DiamondRock Hospitality Company (DRH) Q4 2011 earnings summary

Executive summary

• Portfolio of 26 premium hotels and resorts totaled 11,828 rooms; 2011 lodging indicators improved, while GAAP results remained loss-making.

• Strategy emphasized branded gateway-city and resort properties, active asset management, selective dispositions and a conservative capital structure.

Financial highlights

• Continuing-operations revenue rose 18.3% to $638.2M in 2011 from $539.3M; acquisitions contributed materially to the increase, limiting year-over-year comparability.

• Operating income was $40.7M vs. $25.8M; net loss narrowed to $7.7M from $9.2M.

• EBITDA was $149.7M vs. $127.5M; FFO was $91.5M vs. $79.3M. Both are non-GAAP measures.

• Corporate expenses included $2.3M in Allerton bankruptcy legal fees and a $1.7M accrual for the Los Angeles Airport Marriott litigation settlement; hotel acquisition costs were $2.5M.

Outlook and guidance

• Management viewed the lodging sector as entering an early, sustainable recovery, with historically low new supply expected to support revenue and profit growth; acquisition opportunities were increasing.

• Expected 2012 capital improvements were ~$45M, including ~$16M from corporate cash; major projects included Conrad Chicago, Courtyard Midtown East, Renaissance Worthington and Marriott Atlanta Alpharetta.

• Times Square hotel development was expected to open in 2014; the fixed purchase price was ~$128M for 282 rooms, with no construction-cost overrun risk assumed.