 |
| 39.65 |
| -3.0 | % |
Prime (3) |
| 36 |
| 5,250 |
| 48.47 |
| 50.44 |
| -3.9 | % | 48.32 |
| 49.62 |
| -2.6 | % |
Homestead |
| 18 |
| 2,399 |
| 41.43 |
| 37.06 |
| 11.8 | % | 40.06 |
| 36.64 |
| 9.3 | % |
Total/Average |
| 285 |
| 38,489 |
| $59.91 |
| $55.96 |
| 7.1 | % | $57.52 |
| $54.65 |
| 5.3 | % |
(1) Includes data for the calendar periods indicated, except for our Courtyard by Marriott®, Residence Inn by Marriott®, Marriott Hotels Resorts and Suites®, TownePlace Suites by Marriott®, and SpringHill Suites by Marriott® branded hotels, which include data for comparable fiscal periods.
(2) 2003 includes data for periods prior to our ownership of some hotels.
(3) 2003 includes data for periods some hotels were not operated by the current manager.
Rent/Return Coverage Data(1)
Lease/Management Agreement |
| Quarter ended 6/30/04 |
| Year ended 6/30/04 |
| Year ended 12/31/03 |
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|
Host (no. 1) |
| 1.4x |
| 1.1x |
| 1.0x |
|
Host (no. 2) |
| 1.1x |
| 0.9x |
| 1.0x |
|
Marriott |
| 1.0x |
| 0.8x |
| 0.8x |
|
Barcelo Crestline |
| 1.0x |
| 0.8x |
| 0.7x |
|
InterContinental (no. 1) |
| 0.9x |
| 0.7x |
| 0.7x |
|
InterContinental (no. 2) |
| 0.9x |
| 0.8x |
| 0.8x |
|
Prime |
| 1.3x |
| 1.1x |
| 1.0x |
|
Homestead |
| 1.3x |
| 1.1x |
| 1.1x |
|
Range (all agreements) |
| 0.9x-1.4x |
| 0.7x-1.1x |
| 0.7x-1.1x |
|
(1) We define coverage as combined total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E Reserve contributions (which data is provided to us by our tenants or operators), divided by the minimum rent or return payments due to us. For some combinations, amounts have been calculated using data for periods prior to our ownership of some hotels and prior to commencement of operating agreements.
7
