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
Date of Report (Date of earliest event reported):
March 23, 2012
DiamondRock Hospitality Company
(Exact name of registrant as specified in charter)
| Maryland | 001-32514 | 20-1180098 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
3 Bethesda Metro Center, Suite 1500
Bethesda, MD 20814
(Address of Principal Executive Offices) (Zip Code)
(240) 744-1150
(Registrant’s telephone number, including area code)
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 (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.01. Completion of Acquisition or Disposition of Assets.
On March 23, 2012, DiamondRock Hospitality Company (the “Company”) completed the sale of a three-hotel portfolio to Inland American, an unaffiliated third party, for a contractual sales price of $262.5 million. The 1,422-room portfolio consists of the 409-room Griffin Gate Marriott Resort and Spa in Lexington, Kentucky, the 521-room Renaissance Waverly in Atlanta, Georgia, and the 492-room Renaissance Austin in Austin, Texas. The Company received net cash proceeds of $93.1 million and the buyer assumed $97 million of mortgage debt secured by the Renaissance Waverly and $83 million of mortgage debt secured by the Renaissance Austin. As part of the sale, the Company received approximately $10 million for hotel working capital and cash previously held in restricted escrow accounts, net of closing costs.
There are no material relationships between the buyer and the Company or any of its affiliates, or any director or officer of the Company, or any associate of any such director or officer, other than in respect of the sale of the hotel portfolio.
ITEM 7.01. Regulation FD Disclosure
On March 26, 2012, the Company issued a press release reporting the sale of the three-hotel portfolio. A copy of that press release is attached to this Current Report on Form 8-K (“Current Report”) as Exhibit 99.1 and is incorporated by reference herein. The press release has also been posted in the investor relations/press releases section of its website at www.drhc.com.
The information in this Item 7.01 of this Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed “filed” for 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 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 9.01. | Financial Statements and Exhibits. |
| (b) | Pro Forma Financial Information. |
Unaudited Pro Forma Financial Information
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2011
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2011
| (d) | Exhibits. |
See Index to Exhibits attached hereto.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Company’s historical financial information as of and for the year ended December 31, 2011 was derived from its audited historical financial statements. The following unaudited pro forma financial information gives effect to the following transactions:
| • | The portfolio sale of the Griffin Gate Marriott Resort and Spa, Renaissance Waverly and Renaissance Austin for a contractual sales price of $262.5 million, which includes the buyer’s assumption of $97 million of mortgage debt secured by the Renaissance Waverly and $83 million of mortgage debt secured by the Renaissance Austin; |
| • | The Company’s acquisitions of the JW Marriott Denver at Cherry Creek, Radisson Lexington Hotel New York, and Courtyard Denver Downtown; |
| • | The assumption of $42.4 million of mortgage debt in conjunction with the acquisition of the JW Marriott Denver at Cherry Creek and $27.2 million of mortgage debt in conjunction with the acquisition of the Courtyard Denver Downtown; |
| • | The prepayment of $27.2 million of mortgage debt secured by the Courtyard Denver Downtown; |
| • | The Company’s borrowing of $100 million of mortgage debt secured by the Hilton Minneapolis; |
| • | The Company’s borrowing of $170.4 million of mortgage debt secured by the Radisson Lexington Hotel New York; |
| • | The amendment to the Company’s $200 million senior unsecured credit facility; |
| • | The repayment of the $100 million outstanding under the Company’s senior unsecured credit facility; and |
| • | The Company’s follow-on public offering of 12,418,662 shares of common unsecured stock at a public offering price of $12.15 per share. |
The unaudited pro forma consolidated balance sheet as of December 31, 2011 is presented as if these transactions had occurred on December 31, 2011. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2011 is presented as if these transactions had occurred on January 1, 2011.
The unaudited pro forma financial information and related notes are presented for informational purposes only and do not purport to represent what the Company’s results of operations would actually have been if the transactions had in fact occurred on the dates discussed above. They also do not project or forecast the Company’s financial position or results of operations for any future date or period.
The unaudited pro forma financial information should be read together with the historical financial statements and notes thereto and with the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The pro forma adjustments are based on available information and upon assumptions that management believes are reasonable. However, the Company cannot assure you that actual results would not differ from the pro forma information and perhaps in material and adverse ways.
DIAMONDROCK HOSPITALITY COMPANY
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2011
(in thousands)
| A | B | |||||||||||||||
| Historical | Portfolio Sale | Debt Financing | Pro Forma | |||||||||||||
| ASSETS | ||||||||||||||||
| Property and equipment, at cost |
$ | 2,667,682 | $ | — | $ | — | $ | 2,667,682 | ||||||||
| Less: accumulated depreciation |
(433,178 | ) | — | — | (433,178 | ) | ||||||||||
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| 2,234,504 | — | — | 2,234,504 | |||||||||||||
| Assets held for sale |
263,399 | (263,399 | ) | — | — | |||||||||||
| Restricted cash |
53,871 | — | 1,333 | 55,204 | ||||||||||||
| Due from hotel managers |
50,728 | — | — | 50,728 | ||||||||||||
| Note receivable |
54,788 | — | — | 54,788 | ||||||||||||
| Favorable lease assets, net |
43,285 | — | — | 43,285 | ||||||||||||
| Prepaids and other assets |
65,900 | — | — | 65,900 | ||||||||||||
| Cash and cash equivalents |
26,291 | 93,123 | 37,841 | 157,255 | ||||||||||||
| Deferred financing costs, net |
5,869 | — | 4,160 | 10,029 | ||||||||||||
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| Total assets |
$ | 2,798,635 | $ | (170,276 | ) | $ | 43,334 | $ | 2,671,693 | |||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Liabilities: |
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| Mortgage debt |
$ | 762,933 | $ | — | $ | 143,155 | $ | 906,088 | ||||||||
| Mortgage debt of assets held for sale |
180,000 | (180,000 | ) | — | — | |||||||||||
| Senior unsecured credit facility |
100,000 | — | (100,000 | ) | — | |||||||||||
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| Total debt |
1,042,933 | (180,000 | ) | 43,155 | 906,088 | |||||||||||
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| Deferred income related to key money, net |
24,593 | — | — | 24,593 | ||||||||||||
| Unfavorable contract liabilities, net |
81,914 | — | — | 81,914 | ||||||||||||
| Due to hotel managers |
41,676 | — | — | 41,676 | ||||||||||||
| Liabilities of assets held for sale |
3,805 | (3,805 | ) | — | — | |||||||||||
| Dividends declared and unpaid |
13,594 | — | — | 13,594 | ||||||||||||
| Accounts payable and accrued liabilities |
87,963 | — | — | 87,963 | ||||||||||||
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| Total other liabilities |
253,545 | (3,805 | ) | — | 249,740 | |||||||||||
| Stockholders’ Equity: |
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| Preferred stock |
— | — | — | — | ||||||||||||
| Common stock |
1,675 | — | — | 1,675 | ||||||||||||
| Additional paid-in capital |
1,708,427 | — | — | 1,708,427 | ||||||||||||
| Accumulated deficit |
(207,945 | ) | 13,529 | 179 | (194,237 | ) | ||||||||||
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| Total stockholders’ equity |
1,502,157 | 13,529 | 179 | 1,515,865 | ||||||||||||
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| Total liabilities and stockholders’ equity |
$ | 2,798,635 | $ | (170,276 | ) | $ | 43,334 | $ | 2,671,693 | |||||||
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2011
The accompanying unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011 is based on the Historical Consolidated Balance Sheet as of December 31, 2011, as adjusted to assume that the following transactions that occurred after December 31, 2011 occurred on December 31, 2011:
| • | The portfolio sale of the Griffin Gate Marriott Resort and Spa, Renaissance Waverly and Renaissance Austin for $262.5 million, which includes the buyer’s assumption of $97 million of mortgage debt secured by the Renaissance Waverly and $83 million of mortgage debt secured by the Renaissance Austin; |
| • | The prepayment of $27.2 million of mortgage debt secured by the Courtyard Denver Downtown; |
| • | The Company’s borrowing of $170.4 million of mortgage debt secured by the Radisson Lexington Hotel New York; and |
| • | The repayment of the amount outstanding under the Company’s senior unsecured credit facility with a portion of the proceeds from the $170.4 million of mortgage debt secured by the Radisson Lexington Hotel New York. |
In management’s opinion, all material adjustments to reflect the effects of the preceding transactions have been made. The accompanying unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011 is presented for illustrative purposes only and is not necessarily indicative of what the Company’s actual financial position would have been had the transactions described above occurred on December 31, 2011 nor does it purport to represent the Company’s future financial position.
Notes and Management Assumptions:
| A | Reflects the portfolio sale of the Griffin Gate Marriott Resort and Spa, Renaissance Waverly and Renaissance Austin as follows: |
| • | Sale of assets with a net book value of $263.4 million |
| • | Assignment of mortgage debt with an aggregate principal amount of $180.0 million and assumption of other liabilities of $3.8 million |
| • | Net proceeds of $93.1 million |
| B | Reflects the following debt financing transactions: |
| • | The prepayment of $27.2 million of mortgage debt secured by the Courtyard Denver Downtown |
| • | The borrowings under the $170.4 million of mortgage debt secured by the Radisson Lexington Hotel New York |
| • | The repayment of $100 million in outstanding borrowings under the Company’s senior unsecured credit facility as of December 31, 2011 |
DIAMONDROCK HOSPITALITY COMPANY
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2011
(in thousands, except share and per share amounts)
| C | C | C | D | E | F | |||||||||||||||||||||||||||
| Historical | JW Marriott Cherry Creek |
Radisson Lexington |
Courtyard Denver |
Depreciation Adjustment |
TRS Income Taxes |
Debt Financing |
Pro Forma | |||||||||||||||||||||||||
| REVENUES: |
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| Rooms |
$ | 441,514 | $ | 4,033 | $ | 17,251 | $ | 4,169 | $ | — | $ | — | $ | — | $ | 466,967 | ||||||||||||||||
| Food and beverage |
165,114 | 2,229 | 224 | — | — | — | — | 167,567 | ||||||||||||||||||||||||
| Other |
31,602 | 295 | 873 | 323 | — | — | — | 33,093 | ||||||||||||||||||||||||
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| Total revenues |
638,230 | 6,557 | 18,348 | 4,492 | — | — | — | 667,627 | ||||||||||||||||||||||||
| OPERATING EXPENSES: |
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| Rooms |
118,701 | 815 | 6,177 | 866 | — | — | — | 126,559 | ||||||||||||||||||||||||
| Food and beverage |
117,205 | 1,603 | 133 | — | — | — | — | 118,941 | ||||||||||||||||||||||||
| Management fees |
22,031 | 148 | 459 | 90 | — | — | — | 22,728 | ||||||||||||||||||||||||
| Other hotel expenses |
228,559 | 2,535 | 6,573 | 1,727 | — | — | — | 239,394 | ||||||||||||||||||||||||
| Depreciation and amortization |
87,259 | — | — | — | 5,464 | — | — | 92,723 | ||||||||||||||||||||||||
| Hotel acquisition costs |
2,521 | — | — | — | — | — | — | 2,521 | ||||||||||||||||||||||||
| Corporate expenses |
21,247 | — | — | — | — | — | — | 21,247 | ||||||||||||||||||||||||
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| Total operating expenses |
597,523 | 5,101 | 13,342 | 2,683 | 5,464 | — | — | 624,113 | ||||||||||||||||||||||||
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| OPERATING INCOME (LOSS) |
40,707 | 1,456 | 5,006 | 1,809 | (5,464 | ) | — | — | 43,514 | |||||||||||||||||||||||
| Interest income |
(614 | ) | — | — | — | — | — | — | (614 | ) | ||||||||||||||||||||||
| Interest expense |
45,406 | — | — | — | — | — | 6,805 | 52,211 | ||||||||||||||||||||||||
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| Total other expenses |
44,792 | — | — | — | — | — | 6,805 | 51,597 | ||||||||||||||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
(4,085 | ) | 1,456 | 5,006 | 1,809 | (5,464 | ) | — | (6,805 | ) | (8,083 | ) | ||||||||||||||||||||
| Income tax expense |
3,655 | — | — | — | — | 165 | — | 3,820 | ||||||||||||||||||||||||
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| (LOSS) INCOME FROM CONTINUING OPERATIONS |
$ | (7,740 | ) | $ | 1,456 | $ | 5,006 | $ | 1,809 | $ | (5,464 | ) | $ | (165 | ) | $ | (6,805 | ) | $ | (11,903 | ) | |||||||||||
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| Calculation of Basic and Diluted EPS (G): |
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| Loss from continuing operations |
$ | (11,903 | ) | |||||||||||||||||||||||||||||
| Weighted average number of shares |
167,386,801 | |||||||||||||||||||||||||||||||
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| Basis and diluted loss per share |
$ | (0.07 | ) | |||||||||||||||||||||||||||||
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2011
The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2011 is based on the Historical Consolidated Statement of Operations for the year ended December 31, 2011, as adjusted to assume that the following transactions occurred on January 1, 2011:
| • | The acquisition of the JW Marriott Denver at Cherry Creek for approximately $74.2 million; |
| • | The acquisition of the Radisson Lexington Hotel New York for approximately $336.8 million; |
| • | The acquisition of the Courtyard Denver Downtown for approximately $46.2 million; |
| • | Interest expense on the $42.4 million of mortgage debt assumed in conjunction with the acquisition of the JW Marriott Denver at Cherry Creek and the prepayment of the $27.2 million of mortgage debt assumed in conjunction with the acquisition of the Courtyard Denver Downtown; |
| • | Interest expense on the fixed-rate $100 million of mortgage debt secured by the Hilton Minneapolis; |
| • | Interest expense on the variable-rate $170.4 million of mortgage debt secured by the Radisson Lexington Hotel New York; and |
| • | The offering of 12,418,662 shares of the Company’s common stock at a public offering price of $12.15 per share. |
The Historical Consolidated Statement of Operations for the year ended December 31, 2011 has not been adjusted for the portfolio sale of the Griffin Gate Marriott Resort and Spa, Renaissance Waverly and Renaissance Austin as the operating results for these hotels were previously reported in discontinued operations in the historical financial statements.
In management’s opinion, all material adjustments to reflect the effects of the preceding transactions have been made. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the period from January 1, 2011 to December 31, 2011 is presented for illustrative purposes only and is not necessarily indicative of what the Company’s actual results of operations would have been had the transactions described above occurred on January 1, 2011 nor does it purport to represent the Company’s future financial position or results of operations.
Notes and Management Assumptions:
| C | Reflects the adjustment to record the pre-acquisition unaudited revenues and operating expenses of the JW Marriott Denver at Cherry Creek, Radisson Lexington Hotel New York and Courtyard Denver Downtown. |
| D | Reflects the adjustment to record the depreciation and amortization resulting from the acquisitions of the JW Marriott Denver at Cherry Creek, Radisson Lexington Hotel New York and Courtyard Denver Downtown, as follows (in thousands): |
| Hotel |
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| JW Marriott Denver at Cherry Creek |
$ | 684 | ||
| Radisson Lexington Hotel New York |
4,220 | |||
| Courtyard Denver Downtown |
560 | |||
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| Total |
$ | 5,464 | ||
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| E | Reflects the adjustment to record the pro forma income tax provision of the Company’s taxable REIT subsidiary (TRS) assuming the TRS leases were in place on January 1, 2011. The pro forma income tax provision was calculated using the TRS’ 2011 effective income tax rate of 40.32%. |
| F | Reflects the adjustment to include interest expense incurred on the new mortgage debt secured by the Hilton Minneapolis and Radisson Lexington New York and the assumption of the mortgage debt secured by the JW Marriott Denver at Cherry Creek. Interest expense is also adjusted to reflect the repayment of the $100 million outstanding on the Company’s corporate credit facility and the prepayment of the mortgage debt secured by the Courtyard Denver Downtown. The adjustment also reflects the amendment to the Company’s corporate credit facility and the amortization of deferred financing costs and the debt premium related to the assumption of the mortgage debt related to the JW Marriott Denver at Cherry Creek. The adjustment to interest expense is comprised of the following (in thousands): |
| Interest on new mortgage debt |
$ | 8,462 | ||
| Interest on assumed mortgage debt |
969 | |||
| Interest on repaid mortgage debt |
(635 | ) | ||
| Interest on repaid credit facility |
(1,991 | ) | ||
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| Total |
$ | 6,805 | ||
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| G | Reflects the adjustment to weighted average shares to assume the Company’s follow-on public offering of 12,418,662 shares of common stock occurred on January 1, 2011. |
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.
| DIAMONDROCK HOSPITALITY COMPANY | ||||||
| Date: March 26, 2012 | By: | /s/ William J. Tennis | ||||
| William J. Tennis | ||||||
| Executive Vice President, General Counsel and Corporate Secretary | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release dated March 26, 2012 | |
Exhibit 99.1
COMPANY CONTACT
Chris King
(240) 744-1150
FOR IMMEDIATE RELEASE
MONDAY, MARCH 26, 2012
DIAMONDROCK CLOSES SALE OF THREE HOTEL PORTFOLIO TO INLAND AMERICAN
BETHESDA, MD, March 26, 2012 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced that it has completed the previously disclosed sale of a 3-hotel portfolio consisting of the 409-room Griffin Gate Marriott Resort & Spa in Lexington, Kentucky; the 521-room Renaissance Waverly in Atlanta, Georgia; and the 492-room Renaissance Austin in Austin, Texas. All of the hotels are subject to long-term management agreements with Marriott International, Inc. Inland American, through its affiliates, acquired the portfolio for a contractual sales price of $262.5 million. As part of the sale, the Company received approximately $10 million for hotel working capital and cash previously held in restricted escrow accounts, net of closing costs. The hotels collectively generated $21.1 million of Adjusted EBITDA for the Company in 2011. The Company expects to record a book gain on the transaction, which will be excluded from its reported Adjusted EBITDA.
“We are pleased to announce the completion of the sale of the three hotels to Inland American. We believe the disposition achieves three primary benefits for DiamondRock: (1) improves portfolio quality and market concentration; (2) enhances the Company’s already best-in-class balance sheet by reducing debt by $180 million and increasing corporate cash by approximately $93 million; and (3) further positions DiamondRock to be an opportunistic acquirer of hotels in 2012,” stated Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company.
Eastdil Secured advised DiamondRock on the sale of the hotel portfolio.
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 23 premium hotels with approximately 10,500 rooms and holds one senior mortgage loan. The Company’s hotels are generally operated under globally recognized brands such as Hilton, Marriott, and Westin. For further information, please visit DiamondRock Hospitality Company’s website at www.drhc.com.
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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,” “anticipate,” “position,” 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 those risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on February 29, 2012. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we 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.
| Reconciliation of Estimated Net Income to Estimated EBITDA and Estimated Net Operating Income ($000s) |
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| 2011 Actual | ||||
| Estimated Net Income (Loss) |
$ | (961 | ) | |
| Depreciation Expense |
11,965 | |||
| Interest Expense |
10,102 | |||
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| Estimated EBITDA |
$ | 21,106 | ||
| Escrow Contributions |
(3,604 | ) | ||
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| Estimated Net Operating Income |
$ | 17,502 | ||
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EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization. We believe it is a useful financial performance measure for us and for our stockholders and is a complement to net income and other financial performance measures provided in accordance with GAAP. We use EBITDA to measure the financial performance of our operating hotels because it excludes expenses such as depreciation and amortization, income taxes and interest expense, which are not indicative of operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. By excluding depreciation and amortization expense, which can vary from hotel to hotel based on a variety of factors unrelated to the hotels’ financial performance, we can more accurately assess the financial performance of our hotels. Under GAAP, hotels are recorded at historical cost at the time of acquisition and are depreciated on a straight-line basis. By excluding depreciation and amortization, we believe EBITDA provides a basis for measuring the financial performance of hotels unrelated to historical cost. However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as calculated by us, may not be comparable to
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EBITDA reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile it to net income (loss) which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity.
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