(amounts in thousands, except per share amounts)
Quarter Ended Year Ended
December 31, December 31,
------------------ -------------------
2003 2002 2003 2002
--------- -------- --------- ---------
Net income $144,132 $38,736 $238,213 $142,202
Net income available for common
shareholders $140,437 $36,508 $223,433 $134,630
Funds from operations ("FFO") $61,807 $62,414 $233,075 $247,544
Weighted average common shares
outstanding 62,587 62,547 62,576 62,538
Common distributions declared $45,063 $45,034 $180,242 $179,504
Per common share amounts:
Net income available for
common shareholders $2.24 $0.58 $3.57 $2.15
Funds from operations ("FFO") $0.99 $1.00 $3.72 $3.96
Common distributions declared $0.72 $0.72 $2.88 $2.87
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
-------------- -----------------
2003 2002 2003 2002
------- ------- -------- --------
Revenues (1):
Minimum rent $55,874 $62,224 $216,125 $245,197
Percentage rent 1,128 2,291 1,128 2,291
Hotel operating revenues 68,801 19,410 209,299 79,328
FF&E reserve income (2) 4,203 4,892 18,335 21,600
Interest income 63 19 398 290
Gain on lease
terminations (3) 107,516 -- 107,516 --
------- ------- -------- --------
Total revenues 237,585 88,836 552,801 348,706
------- ------- -------- --------
Expenses (1):
Hotel operating expenses 48,695 11,910 145,863 50,515
Interest (including
amortization of deferred
financing costs of
$683, $644, $2,536
and $2,650, respectively) 12,626 10,419 44,536 42,424
Depreciation and
amortization 27,732 24,296 104,807 96,474
General and administrative 4,400 3,475 16,800 15,491
Loss on early extinguishment
of debt (4) -- -- 2,582 1,600
------- ------- -------- --------
Total expenses 93,453 50,100 314,588 206,504
------- ------- -------- --------
Net income 144,132 38,736 238,213 142,202
Preferred distributions (3,695) (2,228) (14,780) (7,572)
------- ------- -------- --------
Net income available for
common shareholders $140,437 $36,508 $223,433 $134,630
======= ======= ======== ========
----------------------------------------------------------------------
Calculation of FFO (5):
Net income available for
common shareholders $140,437 $36,508 $223,433 $134,630
Add: FF&E deposits not
in net income (2) 2,004 3,507 9,769 14,840
Depreciation and
amortization 27,732 24,296 104,807 96,474
Loss on early
extinguishment of
debt (4) -- -- 2,582 1,600
Less: Previously recognized
percentage rent
in FFO (6) (850) (1,897) -- --
Gain on lease
terminations (107,516) -- (107,516) --
------- ------- -------- --------
Funds from operations
("FFO") $61,807 $62,414 $233,075 $247,544
======= ======= ======== ========
----------------------------------------------------------------------
Weighted average common
shares outstanding 62,587 62,547 62,576 62,538
======= ======= ======== ========
Per common share amounts:
Net income available for
common shareholders $2.24 $0.58 $3.57 $2.15
FFO (5) $0.99 $1.00 $3.72 $3.96
Common distributions
declared $0.72 $0.72 $2.88 $2.87
----------------------------------------------------------------------
See Notes at end of release.
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 283 hotels
(38,204 rooms) that were open for a full year as of January 1, 2003.
Fourth Quarter Year Ended
---------------------- ----------------------
2003 2002 Change 2003 2002 Change
------- ------- ------ ------- ------- ------
Average Daily Rate
("ADR") $77.56 $78.92 -1.7% $77.50 $79.08 -2.0%
Occupancy 67.2% 67.6% -0.4 pts 69.9% 71.7% -1.8 pts
Revenue Per Available
Room ("RevPAR") $52.12 $53.35 -2.3% $54.17 $56.70 -4.5%
Key Balance Sheet Data
----------------------
(in thousands)
Dec. 31, Dec. 31,
2003 2002
----------- -----------
Cash and cash equivalents $6,428 $7,337
=========== ===========
Real Estate, at cost $3,179,507 $2,762,322
=========== ===========
Debt, net of discount
Floating rate - Credit Facility, due
2005 $201,000 $--
Fixed rate - 7.00% Senior Notes, due
2008 149,888 149,861
Fixed rate - 8.50% Senior Notes, due
2009 -- 150,000
Fixed rate - 9.125% Senior Notes, due
2010 49,960 49,953
Fixed rate - 8.30% Mortgage payable, due
2011 3,881 --
Fixed rate - 6.85% Senior Notes, due
2012 124,240 124,151
Fixed rate - 6.75% Senior Notes, due
2013 297,157 --
----------- -----------
Total Debt $826,126 $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 (62,587,079 and 62,547,348 shares
outstanding, respectively) 1,490,015 1,489,507
----------- -----------
Total Equity $1,645,528 $1,645,020
=========== ===========
Additional Data
---------------
(in thousands, except percentages and ratios)
Dec.31, Dec.31,
2003 2002
---------- ----------
Leverage Ratios
---------------
Total Debt / Total Assets 29.9% 19.7%
Total Debt / Real Estate, at cost 26.0% 17.2%
Total Debt / Total Book Capitalization 33.4% 22.4%
Variable Rate Debt / Total Book Capitalization 8.1% --
Year Ended
Cash Flow Data December 31,
-------------- ---------------------
2003 2002
---------- ----------
Cash flow provided by (used in):
Operating activities $219,405 $210,245
Investing activities $(371,610) $(142,311)
Financing activities $151,296 $(99,559)
----------------------------------------------------------------------
See Notes at end of release.
Hospitality Properties Trust
(1) All of our 286 hotels are leased to or managed by third parties;
we do not operate hotels. At January 1, 2004, we have 115 leased
hotels and 171 managed hotels. 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 $7,032 and $2,648 less than the minimum return due to us
for the 2003 and 2002 fourth quarter, respectively, and $6,922 and
$5,822 less than the minimum return due to us for the years ended
December 31, 2003 and 2002, respectively. These amounts were
funded by our managers and are reflected as a reduction in hotel
operating expenses. On July 1, 2003, Prime Hospitality Corp.
defaulted on its lease for 24 hotels we own. Effective January 1,
2004, we terminated this lease and entered a new management
agreement with Prime for these hotels and 12 other hotels we own.
The lease termination agreement provides that the security deposit
we held be reduced for shortfalls in minimum rent payments to us
of $6,719 for the period July 1, 2003 to December 31, 2003, and
this non-cash amount is included in our minimum rent revenues for
the quarter and year ended December 31, 2003.
(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.
(3) Represents the gains recorded in the 2003 fourth quarter as a
result of the termination of our two leases with Wyndham
International, Inc. for 12 and 15 hotels, respectively, and the
termination of our lease with Candlewood Hotel Company, Inc. for
64 hotels. Subsequently, all of these hotels are operated under
management agreements with new operators that require payment to
us of minimum returns. The gain on lease terminations results
primarily from our retention of security and guarantee deposits,
and the transfer by our former tenants to us of FF&E escrow
accounts and hotel tenant improvements.
(4) Represents the write off of unamortized deferred financing costs
related to early extinguishment of debt.
(5) 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) and deferred
percentage rent (see note 6) and exclude loss on early
extinguishment of debt not settled in cash and gain on lease
terminations (see note 3). 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 generally accepted accounting
principles, or 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 an 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) 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 included these amounts during the
first three quarters.
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