CHICAGO, Aug. 5 /PRNewswire-FirstCall/ -- Strategic Hotels &
Resorts (NYSE:BEE) today reported results for the second quarter
ended June 30, 2009. Second Quarter Recap -- Comparable funds from
operations (Comparable FFO) was a loss of $0.03 per diluted share
compared with income of $0.48 per diluted share in the prior year.
-- Quarterly Comparable EBITDA was $33.6 million compared with
$74.1 million in the prior year. -- North American total revenue
per available room (Total RevPAR) decreased 28.7 percent and
revenue per available room (RevPAR) decreased 30.6 percent driven
by a 9.6 percentage point decrease in occupancy and a 20.7 percent
decrease in average daily rate (ADR). Non-rooms revenue declined by
26.4 percent. -- The company's two Mexican properties were
adversely impacted by events surrounding the H1N1 virus outbreak.
Excluding these hotels, North American Total RevPAR would have
decreased 25.5 percent and RevPAR would have decreased 27.3
percent. -- European Total RevPAR decreased 28.0 percent (14.0
percent in constant dollars) and RevPAR decreased 25.2 percent
(10.8 percent in constant dollars). -- North American gross
operating profit (GOP) and EBITDA margins contracted 810 basis
points and 950 basis points, respectively. Excluding the company's
Mexican assets, North American GOP and EBITDA margins would have
contracted 690 basis points and 820 basis points, respectively.
Chief Executive Officer Laurence Geller remarked, "We have recently
seen some improvement in certain leading indicators and an overall
increase in confidence pertaining to future economic conditions.
Nevertheless, our financial results continue to be heavily
influenced by the lingering recession and general weakness in the
hotel industry, which is particularly acute in higher-end assets.
While we saw declines in every segment of our business, the falloff
in group activity was especially costly as we were forced to
replace lost group occupancy with discounted transient business,
leading to a significant decline in average rates and sharp
contraction in profit margins. During this challenging period we
remained vigilant in controlling costs and, despite the drop in
rates, are pleased to have achieved our stated objective of
limiting our portfolio's year-over-year percentage decline in
EBITDA relative to its percentage decline in revenue to under a
two-to-one ratio. We also continue to make progress on lowering
corporate overhead costs as we reported corporate expenses of $5.5
million for the quarter, a 28 percent reduction from a year ago."
Financial Results The company reported second quarter 2009
financial results as follows: -- Net loss attributable to common
shareholders was $86.0 million, or $1.14 per diluted share,
compared with net income attributable to common shareholders of
$10.6 million, or $0.14 per diluted share, for the second quarter
of 2008. -- Comparable EBITDA was $33.6 million compared with $74.1
million for the second quarter of 2008. -- FFO was a loss of $52.8
million, or $0.70 per diluted share, compared with income of $40.6
million, or $0.53 per diluted share, in the second quarter of 2008.
Comparable FFO was a loss of $2.5 million, or $0.03 per diluted
share, compared with income of $36.4 million, or $0.48 per diluted
share, in the second quarter of 2008. The company reported
financial results for the six month period ending June 30, 2009 as
follows: -- Net loss attributable to common shareholders was $129.2
million, or $1.72 per diluted share, compared with net income
attributable to common shareholders of $2.6 million, or $0.04 per
diluted share, for the six month period ending June 30, 2008. --
Comparable EBITDA was $56.3 million compared with $129.8 million
for the six month period ending June 30, 2008. -- FFO was a loss of
$63.4 million, or $0.84 per diluted share, compared with income of
$59.9 million, or $0.79 per diluted share, in the six months ending
June 30, 2008. Comparable FFO was a loss of $13.9 million, or $0.18
per diluted share, compared with income of $58.9 million, or $0.77
per diluted share, in the six month period ending June 30, 2008.
Impairment Losses and Other Charges Second quarter 2009 results
include impairment of goodwill and other charges totaling $49.8
million, including impairment of goodwill of $41.9 million and
write-offs of $7.9 million related to the abandonment of certain
capital projects. These one-time charges have been excluded from
Comparable EBITDA, FFO and FFO per share metrics. Liquidity As of
the end of the second quarter, the company had $398.4 million
available on its $400.0 million bank credit facility against $261.3
million total outstanding, leaving $137.1 million of liquidity.
Certain financial covenants limit availability on the facility,
including cash flow generated by five borrowing base assets,
calculated on a trailing twelve month basis. These hotels include
the Four Seasons in Mexico City and Punta Mita, both of which have
been impacted by the H1N1 virus outbreak during the second quarter,
security concerns associated with traveling to Mexico and general
economic weakness. As a result, availability on the facility is
projected to be further restricted in future quarters, thus putting
increased pressure on the company's liquidity position. Mr. Geller
commented, "The spread, and perceived threat, of the H1N1 virus had
a serious negative impact on our two Mexican assets. RevPAR at
these hotels declined 57.7% during the second quarter and EBITDA
decreased $7.2 million from the prior period. We are cognizant of
the restrictions this puts on the availability on our bank credit
facility and constantly monitor our liquidity position." Subsequent
Event The company entered into a joint venture agreement on its
existing 60-acre ocean front land parcel near the Four Seasons
Punta Mita Resort in Nayarit, Mexico with Cantiles de Mita, S.A. de
C.V., a wholly owned subsidiary of DINE, the master developer of
Punta Mita and original seller of the land parcel. In exchange for
a 50 percent interest in the land, the company is released from its
final installment payment of $17.5 million due in August 2009 and
receives a preferred position which entitles the company to receive
the first $12.0 million of distributions generated from the project
with any excess distributions split equally among the partners.
Earnings Call The company will conduct its second quarter 2009
conference call for investors and other interested parties on
August 6, 2009 at 10:00 a.m. Eastern Time (ET). Interested
individuals are invited to listen to the call by telephone at
888-713-4214 (toll international: 617-213-4866) with pass code
19665792. To participate on the web cast, log on to
http://www.strategichotels.com/ or
https://www.theconferencingservice.com/prereg/key.process?key=PEXWEGEC3
15 minutes before the call to download the necessary software. For
those unable to listen to the call live, a taped rebroadcast will
be available beginning at 1:00 p.m. ET on August 6, 2009, through
11:59 p.m. ET on August 13, 2009. To access the replay, dial
888-286-8010 (toll international: 617-801-6888) and request replay
pin number 67405958. A replay of the call will also be available on
the Internet at http://www.strategichotels.com/ or
http://www.earnings.com/ for 30 days after the call. The company
also produces supplemental financial data that includes detailed
information regarding its operating results. This supplemental data
is considered an integral part of this earnings release. These
materials are available on the Strategic Hotels & Resorts'
website at http://www.strategichotels.com/ within the second
quarter information section. Portfolio Definitions North American
hotel comparisons for the second quarter 2009 are derived from the
company's hotel portfolio at June 30, 2009, consisting of
properties in which operations are included in the consolidated
results of the company. European hotel comparisons for the second
quarter 2009 are derived from the company's European owned and
leased hotel properties at June 30, 2009. About the Company
Strategic Hotels & Resorts, Inc. is a real estate investment
trust (REIT) which owns and provides value-enhancing asset
management of high-end hotels and resorts in the United States,
Mexico and Europe. The company currently has ownership interests in
19 properties with an aggregate of 8,358 rooms. For a list of
current properties and for further information, please visit the
company's website at http://www.strategichotels.com/. This press
release contains forward-looking statements about Strategic Hotels
& Resorts (the "Company"). Except for historical information,
the matters discussed in this press release are forward-looking
statements subject to certain risks and uncertainties. Actual
results could differ materially from the Company's projections.
Factors that may contribute to these differences include, but are
not limited to the following: economic conditions generally and in
the real estate market specifically, including further
deterioration of the current global economic downturn and the
extent of its effect on business and leisure travel and the lodging
industry; demand for hotel rooms in our current and proposed market
areas; outbreak of contagious diseases such as the H1N1 virus; our
liquidity and refinancing demands; availability of capital; the
recovery of financing markets and our ability to obtain or
refinance debt; our ability to comply with covenants contained in
our debt facilities; rising interest rates and operating costs;
rising insurance premiums; cash available for capital expenditures;
competition; ability to dispose of existing properties in a manner
consistent with our disposition strategy and liquidity needs;
delays and cost overruns in construction and development; demand
for hotel condominiums; marketing challenges associated with
entering new lines of business; risks related to natural disasters;
the effect of threats of terrorism and increased security
precautions on travel patterns and hotel bookings; the outbreak of
hostilities and international political instability; legislative or
regulatory changes, including changes to laws governing the
taxation of REITs; and changes in generally accepted accounting
principles, policies and guidelines applicable to REITs. Additional
risks are discussed in the Company's filings with the Securities
and Exchange Commission, including those appearing in the Company's
most recent form 10-K and subsequent 10-Qs. Although the Company
believes the expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. The
forward-looking statements are made as of the date of this press
release, and we undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise. Strategic Hotels &
Resorts, Inc. and Subsidiaries (SHR) Consolidated Statements of
Operations (in thousands, except per share data) Three Months Ended
Six Months Ended June 30, June 30, -------- -------- 2009 2008 2009
2008 ---- ---- ---- ---- Revenues: Rooms $104,627 $148,320 $201,213
$278,600 Food and beverage 60,644 91,157 117,750 170,281 Other
hotel operating revenue 26,179 29,074 51,970 56,228 ------ ------
------ ------ 191,450 268,551 370,933 505,109 Lease revenue 1,169
1,402 2,289 2,689 ----- ----- ----- ----- Total revenues 192,619
269,953 373,222 507,798 ------- ------- ------- ------- Operating
Costs and Expenses: Rooms 28,902 35,448 56,191 68,573 Food and
beverage 44,129 59,777 86,956 116,520 Other departmental expenses
54,143 64,216 109,381 126,778 Management fees 7,659 11,047 14,422
20,656 Other hotel expenses 13,933 15,317 27,715 31,359 Lease
expense 4,159 4,534 8,125 8,861 Depreciation and amortization
35,211 30,197 69,314 57,800 Impairment losses and other charges
49,755 - 50,214 - Corporate expenses 5,456 7,566 15,880 14,996
----- ----- ------ ------ Total operating costs and expenses
243,347 228,102 438,198 445,543 ------- ------- ------- -------
Operating (loss) income (50,728) 41,851 (64,976) 62,255 Interest
expense (26,259) (22,662) (50,225) (45,504) Interest income 98 459
512 1,054 Loss on early extinguishment of debt - - (883) - Equity
in earnings of joint ventures 432 1,582 571 803 Foreign currency
exchange (loss) gain (1,109) 4,687 906 1,478 Other income
(expenses), net 82 (177) 43 (439) --- ---- --- ---- (Loss) income
before income taxes, distributions in excess of noncontrolling
interest capital, loss on sale of noncontrolling interests in hotel
properties and discontinued operations (77,484) 25,740 (114,052)
19,647 Income tax expense (682) (6,435) (782) (6,647) Distributions
in excess of noncontrolling interest capital - (784) - (784) ---
---- --- ---- (Loss) income before loss on sale of noncontrolling
interests in hotel properties and discontinued operations (78,166)
18,521 (114,834) 12,216 Loss on sale of noncontrolling interests in
hotel properties - (41) - (46) --- --- --- --- (Loss) income from
continuing operations (78,166) 18,480 (114,834) 12,170 Income from
discontinued operations, net of tax - 2,068 - 7,268 --- ----- ---
----- Net (loss) income (78,166) 20,548 (114,834) 19,438 Net loss
(income) attributable to the noncontrolling interests in SHR's
operating partnership 1,007 (254) 1,453 (252) Net income
attributable to the noncontrolling interests in consolidated
affiliates (1,101) (2,006) (348) (1,109) ------ ------ ---- ------
Net (loss) income attributable to SHR (78,260) 18,288 (113,729)
18,077 Preferred shareholder dividends (7,722) (7,722) (15,443)
(15,443) ------ ------ ------- ------- Net (loss) income
attributable to SHR common shareholders $(85,982) $10,566
$(129,172) $2,634 ======== ======= ========= ====== Basic (Loss)
Income Per Share: (Loss) income from continuing operations
attributable to SHR common shareholders $(1.14) $0.11 $(1.72)
$(0.06) Income from discontinued operations attributable to SHR
common shareholders - 0.03 - 0.10 --- ---- --- ---- Net (loss)
income attributable to SHR common shareholders $(1.14) $0.14
$(1.72) $0.04 ====== ===== ====== ===== Weighted average common
shares outstanding 75,381 75,000 75,166 74,991 ====== ====== ======
====== Diluted (Loss) Income Per Share: (Loss) income from
continuing operations attributable to SHR common shareholders
$(1.14) $0.11 $(1.72) $(0.06) Income from discontinued operations
attributable to SHR common shareholders - 0.03 - 0.10 --- ---- ---
---- Net (loss) income attributable to SHR common shareholders
$(1.14) $0.14 $(1.72) $0.04 ====== ===== ====== ===== Weighted
average common shares outstanding 75,381 75,048 75,166 74,991
====== ====== ====== ====== Strategic Hotels & Resorts, Inc.
and Subsidiaries (SHR) Consolidated Balance Sheets (in thousands,
except share data) June 30, December 31, 2009 2008 ---- ---- Assets
Investment in hotel properties, net $2,369,540 $2,383,860 Goodwill
80,081 120,329 Intangible assets, net of accumulated amortization
of $4,003 and $3,096 35,254 32,277 Investment in joint ventures
81,938 82,122 Cash and cash equivalents 69,432 80,954 Restricted
cash and cash equivalents 20,229 37,358 Accounts receivable, net of
allowance for doubtful accounts of $2,512 and $2,203 64,734 70,945
Deferred financing costs, net of accumulated amortization of $8,885
and $6,655 14,871 10,375 Deferred tax assets 37,612 38,260 Other
assets 47,184 52,687 ------ ------ Total assets $2,820,875
$2,909,167 ========== ========== Liabilities and Shareholders'
Equity Liabilities: Mortgages and other debt payable $1,317,258
$1,301,535 Exchangeable senior notes, net of discount 167,241
165,155 Bank credit facility 260,500 206,000 Accounts payable and
accrued expenses 197,534 281,918 Deferred tax liabilities 33,654
34,236 Deferred gain on sale of hotels 102,227 104,251 -------
------- Total liabilities 2,078,414 2,093,095 Noncontrolling
interests in SHR's operating partnership 4,555 5,330 Equity: SHR's
shareholders' equity: 8.50% Series A Cumulative Redeemable
Preferred Stock ($0.01 par value; 4,488,750 shares issued and
outstanding; liquidation preference $25.00 per share) 108,206
108,206 8.25% Series B Cumulative Redeemable Preferred Stock ($0.01
par value; 4,600,000 shares issued and outstanding; liquidation
preference $25.00 per share) 110,775 110,775 8.25% Series C
Cumulative Redeemable Preferred Stock ($0.01 par value; 5,750,000
shares issued and outstanding; liquidation preference $25.00 per
share) 138,940 138,940 Common shares ($0.01 par value; 150,000,000
common shares authorized; 75,167,096 and 74,410,012 common shares
issued and outstanding) 750 744 Additional paid-in capital
1,232,971 1,228,774 Accumulated deficit (823,992) (710,263)
Accumulated other comprehensive loss (55,418) (93,637) -------
------- Total SHR's shareholders' equity 712,232 783,539
Noncontrolling interests in consolidated affiliates 25,674 27,203
------ ------ Total equity 737,906 810,742 ------- ------- Total
liabilities and equity $2,820,875 $2,909,167 ========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS Supplemental Financial Data (in thousands,
except per share information) June 30, 2009 ------------- Pro Rata
Share Consolidated -------------- ------------ Capitalization
-------------- Common shares outstanding 75,167 75,167 Operating
partnership units outstanding 971 971 Stock options outstanding 885
885 Restricted stock units outstanding 861 861 --- --- Combined
shares, options and units outstanding 77,884 77,884 Common stock
price at end of period $1.11 $1.11 ----- ----- Common equity
capitalization $86,451 $86,451 Preferred equity capitalization (at
$25.00 face value) 370,236 370,236 Consolidated debt (excludes
discount on exchangeable senior notes) 1,757,758 1,757,758 Pro rata
share of unconsolidated debt 282,825 - Pro rata share of
consolidated debt (107,065) - Cash and cash equivalents (69,432)
(69,432) ------- ------- Total enterprise value $2,320,773
$2,145,013 ========== ========== Net Debt / Total Enterprise Value
80.3% 78.7% Preferred Equity / Total Enterprise Value 16.0% 17.3%
Common Equity / Total Enterprise Value 3.7% 4.0% Strategic Hotels
& Resorts, Inc. and Subsidiaries (SHR) Investment in the Hotel
del Coronado (in thousands) On January 9, 2006, we purchased a 45%
interest in the joint venture that owns the Hotel del Coronado. We
account for this investment using the equity method of accounting.
Three Months Ended Six Months Ended June 30, June 30, ----------
---------- 2009 2008 2009 2008 ---- ---- ---- ---- Total revenues
(100%) $30,006 $39,411 $58,198 $74,269 Property EBITDA (100%)
$9,441 $14,703 $17,947 $26,151 Equity in earnings of joint venture
(SHR 45% ownership) Property EBITDA $4,248 $6,616 $8,076 $11,768
Depreciation and amortization (1,922) (1,747) (3,825) (3,647)
Interest expense (1,970) (3,577) (4,031) (7,988) Other income
(expense), net 41 (6) (142) (34) Income taxes (13) (38) 200 302 ---
--- --- --- Equity in earnings of joint venture $384 $1,248 $278
$401 ==== ====== ==== ==== EBITDA Contribution from investment in
Hotel del Coronado Equity in earnings of joint venture $384 $1,248
$278 $401 Depreciation and amortization 1,922 1,747 3,825 3,647
Interest expense 1,970 3,577 4,031 7,988 Income taxes 13 38 (200)
(302) --- --- ---- ---- EBITDA Contribution for investment in Hotel
del Coronado $4,289 $6,610 $7,934 $11,734 ====== ====== ======
======= FFO Contribution from investment in Hotel del Coronado
Equity in earnings of joint venture $384 $1,248 $278 $401
Depreciation and amortization 1,922 1,747 3,825 3,647 ----- -----
----- ----- FFO Contribution for investment in Hotel del Coronado
$2,306 $2,995 $4,103 $4,048 ====== ====== ====== ====== Interest
Spread over Loan Debt Rate LIBOR Amount Maturity ---- ---- -----
------ -------- CMBS Mortgage and Mezzanine 2.39% 208 bp $610,000
January 2011 (a) Revolving Credit Facility 2.81% 250 bp 18,500
January 2011 (a) ------ 628,500 Cash and cash equivalents (50,446)
------- Net Debt $578,054 ======== (a) Includes extension options.
Effective LIBOR Notional Cap Date Cap Rate Amount Maturity --- ----
-------- ------ -------- CMBS Mortgage and Mezzanine Loan and
Revolving Credit Facility Cap January 2009 5.0% $630,000 May 2009
CMBS Mortgage and Mezzanine Loan and Revolving Credit Facility Cap
June 2009 3.0% $630,000 January 2010 CMBS Mortgage and Mezzanine
Loan and Revolving Credit Facility Cap February 2010 5.0% $630,000
January 2011 Strategic Hotels & Resorts, Inc. and Subsidiaries
(SHR) Leasehold Information (in thousands) Three Months Ended Six
Months Ended June 30, June 30, ---------- ---------- 2009 2008 2009
2008 ---- ---- ---- ---- Paris Marriott Champs Elysees: Property
EBITDA $4,645 $6,092 $7,252 $10,096 Revenue (a) $4,645 $6,092
$7,252 $10,096 Lease Expense (2,985) (3,213) (5,847) (6,272) Less:
Deferred Gain on Sale Leaseback (1,146) (1,315) (2,246) (2,579)
------ ------ ------ ------ Adjusted Lease Expense (4,131) (4,528)
(8,093) (8,851) ---- ------ ----- ------ EBITDA Contribution from
Leasehold $514 $1,564 $(841) $1,245 ==== ====== ===== ======
Marriott Hamburg: Property EBITDA $1,422 $1,668 $2,775 $3,229
Revenue (a) $1,169 $1,402 $2,289 $2,689 Lease Expense (1,174)
(1,321) (2,278) (2,589) Less: Deferred Gain on Sale Leaseback (53)
(61) (104) (119) --- --- ---- ---- Adjusted Lease Expense (1,227)
(1,382) (2,382) (2,708) ---- --- ---- ---- EBITDA Contribution from
Leasehold $(58) $20 $(93) $(19) ==== === ==== ==== Total
Leaseholds: Property EBITDA $6,067 $7,760 $10,027 $13,325 Revenue
(a) $5,814 $7,494 $9,541 $12,785 Lease Expense (4,159) (4,534)
(8,125) (8,861) Less: Deferred Gain on Sale Leaseback (1,199)
(1,376) (2,350) (2,698) ------ ------ ------ ------ Adjusted Lease
Expense (5,358) (5,910) (10,475) (11,559) ---- ------ ----- ------
EBITDA Contribution from Leasehold $456 $1,584 $(934) $1,226 ====
====== ===== ====== June 30, December 31, Security Deposits (b):
2009 2008 ---- ---- Paris Marriott Champs Elysees $13,568 $15,507
Marriott Hamburg 7,015 6,984 ----- ----- Total $20,583 $22,491
======= ======= (a) For the three and six months ended June 30,
2009 and 2008, Revenue for the Paris Marriott Champs Elysees
represents Property EBITDA. For the three and six months ended June
30, 2009 and 2008, Revenue for the Marriott Hamburg represents
lease revenue. (b) The security deposits are recorded in other
assets on the consolidated balance sheets. Strategic Hotels &
Resorts, Inc. and Subsidiaries (SHR) Non-GAAP Financial Measures In
addition to REIT hotel income, five other non-GAAP financial
measures are presented for the Company that we believe are useful
to management and investors as key measures of our operating
performance: Funds from Operations (FFO); FFO - Fully Diluted;
Comparable FFO; Earnings Before Interest Expense, Taxes,
Depreciation and Amortization (EBITDA); and Comparable EBITDA. A
reconciliation of these measures to net loss attributable to SHR
common shareholders, the most directly comparable GAAP measure, is
set forth in the following tables. We compute FFO in accordance
with standards established by the National Association of Real
Estate Investment Trusts, or NAREIT, which adopted a definition of
FFO in order to promote an industry-wide standard measure of REIT
operating performance. NAREIT defines FFO as net income (or loss)
(computed in accordance with GAAP) excluding losses or gains from
sales of depreciable property plus real estate-related depreciation
and amortization, and after adjustments for our portion of these
items related to unconsolidated partnerships and joint ventures. We
also present FFO - Fully Diluted, which is FFO plus income or loss
on income attributable to convertible noncontrolling interests. We
also present Comparable FFO, which is FFO - Fully Diluted excluding
the impact of any gains or losses on early extinguishment of debt,
impairment losses, foreign currency exchange gains or losses and
other non-recurring charges. We believe that the presentation of
FFO, FFO - Fully Diluted and Comparable FFO provides useful
information to management and investors regarding our results of
operations because they are measures of our ability to fund capital
expenditures and expand our business. In addition, FFO is widely
used in the real estate industry to measure operating performance
without regard to items such as depreciation and amortization. We
also present Comparable FFO per diluted share as a non-GAAP measure
of our performance. We calculate Comparable FFO per diluted share
for a given operating period as our Comparable FFO (as defined
above) divided by the weighted average of fully diluted shares
outstanding. Comparable FFO per diluted share, in accordance with
NAREIT, is adjusted for the effects of dilutive securities.
Dilutive securities may include shares granted under share-based
compensation plans, operating partnership units and exchangeable
debt securities. No effect is shown for securities that are
anti-dilutive. EBITDA represents net loss attributable to SHR
common shareholders excluding: (i) interest expense, (ii) income
tax expense, including deferred income tax benefits and expenses
applicable to our foreign subsidiaries and income taxes applicable
to sale of assets; and (iii) depreciation and amortization. EBITDA
also excludes interest expense, income tax expense and depreciation
and amortization of our equity method investments. EBITDA is
presented on a full participation basis, which means we have
assumed conversion of all convertible noncontrolling interests of
our operating partnership into our common stock and includes
preferred dividends. We believe this treatment of noncontrolling
interests provides more useful information for management and our
investors and appropriately considers our current capital
structure. We also present Comparable EBITDA, which eliminates the
effect of realizing deferred gains on our sale leasebacks, as well
as the effect of gains or losses on sales of assets, early
extinguishment of debt, impairment losses, foreign currency
exchange gains or losses and other non-recurring charges. We
believe EBITDA and Comparable EBITDA are useful to management and
investors in evaluating our operating performance because they
provide management and investors with an indication of our ability
to incur and service debt, to satisfy general operating expenses,
to make capital expenditures and to fund other cash needs or
reinvest cash into our business. We also believe they help
management and investors meaningfully evaluate and compare the
results of our operations from period to period by removing the
impact of our asset base (primarily depreciation and amortization)
from our operating results. Our management also uses EBITDA and
Comparable EBITDA as measures in determining the value of
acquisitions and dispositions. We caution investors that amounts
presented in accordance with our definitions of FFO, FFO - Fully
Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may not be
comparable to similar measures disclosed by other companies, since
not all companies calculate these non-GAAP measures in the same
manner. FFO, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA should not be considered as an alternative
measure of our net loss or operating performance. FFO, FFO - Fully
Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may include
funds that may not be available for our discretionary use due to
functional requirements to conserve funds for capital expenditures
and property acquisitions and other commitments and uncertainties.
Although we believe that FFO, FFO - Fully Diluted, Comparable FFO,
EBITDA, and Comparable EBITDA can enhance your understanding of our
financial condition and results of operations, these non-GAAP
financial measures, when viewed individually, are not necessarily a
better indicator of any trend as compared to comparable GAAP
measures such as net loss attributable to SHR common shareholders.
In addition, you should be aware that adverse economic and market
conditions might negatively impact our cash flow. Below, we have
provided a quantitative reconciliation of FFO, FFO - Fully Diluted,
Comparable FFO, EBITDA, and Comparable EBITDA to the most directly
comparable GAAP financial performance measure, which is net loss
attributable to SHR common shareholders, and provide an explanatory
description by footnote of the items excluded from FFO, FFO - Fully
Diluted, and EBITDA. Strategic Hotels & Resorts, Inc. and
Subsidiaries (SHR) Reconciliation of Net (Loss) Income Attributable
to SHR Common Shareholders to EBITDA and Comparable EBITDA (in
thousands) Three Months Ended Six Months Ended June 30, June 30,
-------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Net
(loss) income attributable to SHR common shareholders $(85,982)
$10,566 $(129,172) $2,634 Depreciation and amortization -
continuing operations 35,211 30,197 69,314 57,800 Depreciation and
amortization - discontinued operations - 461 - 1,151 Interest
expense - continuing operations 26,259 22,662 50,225 45,504 Income
taxes - continuing operations 682 6,435 782 6,647 Income taxes -
discontinued operations - (265) - (175) Noncontrolling interests
(1,007) 254 (1,453) 252 Adjustments from consolidated affiliates
(a) (2,741) (2,601) (4,305) (4,272) Adjustments from unconsolidated
affiliates 3,925 5,608 7,824 11,597 Preferred shareholder dividends
7,722 7,722 15,443 15,443 ----- ----- ------ ------ EBITDA (15,931)
81,039 8,658 136,581 Realized portion of deferred gain on sale
leasebacks (1,199) (1,376) (2,350) (2,698) Loss (gain) on sale of
assets - continuing operations 7 (17) 5 (134) Loss (gain) on sale
of assets - discontinued operations - 2 - (414) Loss on sale of
noncontrolling interests in hotel properties - 41 - 46 Impairment
losses and other charges 49,755 - 50,214 - Impairment losses and
other charges - adjustments from consolidated affiliates (169) -
(169) - Foreign currency exchange loss (gain) (b) 1,109 (4,687)
(906) (1,478) Hyatt Regency La Jolla noncontrolling interest (a) -
(1,703) - (2,883) Distributions in excess of noncontrolling
interest capital - 784 - 784 Loss on early extinguishment of debt -
- 883 - --- --- --- --- Comparable EBITDA $33,572 $74,083 $56,335
$129,804 ======= ======= ======= ======== (a) The noncontrolling
interest partner's share of the Hyatt Regency La Jolla's property
EBITDA is not deducted from net income attributable to SHR common
shareholders under GAAP accounting rules for the three and six
months ended June 30, 2008. Under new accounting rules effective
January 1, 2009, the noncontrolling interest partner's share of the
Hyatt Regency La Jolla's property EBITDA is included in adjustments
from consolidated affiliates for the three and six months ended
June 30, 2009. (b) Foreign currency exchange gains or losses
applicable to third-party and inter-company debt and certain
balance sheet items held by foreign subsidiaries. Strategic Hotels
& Resorts, Inc. and Subsidiaries (SHR) Reconciliation of Net
(Loss) Income Attributable to SHR Common Shareholders to Funds From
Operations (FFO), FFO - Fully Diluted and Comparable FFO (in
thousands, except per share data) Three Months Ended Six Months
Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ----
---- ---- ---- Net (loss) income attributable to SHR common
shareholders $(85,982) $10,566 $(129,172) $2,634 Depreciation and
amortization - continuing operations 35,211 30,197 69,314 57,800
Depreciation and amortization - discontinued operations - 461 -
1,151 Corporate depreciation (304) (300) (608) (592) Loss (gain) on
sale of assets - continuing operations 7 (17) 5 (134) Loss (gain)
on sale of assets - discontinued operations - 2 - (414) Loss on
sale of noncontrolling interests in hotel properties - 41 - 46
Realized portion of deferred gain on sale leasebacks (1,199)
(1,376) (2,350) (2,698) Deferred tax expense on realized portion of
deferred gain on sale leasebacks 358 410 701 804 Noncontrolling
interests adjustments (472) (415) (929) (802) Adjustments from
consolidated affiliates (a) (1,860) (1,361) (3,692) (2,636)
Adjustments from unconsolidated affiliates 1,954 1,747 3,889 3,647
----- ----- ----- ----- FFO (52,287) 39,955 (62,842) 58,806
Convertible noncontrolling interests (535) 669 (524) 1,054 ---- ---
---- ----- FFO - Fully Diluted (52,822) 40,624 (63,366) 59,860
Impairment losses and other charges 49,755 - 50,214 - Impairment
losses and other charges - adjustments from consolidated affiliates
(169) - (169) - Foreign currency exchange loss (gain), net of tax
(b) 761 (3,838) (1,416) 78 Hyatt Regency La Jolla noncontrolling
interest (a) - (1,193) - (1,782) Distributions in excess of
noncontrolling interest capital - 784 - 784 Loss on early
extinguishment of debt - - 883 - --- --- --- --- Comparable FFO
$(2,475) $36,377 $(13,854) $58,940 ======= ======= ======== =======
Comparable FFO per diluted share $(0.03) $0.48 $(0.18) $0.77 ======
===== ====== ===== Weighted average diluted shares 75,381 76,024
75,166 76,129 ====== ====== ====== ====== (a) The noncontrolling
interest partner's share of the Hyatt Regency La Jolla's property
FFO is not deducted from net income attributable to SHR common
shareholders under GAAP accounting rules for the three and six
months ended June 30, 2008. Under new accounting rules effective
January 1, 2009, the noncontrolling interest partner's share of the
Hyatt Regency La Jolla's property EBITDA is included in adjustments
from consolidated affiliates for the three and six months ended
June 30, 2009. (b) Foreign currency exchange gains or losses
applicable to third-party and inter-company debt and certain
balance sheet items held by foreign subsidiaries. Strategic Hotels
& Resorts, Inc. and Subsidiaries (SHR) Debt Summary (dollars in
thousands) Interest Loan Debt Rate Spread (a) Amount Maturity (b)
---- ---- --------- ------ ----------- Punta Mita land parcel
promissory note N/A N/A $17,257 August 2009 Bank credit facility
4.06% 375 bp 260,500 March 2011 Westin St. Francis 1.01% 70 bp
220,000 August 2011 Fairmont Scottsdale 0.87% 56 bp 180,000
September 2011 InterContinental Chicago 1.37% 106 bp 121,000
October 2011 InterContinental Miami 1.04% 73 bp 90,000 October 2011
InterContinental Prague (c) 2.30% 120 bp (c) 145,902 March 2012
Loews Santa Monica Beach Hotel 0.94% 63 bp 118,250 March 2012
Ritz-Carlton Half Moon Bay 0.98% 67 bp 76,500 March 2012
Exchangeable senior notes, net of discount (d) 3.50% Fixed 167,241
April 2012 Fairmont Chicago 1.01% 70 bp 123,750 April 2012 Hyatt
Regency La Jolla 1.31% 100 bp 97,500 September 2012 Marriott London
Grosvenor Square (e) 2.29% 110 bp (e) 127,099 October 2013 -------
$1,744,999 ========== (a) Spread over LIBOR (0.31% at June 30,
2009). (b) Includes extension options, excluding the conditional
one-year extension option on the bank credit facility. (c)
Principal balance of euro 104,000,000 at June 30, 2009. Spread over
three-month EURIBOR (1.10% at June 30, 2009). (d) Reflects the cash
coupon. (e) Principal balance of 77,250,000 pounds Sterling at June
30, 2009. Spread over three-month GBP LIBOR (1.19% at June 30,
2009). U.S. Interest Rate Swaps Fixed Pay Rate Against Notional
Swap Effective Date LIBOR Amount Maturity ------------------- -----
------ -------- April 2005 4.59% $75,000 April 2012 June 2005 4.12%
50,000 June 2012 June 2006 5.50% 75,000 June 2013 August 2006 5.42%
100,000 August 2013 March 2007 4.84% 100,000 July 2012 March 2009
0.70% 50,000 September 2009 March 2009 0.78% 50,000 December 2009
March 2009 0.90% 75,000 April 2010 March 2009 1.12% 50,000 December
2010 March 2009 1.38% 50,000 August 2011 March 2009 0.64% 50,000
September 2009 March 2009 1.02% 50,000 December 2010 March 2009
0.64% 50,000 December 2009 March 2009 1.04% 100,000 February 2011
March 2009 1.22% 50,000 August 2011 ---- ------ 2.60% $975,000 ====
======== European Interest Rate Swap Fixed Pay Rate Against GBP
Swap Effective Date LIBOR (f) Notional Amount Maturity
------------------- -------- --------------- -------- October 2007
3.22% - 5.72% 77,250 pounds Sterling October 2013 Fixed Pay Rate
Against Swap Effective Date EURIBOR Notional Amount Maturity
------------------- ------- --------------- -------- September 2008
4.53% euro 104,000 March 2012 Forward-Starting Interest Rate Swaps
Fixed Pay Rate Against Notional Swap Effective Date LIBOR Amount
Maturity ------------------- ----- ------ -------- September 2009
4.90% $100,000 September 2014 December 2009 4.96% 100,000 December
2014 April 2010 5.42% 75,000 April 2015 December 2010 5.23% 100,000
December 2015 February 2011 5.27% 100,000 February 2016 -------
$475,000 ======== At June 30, 2009, future scheduled debt principal
payments (including non-conditional extension options) are as
follows: Years ended December 31, Amount ------------------------
------ 2009 $17,257 2010 7,766 2011 879,266 2012 736,537 2013
116,932 Thereafter - --- 1,757,758 Less discount on exchangeable
senior notes (12,759) ------- Total $1,744,999 ========== Percent
of fixed rate debt including U.S. and European swaps 82.1% Weighted
average interest rate including U.S. and European swaps (g) 3.63%
Weighted average maturity of fixed rate debt (debt with maturity of
greater than one year) 3.77 (f) In April 2009, we modified the GBP
LIBOR interest rate swap agreement, which adjusts the fixed pay
rate from 5.72% to 3.22% for the period from January 15, 2009
through January 17, 2011. (g) Excludes the amortization of deferred
financing costs, amortization of the discount on the exchangeable
senior notes and the amortization of the interest rate swap costs.
DATASOURCE: Strategic Hotels & Resorts, Inc. CONTACT: Ryan
Bowie, Vice President and Treasurer of Strategic Hotels &
Resorts, +1-312-658-5766 Web Site: http://www.strategichotels.com/
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