DiamondRock Hospitality Company Reports Second Quarter Results

BETHESDA, Md., July 22 /PRNewswire-FirstCall/ -- DiamondRock Hospitality
Company (the "Company") (NYSE: DRH) today announced results of operations for
its second fiscal quarter 2008, which ended on June 13, 2008. The Company is a
lodging focused real estate investment trust that owns twenty premium hotels
in North America.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040708/DCTH028 )
Second Quarter 2008 Highlights
-- RevPAR: The Company's same-store RevPAR increased 1.5 percent compared
to the same period in 2007.
-- Hotel Adjusted EBITDA Margins: The Company's same-store Hotel Adjusted
EBITDA margins decreased 60 basis points compared to the same period in 2007.
-- Adjusted EBITDA: The Company's Adjusted EBITDA was $53.5 million.
-- Adjusted FFO: The Company's adjusted funds from operations ("Adjusted
FFO") was $41.2 million and Adjusted FFO per diluted share was $0.43.
-- Dividend: The Company paid a quarterly dividend of $0.25 per share
during the second quarter.
William W. McCarten, Chairman and Chief Executive Officer, stated:
"DiamondRock's second quarter results were at the low end of our expectations.
The bright spots for demand in the quarter included the Chicago Conrad as well
as our hotels located in Los Angeles and New York City. However, as the
general economy continues to soften, we face a difficult operating environment
with particular challenges in the Atlanta and suburban Chicago markets. In
response, we continue to work aggressively with our operators to implement
revenue management strategies and cost containment measures. The team did an
excellent job with margins in the second quarter given the modest revenue
growth."
Mr. McCarten added, "Lodging is a cyclical business, and we are currently
in the most difficult phase of that cycle. With low or negative GDP growth,
reduced airline capacity, and declining corporate profits, the lodging
industry will likely generate negative revenue growth for the balance of 2008.
Despite these headwinds, we believe that DiamondRock is well positioned.
Anticipating the slowdown, we have purposely maintained one of the lowest
levels of leverage in the industry. With a high quality portfolio of hotels
and a stellar balance sheet, DiamondRock is poised to weather the downturn and
opportunistically deploy its capital to create shareholder value."
Mr. McCarten concluded, "As we previously announced, on September 1st,
Mark W. Brugger will become our Chief Executive Officer. I think he will bring
energy, creativity and good judgment to this role, enabling DiamondRock to
continue to make the correct strategic decisions in the current difficult
economy. I intend to continue to work closely with Mark as the Chairman of the
Board of Directors and Mark will continue to be supported by the same
executive team that helped launch the Company."
Operating Results
Please see "Certain Definitions" and "Non-GAAP Financial Measures"
attached to this press release for an explanation of the terms "EBITDA,"
"Adjusted EBITDA," "Hotel Adjusted EBITDA Margins," "FFO," "Adjusted FFO" and
"same-store."
For the second quarter ended June 13, 2008, the Company reported the
following:
-- Revenues of $181.0 million compared to $179.5 million for the
comparable period in 2007.
-- Adjusted EBITDA of $53.5 million compared to $54.6 million for the
comparable period in 2007.
-- Adjusted FFO and Adjusted FFO per diluted share of $41.2 million and
$0.43, respectively, compared to $39.6 million and $0.42, respectively, for
the comparable period in 2007.
-- Net income of $21.8 million (or $0.23 per diluted share) compared to
$20.5 million (or $0.21 per diluted share) for the comparable period in 2007.
Same-store RevPAR for the second quarter increased 1.5 percent to $141.20
from $139.14 for the comparable period in 2007, driven by a 2.2 percent
increase in the average daily rate and a 0.5 percentage point decrease in
occupancy (from 76.2 percent to 75.7 percent). Same-store Hotel Adjusted
EBITDA margins for our hotels decreased 60 basis points from the comparable
period in the prior year.
For the period from January 1, 2008 to June 13, 2008, the Company reported
the following:
-- Revenues of $313.9 million compared to $313.3 million for the
comparable period in 2007.
-- Adjusted EBITDA of $83.7 million compared to $88.6 million for the
comparable period in 2007.
-- Adjusted FFO and Adjusted FFO per diluted share of $64.4 million and
$0.68, respectively, compared to $63.8 million and $0.68, respectively, for
the comparable period in 2007.
-- Net income of $26.9 million (or $0.28 per diluted share) compared to
$27.3 million (or $0.29 per diluted share) for the comparable period in 2007.
Same-store RevPAR for year-to-date increased 1.0 percent to $130.53 from
$129.19 for the comparable period in 2007, driven by a 2.7 percent increase in
the average daily rate and a 1.2 percentage point decrease in occupancy (from
73.5 percent to 72.3 percent). Year-to-date, same-store Hotel Adjusted EBITDA
margins for our hotels decreased 108 basis points from the comparable period
in the prior year.
Excluding the Chicago Marriott Downtown, which underwent a $35 million
renovation and associated disruption earlier this year, same-store RevPAR for
the year-to-date increased 2.7% and same-store Hotel Adjusted EBITDA margins
for the year-to-date decreased 91 basis points.
Operating Results Compared to Prior Guidance
The following is a chart showing our actual second quarter 2008 results
compared to our guidance for the second quarter 2008:
Q2 2008 Guidance Actual Q2 2008 Results
RevPAR Growth 2% to 4% 1.5 %
Adjusted EBITDA $52 to $55 million $53.5 million
Adjusted FFO $41 to $43 million $41.2 million
Adjusted FFO/Share $0.43 to $0.45 $0.43 per diluted share
per diluted share

Share Repurchases
The Board of Directors has authorized the Company to repurchase up to 4.8
million shares of its common stock. As of July 21, 2008, the Company has
purchased 2.8 million shares of its common stock under the Board authorization
at an average price of $10.74.
Balance Sheet
As of the end of the second quarter, the Company had total assets of
approximately $2.1 billion. Cash and cash equivalents were $59.1 million,
including $34.1 million of restricted cash.
As of the end of the second quarter, the Company had total debt of
approximately $855.1 million, comprised of limited recourse, property-specific
mortgages and $32.0 million outstanding under its $200 million senior
unsecured credit facility. The Company's debt has a weighted average interest
rate of 5.5 percent and a weighted average maturity of 6.9 years as of June
13, 2008. Eight of the Company's 20 hotels were unencumbered by mortgage debt
as of June 13, 2008.
As of the end of the second quarter, the Company continued to own 100% of
its properties directly and has never issued operating partnership units or
preferred stock.
Outlook
The Company is providing guidance, 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 Securities
and Exchange Commission.
In the current economic environment, we believe that it is difficult to
forecast future results. With the soft economy impacting leisure and business
travelers, compounded by reductions in airline capacity, we currently believe
that room demand in several of our key markets will be lower than our revised
expectations at the end of the first quarter. As a result, we currently expect
full year RevPAR growth to be in the range of negative 1 to negative 3
percent. The Chicago Marriott Downtown, which underwent a $35 million
renovation this year, negatively impacts the full year RevPAR projections by
approximately 1 percentage point in 2008.
Based on our current expectations for RevPAR growth for the full year, we
project:
-- Adjusted EBITDA of $175 to $181 million.

-- Adjusted FFO of $136 to $140 million.

-- Adjusted FFO per share of $1.46 to $1.51 based on 93.0 million weighted
average diluted shares. The share count incorporates the full benefit of the
4.8 million share repurchase program.

For the third fiscal quarter of 2008, we expect:

-- Same-store RevPAR to decrease 3 to 5 percent.

-- Adjusted EBITDA of $36 million to $39 million.

-- Adjusted FFO of $29 million to $31 million.

-- Adjusted FFO per share of $0.32 to $0.34 based on 92.0 million weighted
average diluted shares. The share count incorporates the full benefit of the
4.8 million share repurchase program.
Dividends for Second Quarter 2008
On June 24, 2008, a cash dividend of $0.25 per share was paid to
shareholders of record as of June 13, 2008, the last day of our second fiscal
quarter.
Major Capital Expenditures
DiamondRock has and continues to make significant capital investments in
its hotels. In 2008, the Company plans to commence or complete approximately
$70 to $80 million of capital improvements at its hotels. The Company spent
$36.8 million on capital improvements at its hotels from January 1, 2008 to
June 13, 2008. The most significant capital projects for 2008 are as follows:
-- Chicago Marriott Downtown: The Company has substantially completed a
$35 million renovation of the hotel. The project included a complete
renovation of all the meeting and ballrooms, adding 17,000 square feet of new
meeting space, reconcepting and relocating the restaurant, expanding the lobby
bar and creating a Marriott "great room" in the lobby. The project began
during the third quarter of 2007 and was substantially completed in April
2008. The estimated disruption of approximately $2 million to Hotel Adjusted
EBITDA, mainly associated with the ballroom renovations, primarily impacted
the first quarter of 2008.
-- Westin Boston Waterfront: The Company has completed the construction of
additional meeting rooms in the building attached to the hotel. The $19
million project included the creation of over 37,000 square feet of meeting
and exhibition space. The project began in the third quarter of 2007 and was
substantially completed in the first quarter of 2008.
-- Chicago Conrad: The Company completed its renovation of the guestrooms
and corridors during the first quarter and is currently upgrading the arrival
experience with a front entrance repositioning to be completed during the
third quarter of 2008.
-- Salt Lake City Marriott: The Company plans to significantly renovate
the guestrooms at the hotel in late 2008.
Earnings Call
The Company will host a conference call to discuss its second quarter 2008
results and its 2008 guidance on Wednesday, July 23, 2008, at 10:00 am Eastern
Time (ET). To participate in the live call, investors are invited to dial
1-888-713-4218 (for domestic callers) or 617-213-4870 (for international
callers). The participant passcode is 57914861. A live webcast of the call
will be available via the investor relations section of DiamondRock
Hospitality Company's website at http://www.drhc.com. A replay of the webcast
will also be archived on the website for one year.
About the Company
DiamondRock Hospitality Company is a self-advised real estate investment
trust (REIT) that is an owner of premium hotel properties. DiamondRock owns 20
hotels with approximately 9,600 guestrooms. For further information, please
visit DiamondRock Hospitality Company's website at http://www.drhc.com.
This press release contains forward-looking statements within the meaning
of federal securities laws and regulations. These forward-looking statements
are identified by their use of terms and phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan," "predict,"
"project," "should," "will," "continue" and other similar terms and phrases,
including references to assumptions and forecasts of future results.
Forward-looking statements are not guarantees of future performance and
involve known and unknown risks, uncertainties and other factors which may
cause the actual results to differ materially from those anticipated at the
time the forward-looking statements are made. These risks include, but are not
limited to: national and local economic and business conditions, including the
potential for additional terrorist attacks, that will affect occupancy rates
at our hotels and the demand for hotel products and services; operating risks
associated with the hotel business; risks associated with the level of our
indebtedness and our ability to meet covenants in our debt agreements;
relationships with property managers; our ability to maintain our properties
in a first-class manner, including meeting capital expenditure requirements;
our ability to complete planned renovation on budget; our ability to compete
effectively in areas such as access, location, quality of accommodations and
room rate structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices, construction
procedures and costs; our ability to complete acquisitions; our ability to
raise equity capital; the performance of acquired properties after they are
acquired; necessary capital expenditures on the acquired properties; and our
ability to continue to satisfy complex rules in order for us to qualify as a
REIT for federal income tax purposes; and other risks and uncertainties
associated with our business described from time to time in our filings with
the Securities and Exchange Commission. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that the expectations will be attained
or that any deviation will not be material. All information in this release is
as of the date of this release, and we undertake no obligation to update any
forward-looking statement to conform the statement to actual results or
changes in our expectations.
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are
based on results of our hotels reported to us by our hotel managers. Our hotel
managers use different reporting periods. Marriott International, the manager
of the majority of our hotel properties, uses a fiscal year ending on the
Friday closest to December 31 and reports twelve weeks of operations for the
first three quarters and sixteen or seventeen weeks for the fourth quarter of
the year for its domestic managed hotels. In contrast, Marriott International
for its non-domestic hotels (including Frenchman's Reef), Noble Management
Group, LLC, our manager of the Westin Atlanta North, Vail Resorts, our manager
of the Vail Marriott, Hilton Hotels Corporation, our manager of the Conrad
Chicago, and Westin Hotel Management, L.P., our manager of the Westin Boston
Waterfront report results on a monthly basis. Additionally, the Company, as a
REIT, is required by tax law to report results on a calendar year. As a
result, the Company has adopted the reporting periods used by Marriott
International for its domestic hotels, except that the fiscal year always ends
on December 31 to comply with REIT rules. The first three fiscal quarters end
on the same day as Marriott International's fiscal quarters but our fourth
quarter ends on December 31 and our full year results, as reported in our
statement of operations, always include the same number of days as the
calendar year.
Two consequences of the reporting cycle we have adopted are: (1) quarterly
start dates will usually differ between years, except for the first quarter
which always commences on January 1, and (2) our first and fourth quarters of
operations and year-to-date operations may not include the same number of days
as reflected in prior years.
While the reporting calendar we adopted is more closely aligned with the
reporting calendar used by the manager of a majority of our properties, one
final consequence of our calendar is we are unable to report any results for
Frenchman's Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, or for
the Westin Boston Waterfront for the month of operations that ends after our
fiscal quarter-end because neither Vail Resorts, Noble Management Group, LLC,
Hilton Hotels Corporation, Westin Hotel Management, L.P., nor Marriott
International make mid-month results available to us. As a result, our
quarterly results of operations include results from Frenchman's Reef, Westin
Atlanta North, Vail Marriott, Conrad Chicago, and the Westin Boston Waterfront
as follows: first quarter (January and February), second quarter (March to
May), third quarter (June to August) and fourth quarter (September to
December). While this does not affect full-year results, it does affect the
reporting of quarterly results.
Ground Leases
Four of the Company's hotels are subject to ground leases: Bethesda
Marriott Suites, Courtyard Manhattan Fifth Avenue, Salt Lake City Downtown
Marriott, and the Westin Boston Waterfront. In addition, part of a parking
structure at a fifth hotel and two golf courses at two additional hotels are
also subject to ground leases. In accordance with GAAP, the Company records
rent expense on a straight-line basis for ground leases that provide minimal
rental payments that increase in pre-established amounts over the remaining
term of the ground lease. For the second fiscal quarter 2008, contractual cash
rent payable on the ground leases totaled $0.5 million and the Company
recorded approximately $2.3 million in ground rent expense. The non-cash
portion of ground rent expense recorded for the second fiscal quarter 2008 was
$1.8 million.

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

ASSETS
June 13, December 31,
2008 2007
(Unaudited)

Property and equipment, at cost $2,123,272 $2,086,933
Less: accumulated depreciation (182,922) (148,101)

1,940,350 1,938,832

Deferred financing costs, net 3,652 4,020
Restricted cash 34,138 31,736
Due from hotel managers 72,460 68,153
Favorable lease assets, net 41,721 42,070
Prepaid and other assets 21,065 17,043
Cash and cash equivalents 24,937 29,773

Total assets $2,138,323 $2,131,627

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Mortgage debt $823,117 $824,526
Senior unsecured credit facility 32,000 -
Total debt 855,117 824,526

Deferred income related to key money, net 20,631 15,884
Unfavorable contract liabilities, net 85,329 86,123
Due to hotel managers 36,048 36,910
Dividends declared and unpaid 23,923 22,922
Accounts payable and accrued expenses 59,309 64,980

Total other liabilities 225,240 226,819

Shareholders' Equity:

Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, $.01 par value; 200,000,000
shares authorized; 94,535,000 and 94,730,813
shares issued and outstanding at June 13, 2008
and December 31, 2007, respectively 945 947
Additional paid-in capital 1,144,108 1,145,511
Accumulated deficit (87,087) (66,176)

Total shareholders' equity 1,057,966 1,080,282

Total liabilities and shareholders' equity $2,138,323 $2,131,627

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended June 13, 2008 and June 15, 2007 and the Periods
from January 1, 2008 to June 13, 2008 and January 1, 2007 to June 15, 2007
(in thousands, except per share amounts)

Fiscal Fiscal Period from Period from
Quarter Quarter January 1, January 1,
Ended Ended 2008 2007
June 13, June 15, to June 13, to June 15,
2008 2007 2008 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:

Rooms $116,011 $114,252 $201,938 $199,006
Food and beverage 55,532 54,275 95,614 95,722
Other 9,473 9,417 16,327 15,429

Total revenues 181,016 177,944 313,879 310,157

Operating Expenses:

Rooms 26,249 25,146 47,408 45,259
Food and beverage 36,377 35,745 65,305 64,232
Management fees 8,048 7,882 13,013 13,063
Other hotel expenses 55,189 54,043 101,641 97,835
Depreciation and
amortization 18,069 17,371 34,756 33,169
Corporate expenses 3,345 3,273 6,305 6,422
Total operating expenses 147,277 143,460 268,428 259,980
Operating profit 33,739 34,484 45,451 50,177

Other Expenses (Income):

Interest income (332) (666) (770) (1,260)
Interest expense 11,430 11,884 22,125 23,379
Total other expenses 11,098 11,218 21,355 22,119

Income before income taxes 22,641 23,266 24,096 28,058

Income tax (provision)
benefit (886) (3,160) 2,836 (1,580)

Income from continuing
operations 21,755 20,106 26,932 26,478

Income from discontinued
operations, net of tax - 407 - 825

Net income $21,755 $20,513 $26,932 $27,303

Earnings per share:
Continuing operations $0.23 $0.21 $0.28 $0.28
Discontinued operations - 0.00 - 0.01

Basic and diluted
earnings per share $0.23 $0.21 $0.28 $0.29

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Periods
from January 1, 2008 to June 13, 2008 and January 1, 2007 to
June 15, 2007
(in thousands)

Period from Period from
January 1, 2008 January 1,2007
to June 13, to June 15,
2008 2007
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $26,932 $27,303
Adjustments to reconcile net income
to net cash provided by operating
activities:
Real estate depreciation 34,756 33,704
Corporate asset depreciation
as corporate expenses 75 79
Non-cash ground rent 3,550 3,594
Non-cash financing costs as interest 372 349
Amortization of debt premium and
unfavorable contract liabilities (794) (868)
Amortization of deferred income (253) (164)
Stock-based compensation 1,567 2,097
Yield support received 797 1,741
Non-cash yield support recognized - (189)
Changes in assets and liabilities:
Prepaid expenses and other assets (4,022) (460)
Restricted cash (582) 530
Due to/from hotel managers (5,966) (10,650)
Accounts payable and accrued expenses (8,455) (3,630)

Net cash provided by operating activities 47,977 53,436

Cash flows from investing activities:
Hotel acquisitions - (331,325)
Receipt of deferred key money 5,000 -
Hotel capital expenditures (36,766) (22,549)
Change in restricted cash (1,820) (564)

Net cash used in investing activities (33,586) (354,438)

Cash flows from financing activities:
Repayments of credit facility (15,000) (35,000)
Draws on credit facility 47,000 61,500
Scheduled mortgage debt principal payments (1,413) (1,707)
Payment of financing costs - (1,113)
Proceeds from sale of common stock - 317,935
Payment of costs related to sale of common
stock - (380)
Share repurchases (3,184) -
Payment of dividends (46,630) (36,658)

Net cash (used in) provided by financing
activities $(19,227) $304,577

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Periods from January 1, 2008 to June 13, 2008 and January 1, 2007 to
June 15, 2007
(in thousands)

Period from Period from
January 1, January 1,
2008 2007
to June 13, to June 15,
2008 2007
(Unaudited) (Unaudited)
Net (decrease) increase in cash and cash
equivalents $(4,836) $3,575
Cash and cash equivalents, beginning of period 29,773 19,691
Cash and cash equivalents, end of period $24,937 $23,266

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest $24,176 $24,716
Cash paid for income taxes $861 $340
Capitalized interest $183 $-

Non-Cash Financing Activities:

Unpaid dividends $23,923 $22,947

Non-GAAP Financial Measures
We use the following four non-GAAP financial measures that we believe are
useful to investors as key measures of our operating performance: (1) EBITDA,
(2) Adjusted EBITDA, (3) FFO and (4) Adjusted FFO.
EBITDA represents net income excluding: (1) interest expense; (2)
provision for income taxes, including income taxes applicable to sale of
assets; and (3) depreciation and amortization. We believe EBITDA is useful to
an investor in evaluating our operating performance because it helps investors
evaluate and compare the results of our operations from period to period by
removing the impact of our capital structure (primarily interest expense) and
our asset base (primarily depreciation and amortization) from our operating
results. We also use EBITDA as one measure in determining the value of hotel
acquisitions and dispositions.

Historical (in 000s)
Fiscal Fiscal
Quarter Ended Quarter Ended
June 13, 2008 June 15, 2007
Net income $21,755 $20,513
Interest expense 11,430 11,884
Income tax expense (1) 886 3,095
Depreciation and amortization (2) 18,069 17,643
EBITDA $52,140 $53,135

(1) Includes $0.1 million of income tax benefit included in discontinued
operations for the fiscal quarter ended June 15, 2007.
(2) Includes $0.3 million of depreciation expense included in discontinued
operations for the fiscal quarter ended June 15, 2007.

Historical (in 000s)
Period From Period From
January 1, January 1,
2008 to 2007 to
June 13, 2008 June 15, 2007
Net income $26,932 $27,303
Interest expense 22,125 23,379
Income tax (benefit) expense (1) (2,836) 1,440
Depreciation and amortization (2) 34,756 33,704
EBITDA $80,977 $85,826

(1) Includes $0.1 million of income tax benefit included in discontinued
operations for the period from January 1, 2007 to June 15, 2007.
(2) Includes $0.5 million of depreciation expense included in discontinued
operations for the period from January 1, 2007 to June 15, 2007.

Forecast Third Quarter 2008 (in 000s)
Low End High End
Net income $9,000 $11,000
Interest expense 11,700 11,700
Income tax benefit (4,700) (3,700)
Depreciation and amortization 18,600 18,600
EBITDA $34,600 $37,600

Forecast Full Year 2008 (in 000s)
Low End High End
Net income $50,700 $54,700
Interest expense 50,000 50,000
Income tax benefit (11,000) (9,000)
Depreciation and amortization 79,200 79,200
EBITDA $168,900 $174,900

We also evaluate our performance by reviewing Adjusted EBITDA because we
believe that the exclusion of certain additional recurring and non-recurring
items described below provides useful supplemental information regarding our
ongoing operating performance and that the presentation of Adjusted EBITDA,
when combined with the primary GAAP presentation of net income, is beneficial
to a complete understanding of our operating performance. We adjust EBITDA for
the following items, which may occur in any period, and refer to this measure
as Adjusted EBITDA:
-- Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-cash
amortization of our favorable lease assets.
-- The impact of the non-cash amortization of the unfavorable contract
liabilities recorded in conjunction with our acquisitions of the Bethesda
Marriott Suites and the Chicago Marriott Downtown. The amortization of the
unfavorable contract liabilities does not reflect the underlying performance
of the Company.
-- Cumulative effect of a change in accounting principle: Infrequently,
the Financial Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to reflect the
cumulative effect of a change in accounting principle. We exclude these
one-time adjustments because they do not reflect our actual performance for
that period.
-- Gains from Early Extinguishment of Debt: We exclude the effect of gains
recorded on the early extinguishment of debt because we believe that including
them in EBITDA is not consistent with reflecting the ongoing performance of
our remaining assets.

-- Impairment Losses and Gains or Losses on Dispositions: We exclude the
effect of impairment losses and gains or losses on dispositions recorded
because we believe that including them in EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In addition, we
believe that impairment charges are similar to depreciation expense, which is
also excluded from EBITDA.

Historical (in 000s)
Fiscal Fiscal
Quarter Ended Quarter Ended
June 13, 2008 June 15, 2007
EBITDA $52,140 $53,135
Non-cash ground rent 1,777 1,887
Non-cash amortization of unfavorable
contract liabilities (397) (397)
Adjusted EBITDA $53,520 $54,625

Historical (in 000s)
Period From Period From
January 1, 2008 January 1, 2007
to June 13, 2008 to June 15, 2007
EBITDA $80,977 $85,826
Non-cash ground rent 3,553 3,594
Non-cash amortization of unfavorable
contract liabilities (794) (794)
Adjusted EBITDA $83,736 $88,626

Forecast Third Quarter 2008 (in 000s)
Low End High End
EBITDA $34,600 $37,600
Non-cash ground rent 1,800 1,800
Non-cash amortization of unfavorable
contract liabilities (400) (400)
Adjusted EBITDA $36,000 $39,000

Forecast Full Year 2008 (in 000s)
Low End High End
EBITDA $168,900 $174,900
Non-cash ground rent 7,800 7,800
Non-cash amortization of unfavorable
contract liabilities (1,700) (1,700)
Adjusted EBITDA $175,000 $181,000

We compute FFO in accordance with standards established by NAREIT (which
defines FFO as net income determined in accordance with GAAP), excluding gains
(losses) from sales of property, plus depreciation and amortization. We
believe that the presentation of FFO provides useful information to investors
regarding our operating performance because it is a measure of our operations
without regard to specified non-cash items, such as real estate depreciation
and amortization and gain or loss on sale of assets. We also use FFO as one
measure in assessing our results.

Historical (in 000s)
Fiscal Fiscal
Quarter Ended Quarter Ended
June 13, 2008 June 15, 2007
Net income $21,755 $20,513
Real estate related depreciation and
amortization (1) 18,069 17,643
FFO $39,824 $38,156
FFO per share (basic and diluted) $0.42 $0.40

(1) Includes $0.3 million of depreciation expense included in discontinued
operations for the fiscal quarter ended June 15, 2007.

Historical (in 000s)
Period From Period From
January 1, 2008 January 1, 2007
to June 13, 2008 to June 15, 2007
Net income $26,932 $27,303
Real estate related depreciation and
amortization (1) 34,756 33,704
FFO $61,688 $61,007
FFO per share (basic and diluted) $0.65 $0.65

(1) Includes $0.3 million of depreciation expense included in discontinued
operations for the fiscal quarter ended June 15, 2007.

Forecast Third Quarter 2008 (in 000s)
Low End High End
Net income $9,000 $11,000
Real estate related depreciation and
amortization (1) 18,600 18,600
FFO $27,600 $29,600
FFO per share (basic and diluted) $0.30 $0.32

Forecast Full Year 2008 (in 000s)
Low End High End
Net income $50,700 $54,700
Real estate related depreciation and
amortization (1) 79,200 79,200
FFO $129,900 $133,900
FFO per share (basic and diluted) $1.40 $1.44

We also evaluate our performance by reviewing Adjusted FFO because we
believe that the exclusion of certain additional recurring and non-recurring
items described below provides useful supplemental information regarding our
ongoing operating performance and that the presentation of Adjusted FFO, when
combined with the primary GAAP presentation of net income, is beneficial to a
complete understanding of our operating performance. We adjust FFO for the
following items, which may occur in any period, and refer to this measure as
Adjusted FFO:
-- Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-cash
amortization of our favorable lease assets.
-- The impact of the non-cash amortization of the unfavorable contract
liabilities recorded in conjunction with our acquisitions of the Bethesda
Marriott Suites and the Chicago Marriott Downtown. The amortization of the
unfavorable contract liabilities does not reflect the underlying performance
of the Company.
-- Cumulative effect of a change in accounting principle: Infrequently,
the Financial Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to reflect the
cumulative effect of a change in accounting principle. We exclude these
one-time adjustments because they do not reflect our actual performance for
that period.
-- Gains from Early Extinguishment of Debt: We exclude the effect of gains
recorded on the early extinguishment of debt because we believe that including
them in FFO is not consistent with reflecting the ongoing performance of our
remaining assets.
-- Impairment Losses: We exclude the effect of impairment losses recorded
because we believe that including them in FFO is not consistent with
reflecting the ongoing performance of our remaining assets. In addition, we
believe that impairment charges are similar to gains or losses on dispositions
and depreciation expense, both of which are also excluded from FFO.

Historical (in 000s)
Fiscal Fiscal
Quarter Ended Quarter Ended
June 13, 2008 June 15, 2007
FFO $39,824 $38,156
Non-cash ground rent 1,777 1,887
Non-cash amortization of unfavorable
contract liabilities (397) (397)
Adjusted FFO $41,204 $39,646
Adjusted FFO per share (basic and diluted) $0.43 $0.42

Historical (in 000s)
Period From Period From
January 1, 2008 January 1, 2007
to June 13, 2008 to June 15, 2007
FFO $61,688 $61,007
Non-cash ground rent 3,553 3,594
Non-cash amortization of unfavorable
contract liabilities (794) (794)
Adjusted FFO $64,447 $63,807
Adjusted FFO per share (basic and diluted) $0.68 $0.68

Forecast Third Quarter 2008 (in 000s)
Low End High End
FFO $27,600 $29,600
Non-cash ground rent 1,800 1,800
Non-cash amortization of unfavorable
contract liabilities (400) (400)
Adjusted FFO $29,000 $31,000
Adjusted FFO per share (basic and diluted) $0.32 $0.34

Forecast Full Year 2008 (in 000s)
Low End High End
FFO $129,900 $133,900
Non-cash ground rent 7,800 7,800
Non-cash amortization of unfavorable
contract liabilities (1,700) (1,700)
Adjusted FFO $136,000 $140,000
Adjusted FFO per share (basic and diluted) $1.46 $1.51

Certain Definitions
In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from
Hotel EBITDA the non-cash expense incurred by the hotels due to the straight
lining of the rent from our ground lease obligations, the non-cash
amortization of our favorable lease assets, and the non-cash amortization of
the unfavorable contract liabilities recorded in conjunction with the
acquisitions of the Bethesda Marriott Suites and the Chicago Marriott
Downtown. Hotel EBITDA represents hotel net income excluding: (1) interest
expense; (2) income taxes; and (3) depreciation and amortization. Hotel
Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by
total hotel revenues.

Market Capitalization as of June 13, 2008
(in thousands, except per share data)

Enterprise Value

Common equity capitalization (at 6/13/08 closing price
of $11.96/share) $1,141,640
Consolidated debt 855,117
Cash and cash equivalents (24,937)

Total enterprise value $1,971,820

Dividend Per Share
Common dividend declared (holders of record on June 13, 2008) $0.25

Share Reconciliation

Common shares outstanding 94,535

Unvested restricted stock held by management and employees 475
Share grants under deferred compensation plan held by
corporate officers 445

Combined shares outstanding 95,455

Debt Summary as of June 13, 2008
(dollars in thousands)

Interest Outstanding
Property Rate Term Principal Maturity

Courtyard Manhattan/Midtown
East 5.195% Fixed $41,751 December 2009
Salt Lake City Marriott
Downtown 5.500% Fixed 35,077 January 2015
Courtyard Manhattan/Fifth
Avenue 6.480% Fixed 51,000 June 2016
Marriott Griffin Gate Resort 5.110% Fixed 28,789 January 2010
Bethesda Marriott Suites 3.330% Variable 5,000 July 2010
Los Angeles Airport Marriott 5.300% Fixed 82,600 July 2015
Marriott Frenchman's Reef 5.440% Fixed 62,500 August 2015
Renaissance Worthington 5.400% Fixed 57,400 July 2015
Orlando Airport Marriott 5.680% Fixed 59,000 January 2016
Chicago Marriott Downtown 5.975% Fixed 220,000 April 2016
Austin Renaissance Hotel 5.507% Fixed 83,000 December 2016
Waverly Renaissance Hotel 5.503% Fixed 97,000 December 2016
Senior Unsecured Credit
Facility 3.400% Variable 32,000 February 2011
Total Debt $855,117

Pro Forma Operating Statistics

ADR Occupancy
2Q 2008 2Q 2007 B/(W) 2Q 2008 2Q 2007 B/(W)
Atlanta
Alpharetta $149.48 $154.93 (3.5%) 64.7% 63.6% 1.0%
Westin Atlanta
North (1) $144.12 $135.82 6.1% 63.0% 74.2% (11.2%)
Atlanta
Waverly $146.56 $147.13 (0.4%) 69.8% 67.6% 2.2%
Renaissance
Austin $156.49 $161.75 (3.2%) 74.4% 81.7% (7.3%)
Bethesda
Marriott
Suites $197.55 $188.13 5.0% 79.4% 82.7% (3.3%)
Boston
Westin (1) $202.48 $203.07 (0.3%) 70.6% 71.0% (0.5%)
Chicago
Marriott $238.83 $227.40 5.0% 81.8% 84.1% (2.3%)
Chicago
Conrad (1) $247.55 $238.14 4.0% 79.7% 73.6% 6.0%
Courtyard
Fifth Avenue $316.02 $281.34 12.3% 88.5% 92.6% (4.1%)
Courtyard
Midtown East $320.39 $300.43 6.6% 89.4% 91.2% (1.9%)
Frenchman's
Reef (1) $261.23 $260.51 0.3% 84.8% 88.2% (3.4%)
Griffin Gate
Marriott $155.72 $149.32 4.3% 71.8% 72.5% (0.7%)
Los Angeles
Airport $115.35 $115.93 (0.5%) 84.7% 77.1% 7.6%
Oak Brook
Hills (2) $137.78 $136.49 0.9% 60.6% 65.7% (5.1%)
Orlando Airport
Marriott $118.73 $119.19 (0.4%) 74.9% 80.6% (5.8%)
Salt Lake City
Marriott $131.65 $127.97 2.9% 68.1% 66.1% 2.0%
The Lodge
at Sonoma $226.50 $218.66 3.6% 75.5% 74.6% 0.9%
Torrance
Marriott
South Bay $124.77 $120.12 3.9% 80.1% 77.9% 2.2%
Vail
Marriott (1) $256.12 $266.72 (4.0%) 62.7% 57.3% 5.4%
Renaissance
Worthington $184.50 $177.82 3.8% 78.8% 77.1% 1.7%

RevPAR Hotel Adjusted EBITDA Margin
2Q 2008 2Q 2007 B/(W) 2Q 2008 2Q 2007 B/(W)
Atlanta
Alpharetta $96.66 $98.56 (1.9%) 32.0% 34.4% (2.38%)
Westin
Atlanta
North (1) $90.75 $100.78 (10.0%) 26.7% 34.8% (8.10%)
Atlanta
Waverly $102.28 $99.44 2.9% 26.3% 28.7% (2.42%)
Renaissance
Austin $116.37 $132.11 (11.9%) 29.5% 30.7% (1.17%)
Bethesda
Marriott
Suites $156.81 $155.59 0.8% 32.7% 35.0% (2.30%)
Boston
Westin (1) $142.87 $144.27 (1.0%) 31.2% 32.4% (1.13%)
Chicago
Marriott $195.44 $191.31 2.2% 33.9% 32.3% 1.61%
Chicago
Conrad (1) $197.25 $175.35 12.5% 34.0% 32.2% 1.88%
Courtyard
Fifth Avenue $279.72 $260.54 7.4% 43.0% 40.9% 2.11%
Courtyard
Midtown East $286.33 $274.10 4.5% 45.9% 46.0% (0.08%)
Frenchman's
Reef (1) $221.59 $229.85 (3.6%) 29.8% 31.3% (1.49%)
Griffin Gate
Marriott $111.85 $108.31 3.3% 32.8% 33.9% (1.05%)
Los Angeles
Airport $97.70 $89.43 9.3% 24.4% 24.9% (0.51%)
Oak Brook
Hills (2) $83.49 $89.66 (6.9%) 28.9% 30.6% (1.74%)
Orlando Airport
Marriott $88.91 $96.12 (7.5%) 31.6% 33.8% (2.17%)
Salt Lake City
Marriott $89.70 $84.61 6.0% 26.5% 25.8% 0.70%
The Lodge at
Sonoma $170.97 $163.15 4.8% 22.6% 22.4% 0.26%
Torrance
Marriott
South Bay $99.97 $93.62 6.8% 27.0% 29.7% (2.68%)
Vail
Marriott (1) $160.60 $152.78 5.1% 32.3% 29.7% 2.64%
Renaissance
Worthington $145.38 $137.11 6.0% 32.2% 32.7% (0.57%)

(1) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter and
include the months of March, April and May.
(2) Hotel Adjusted EBITDA Margins for the second quarter of 2007 were
impacted by $0.1 million in yield support at Oak Brook Hills.

Hotel Adjusted EBITDA Reconciliation

Second Quarter 2008

Plus: Plus: Plus: Equals:
Net Non-Cash Hotel
Total Income/ Deprecia- Interest Adjust- Adjusted
Revenues (Loss) tion Expense ments(1) EBITDA

Atlanta
Alpharetta $3,704 $966 $218 $- $- $1,184
Westin Atlanta
North (2) $4,609 $574 $659 $- $- $1,233
Atlanta
Waverly $8,557 $47 $951 $1,251 $- $2,249
Renaissance
Austin $8,454 $622 $802 $1,073 $- $2,496
Bethesda
Marriott Suites $4,709 $(483) $484 $69 $1,468 $1,538
Boston Westin
(2) $18,980 $3,016 $2,794 $- $117 $5,927
Chicago
Marriott $28,317 $4,050 $2,836 $3,085 $(365) $9,606
Chicago Conrad
(2) $7,272 $1,423 $1,053 $- $- $2,475
Courtyard Fifth
Avenue $4,386 $585 $455 $799 $48 $1,886
Courtyard
Midtown East $7,826 $2,559 $517 $516 $- $3,592
Frenchman's
Reef (2) 16,503 $3,448 $676 $800 $- $4,925
Griffin Gate
Marriott $7,599 $1,386 $759 $48 $2 $2,496
Los Angeles
Airport $13,525 $1,014 $1,244 $1,042 $- $3,300
Oak Brook Hills $6,840 $1,058 $791 $- $125 $1,974
Orlando Airport
Marriott $5,849 $357 $703 $788 $- $1,848
Salt Lake City
Marriott $5,943 $661 $456 $457 $- $1,574
The Lodge at
Sonoma $4,711 $561 $505 $- $- $1,066
Torrance
Marriott
South Bay $5,987 $867 $752 $- $- $1,619
Vail Marriott
(2) $7,271 $1,656 $696 $- $- $2,352
Renaissance
Worthington $9,974 $1,757 $718 $733 $2 $3,209

(1) The non-cash adjustments include expenses incurred by the hotels due
to the straight lining of the rent from our ground lease obligations, the
non-cash amortization of our favorable lease assets and the non-cash
amortization of our unfavorable contract liabilities.
(2) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter and
include the months of March, April and May.

Hotel Adjusted EBITDA Reconciliation

Second Quarter 2007

Plus: Plus: Plus: Equals:
Net Non-Cash Hotel
Total Income/ Deprecia- Interest Adjust- Adjusted
Revenues (Loss) tion Expense ments(1) EBITDA

Atlanta
Alpharetta $3,765 $946 $347 $- $- $1,294
Westin Atlanta
North (2) $5,330 $1,231 $626 $- $- $1,857
Atlanta Waverly $8,434 $317 $855 $1,249 $- $2,421
Renaissance
Austin $9,042 $958 $747 $1,071 $- $2,776
Bethesda
Marriott Suites $4,729 $(861) $674 $366 $1,474 $1,653
Boston Westin
(2) $19,563 $3,807 $2,343 $- $180 $6,330
Chicago
Marriott $26,864 $3,550 $2,369 $3,127 $(365) $8,681
Chicago Conrad
(2) $6,621 $1,278 $851 $- $- $2,129
Courtyard Fifth
Avenue $4,099 $371 $443 $790 $73 $1,677
Courtyard
Midtown East $7,498 $2,384 $538 $525 $- $3,447
Frenchman's
Reef (2) $16,260 $3,746 $569 $779 $- $5,094
Griffin Gate
Marriott $7,488 $1,497 $685 $355 $1 $2,538
Los Angeles
Airport $12,938 $1,041 $1,143 $1,039 $- $3,223
Oak Brook Hills $7,024 $626 $1,398 $- $125 $2,150
Orlando Airport
Marriott $6,249 $662 $665 $783 $- $2,110
Salt Lake City
Marriott $5,528 $262 $695 $469 $- $1,426
The Lodge at
Sonoma $4,352 $531 $442 $- $- $973
Torrance
Marriott
South Bay $5,795 $1,046 $676 $- $- $1,722
Vail Marriott
(2) $6,879 $1,394 $648 $- $- $2,043
Renaissance
Worthington $9,479 $1,748 $619 $734 $3 $3,104

(1) The non-cash adjustments include expenses incurred by the hotels due
to the straight lining of the rent from our ground lease obligations, the non-
cash amortization of our favorable lease assets and the non-cash amortization
of our unfavorable contract liabilities.
(2) The hotel reports results on a monthly basis. The figures presented
are based on the Company's reporting calendar for the second quarter and
include the months of March, April and May.
SOURCE DiamondRock Hospitality Company

Chris King of DiamondRock Hospitality Company, +1-240-744-1150