UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-14045
LASALLE HOTEL PROPERTIES
(Exact name of registrant as specified in its charter)
| Maryland | 36-4219376 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| 4800 Montgomery Lane, Suite M25, Bethesda, MD | 20814 | |
| (Address of principal executive offices) | (Zip Code) |
(301)941-1500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common and preferred shares as of the latest practicable date.
| Class |
Outstanding at | |
| Common Shares of Beneficial Interest |
20,760,582 | |
| 10¼% Series A Cumulative Redeemable Preferred Shares |
3,991,900 |
| Page | ||||
| PART I |
Financial Information | |||
| Item 1. |
Financial Statements | 3 | ||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 36 | ||
| Item 4. |
Controls and Procedures | 37 | ||
| PART II |
Other Information | |||
| Item 1. |
Legal Proceedings | 37 | ||
| Item 2. |
Changes in Securities and Use of Proceeds | 37 | ||
| Item 3. |
Defaults Upon Senior Securities | 37 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 37 | ||
| Item 5. |
Other Information | 38 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 38 | ||
| Signatures | 40 | |||
2
PART I. Financial Information
LASALLE HOTEL PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| Assets: |
||||||||
| Investment in hotel properties, net (Note 2) |
$ | 595,120 | $ | 495,488 | ||||
| Property under development (Note 5) |
12,417 | — | ||||||
| Investment in joint venture (Note 2) |
4,093 | 4,580 | ||||||
| Cash and cash equivalents |
1,956 | 6,521 | ||||||
| Restricted cash reserves (Note 7) |
22,000 | 18,737 | ||||||
| Rent receivable |
2,960 | 2,251 | ||||||
| Notes receivable |
1,352 | 1,802 | ||||||
| Hotel receivables (net of allowance for doubtful accounts of $201 and $197, respectively) |
10,233 | 5,886 | ||||||
| Deferred financing costs, net |
2,044 | 2,721 | ||||||
| Deferred tax asset |
7,412 | 4,215 | ||||||
| Prepaid expenses and other assets |
11,951 | 7,223 | ||||||
| Assets sold, net (Note 3) |
173 | 56,311 | ||||||
| Total assets |
$ | 671,711 | $ | 605,735 | ||||
| Liabilities and Shareholders’ Equity: |
||||||||
| Borrowings under credit facilities (Note 6) |
$ | 91,777 | $ | 99,390 | ||||
| Bonds payable (Note 6) |
42,500 | 42,500 | ||||||
| Mortgage loans (including unamortized premium of $2,380) (Note 6) |
134,861 | 70,175 | ||||||
| Accounts payable and accrued expenses (Note 7) |
25,163 | 16,312 | ||||||
| Advance deposits |
3,847 | 1,555 | ||||||
| Accrued interest |
967 | 650 | ||||||
| Distributions payable |
4,040 | 6,575 | ||||||
| Liabilities of assets sold (Note 3) |
36 | 48,199 | ||||||
| Total liabilities |
303,191 | 285,356 | ||||||
| Minority interest in LaSalle Hotel Operating Partnership, L.P. (Note 8) |
5,784 | 5,262 | ||||||
| Minority interest in other partnerships |
10 | 10 | ||||||
| Commitments and contingencies (Note 7) |
— | — | ||||||
| Shareholders’ Equity: |
||||||||
| Preferred shares, $.01 par value, 20,000,000 shares authorized, 3,991,900 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively (Note 8) |
40 | 40 | ||||||
| Common shares of beneficial interest, $.01 par value, 100,000,000 shares authorized, 20,760,582 and 18,708,829 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively (Note 8) |
208 | 187 | ||||||
| Additional paid-in capital, including offering costs of $26,658 and $25,329 at June 30, 2003 and December 31, 2002, respectively |
403,220 | 374,383 | ||||||
| Deferred compensation |
(1,540 | ) | (1,914 | ) | ||||
| Accumulated other comprehensive loss (Note 10) |
(579 | ) | (1,050 | ) | ||||
| Distributions in excess of retained earnings |
(38,623 | ) | (56,539 | ) | ||||
| Total shareholders’ equity |
362,726 | 315,107 | ||||||
| Total liabilities and shareholders’ equity |
$ | 671,711 | $ | 605,735 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
| For the six months ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues: |
||||||||
| Hotel operating revenues: |
||||||||
| Room revenue |
$ | 44,777 | $ | 44,181 | ||||
| Food and beverage revenue |
24,375 | 22,485 | ||||||
| Other operating department revenue |
6,178 | 6,104 | ||||||
| Participating lease revenue |
10,495 | 10,272 | ||||||
| Interest income |
124 | 154 | ||||||
| Other income (Note 7) |
796 | 12 | ||||||
| Total revenues |
86,745 | 83,208 | ||||||
| Expenses: |
||||||||
| Hotel operating expenses: |
||||||||
| Room |
12,375 | 11,259 | ||||||
| Food and beverage |
18,308 | 16,391 | ||||||
| Other direct |
3,730 | 3,487 | ||||||
| Other indirect (Note 11) |
23,523 | 21,777 | ||||||
| Depreciation and other amortization |
16,959 | 15,035 | ||||||
| Real estate taxes, personal property taxes and insurance |
4,789 | 4,406 | ||||||
| Ground rent (Note 7) |
1,623 | 1,421 | ||||||
| General and administrative |
3,764 | 3,063 | ||||||
| Interest |
6,187 | 6,281 | ||||||
| Amortization of deferred financing costs |
1,175 | 1,117 | ||||||
| Impairment of investment in hotel property (Note 2) |
2,453 | — | ||||||
| Other expenses |
79 | 7 | ||||||
| Total expenses |
94,965 | 84,244 | ||||||
| Loss before income tax benefit, minority interest, equity in earnings of unconsolidated entities and discontinued operations |
(8,220 | ) | (1,036 | ) | ||||
| Income tax benefit (Note 12) |
2,776 | 1,336 | ||||||
| Income (loss) before minority interest, equity in earnings of unconsolidated |
(5,444 | ) | 300 | |||||
| Minority interest in LaSalle Hotel Operating Partnership, L.P. |
118 | (8 | ) | |||||
| Income (loss) before equity in earnings of unconsolidated entities and discontinued operations |
(5,326 | ) | 292 | |||||
| Equity in earnings of unconsolidated entities: |
||||||||
| Equity in income of joint venture (Note 2) |
117 | 35 | ||||||
| Total equity in earnings of unconsolidated entities |
117 | 35 | ||||||
| Income (loss) before discontinued operations |
(5,209 | ) | 327 | |||||
| Discontinued operations (Note 3): |
||||||||
| Income from operations of property disposed of |
39 | 1,039 | ||||||
| Gain on sale of property disposed of |
37,091 | — | ||||||
| Minority interest |
(822 | ) | (24 | ) | ||||
| Income tax expense (Note 12) |
(64 | ) | — | |||||
| Net income from discontinued operations |
36,244 | 1,015 | ||||||
| Net income |
31,035 | 1,342 | ||||||
| Distributions to preferred shareholders |
(5,115 | ) | (3,296 | ) | ||||
| Net income (loss) applicable to common shareholders |
$ | 25,920 | $ | (1,954 | ) | |||
| Earnings per Common Share—Basic: |
||||||||
| Loss applicable to common shareholders before discontinued operations |
$ | (0.56 | ) | $ | (0.16 | ) | ||
| Discontinued operations |
1.94 | 0.06 | ||||||
| Net income (loss) applicable to common shareholders |
$ | 1.38 | $ | (0.10 | ) | |||
| Earnings per Common Share—Diluted: |
||||||||
| Loss applicable to common shareholders before discontinued operations |
$ | (0.55 | ) | $ | (0.16 | ) | ||
| Discontinued operations |
1.92 | 0.06 | ||||||
| Net income (loss) applicable to common shareholders |
$ | 1.37 | $ | (0.10 | ) | |||
| Weighted average number common shares outstanding: |
||||||||
| Basic |
18,725,717 | 18,679,391 | ||||||
| Diluted |
18,874,406 | 18,854,772 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
| For the three months ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues: |
||||||||
| Hotel operating revenues: |
||||||||
| Room revenue |
$ | 26,023 | $ | 26,144 | ||||
| Food and beverage revenue |
14,253 | 13,683 | ||||||
| Other operating department revenue |
4,230 | 3,981 | ||||||
| Participating lease revenue |
5,535 | 5,199 | ||||||
| Interest income |
62 | 74 | ||||||
| Other income (Note 7) |
387 | — | ||||||
| Total revenues |
50,490 | 49,081 | ||||||
| Expenses: |
||||||||
| Hotel operating expenses: |
||||||||
| Room |
6,576 | 6,124 | ||||||
| Food and beverage |
10,121 | 9,525 | ||||||