BETHESDA, Md., Feb. 22, 2017 — DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 26 premium hotels in the United States, today announced results of operations for the quarter and year ended December 31, 2016.
2016 Operating Highlights
- Net Income: Net income was $114.8 million and earnings per diluted share was $0.57.
- Comparable RevPAR: RevPAR was $179.69, a 0.2% decrease from 2015.
- Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 31.81%, an increase of 15 basis points from 2015.
- Adjusted EBITDA: Adjusted EBITDA was $258.9 million, a decrease of $7.0 million or 2.6% from 2015. The decrease in Adjusted EBITDA is primarily attributable to the disposition of three non-core hotels during 2016.
- Adjusted FFO: Adjusted FFO was $206.3 million and Adjusted FFO per diluted share was $1.02.
- Dividends: The Company declared four quarterly dividends totaling $0.50 per share during 2016, returning over $100 million to shareholders.
- Cash: The Company ended the year with $243.1 million of unrestricted corporate cash.
Fourth Quarter 2016 Highlights
- Net Income: Net income was $23.9 million and earnings per diluted share was $0.12.
- Comparable RevPAR: RevPAR was $174.91, a 0.3% decrease from the comparable period of 2015.
- Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 31.28%, a decrease of 16 basis points from the comparable period of 2015.
- Adjusted EBITDA: Adjusted EBITDA was $58.7 million, a decrease of $8.3 million or 12.4% from 2015. Adjusted EBITDA for the comparable period of 2015 included $7.4 million of Adjusted EBITDA from the three non-core hotels that were sold in 2016.
- Adjusted FFO: Adjusted FFO was $48.4 million and Adjusted FFO per diluted share was $0.24.
- Share Repurchases: The Company repurchased 635,637 shares at an average price of $8.92 per share during the fourth quarter.
- Dividends: The Company declared a dividend of $0.125 per share during the fourth quarter, which was paid on January 12, 2017.
Recent Developments
- Thomas G. Healy joined the Company on January 16, 2017 as Chief Operating Office and Executive Vice President, Asset Management.
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, "In 2016 DiamondRock implemented rigorous cost controls, resulting in zero growth in total hotel expenses, a record for the Company. This strong asset management led the company to achieve its original EBITDA guidance despite a softer demand environment. With the recent addition of Tom Healy, a proven industry leader, as Chief Operating Officer we look to build upon this success." Mr. Brugger added, "The company also executed on its strategic priority to create $450 million investment capacity through asset sales and financings in 2016, which positions DiamondRock to be opportunistic headed into 2017."
Operating Results
Please see "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO"and a reconciliation of these measures to net income. Comparable operating results include our 2015 acquisitions for all periods presented and exclude our 2016 dispositions for all periods presented. See "Reconciliation of Comparable Operating Results" attached to this press release for a reconciliation to historical amounts.
For the quarter ended December 31, 2016, the Company reported the following:
Fourth Quarter
2016
2015
Change
Comparable Operating Results (1)
ADR
$230.01
$227.67
1.0
%
Occupancy
76.0
%
77.1
%
-1.1 percentage points
RevPAR
$174.91
$175.45
-0.3
%
Revenues
$206.6 million
$208.7 million
-1.0
%
Hotel Adjusted EBITDA Margin
31.28
%
31.44
%
-16 basis points
Actual Operating Results
Revenues
$206.6 million
$233.8 million
-11.6
%
Net income
$23.9 million
$25.7 million
-$1.8 million
Earnings per diluted share
$0.12
$0.14
-$0.02
Adjusted EBITDA
$58.7 million
$67.0 million
-$8.3 million
Adjusted FFO
$48.4 million
$51.9 million
-$3.5 million
Adjusted FFO per diluted share
$0.24
$0.26
-$0.02
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
For the year ended December 31, 2016, the Company reported the following:
Year Ended
2016
2015
Change
Comparable Operating Results (1)(2)
ADR
$225.43
$224.17
0.6
%
Occupancy
79.7
%
80.3
%
-0.6 percentage points
RevPAR
$179.69
$180.09
-0.2
%
Revenues
$851.2 million
$847.7 million
0.4
%
Hotel Adjusted EBITDA Margin
31.81
%
31.66
%
15 basis points
Actual Operating Results
Revenues
$896.6 million
$931.0 million
-3.7
%
Net income
$114.8 million
$85.6 million
$29.2 million
Earnings per diluted share
$0.57
$0.43
$0.14
Adjusted EBITDA
$258.9 million
$265.9 million
-$7.0 million
Adjusted FFO
$206.3 million
$203.4 million
$2.9 million
Adjusted FFO per diluted share
$1.02
$1.01
$0.01
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
(2)
The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel from January 1, 2015 to February 5, 2015 and Sheraton Suites Key West from January 1, 2015 to June 29, 2015 in order to reflect the period in 2015 comparable to our ownership period in 2016. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.
Share Repurchase Program
The Company repurchased 728,237 shares of its common stock at an average price of $8.92 per share for a total purchase price of $6.5 million during 2016. The Company has $143.5 million of remaining authorized capacity under its $150 million share repurchase program. The shares are purchased in the open market or through private transactions from time-to-time, depending upon market conditions, pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.
Capital Expenditures
The Company spent approximately $102.9 million on capital improvements at its hotels in 2016, which included the following significant projects:
- The Gwen, a Luxury Collection Hotel: The Company rebranded the Conrad Chicago to Marriott's Luxury Collection brand in 2015. The renovation work associated with the brand conversion is being completed in two phases. The first phase, consisting of the lobby, rooftop bar and other public spaces, was completed in May 2016. The second phase of the renovation, consisting of the guest rooms, commenced in December 2016 and is expected to be completed during the second quarter of 2017.
- Chicago Marriott Downtown: The second and largest phase of the multi-year renovation was completed early in the second quarter of 2016. This phase included the upgrade renovation of approximately 460 guest rooms as well as construction of a new, state-of-the-art fitness center.
- Worthington Renaissance: The Company completed the guest room renovation at the hotel in January 2017.
- Charleston Renaissance: The Company commenced the guest room renovation at the hotel during the fourth quarter of 2016 and expects to complete the project in the first quarter of 2017.
The Company expects to spend between $110 million and $120 million on capital improvements at its hotels in 2017, which includes carryover from certain projects that commenced in 2016. Significant projects in 2017 include:
- Chicago Marriott Downtown: The Company has commenced the third phase of the multi-year renovation, which includes the upgrade renovation of approximately 340 guest rooms, and expects to complete this phase during the second quarter of 2017. The Company expects to commence the final phase of the multi-year renovation, which will include renovating the remaining 260 guest rooms, meeting rooms and certain public spaces, during late 2017 with completion in early 2018.
- The Lodge at Sonoma: The Company commenced the guest room renovation at the hotel in January 2017 and expects to complete the project during the second quarter of 2017.
- JW Marriott Denver: The Company expects to renovate the guest rooms, corridors, meeting space and lobby during the seasonally slow period beginning in late 2017 through early 2018.
Balance Sheet
As of December 31, 2016, the Company had $243.1 million of unrestricted cash on hand and approximately $920.5 million of total debt, which consisted of property-specific mortgage debt, $100.0 million of borrowings on its term loan and no outstanding borrowings on its $300 million senior unsecured credit facility.
Dividends
The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of December 30, 2016. The dividend was paid on January 12, 2017.
Guidance
The Company is providing annual guidance for 2017, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. Comparable RevPAR assumes that all of the Company's 26 hotels were owned since January 1, 2016.
The Company expects the full year 2017 results to be as follows:
Metric
Low End
High End
Comparable RevPAR Growth
-1.0 percent
1.0 percent
Adjusted EBITDA
$231 million
$244 million
Adjusted FFO
$186 million
$196 million
Adjusted FFO per share (based on 201.5 million shares)
$0.92 per share
$0.97 per share
The full year guidance range above reflects expected income tax expense of $7 to $11 million, expected interest expense of $37 million to $38 million and expected corporate expenses of $25 million.
The Company expects approximately 17% to 18% of its full year 2017 Adjusted EBITDA to be earned during the first quarter of 2017.
Selected Quarterly Comparable Operating Information
The following table is presented to provide investors with selected quarterly comparable operating information for 2016. The operating information excludes our 2016 dispositions for all periods presented.
Quarter 1, 2016
Quarter 2, 2016
Quarter 3, 2016
Quarter 4, 2016
Full Year 2016
ADR
$
216.03
$
231.31
$
223.44
$
230.01
$
225.43
Occupancy
73.2
%
85.5
%
84.1
%
76.0
%
79.7
%
RevPAR
$
158.22
$
197.69
$
187.91
$
174.91
$
179.69
Revenues (in thousands)
$
192,030
$
232,500
$
220,087
$
206,621
$
851,238
Hotel Adjusted EBITDA (in thousands)
$
51,969
$
83,467
$
70,686
$
64,636
$
270,758
% of full Year
19.2
%
30.8
%
26.1
%
23.9
%
100.0
%
Hotel Adjusted EBITDA Margin
27.06
%
35.90
%
32.12
%
31.28
%
31.81
%
Available Rooms
857,311
858,039
867,468
868,480
3,451,298
To view full financial release and corresponding tables please click the PDF icon or visit: http://investor.drhc.com/phoenix.zhtml?c=181049&p=irol-news&nyo=0
