DiamondRock Hospitality Company (DRH) Q4 2013 earnings summary

Executive summary

• Owned 26 premium hotels and resorts with 11,121 rooms; 2013 revenue rose 10.0% to $799.7M, while net income reached $49.1M versus a $16.6M loss in 2012.

• Portfolio strategy centers on high-barrier urban and resort markets, active asset management, capital recycling, and conservative leverage; over 85% of portfolio EBITDA came from core urban and resort hotels.

Financial highlights

• Revenue increased $72.8M YoY to $799.7M; excluding 2012 acquisitions, revenue grew 2.4%. Rooms revenue rose 9.6%, food and beverage 10.3%, and other revenue 14.0%.

• Operating income was $75.2M versus $28.5M; net income was $49.1M versus a $16.6M loss, and diluted EPS was $0.25 versus a $0.09 loss.

• Continuing-operations income was $23.8M; discontinued operations contributed $25.2M, including a $22.7M gain on the Torrance Marriott South Bay sale.

• Interest expense rose to $57.3M from $53.8M, while Allerton Loan interest income contributed $6.1M in 2013.

Outlook and guidance

• Management viewed 2014 as part of a multi-year lodging recovery; expected RevPAR gains to be driven more by room-rate growth than occupancy, with renovated hotels expected to outperform markets.

• Expected to acquire a completed 282-room Times Square hotel during 2014 for a fixed contractual price of approximately $128M; no construction cost-overrun risk was assumed.

• Expected 2014 cash sources were hotel operations and existing corporate cash; planned uses included the Times Square acquisition, capital spending, debt service, dividends, and corporate costs.

• Planned to address debt maturities with refinancing, borrowing capacity on unencumbered hotels, non-core asset sales, the $200M credit facility, and operating cash flow.