UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

DiamondRock Hospitality Company

(Exact name of registrant as specified in its charter)

Maryland		001-32514		20-1180098
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

6903 Rockledge Drive, Suite 800 Bethesda, MD		20817
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (240) 744-1150

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

The information in this Current Report on Form 8-K is furnished under Item 2.02 — “Results of Operations and Financial Condition.” Such information, including the exhibits attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

ITEM 2.02. Results of Operations and Financial Condition.

On July 27, 2010, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for the quarter ended June 18, 2010. The text of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

ITEM 9.01. Financial Statements and Exhibits.

(d) Exhibits.

See Index to Exhibits attached hereto.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit No.				Description
	99.1			Press release dated July 27, 2010.

Exhibit 99.1

COMPANY CONTACT

Chris King
(240) 744-1150

FOR IMMEDIATE RELEASE

TUESDAY, JULY 27, 2010

DIAMONDROCK HOSPITALITY COMPANY REPORTS SECOND QUARTER 2010 RESULTS

BETHESDA, Maryland, Tuesday July 27, 2010 — DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced results of operations for its second fiscal quarter ended June 18, 2010. The Company is a lodging focused real estate investment trust that owns twenty-one premium hotels in North America and holds a senior loan secured by a premium hotel in Chicago, Illinois.

Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company, stated, “Second quarter results exceeded our internal expectations with particularly strong performance from New York and Chicago. Seven of our hotels recorded double-digit RevPAR increases and half increased average daily rate. Additionally, the Company continued to execute on its acquisition strategy and has committed over a quarter of a billion dollars towards high quality deals. With conservative leverage and a year-end cash balance of approximately $160 million, DiamondRock remains positioned to seize opportunistic acquisitions.”

Second Quarter 2010 Highlights

•

Acquisition of Hilton Minneapolis: The Company acquired the 821-room Hilton Minneapolis in Minneapolis, Minnesota for total consideration of $156 million.

•

Agreement to Acquire the Renaissance Charleston Historic District: The Company agreed to acquire the 166-room Renaissance Charleston Historic District Hotel located in Charleston, South Carolina for $39 million.

•

Acquisition of Allerton Chicago Senior Mortgage: The Company acquired the $69 million senior mortgage loan secured by the Allerton Hotel in Chicago, Illinois for an $8.5 million discount to par.

•

New Credit Facility: Subsequent to the end of the second quarter, the Company agreed to terms for a new $200 million senior unsecured revolving credit facility.

•

RevPAR: The Company’s RevPAR was $116.53, an increase of 6.1 percent from the comparable period in 2009.

•

Hotel Adjusted EBITDA Margins: The Company’s Hotel Adjusted EBITDA margin was 25.86% an increase of 67 basis points from the comparable period in 2009.

•

Adjusted EBITDA: The Company’s Adjusted EBITDA was $35.8 million.

•

Adjusted FFO: The Company’s Adjusted FFO was $21.6 million and Adjusted FFO per diluted share was $0.16. This reflects income tax expense of $3.1 million during the second quarter.

•

Successful Equity Raise: During the second quarter the Company completed a follow-on public offering of its common stock for net proceeds of $184.8 million.

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,” and “Adjusted FFO.”

For the second quarter beginning March 27, 2010 and ended June 18, 2010, the Company reported the following:

•

Revenues of $151.1 million compared to $143.6 million for the comparable period in 2009.

•

Adjusted EBITDA of $35.8 million compared to $32.6 million for the comparable period in 2009.

•

Adjusted FFO and Adjusted FFO per diluted share of $21.6 million and $0.16, respectively, compared to $24.9 million and $0.24, respectively, for the comparable period in 2009.

•

Net income of $0.8 million (or $0.01 per diluted share) compared to $2.5 million (or $0.02 per diluted share) for the comparable period in 2009.

RevPAR for the second quarter increased 6.1 percent (from $109.85 to $116.53) from the comparable period in 2009, driven by a 3.7 percentage point increase in occupancy (from 69.0 percent to 72.7 percent) and a 0.6 percent increase in the average daily rate (from $159.30 to $160.29). Hotel Adjusted EBITDA margins increased 67 basis points (from 25.19% to 25.86%) from the comparable period in 2009.

For the period from January 1, 2010 to June 18, 2010, the Company reported the following:

•

Revenues of $264.0 million compared to $262.2 million for the comparable period in 2009.

•

Adjusted EBITDA of $54.3 million compared to $53.0 million for the comparable period in 2009.

•

Adjusted FFO and Adjusted FFO per diluted share of $33.6 million and $0.25, respectively, compared to $39.7 million and $0.41, respectively, for the comparable period in 2009.

•

Net loss of $7.5 million (or $0.06 per diluted share) compared to $2.8 million (or $0.03 per diluted share) for the comparable period in 2009.

Year-to-date RevPAR increased 1.7 percent (from $104.53 to $106.31) from the comparable period in 2009, driven by a 2.8 percent increase in occupancy (from 66.4 percent to 69.2 percent) partially offset by a 2.4 percent decrease in the average daily rate (from $157.36 to $153.53). Year-to-date Hotel Adjusted EBITDA margins increased 8 basis points (from 22.96% to 23.04%) from the comparable period in 2009.

Agreement to Acquire the Renaissance Charleston Historic District Hotel

On July 1, 2010, the Company signed a definitive purchase and sale agreement to acquire the 166-room Renaissance Charleston Historic District Hotel (the “Renaissance”) located in Charleston, South Carolina. The contractual purchase price of $39 million represents an EBITDA multiple of 11.1 times the Renaissance’s 2010 full year forecast of $3.5 million. The hotel is projected to generate approximately $1.3 million of EBITDA during the Company’s ownership period in 2010. The “off market” acquisition was sourced through DiamondRock’s strategic sourcing relationship with Marriott International. DiamondRock expects the acquisition to be completed during August 2010, subject to the satisfaction of customary closing conditions. The acquisition will be funded with corporate cash.

Hilton Minneapolis Acquisition

On June 17, 2010, the Company acquired the 821-room Hilton Minneapolis in Minneapolis, Minnesota, for total consideration of $156 million. The hotel will remain a Hilton-branded and managed property. The hotel is projected to generate $8.9 million of Adjusted EBITDA during the Company’s ownership period in 2010. The post acquisition operating results of the Hilton Minneapolis are not included in the Company’s second quarter results due to the hotel reporting on a calendar month and year basis.

Allerton Hotel Mortgage Loan

The Company acquired the entire $69 million senior loan secured by the 443-room Allerton Hotel located on Magnificent Mile in Chicago, Illinois for approximately $60.5 million, a discount of $8.5 million from par value. The senior loan bears interest at a rate of LIBOR plus 692 basis points, including 5 percentage points of default interest. The loan matured in January 2010 and is currently in default. The Company continues to pursue the foreclosure proceedings initially filed in April 2010 which would result in DiamondRock owning the hotel. However, no assurance can be given that the foreclosure proceedings will be successful. The matter may be resolved without foreclosure if the borrower repays the senior loan in full.

The Company will include all cash received from the senior loan on the Allerton in its calculations of Adjusted EBITDA and Adjusted FFO. Subsequent to the end of the second fiscal quarter the Company received cash interest payments from the borrower totaling $750,000. The Company’s 2010 Adjusted EBITDA and Adjusted FFO guidance assumes $2.5 million of cash received as payment of interest on the Allerton senior loan.

New Line of Credit

The Company has agreed to terms for a new $200 million senior unsecured revolving credit facility with Wells Fargo Bank, N.A. and Bank of America, N.A. serving as co-lead arrangers. The significant terms of the proposed credit facility are as follows:

•

Term: Term of 48 months, including the extension of one year conditioned upon the payment of applicable fees and satisfaction of certain conditions.

•

Accordion Feature: Amount of the borrowing capacity can increase to a maximum amount of $275 million with the lenders’ approval.

•

Financial Covenants: The proposed financial covenants including a maximum leverage ratio of 60%, a minimum fixed charge coverage ratio that will range from 1.3x to 1.5x during the term of the agreement and a minimum tangible net worth covenant.

•

Interest Rate: Interest rate spread based on a pricing grid depending on our leverage ratio. The LIBOR spread ranges from 275 to 375 basis points over LIBOR, with a LIBOR floor of 1.00%.

•

Unused Fee: The unused facility fee ranges from 50 to 40 basis points depending on the amount drawn on the facility.

The proposed new credit facility, which will replace the Company’s existing credit facility, is subject to lender due diligence, definitive documentation and closing requirements; accordingly, no assurance can be given that this proposed facility will be procured on the terms, including the amount available to be borrowed, described above, or at all.

Follow-On Public Offering

On May 28, 2010, the Company completed a follow-on public offering of our common stock. The Company sold 23,000,000 shares of common stock, including the underwriters’ overallotment of 3,000,000 shares, at an offering price of $8.40 per share. The net proceeds, after deduction of offering costs, were approximately $184.8 million.

Balance Sheet

As of the end of the second quarter, the Company has approximately $155.4 million of unrestricted cash on hand and $783.8 million of debt outstanding, which consists solely of fixed rate, property-specific mortgage debt with no near-term maturities. Eleven of the Company’s 21 hotels are unencumbered by mortgage debt and the Company’s $200 million senior unsecured credit facility is unused.

The Company continues to maintain its straightforward capital structure. As of June 18, 2010, the Company continued to own 100% of its properties directly.

Outlook and Guidance

The Company is providing full year guidance, which is based upon the recent operating forecasts prepared by its hotel operators and also includes anticipated period of ownership results from the Hilton Minneapolis and the Renaissance Charleston, as well as expected cash receipts from the senior loan secured by the Allerton Hotel. The Company is not providing quarterly guidance. Achievement of the anticipated results is subject to the risks disclosed herein and in the Company’s filings with the Securities and Exchange Commission.

For the full year 2010, the Company expects:

•

RevPAR growth of 2 percent to 4 percent.

•

Adjusted EBITDA of $132 million to $136 million.

•

Adjusted FFO of $83 million to $85 million, which assumes income tax expense to range from $3.5 million to $5.5 million.

•

Adjusted FFO per share of $0.57 to $0.59 based on 144.4 million diluted weighted average shares.

Income Taxes

The full year guidance above reflects an estimated income tax expense of $3.5 million to $5.5 million for the year ended December 31, 2010. The estimated income tax expense increased from the Company’s full year guidance provided at the first quarter due to the impact of the acquisitions of the Minneapolis Hilton and the Renaissance Charleston Historic District as well as the tax impact on our improved operating results compared to our first quarter guidance. The guidance also reflects the Company renewing its Economic Development Credits associated with the Frenchman’s Reef Marriott, which the Company continues to pursue.

Earnings Call

The Company will host a conference call to discuss its second quarter results on Tuesday, July 27, 2010, at 2:00 pm Eastern Time (ET). To participate in the live call, investors are invited to dial 888-679-8034 (for domestic callers) or 617-213-4847 (for international callers). The participant passcode is 90666795. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at 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. The Company owns 21 hotels with approximately 10,400 rooms and holds the senior loan on a 443-room hotel located in Chicago. The Company also has entered into a definitive purchase and sale agreement to acquire the 166-room Renaissance Charleston Historic District Hotel, which is expected to close in the third quarter, subject to the satisfaction of customary closing conditions. For further information, please visit DiamondRock Hospitality Company’s website at 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 “believe,” “expect,” “intend,” “project,” “forecast,” 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 the Company’s hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company’s indebtedness; relationships with property managers; the 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; risks associated with the foreclosure proceedings on the Allerton Hotel; the Company’s ability to achieve the returns that it expects from the Hilton Minneapolis, Renaissance Charleston and the Allerton senior loan, including its expectations regarding the projected demand drivers in Minneapolis and Charleston; and other risk factors contained in the Company’s filings with the Securities and Exchange Commission. Although the Company has signed a definitive agreement to purchase the Renaissance Charleston Historic District Hotel, there is a risk that the transaction may not close for a variety of reasons, including the failure of its completion of satisfactory due diligence and the failure to satisfy closing conditions. Although the Company believes 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 the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Reporting Periods for Statement of Operations

The results reported in the Company’s consolidated statements of operations are based on results of its hotels reported by hotel managers. The Company’s hotel managers use different reporting periods. Marriott International, the manager of most of the Company’s 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 16 or 17 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), Davidson Hotel Company, manager of the Westin Atlanta North, Vail Resorts, manager of the Vail Marriott, Hilton Hotels Corporation, manager of the Conrad Chicago and the Hilton Minneapolis, and Westin Hotel Management, L.P., manager of the Westin Boston Waterfront report results on a monthly basis. Additionally, the Company, as a REIT, is required by U.S. federal tax laws to report results on a calendar year basis. 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 the fourth quarter ends on December 31 and full year results, as reported in the statement of operations, always include the same number of days as the calendar year.

Two consequences of the reporting cycle the Company has adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) the 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 the Company adopted is more closely aligned with the reporting calendar used by the manager of most of its properties, one final consequence of the calendar is the Company is unable to report any results for Frenchman’s Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, Westin Boston Waterfront or the Hilton Minneapolis for the month of operations that ends after its fiscal quarter-end because none of Vail Resorts, Davidson Hotel Company, Hilton Hotels Corporation, Westin Hotel Management, L.P., and Marriott International make mid-month results available. As a result, the quarterly results of operations include results from Frenchman’s Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, Westin Boston Waterfront, and Hilton Minneapolis 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

Five of the Company’s hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, Salt Lake City Downtown Marriott, Westin Boston Waterfront and Hilton Minneapolis. 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 U.S. generally accepted accounting principles, 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 quarter 2010, contractual cash rent payable on the ground leases totaled $0.4 million and the Company recorded approximately $2.2 million in ground rent expense. The non-cash portion of ground rent expense recorded for the second quarter 2010 was $1.8 million.

DIAMONDROCK HOSPITALITY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

		June 18, 2010				December 31, 2009
		(Unaudited)
ASSETS
Property and equipment, at cost		$	2,337,163			$	2,171,311
Less: accumulated depreciation			(347,336	)			(309,224	)
			1,989,827				1,862,087
Deferred financing costs, net			3,365				3,624
Restricted cash			40,817				31,274
Due from hotel managers			66,243				45,200
Note receivable			60,482				—
Favorable lease assets, net			36,970				37,319
Prepaid and other assets			60,275				58,607
Cash and cash equivalents			155,418				177,380
Total assets		$	2,413,397			$	2,215,491
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage debt		$	783,844			$	786,777
Senior unsecured credit facility			—				—
Total debt			783,844				786,777
Deferred income related to key money, net			19,503				19,763
Unfavorable contract liabilities, net			81,890				82,684
Due to hotel managers			39,319				29,847
Dividends declared and unpaid			—				41,810
Accounts payable and accrued expenses			75,536				79,104
Total other liabilities			216,248				253,208
Stockholders’ 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; 154,570,543 and 124,299,423 shares issued and outstanding at June 18, 2010 and December 31, 2009, respectively			1,546				1,243
Additional paid-in capital			1,556,169				1,311,053
Accumulated deficit			(144,410	)			(136,790	)
Total stockholders’ equity			1,413,305				1,175,506
Total liabilities and stockholders’ equity		$	2,413,397			$	2,215,491

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

		Fiscal Quarter				Fiscal Quarter				Period from				Period from
		Ended				Ended				January 1, 2010 to				January 1, 2009 to
		June 18, 2010				June 19, 2009				June 18, 2010				June 19, 2009
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
Rooms		$	95,730			$	90,228			$	167,378			$	165,343
Food and beverage			47,699				44,697				83,250				81,587
Other			7,696				8,682				13,324				15,221
Total revenues			151,125				143,607				263,952				262,151
Operating Expenses:
Rooms			24,458				22,974				44,530				42,956
Food and beverage			31,490				30,320				56,215				56,901
Management fees			5,482				5,008				8,554				8,336
Other hotel expenses			51,990				50,516				96,619				96,540
Impairment of favorable lease asset			—				1,286				—				1,286
Depreciation and amortization			19,074				19,729				37,981				38,446
Corporate expenses			3,897				3,651				7,248				7,419
Total operating expenses			136,391				133,484				251,147				251,884
Operating profit			14,734				10,123				12,805				10,267
Other Expenses (Income):
Interest income			(286	)			(101	)			(367	)			(183	)
Interest expense			11,089				11,086				19,215				22,584
Total other expenses			10,803				10,985				18,848				22,401
Income (loss) before income taxes			3,931				(862	)			(6,043	)			(12,134	)
Income tax (expense) benefit			(3,092	)			3,319				(1,462	)			9,297
Net income (loss)		$	839			$	2,457			$	(7,505	)		$	(2,837	)
Earnings (loss) per share:
Basic and diluted earnings (loss) per share		$	0.01			$	0.02			$	(0.06	)		$	(0.03	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods from January 1, 2010 to June 18, 2010 and January 1, 2009 to June 19, 2009
(in thousands)

		Period from				Period from
		January 1, 2010				January 1, 2009
		to June 18, 2010				to June 19, 2009
		(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income (loss)		$	(7,505	)		$	(2,837	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Real estate depreciation			37,981				38,446
Corporate asset depreciation as corporate expenses			70				67
Non-cash ground rent			3,566				3,570
Non-cash financing costs as interest			457				386
Non-cash reversal of penalty interest			(3,134	)			—
Impairment of favorable lease asset			—				1,286
Amortization of unfavorable contract liabilities			(794	)			(794	)
Amortization of deferred income			(260	)			(260	)
Stock-based compensation			1,915				2,532
Changes in assets and liabilities:
Prepaid expenses and other assets			(1,368	)			(3,565	)
Restricted cash			(2,546	)			123
Due to/from hotel managers			(11,538	)			4,754
Accounts payable and accrued expenses			(3,083	)			(13,457	)
Net cash provided by operating activities			13,761				30,251
Cash flows from investing activities:
Hotel capital expenditures			(10,391	)			(13,265	)
Hotel acquisition			(156,501	)			—
Purchase of mortgage loan			(60,282	)			—
Change in restricted cash			(6,997	)			(970	)
Net cash used in investing activities			(234,171	)			(14,235	)
Cash flows from financing activities:
Repayments of credit facility			—				(57,000	)
Scheduled mortgage debt principal payments			(2,934	)			(1,968	)
Repurchase of common stock			(3,961	)			(159	)
Proceeds from sale of common stock, net			209,864				82,158
Payment of financing costs			(198	)			(1,240	)
Payment of cash dividends			(4,323	)			(80	)
Net cash provided by financing activities			198,448				21,711
Net (decrease) increase in cash and cash equivalents			(21,962	)			37,727
Cash and cash equivalents, beginning of period			177,380				13,830
Cash and cash equivalents, end of period		$	155,418			$	51,557
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest		$	23,484			$	23,819
Cash paid for income taxes		$	642			$	868

Non-GAAP Financial Measures

The Company uses the following four non-GAAP financial measures that it believes are useful to investors as key measures of its operating performance: (1) EBITDA, (2) FFO, (3) Adjusted EBITDA and (4) Adjusted FFO.

EBITDA represents net (loss) income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company believes EBITDA is useful to an investor in evaluating its operating performance because it helps investors evaluate and compare the results of its operations from period to period by removing the impact of the Company’s capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization) from its operating results. The Company also uses EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

		Historical (in 000s)
		Fiscal Quarter Ended								Period From
										January 1, 2010				January 1, 2009
		June 18, 2010				June 19, 2009				to June 18, 2010				to June 19, 2009
Net income (loss)		$	839			$	2,457			$	(7,505	)		$	(2,837	)
Interest expense			11,089				11,086				19,215				22,584
Income tax expense (benefit)			3,092				(3,319	)			1,462				(9,297	)
Depreciation and amortization			19,074				19,729				37,981				38,446
EBITDA		$	34,094			$	29,953			$	51,153			$	48,896

		Full Year Forecast 2010 (in 000s)
		Low End				High End
Net loss		$	(14,800	)		$	(10,800	)
Interest expense			45,500				45,500
Income tax expense			3,500				5,500
Depreciation and amortization			88,000				86,000
EBITDA		$	122,200			$	126,200

		Acquisitions — 2010 Period of Ownership
		(in 000s)
		Hilton				Renaissance
		Minneapolis				Charleston
Net income		$	4,110			$	630
Interest expense			—				—
Income tax expense			120				20
Depreciation and amortization			4,000				650
EBITDA		$	8,230			$	1,300

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

		Historical (in 000s)
		Fiscal Quarter Ended								Period From
										January 1, 2010				January 1, 2009
		June 18, 2010				June 19, 2009				to June 18, 2010				to June 19, 2009
Net income (loss)		$	839			$	2,457			$	(7,505	)		$	(2,837	)
Real estate related depreciation and amortization			19,074				19,729				37,981				38,446
FFO		$	19,913			$	22,186			$	30,476			$	35,609
FFO per share (basic and diluted)		$	0.14			$	0.21			$	0.23			$	0.37

		Full Year Forecast 2010 (in 000s)
		Low End				High End
Net loss		$	(14,800	)		$	(10,800	)
Real estate related depreciation and amortization			88,000				86,000
FFO		$	73,200			$	75,200
FFO per share (basic and diluted)		$	0.51			$	0.52

The Company also evaluates its performance by reviewing Adjusted EBITDA and Adjusted FFO because it believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding the Company’s ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with the primary GAAP presentation of net income (loss), is beneficial to a complete understanding of the Company’s operating performance. The Company adjusts EBITDA and FFO for the following items, which may occur in any period, and refers to these measures as Adjusted EBITDA and Adjusted FFO:

•

Non-Cash Ground Rent: The Company excludes the non-cash expense incurred from straight lining the rent from its ground lease obligations and the non-cash amortization of its favorable lease assets.

•

The impact of the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the Company’s 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. The Company excludes these one-time adjustments because they do not reflect its actual performance for that period.

•

Gains from Early Extinguishment of Debt: The Company excludes the effect of gains recorded on the early extinguishment of debt because it believes that including them in EBITDA and FFO is not consistent with reflecting the ongoing performance of its hotels.

•

Impairment Losses: The Company excludes the effect of impairment losses recorded because it believes that including them in EBITDA and FFO is not consistent with reflecting the ongoing performance of its assets. In addition, the Company believes that impairment charges are similar to depreciation expense, which is also excluded from EBITDA and FFO.

•

Gains or Losses on Dispositions: The Company excludes the effect of gains or losses on dispositions from EBITDA because it believes that including them is not consistent with reflecting the ongoing performance of its remaining assets. In addition, gains and losses on dispositions are excluded from the calculation of FFO in accordance with NAREIT standards.

•

Acquisition Costs: The Company excludes acquisition transaction costs expensed during the period because it believes that including these costs in EBITDA and FFO is not consistent with the underlying performance of the Company.

•

Mortgage Loan Interest Payments Received: The Company includes cash payments received on its senior loan secured by the Allerton Hotel in Adjusted EBITDA and Adjusted FFO. GAAP requires the Company to record the cash received from the borrower as a reduction of its basis in the mortgage loan due to the uncertainty over the timing and amount of cash payments on the loan. The Company believes that these cash payments reflect its return on its investment in the mortgage loan and should be included in Adjusted EBITDA and Adjusted FFO as they relate to the operating performance of the Company.

•

Other Non-Cash and / or Non-Recurring Items: The Company excludes the effect of certain non-cash and/or non-recurring items because it believes that including these costs in EBITDA and FFO is not consistent with the underlying performance of the Company.

		Historical (in 000s)
		Fiscal Quarter Ended								Period From
										January 1, 2010				January 1, 2009
		June 18, 2010				June 19, 2009				to June 18, 2010				to June 19, 2009
EBITDA		$	34,094			$	29,953			$	51,153			$	48,896
Non-cash ground rent			1,777				1,783				3,566				3,570
Non-cash amortization of unfavorable contract liabilities			(397	)			(397	)			(794	)			(794	)
Acquisition costs			337				—				337				—
Impairment of favorable lease asset			—				1,286				—				1,286
Adjusted EBITDA		$	35,811			$	32,625			$	54,262			$	52,958

		Forecast Full Year 2010 (in 000s)
		Low End				High End
EBITDA		$	122,200			$	126,200
Non-cash ground rent			8,400				8,400
Non-cash amortization of unfavorable contract liabilities			(1,700	)			(1,700	)
Acquisition costs			600				600
Mortgage loan cash payments			2,500				2,500
Adjusted EBITDA		$	132,000			$	136,000

		Acquisitions — 2010 Period of Ownership
		(in 000s)
		Hilton				Renaissance
		Minneapolis				Charleston
EBITDA		$	8,230			$	1,300
Non-cash ground rent			670				—
Adjusted EBITDA		$	8,900			$	1,300

		Historical (in 000s)
		Fiscal Quarter Ended								Period From
										January 1, 2010				January 1, 2009
		June 18, 2010				June 19, 2009				to June 18, 2010				to June 19, 2009
FFO		$	19,913			$	22,186			$	30,476			$	35,609
Non-cash ground rent			1,777				1,783				3,566				3,570
Non-cash amortization of unfavorable contract liabilities			(397	)			(397	)			(794	)			(794	)
Acquisition costs			337				—				337				—
Impairment of favorable lease asset			—				1,286				—				1,286
Adjusted FFO		$	21,630			$	24,858			$	33,585			$	39,671
Adjusted FFO per share (basic and diluted)		$	0.16			$	0.24			$	0.25			$	0.41

		Forecast Full Year 2010 (in 000s)
		Low End				High End
FFO		$	73,200			$	75,200
Non-cash ground rent			8,400				8,400
Non-cash amortization of unfavorable contract liabilities			(1,700	)			(1,700	)
Acquisition costs			600				600
Mortgage loan cash payments			2,500				2,500
Adjusted FFO		$	83,000			$	85,000
Adjusted FFO per share (basic and diluted)		$	0.57			$	0.59

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.

DIAMONDROCK HOSPITALITY COMPANY

HOTEL OPERATIONAL DATA
Schedule of Property Level Results
(in thousands)
(unaudited)

		Fiscal Quarter				Fiscal Quarter								Period from				Period from
		Ended				Ended				%				January 1, 2010				January 1, 2009				%
		June 18, 2010				June 19, 2009				Change				to June 18, 2010				to June 19, 2009				Change
Revenues:
Rooms		$	95,730			$	90,228				6.1	%		$	167,378			$	165,343				1.2	%
Food and beverage			47,699				44,697				6.7	%			83,250				81,587				2.0	%
Other			7,696				8,682				(11.4	)%			13,324				15,221				(12.5	)%
Total revenues			151,125				143,607				5.2	%			263,952				262,151				0.7	%
Operating Expenses:
Rooms			24,458				22,974				6.5	%			44,530				42,956				3.7	%
Food and beverage			31,490				30,320				3.9	%			56,215				56,901				(1.2	)%
Other direct departmental			4,421				4,598				(3.8	)%			8,022				8,718				(8.0	)%
General and administrative			13,063				12,406				5.3	%			24,144				23,531				2.6	%
Utilities			5,710				5,404				5.7	%			10,749				10,807				(0.5	)%
Repairs and maintenance			6,782				6,829				(0.7	)%			12,842				13,027				(1.4	)%
Sales and marketing			10,952				10,154				7.9	%			19,417				18,849				3.0	%
Base management fees			4,085				3,796				7.6	%			7,048				6,924				1.8	%
Incentive management fees			1,397				1,212				15.3	%			1,506				1,412				6.7	%
Property taxes			6,503				6,240				4.2	%			12,675				12,381				2.4	%
Ground rent			2,213				2,222				(0.4	)%			4,431				4,449				(0.4	)%
Other fixed expenses			2,346				2,659				(11.8	)%			4,339				4,780				(9.2	)%
Total operating expenses			113,420				108,814				4.2	%			205,918				204,735				0.6	%
Hotel EBITDA		$	37,705			$	34,793				8.4	%		$	58,034			$	57,416				1.1	%
Non-cash ground rent			1,777				1,783				0.3	%			3,566				3,570				(0.1	)%
Non-cash amortization of unfavorable contract liabilities			(397	)			(397	)			0.0	%			(794	)			(794	)			0.0	%
Hotel Adjusted EBITDA		$	39,085			$	36,179				8.0	%		$	60,806			$	60,192				1.0	%

Market Capitalization as of June 18, 2010
(in thousands, except per share data)

Enterprise Value
Common equity capitalization (at June 18, 2010 closing price of $8.97/share)		$	1,400,522
Consolidated debt			783,844
Cash and cash equivalents			(155,418	)
Total enterprise value		$	2,028,948
Share Reconciliation
Common shares outstanding			154,571
Unvested restricted stock held by management and employees			1,548
Share grants under deferred compensation plan held by directors			15
Combined shares outstanding			156,134

Debt Summary as of June 18, 2010
(dollars in thousands)

		Interest								Outstanding
Property		Rate				Term				Principal				Maturity
Courtyard Manhattan / Midtown East			8.810	%		Fixed				$	42,799			October 2014
Salt Lake City Marriott Downtown			5.500	%		Fixed					32,411			January 2015
Courtyard Manhattan / Fifth Avenue			6.480	%		Fixed					51,000			June 2016
Los Angeles Airport Marriott			5.300	%		Fixed					82,600			July 2015
Marriott Frenchman’s Reef			5.440	%		Fixed					60,992			August 2015
Renaissance Worthington			5.400	%		Fixed					56,724			July 2015
Orlando Airport Marriott			5.680	%		Fixed					59,000			January 2016
Chicago Marriott Downtown			5.975	%		Fixed					218,318			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		LIBOR + 0.95				Variable					—			February 2011
Total Debt										$	783,844

Operating Statistics — Second Quarter

		ADR												Occupancy												RevPAR												Hotel Adjusted EBITDA Margin
		2Q 2010				2Q 2009				B/(W)				2Q 2010				2Q 2009				B/(W)				2Q 2010				2Q 2009				B/(W)				2Q 2010				2Q 2009				B/(W)
Atlanta Alpharetta		$	118.12			$	121.03				(2.4	%)			64.9	%			60.9	%			4.0	%		$	76.61			$	73.71				3.9	%			22.96	%			25.06	%		-210bps
Westin Atlanta North (1)		$	102.68			$	100.01				2.7	%			73.5	%			66.6	%			6.9	%		$	75.47			$	66.63				13.3	%			17.49	%			9.16	%		833bps
Atlanta Waverly		$	128.22			$	131.77				(2.7	%)			60.6	%			64.7	%			(4.1	%)		$	77.70			$	85.29				(8.9	%)			16.76	%			23.49	%		-673bps
Renaissance Austin		$	142.09			$	150.74				(5.7	%)			63.9	%			63.5	%			0.4	%		$	90.82			$	95.70				(5.1	%)			31.92	%			32.71	%		-79bps
Bethesda Marriott Suites		$	168.63			$	164.72				2.4	%			76.8	%			69.0	%			7.8	%		$	129.43			$	113.69				13.8	%			27.99	%			27.96	%		3bps
Boston Westin (1)		$	202.26			$	203.52				(0.6	%)			72.2	%			67.5	%			4.7	%		$	145.95			$	137.28				6.3	%			29.59	%			31.19	%		-160bps
Chicago Marriott		$	197.80			$	183.70				7.7	%			78.5	%			78.0	%			0.5	%		$	155.31			$	143.26				8.4	%			26.59	%			25.35	%		124bps
Chicago Conrad (1)		$	164.48			$	188.12				(12.6	%)			83.0	%			74.4	%			8.6	%		$	136.55			$	139.90				(2.4	%)			22.78	%			26.07	%		-329bps
Courtyard Fifth Avenue		$	254.26			$	215.00				18.3	%			91.3	%			89.1	%			2.2	%		$	232.11			$	191.57				21.2	%			33.63	%			24.62	%		901bps
Courtyard Midtown East		$	239.91			$	207.19				15.8	%			92.0	%			87.3	%			4.7	%		$	220.72			$	180.89				22.0	%			37.63	%			32.27	%		535bps
Frenchman’s Reef (1)		$	251.22			$	235.11				6.9	%			85.6	%			88.7	%			(3.1	%)		$	215.08			$	208.61				3.1	%			31.13	%			31.48	%		-34bps
Griffin Gate Marriott		$	133.75			$	133.78				0.0	%			70.6	%			66.0	%			4.6	%		$	94.45			$	88.33				6.9	%			28.80	%			29.88	%		-108bps
Los Angeles Airport		$	100.48			$	108.05				(7.0	%)			79.1	%			70.3	%			8.8	%		$	79.48			$	75.97				4.6	%			13.18	%			12.11	%		107bps
Hilton Minneapolis (2)			—				—				—				—				—				—				—				—				—				—				—					—
Oak Brook Hills		$	106.17			$	122.08				(13.0	%)			59.9	%			39.3	%			20.6	%		$	63.58			$	47.99				32.5	%			16.06	%			15.17	%		89bps
Orlando Airport Marriott		$	97.14			$	100.37				(3.2	%)			69.0	%			74.9	%			(5.9	%)		$	66.99			$	75.21				(10.9	%)			17.72	%			24.95	%		-723bps
Salt Lake City Marriott		$	130.64			$	129.39				1.0	%			54.8	%			50.3	%			4.5	%		$	71.57			$	65.07				10.0	%			26.52	%			17.53	%		899bps
The Lodge at Sonoma		$	192.05			$	187.16				2.6	%			71.2	%			63.0	%			8.2	%		$	136.80			$	117.87				16.1	%			14.27	%			10.67	%		360bps
Torrance Marriott South Bay		$	101.44			$	111.70				(9.2	%)			83.4	%			72.3	%			11.1	%		$	84.65			$	80.73				4.9	%			21.36	%			23.69	%		-233bps
Vail Marriott (1)		$	223.84			$	199.48				12.2	%			55.4	%			61.2	%			(5.8	%)		$	124.04			$	122.02				1.7	%			25.23	%			18.67	%		656bps
Renaissance Worthington		$	164.74			$	168.58				(2.3	%)			67.3	%			64.0	%			3.3	%		$	110.87			$	107.88				2.8	%			34.49	%			31.61	%		288bps
Total/Weighted Average		$	160.29			$	159.30				0.6	%			72.7	%			69.0	%			3.7	%		$	116.53			$	109.85				6.1	%			25.86	%			25.19	%		67bps

Operating Statistics — Year to Date

		ADR												Occupancy												RevPAR												Hotel Adjusted EBITDA Margin
		YTD 2010				YTD 2009				B/(W)				YTD 2010				YTD 2009				B/(W)				YTD 2010				YTD 2009				B/(W)				YTD 2010				YTD 2009				B/(W)
Atlanta Alpharetta		$	119.44			$	128.38				(7.0	%)			66.8	%			59.1	%			7.7	%		$	79.75			$	75.82				5.2	%			25.53	%			26.09	%		-56bps
Westin Atlanta North (1)		$	102.42			$	103.88				(1.4	%)			71.1	%			66.5	%			4.6	%		$	72.79			$	69.08				5.4	%			15.94	%			13.07	%		287bps
Atlanta Waverly		$	129.43			$	137.52				(5.9	%)			65.2	%			62.6	%			2.6	%		$	84.36			$	86.11				(2.0	%)			21.33	%			23.28	%		-195bps
Renaissance Austin		$	143.70			$	153.74				(6.5	%)			63.8	%			63.2	%			0.6	%		$	91.72			$	97.12				(5.6	%)			31.22	%			31.15	%		7bps
Bethesda Marriott Suites		$	166.99			$	179.41				(6.9	%)			66.9	%			62.7	%			4.2	%		$	111.80			$	112.45				(0.6	%)			25.38	%			27.66	%		-228bps
Boston Westin (1)		$	187.61			$	190.13				(1.3	%)			63.2	%			60.0	%			3.2	%		$	118.63			$	114.00				4.1	%			22.42	%			23.51	%		-109bps
Chicago Marriott		$	177.18			$	169.99				4.2	%			65.2	%			67.9	%			(2.7	%)		$	115.53			$	115.46				0.1	%			15.54	%			16.77	%		-123bps
Chicago Conrad (1)		$	158.74			$	177.78				(10.7	%)			70.6	%			67.2	%			3.4	%		$	112.12			$	119.53				(6.2	%)			11.84	%			15.28	%		-344bps
Courtyard Fifth Avenue		$	230.28			$	208.59				10.4	%			86.8	%			88.4	%			(1.6	%)		$	199.92			$	184.31				8.5	%			24.59	%			21.10	%		349bps
Courtyard Midtown East		$	214.31			$	204.01				5.0	%			84.6	%			83.2	%			1.4	%		$	181.35			$	169.69				6.9	%			28.08	%			25.60	%		248bps
Frenchman’s Reef (1)		$	267.55			$	252.70				5.9	%			84.4	%			86.5	%			(2.1	%)		$	225.70			$	218.60				3.2	%			34.32	%			31.27	%		305bps
Griffin Gate Marriott		$	122.07			$	122.83				(0.6	%)			60.0	%			57.4	%			2.6	%		$	73.20			$	70.52				3.8	%			18.83	%			20.72	%		-189bps
Los Angeles Airport		$	103.54			$	112.27				(7.8	%)			81.0	%			75.1	%			5.9	%		$	83.89			$	84.27				(0.5	%)			16.55	%			18.39	%		-184bps
Hilton Minneapolis (2)			—				—				—				—				—				—				—				—				—				—				—				—
Oak Brook Hills		$	105.28			$	120.41				(12.6	%)			48.2	%			35.3	%			12.9	%		$	50.74			$	42.52				19.3	%			4.98	%			6.21	%		-123bps
Orlando Airport Marriott		$	102.29			$	111.04				(7.9	%)			74.8	%			78.4	%			(3.6	%)		$	76.51			$	87.07				(12.1	%)			23.37	%			31.06	%		-769bps
Salt Lake City Marriott		$	134.25			$	134.59				(0.3	%)			54.1	%			54.3	%			(0.2	%)		$	72.68			$	73.15				(0.6	%)			28.01	%			23.97	%		404bps
The Lodge at Sonoma		$	176.23			$	176.20				0.0	%			59.2	%			51.4	%			7.8	%		$	104.39			$	90.59				15.2	%			3.87	%			(0.23	%)		410bps
Torrance Marriott South Bay		$	100.32			$	115.41				(13.1	%)			82.5	%			67.4	%			15.1	%		$	82.81			$	77.77				6.5	%			19.87	%			22.74	%		-287bps
Vail Marriott (1)		$	262.31			$	241.82				8.5	%			65.8	%			67.9	%			(2.1	%)		$	172.64			$	164.17				5.2	%			36.86	%			29.75	%		711bps
Renaissance Worthington		$	159.72			$	166.43				(4.0	%)			71.8	%			68.1	%			3.7	%		$	114.65			$	113.36				1.1	%			34.33	%			32.11	%		222bps
Total/Weighted Average		$	153.53			$	157.36				(2.4	%)			69.2	%			66.4	%			2.8	%		$	106.31			$	104.53				1.7	%			23.04	%			22.96	%		8bps