##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 26, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 001-32514
 DIAMONDROCK HOSPITALITY COMPANY
 (Exact Name of Registrant as Specified in Its Charter)
 Maryland
    
    20-1180098(State of Incorporation)
    
    (I.R.S. Employer Identification No.)6903 Rockledge Drive, Suite 800, Bethesda, Maryland
    
    20817(Address of Principal Executive Offices)
    
    (Zip Code)
 (240) 744-1150
(Registrants telephone number, including area code)
 þ o
 o Yes o No
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o Yes þ No




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of March 26, 2010 and December 31, 2009
    
    
    1Condensed Consolidated Statements of Operations
For the Fiscal Quarters ended March 26, 2010 and March 27, 2009
    
    
    2Condensed Consolidated Statements of Cash Flows
For the Fiscal Quarters ended March 26, 2010 and March 27, 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Results of Operations and
Financial Condition
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4.
Removed and Reserved
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25Exhibit 4.1Exhibit 10.1Exhibit 10.2Exhibit 10.4Exhibit 10.5Exhibit 31.1Exhibit 31.2Exhibit 32.1




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Item I. Financial Statements
 DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 26, 2010 and December 31, 2009
(in thousands, except share amounts)
 March 26, 2010
    
    
    December 31, 2009(Unaudited)ASSETSProperty and equipment, at cost
    
    $
    2,175,430
    
    
    $
    2,171,311Less: accumulated depreciation
    
    
    (328,210
    )
    
    
    (309,224
    )1,847,220
    
    
    
    1,862,087Deferred financing costs, net
    
    
    3,549
    
    
    
    3,624Restricted cash
    
    
    37,120
    
    
    
    31,274Due from hotel managers
    
    
    50,365
    
    
    
    45,200Favorable lease assets, net
    
    
    37,145
    
    
    
    37,319Prepaid and other assets
    
    
    57,230
    
    
    
    58,607Cash and cash equivalents
    
    
    181,402
    
    
    
    177,380Total assets
    
    $
    2,214,031
    
    
    $
    2,215,491LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Mortgage debt
    
    $
    785,263
    
    
    $
    786,777Senior unsecured credit facility
    
    
    
    
    
    
    Total debt
    
    
    785,263
    
    
    
    786,777Deferred income related to key money, net
    
    
    19,633
    
    
    
    19,763Unfavorable contract liabilities, net
    
    
    82,287
    
    
    
    82,684Due to hotel managers
    
    
    30,336
    
    
    
    29,847Dividends declared and unpaid
    
    
    
    
    
    
    41,810Accounts payable and accrued expenses
    
    
    70,286
    
    
    
    79,104Total other liabilities
    
    
    202,542
    
    
    
    253,208Stockholders 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; 131,053,682 and
124,299,423 shares issued and outstanding at March 26, 2010 and December 31,
2009, respectively
    
    
    1,311
    
    
    
    1,243Additional paid-in capital
    
    
    1,370,165
    
    
    
    1,311,053Accumulated deficit
    
    
    (145,250
    )
    
    
    (136,790
    )Total stockholders equity
    
    
    1,226,226
    
    
    
    1,175,506Total liabilities and stockholders equity
    
    $
    2,214,031
    
    
    $
    2,215,491
   - 1 -




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DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended March 26, 2010 and March 27, 2009
(in thousands, except per share amounts)
 Fiscal Quarter Ended
    
    
    Fiscal Quarter EndedMarch 26, 2010
    
    
    March 27, 2009(Unaudited)
    
    
    (Unaudited)Revenues:Rooms
    
    $
    71,648
    
    
    $
    75,116Food and beverage
    
    
    35,552
    
    
    
    36,890Other
    
    
    5,628
    
    
    
    6,538Total revenues
    
    
    112,828
    
    
    
    118,544Operating Expenses:Rooms
    
    
    20,073
    
    
    
    19,982Food and beverage
    
    
    24,725
    
    
    
    26,581Management fees
    
    
    3,072
    
    
    
    3,327Other hotel expenses
    
    
    44,629
    
    
    
    46,024Depreciation and amortization
    
    
    18,907
    
    
    
    18,717Corporate expenses
    
    
    3,351
    
    
    
    3,769Total operating expenses
    
    
    114,757
    
    
    
    118,400Operating (loss) profit
    
    
    (1,929
    )
    
    
    144Other Expenses (Income):Interest income
    
    
    (81
    )
    
    
    (83
    )Interest expense
    
    
    8,126
    
    
    
    11,498Total other expenses
    
    
    8,045
    
    
    
    11,415Loss before income taxes
    
    
    (9,974
    )
    
    
    (11,271
    )Income tax benefit
    
    
    1,628
    
    
    
    5,978Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Loss per share:Basic and diluted loss per share
    
    $
    (0.07
    )
    
    $
    (0.06
    )
   - 2 -




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DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Quarters Ended March 26, 2010 and March 27, 2009
(in thousands)
 Fiscal Quarter
    
    
    Fiscal QuarterEnded
    
    
    EndedMarch 26, 2010
    
    
    March 27, 2009(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Adjustments to reconcile net loss to net cash provided by operating activities:Real estate depreciation
    
    
    18,907
    
    
    
    18,717Corporate asset depreciation as corporate expenses
    
    
    34
    
    
    
    34Non-cash ground rent
    
    
    1,789
    
    
    
    1,787Non-cash financing costs as interest expense
    
    
    227
    
    
    
    193Non-cash reversal of penalty interest
    
    
    (3,134
    )
    
    
    Amortization of unfavorable contract liabilities
    
    
    (397
    )
    
    
    (397
    )Amortization of deferred income
    
    
    (130
    )
    
    
    (130
    )Stock-based compensation
    
    
    786
    
    
    
    1,207Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    1,377
    
    
    
    1,658Restricted cash
    
    
    917
    
    
    
    1,383Due to/from hotel managers
    
    
    (4,676
    )
    
    
    3,570Accounts payable and accrued expenses
    
    
    (6,769
    )
    
    
    (8,886
    )Net cash provided by operating activities
    
    
    585
    
    
    
    13,843Cash flows from investing activities:Hotel capital expenditures
    
    
    (4,604
    )
    
    
    (7,293
    )Change in restricted cash
    
    
    (6,763
    )
    
    
    143Net cash used in investing activities
    
    
    (11,367
    )
    
    
    (7,150
    )Cash flows from financing activities:Repayments of credit facility
    
    
    
    
    
    
    (5,000
    )Scheduled mortgage debt principal payments
    
    
    (1,513
    )
    
    
    (1,002
    )Repurchase of common stock
    
    
    (2,023
    )
    
    
    (158
    )Proceeds from sale of common stock, net
    
    
    22,816
    
    
    
    Payment of financing costs
    
    
    (153
    )
    
    
    Payment of cash dividends
    
    
    (4,323
    )
    
    
    (80
    )Net cash provided by (used in) financing activities
    
    
    14,804
    
    
    
    (6,240
    )Net increase in cash and cash equivalents
    
    
    4,022
    
    
    
    453Cash and cash equivalents, beginning of period
    
    
    177,380
    
    
    
    13,830Cash and cash equivalents, end of period
    
    $
    181,402
    
    
    $
    14,283Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    11,633
    
    
    $
    11,987
   - 3 -




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DIAMONDROCK HOSPITALITY COMPANY
 
 Notes to the Condensed Consolidated Financial Statements
(Unaudited)
 1. Organization
    2. Summary of Significant Accounting Policies
 Basis of Presentation
    Reporting Periods
   - 4 -




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Investment in Hotels
   Revenue Recognition
  Loss Per Share
  Stock-based Compensation
   - 5 -




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Income Taxes
   Intangible Assets and Liabilities
  Straight-Line Rent
  Concentration of Credit Risk
  Use of Estimates
  Risks and Uncertainties
   - 6 -




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3. Property and Equipment
  March 26, 2010
    
    
    December 31, 2009Land
    
    $
    220,445
    
    
    $
    220,445Land improvements
    
    
    7,994
    
    
    
    7,994Buildings
    
    
    1,672,787
    
    
    
    1,671,821Furniture, fixtures and equipment
    
    
    273,125
    
    
    
    270,042CIP and corporate office equipment
    
    
    1,079
    
    
    
    1,0092,175,430
    
    
    
    2,171,311Less: accumulated depreciation
    
    
    (328,210
    )
    
    
    (309,224
    )$
    1,847,220
    
    
    $
    1,862,087
 4. Favorable Lease Assets
    5. Capital Stock
 Common Shares
  Stock Dividend.
  - 7 -




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Controlled Equity Offering Program.
 Preferred Shares
  Operating Partnership Units
  6. Stock Incentive Plans
   Restricted Stock Awards
   Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueUnvested balance at January 1, 2010
    
    
    1,719,376
    
    
    $
    4.76Granted
    
    
    356,425
    
    
    
    8.41Additional shares from dividends
    
    
    46,206
    
    
    
    9.57Vested
    
    
    (573,848
    )
    
    
    5.19Unvested balance at March 26, 2010
    
    
    1,548,159
    
    
    $
    5.49
   - 8 -




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##### Table of Contents



Deferred Stock Awards
  Stock Appreciation Rights and Dividend Equivalent Rights
  Weighted-AverageNumber of
    
    
    Grant Date FairSARs/DERs
    
    
    ValueBalance at January 1, 2010
    
    
    300,225
    
    
    $
    6.62Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Balance at March 26, 2010
    
    
    300,225
    
    
    $
    6.62
  Market Stock Units
    - 9 -




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7. Loss Per Share
   Fiscal Quarter
    
    
    Fiscal QuarterEnded March 26,
    
    
    Ended March 27,2010
    
    
    2009(unaudited)
    
    
    (unaudited)Basic Loss per Share Calculation:Numerator:Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Less: dividends on unvested restricted common stock
    
    
    
    
    
    
    Net loss after dividends on unvested restricted common stock
    
    $
    (8,346
    )
    
    $
    (5,293
    )Weighted-average number of common shares outstandingbasic
    
    
    127,747,674
    
    
    
    90,551,505Basic loss per share
    
    $
    (0.07
    )
    
    $
    (0.06
    )Diluted Loss per Share Calculation:Numerator:Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Less: dividends on unvested restricted common stock
    
    
    
    
    
    
    Net loss after dividends on unvested restricted common stock
    
    $
    (8,346
    )
    
    $
    (5,293
    )Weighted-average number of common shares outstandingbasic
    
    
    127,747,674
    
    
    
    90,551,505Unvested restricted common stock
    
    
    
    
    
    
    Unexercised SARs
    
    
    
    
    
    
    Unvested MSUs
    
    
    
    
    
    
    Weighted-average number of common shares outstandingdiluted
    
    
    127,747,674
    
    
    
    90,551,505Diluted loss per share
    
    $
    (0.07
    )
    
    $
    (0.06
    )
 8. Debt
   - 10 -




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PrincipalBalance
    
    
    Interest RateCourtyard Manhattan / Midtown East
    
    $
    42,876
    
    
    8.81
%Marriott Salt Lake City Downtown
    
    
    32,757
    
    
    5.50
%Courtyard Manhattan / Fifth Avenue
    
    
    51,000
    
    
    6.48
%Renaissance Worthington
    
    
    56,906
    
    
    5.40
%Frenchmans Reef & Morning Star Marriott Beach Resort
    
    
    61,199
    
    
    5.44
%Marriott Los Angeles Airport
    
    
    82,600
    
    
    5.30
%Orlando Airport Marriott
    
    
    59,000
    
    
    5.68
%Chicago Marriott Downtown Magnificent Mile
    
    
    218,925
    
    
    5.975
%Renaissance Austin
    
    
    83,000
    
    
    5.507
%Renaissance Waverly
    
    
    97,000
    
    
    5.503
%Senior unsecured credit facility
    
    
    
    

    LIBOR + 1.25Total debt
    
    $
    785,263Weighted-Average Interest Rate
    
    
    
    
    
    5.86
%
 Mortgage Loan Modification
  Senior Unsecured Credit Facility
  Leverage Ratio60% or Greater
    
    
    55% to 60%
    
    
    50% to 55%
    
    
    Less Than 50%Alternate base rate margin
    
    
    0.65
    %
    
    
    0.45
    %
    
    
    0.25
    %
    
    
    0.00
    %LIBOR margin
    
    
    1.55
    %
    
    
    1.45
    %
    
    
    1.25
    %
    
    
    0.95
    %
  Actual atMarch 26,Covenant
    
    
    2010Maximum leverage ratio(1)
    
    
    65
    %
    
    
    51.0
    %Minimum fixed charge coverage ratio
    
    
    1.6
    x
    
    
    1.81
    xMinimum tangible net worth(2)
    
    $892.3 million
    
    
    $1.6 billionUnhedged floating rate debt as a percentage of total indebtedness
    
    
    35
    %
    
    
    0.0
    %
 
 (1)
    
    Maximum leverage ratio is determined by dividing the total debt
outstanding by the net asset value of our corporate assets and
hotels. Hotel level net asset values are calculated based on the
application of a contractual capitalization rate (which ranges
from 7.5% to 8.0%) to the trailing twelve month hotel net
operating income.(2)
    
    Tangible net worth is defined as the gross book value of the
Companys real estate assets and other corporate assets less the
Companys total debt and all other corporate liabilities.  - 11 -




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##### Table of Contents



Actual atMarch 26,Covenant
    
    
    2010Minimum implied debt service ratio
    
    
    1.5
    x
    
    
    N/AMaximum unencumbered leverage ratio
    
    
    65
    %
    
    
    0.0
    %Minimum number of unencumbered borrowing base properties
    
    
    4
    
    
    
    10Minimum unencumbered borrowing base value
    
    $150 million
    
    
    $525.4 millionPercentage of total asset value owned by borrowers or guarantors
    
    
    90
    %
    
    
    100
    %
   9. Fair Value of Financial Instruments
  As of March 26,
    
    
    As of December 31,2010
    
    
    2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueDebt
    
    $
    785,263
    
    
    $
    728,865
    
    
    $
    786,777
    
    
    $
    670,936
  10. Commitments and Contingencies
 Litigation
  Income Taxes
    - 12 -




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This report contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities Litigation Reform Act
of 1995 and includes this statement for purposes of complying with these safe harbor provisions.
These forward-looking statements are generally identifiable by use of the words believe,
expect, intend, anticipate, estimate, project or similar expressions, whether in the
negative or affirmative. Forward-looking statements are based on managements current expectations
and assumptions and are not guarantees of future performance. Factors that may cause actual
results to differ materially from current expectations include, but are not limited to, the risk
factors discussed herein and other factors discussed from time to time in our periodic filings with
the Securities and Exchange Commission. Accordingly, there is no assurance that the Companys
expectations will be realized. Except as otherwise required by the federal securities laws, the
Company disclaims any obligations or undertaking to publicly release any updates or revisions to
any forward-looking statement contained in this report to reflect events, circumstances or changes
in expectations after the date of this report.
 Overview
     
    
    high-quality urban- and destination resort-focused branded hotel real estate;
 
    
    conservative capital structure; and
 
    
    thoughtful asset management.
 High Quality Urban and Destination Resort Focused Branded Real Estate
     - 13 -




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Conservative Capital Structure
     Thoughtful Asset Management
      - 14 -




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Key Indicators of Financial Condition and Operating Performance
  
    
    Occupancy percentage;
    
    Average Daily Rate (or ADR);
    
    Revenue per Available Room (or RevPAR);
    
    Earnings Before Interest, Income Taxes, Depreciation and Amortization (or EBITDA); and
    
    Funds From Operations (or FFO).
     - 15 -




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Our Hotels
  %Number
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changeof
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    from 2009Property
    
    Location
    
    Rooms
    
    
    Occupancy
    
    
    ADR($)
    
    
    RevPAR($)
    
    
    RevPARChicago Marriott
    
    Chicago, Illinois
    
    
    1,198
    
    
    
    52.0
    %
    
    $
    146.43
    
    
    $
    76.21
    
    
    
    (13.7
    %)Los Angeles Airport Marriott
    
    Los Angeles, California
    
    
    1,004
    
    
    
    82.9
    %
    
    
    106.43
    
    
    
    88.24
    
    
    
    (4.5
    %)Westin Boston Waterfront Hotel (1)
    
    Boston, Massachusetts
    
    
    793
    
    
    
    49.3
    %
    
    
    154.19
    
    
    
    76.04
    
    
    
    (2.1
    %)Renaissance Waverly Hotel
    
    Atlanta, Georgia
    
    
    521
    
    
    
    69.7
    %
    
    
    130.48
    
    
    
    90.93
    
    
    
    4.6
    %Salt Lake City Marriott Downtown
    
    Salt Lake City, Utah
    
    
    510
    
    
    
    53.5
    %
    
    
    137.90
    
    
    
    73.78
    
    
    
    (9.0
    %)Renaissance Worthington
    
    Fort Worth, Texas
    
    
    504
    
    
    
    76.2
    %
    
    
    155.34
    
    
    
    118.38
    
    
    
    (0.3
    %)Frenchmans Reef & Morning Star Marriott Beach Resort (1)
    
    St. Thomas, U.S. Virgin Islands
    
    
    502
    
    
    
    82.4
    %
    
    
    294.01
    
    
    
    242.25
    
    
    
    3.4
    %Renaissance Austin Hotel
    
    Austin, Texas
    
    
    492
    
    
    
    63.7
    %
    
    
    145.30
    
    
    
    92.61
    
    
    
    (6.0
    %)Torrance Marriott South Bay
    
    Los Angeles County, California
    
    
    487
    
    
    
    81.7
    %
    
    
    99.19
    
    
    
    81.00
    
    
    
    8.2
    %Orlando Airport Marriott
    
    Orlando, Florida
    
    
    486
    
    
    
    80.6
    %
    
    
    106.65
    
    
    
    85.92
    
    
    
    (12.9
    %)Marriott Griffin Gate Resort
    
    Lexington, Kentucky
    
    
    408
    
    
    
    49.4
    %
    
    
    105.58
    
    
    
    52.20
    
    
    
    (1.7
    %)Oak Brook Hills Marriott Resort
    
    Oak Brook, Illinois
    
    
    386
    
    
    
    36.6
    %
    
    
    103.85
    
    
    
    38.06
    
    
    
    2.4
    %Westin Atlanta North at Perimeter (1)
    
    Atlanta, Georgia
    
    
    369
    
    
    
    67.3
    %
    
    
    101.97
    
    
    
    68.62
    
    
    
    (5.9
    %)Vail Marriott Mountain Resort & Spa (1)
    
    Vail, Colorado
    
    
    346
    
    
    
    82.0
    %
    
    
    302.83
    
    
    
    248.44
    
    
    
    8.2
    %Marriott Atlanta Alpharetta
    
    Atlanta, Georgia
    
    
    318
    
    
    
    68.7
    %
    
    
    120.67
    
    
    
    82.86
    
    
    
    6.4
    %Courtyard Manhattan/Midtown East
    
    New York, New York
    
    
    312
    
    
    
    77.3
    %
    
    
    184.21
    
    
    
    142.44
    
    
    
    (10.3
    %)Conrad Chicago (1)
    
    Chicago, Illinois
    
    
    311
    
    
    
    51.3
    %
    
    
    144.27
    
    
    
    74.03
    
    
    
    (15.7
    %)Bethesda Marriott Suites
    
    Bethesda, Maryland
    
    
    272
    
    
    
    57.3
    %
    
    
    164.83
    
    
    
    94.38
    
    
    
    (15.2
    %)Courtyard Manhattan/Fifth Avenue
    
    New York, New York
    
    
    185
    
    
    
    82.4
    %
    
    
    204.03
    
    
    
    168.11
    
    
    
    (5.1
    %)The Lodge at Sonoma, a Renaissance  Resort & Spa
    
    Sonoma, California
    
    
    182
    
    
    
    47.4
    %
    
    
    152.71
    
    
    
    72.35
    
    
    
    13.1
    %TOTAL/WEIGHTED AVERAGE
    
    
    
    
    9,586
    
    
    
    65.5
    %
    
    $
    145.34
    
    
    $
    95.15
    
    
    
    (3.7
    %)
 
 (1)
    
    The Frenchmans Reef & Morning Star Marriott Beach Resort, Vail Marriott Mountain
Resort & Spa, Westin Atlanta North at Perimeter, Conrad Chicago and the Westin Boston
Waterfront Hotel report operations on a calendar month and year basis. The period from
January 1, 2010 to March 26, 2010 includes the operations for the period from January 1,
2010 to February 28, 2010 for these five hotels. Results of Operations
  Comparison of the Fiscal Quarter Ended March 26, 2010 to the Fiscal Quarter Ended March 27, 2009
   - 16 -




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##### Table of Contents



Revenue.
 Fiscal Quarter
    
    
    Fiscal QuarterEnded March
    
    
    Ended March26, 2010
    
    
    27, 2009
    
    
    % ChangeRooms
    
    $
    71,648
    
    
    $
    75,116
    
    
    
    (4.6
    %)Food and beverage
    
    
    35,552
    
    
    
    36,890
    
    
    
    (3.6
    %)Other
    
    
    5,628
    
    
    
    6,538
    
    
    
    (13.9
    %)Total revenues
    
    $
    112,828
    
    
    $
    118,544
    
    
    
    (4.8
    %)
  Fiscal Quarter
    
    
    Fiscal QuarterEnded March
    
    
    Ended March26, 2010
    
    
    27, 2009
    
    
    % ChangeLos Angeles Airport Marriott
    
    $
    12.3
    
    
    $
    13.0
    
    
    
    (5.4
    %)Chicago Marriott
    
    
    12.1
    
    
    
    14.7
    
    
    
    (17.7
    %)Frenchmans Reef & Morning Star Marriott Beach Resort (1)
    
    
    10.7
    
    
    
    10.0
    
    
    
    7.0
    %Renaissance Worthington
    
    
    7.9
    
    
    
    8.5
    
    
    
    (7.1
    %)Renaissance Waverly Hotel
    
    
    7.8
    
    
    
    7.2
    
    
    
    8.3
    %Renaissance Austin Hotel
    
    
    7.1
    
    
    
    7.6
    
    
    
    (6.6
    %)Westin Boston Waterfront Hotel (1)
    
    
    6.9
    
    
    
    7.0
    
    
    
    (1.4
    %)Vail Marriott Mountain Resort & Spa (1)
    
    
    6.6
    
    
    
    6.1
    
    
    
    8.2
    %Orlando Airport Marriott
    
    
    5.5
    
    
    
    6.6
    
    
    
    (16.7
    %)Salt Lake City Marriott Downtown
    
    
    5.1
    
    
    
    5.6
    
    
    
    (8.9
    %)Torrance Marriott South Bay
    
    
    4.5
    
    
    
    4.6
    
    
    
    (2.2
    %)Courtyard Manhattan/Midtown East
    
    
    4.0
    
    
    
    4.5
    
    
    
    (11.1
    %)Marriott Griffin Gate Resort
    
    
    3.8
    
    
    
    3.7
    
    
    
    2.7
    %Marriott Atlanta Alpharetta
    
    
    3.4
    
    
    
    3.1
    
    
    
    9.7
    %Bethesda Marriott Suites
    
    
    3.0
    
    
    
    3.5
    
    
    
    (14.3
    %)Oak Brook Hills Marriott Resort
    
    
    2.9
    
    
    
    3.0
    
    
    
    (3.3
    %)Courtyard Manhattan/Fifth Avenue
    
    
    2.7
    
    
    
    2.9
    
    
    
    (6.9
    %)Westin Atlanta North at Perimeter (1)
    
    
    2.4
    
    
    
    2.5
    
    
    
    (4.0
    %)The Lodge at Sonoma, a Renaissance Resort & Spa
    
    
    2.3
    
    
    
    2.2
    
    
    
    4.6
    %Conrad Chicago (1)
    
    
    1.8
    
    
    
    2.2
    
    
    
    (18.2
    %)Total
    
    $
    112.8
    
    
    $
    118.5
    
    
    
    (4.8
    %)
 (1)
    
    The Frenchmans Reef & Morning Star Marriott Beach Resort, Vail Marriott Mountain
Resort & Spa, Westin Atlanta North at Perimeter, Conrad Chicago and the Westin Boston
Waterfront Hotel report operations on a calendar month and year basis. The fiscal quarters
ended March 26, 2010 and March 27, 2009 include the operations for the period from January
1, 2010 to February 28, 2010 for these five hotels.  Fiscal Quarter
    
    
    Fiscal QuarterEnded March
    
    
    Ended March26, 2010
    
    
    27, 2009
    
    
    % ChangeOccupancy %
    
    
    65.5
    %
    
    
    63.7
    %
    
    1.8 percentage pointsADR
    
    $
    145.34
    
    
    $
    155.00
    
    
    
    (6.2
    %)RevPAR
    
    $
    95.15
    
    
    $
    98.80
    
    
    
    (3.7
    %)
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##### Table of Contents



Hotel operating expenses.
 Fiscal Quarter
    
    
    Fiscal QuarterEnded March
    
    
    Ended March26, 2010
    
    
    27, 2009
    
    
    % ChangeRooms departmental expenses
    
    $
    20.1
    
    
    $
    20.0
    
    
    
    0.5
    %Food and beverage departmental expenses
    
    
    24.7
    
    
    
    26.6
    
    
    
    (7.1
    %)Other departmental expenses
    
    
    5.5
    
    
    
    6.4
    
    
    
    (14.1
    %)General and administrative
    
    
    11.1
    
    
    
    11.1
    
    
    
    0.0
    %Utilities
    
    
    5.0
    
    
    
    5.4
    
    
    
    (7.4
    %)Repairs and maintenance
    
    
    6.1
    
    
    
    6.2
    
    
    
    (1.6
    %)Sales and marketing
    
    
    8.5
    
    
    
    8.7
    
    
    
    (2.3
    %)Base management fees
    
    
    3.0
    
    
    
    3.1
    
    
    
    (3.2
    %)Incentive management fees
    
    
    0.1
    
    
    
    0.2
    
    
    
    (50.0
    %)Property taxes
    
    
    6.2
    
    
    
    6.0
    
    
    
    3.3
    %Ground rent- Contractual
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.0
    %Ground rent- Non-cash
    
    
    1.8
    
    
    
    1.8
    
    
    
    0.0
    %Total hotel operating expenses
    
    $
    92.5
    
    
    $
    95.9
    
    
    
    (3.5
    %)
   Depreciation and amortization.
 Corporate expenses.
 Interest expense.
   - 18 -




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##### Table of Contents



Interest income
 Income taxes.
  Liquidity and Capital Resources
   Our Financing Strategy
    - 19 -




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##### Table of Contents



Controlled Equity Offering Program.
 Mortgage Loan Modification
 Senior Unsecured Credit Facility
  Leverage Ratio60% or
    
    
    55% to
    
    
    50% to
    
    
    Less ThanGreater
    
    
    60%
    
    
    55%
    
    
    50%Alternate base rate margin
    
    
    0.65
    %
    
    
    0.45
    %
    
    
    0.25
    %
    
    
    0.00
    %LIBOR margin
    
    
    1.55
    %
    
    
    1.45
    %
    
    
    1.25
    %
    
    
    0.95
    %
  Actual atMarch 26,Covenant
    
    
    2010Maximum leverage ratio(1)
    
    
    65
    %
    
    
    51.0
    %Minimum fixed charge coverage ratio(2)
    
    
    1.6
    x
    
    
    1.81
    xMinimum tangible net worth(3)
    
    $892.3 million
    
    
    $1.6 billionUnhedged floating rate debt as a percentage of total indebtedness
    
    
    35
    %
    
    
    0.0
    %
 
 (1)
    
    Maximum leverage ratio is determined by dividing the total debt outstanding
by the net asset value of our corporate assets and hotels. Hotel level net
asset values are calculated based on the application of a contractual
capitalization rate (which ranges from 7.5% to 8.0%) to the trailing twelve
month hotel net operating income.(2)
    
    Minimum fixed charge ratio is calculated based on the trailing four quarters.(3)
    
    Tangible net worth is defined as the gross book value of our real estate
assets and other corporate assets less our total debt and all other corporate
liabilities.  Actual atMarch 26,Covenant
    
    
    2010Minimum implied debt service ratio
    
    
    1.5
    x
    
    
    N/AMaximum unencumbered leverage ratio
    
    
    65
    %
    
    
    0
    %Minimum number of unencumbered borrowing base properties
    
    
    4
    
    
    
    10Minimum unencumbered borrowing base value
    
    $150 million
    
    
    $525.4 millionPercentage of total asset value owned by borrowers or guarantors
    
    
    90
    %
    
    
    100
    %
  - 20 -




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##### Table of Contents



Sources and Uses of Cash
     Transaction Date
    
    Description of Transaction
    
    AmountJanuary
    
    Payment of dividends
    
    $
    (4.3
    )January
    
    Repurchase of shares for employee taxes
    
    $
    (2.0
    )March
    
    Proceeds from Controlled Equity Offering Program
    
    $
    22.8
 Dividend Policy
  
    
    90% of our REIT taxable income determined without regard to the dividends paid deduction,
plus
 
    
    90% of the excess of our net income from foreclosure property over the tax imposed on
such income by the Code, minus
 
    
    any excess non-cash income.
   - 21 -




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##### Table of Contents



Capital Expenditures
   Off-Balance Sheet Arrangements
  Non-GAAP Financial Measures
   Fiscal Quarter Ended
    
    
    Fiscal Quarter EndedMarch 26, 2010
    
    
    March 27, 2009(in thousands)Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Interest expense
    
    
    8,126
    
    
    
    11,498Income tax benefit
    
    
    (1,628
    )
    
    
    (5,978
    )Real estate related depreciation
    
    
    18,907
    
    
    
    18,717EBITDA
    
    $
    17,059
    
    
    $
    18,944
  Fiscal Quarter Ended
    
    
    Fiscal Quarter EndedMarch 26, 2010
    
    
    March 27, 2009(in thousands)Net loss
    
    $
    (8,346
    )
    
    $
    (5,293
    )Real estate related depreciation
    
    
    18,907
    
    
    
    18,717FFO
    
    $
    10,561
    
    
    $
    13,424
  - 22 -




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##### Table of Contents



Critical Accounting Policies
  Investment in Hotels
  Revenue Recognition
 Stock-based Compensation
 Income Taxes.
   - 23 -




---



##### Table of Contents



Inflation
  Seasonality
  New Accounting Pronouncements Not Yet Implemented
  
 Item 3. Qualitative Disclosure about Market Risk
  
 Item 4. Controls and Procedures
    - 24 -




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##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
  Exhibit3.1.1
    
    
    Articles of Amendment and Restatement of the Articles of Incorporation of DiamondRock Hospitality Company
(incorporated by reference to the Registrants Registration Statement on Form S-11 filed with the
Securities and Exchange Commission (File no. 333-123065))3.1.2
    
    
    Amendment to the Articles of Amendment and Restatement of the Articles of Incorporation of DiamondRock
Hospitality Company (incorporated by reference to the Registrants Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 10, 2007)3.2
    
    
    Third Amended and Restated Bylaws of DiamondRock Hospitality Company (incorporated by reference to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on December 17,
2009)4.1
    
    
    Form of Certificate for Common Stock for DiamondRock Hospitality Company10.1
    *
    
    Amended and Restated 2004 Stock Option and Incentive Plan, as amended and restated on April 28, 201010.2
    *
    
    Form of Restricted Stock Award Agreement10.3
    *
    
    Form of Market Stock Unit Agreement (incorporated by reference to the Registrants Current Report on Form
8-K filed with the Securities and Exchange Commission on March 9, 2010)10.4
    *
    
    Form of Deferred Stock Unit Award Agreement10.5
    *
    
    Form of Director Election Form31.1
    
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended.31.2
    
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934,
as amended.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Required by Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended.
 *
    
    Exhibit is management contract or compensatory plan or arrangement  - 25 -




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##### Table of Contents



SIGNATURE
  DiamondRock Hospitality CompanyMay 5, 2010/s/ Sean M. Mahoney
    
    
    
    /s/ William J. TennisSean M. Mahoney
    
    
    
    William J. TennisExecutive Vice President and Chief Financial Officer
    
    
    
    Executive Vice President,(Principal Financial and Accounting Officer)
    
    
    
    General Counsel and Corporate Secretary
  - 26 -