##### 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 September 11, 2009
 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
  Maryland
(State of Incorporation)
    
    20-1180098(I.R.S. Employer Identification No.)6903 Rockledge Drive, Suite 800, Bethesda, Maryland
(Address of Principal Executive Offices)
    
    20817
(Zip Code)
 (240) 744-1150
(Registrants telephone number, including area code)
 þ Yes o No
 o Yes o No
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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 September 11, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations
For the Fiscal Quarters ended September 11, 2009 and September 5, 2008 and the Periods from
January 1, 2009 to September 11, 2009 and January 1, 2008 to September 5, 2008
    
    
    2Condensed Consolidated Statements of Cash Flows
For the Periods from January 1, 2009 to September 11, 2009 and January 1, 2008 to September 5, 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Results of Operations and
Financial Condition
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29Exhibit 31.1Exhibit 31.2Exhibit 32.1




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Item 1. Financial Statements
 DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 As of September 11, 2009 and December 31, 2008
 (in thousands, except share amounts)
 September 11, 2009
    
    
    December 31, 2008(Unaudited)ASSETSProperty and equipment, at cost
    
    $
    2,162,868
    
    
    $
    2,146,616Less: accumulated depreciation
    
    
    (283,797
    )
    
    
    (226,400
    )1,879,071
    
    
    
    1,920,216Deferred financing costs, net
    
    
    3,788
    
    
    
    3,335Restricted cash
    
    
    33,732
    
    
    
    30,060Due from hotel managers
    
    
    51,563
    
    
    
    61,062Favorable lease assets, net
    
    
    38,809
    
    
    
    40,619Prepaid and other assets
    
    
    35,396
    
    
    
    33,414Cash and cash equivalents
    
    
    119,256
    
    
    
    13,830Total assets
    
    $
    2,161,615
    
    
    $
    2,102,536LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Mortgage debt
    
    $
    820,853
    
    
    $
    821,353Senior unsecured credit facility
    
    
    
    
    
    
    57,000Total debt
    
    
    820,853
    
    
    
    878,353Deferred income related to key money, net
    
    
    19,937
    
    
    
    20,328Unfavorable contract liabilities, net
    
    
    83,213
    
    
    
    84,403Due to hotel managers
    
    
    30,656
    
    
    
    35,196Accounts payable and accrued expenses
    
    
    53,018
    
    
    
    66,624Total other liabilities
    
    
    186,824
    
    
    
    206,551Stockholders 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; 115,643,122 and 90,050,264 shares
issued and outstanding at September 11, 2009 and December 31, 2008, respectively
    
    
    1,156
    
    
    
    901Additional paid-in capital
    
    
    1,238,747
    
    
    
    1,100,541Accumulated deficit
    
    
    (85,965
    )
    
    
    (83,810
    )Total stockholders equity
    
    
    1,153,938
    
    
    
    1,017,632Total liabilities and stockholders equity
    
    $
    2,161,615
    
    
    $
    2,102,536
   - 1 -




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DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Fiscal Quarters Ended September 11, 2009 and September 5, 2008 and
 the Periods from January 1, 2009 to September 11, 2009 and January 1, 2008 to September 5, 2008
 (in thousands, except per share amounts)
 Fiscal Quarter
    
    
    Fiscal Quarter
    
    
    Period from
    
    
    Period fromEnded September
    
    
    Ended September
    
    
    January 1, 2009 to
    
    
    January 1, 2008 to11, 2009
    
    
    5, 2008
    
    
    September 11, 2009
    
    
    September 5, 2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Rooms
    
    $
    88,318
    
    
    $
    106,203
    
    
    $
    253,661
    
    
    $
    308,141Food and beverage
    
    
    40,836
    
    
    
    45,746
    
    
    
    122,423
    
    
    
    141,525Other
    
    
    8,646
    
    
    
    9,446
    
    
    
    23,866
    
    
    
    25,609Total revenues
    
    
    137,800
    
    
    
    161,395
    
    
    
    399,950
    
    
    
    475,275Operating Expenses:Rooms
    
    
    23,912
    
    
    
    25,422
    
    
    
    66,868
    
    
    
    72,830Food and beverage
    
    
    29,068
    
    
    
    32,961
    
    
    
    85,969
    
    
    
    98,266Management fees
    
    
    4,907
    
    
    
    6,844
    
    
    
    13,243
    
    
    
    19,857Other hotel expenses
    
    
    50,161
    
    
    
    54,116
    
    
    
    146,701
    
    
    
    155,758Impairment of favorable lease asset
    
    
    
    
    
    
    
    
    
    
    1,286
    
    
    
    Depreciation and amortization
    
    
    18,866
    
    
    
    18,257
    
    
    
    57,312
    
    
    
    53,013Corporate expenses
    
    
    3,675
    
    
    
    3,241
    
    
    
    11,094
    
    
    
    9,546Total operating expenses
    
    
    130,589
    
    
    
    140,841
    
    
    
    382,473
    
    
    
    409,270Operating profit
    
    
    7,211
    
    
    
    20,554
    
    
    
    17,477
    
    
    
    66,005Other Expenses (Income):Interest income
    
    
    (82
    )
    
    
    (296
    )
    
    
    (265
    )
    
    
    (1,066
    )Interest expense
    
    
    11,090
    
    
    
    11,632
    
    
    
    33,673
    
    
    
    33,757Total other expenses
    
    
    11,008
    
    
    
    11,336
    
    
    
    33,408
    
    
    
    32,691(Loss) income before income taxes
    
    
    (3,797
    )
    
    
    9,218
    
    
    
    (15,931
    )
    
    
    33,314Income tax benefit
    
    
    4,558
    
    
    
    2,994
    
    
    
    13,856
    
    
    
    5,830Net income (loss)
    
    $
    761
    
    
    $
    12,212
    
    
    $
    (2,075
    )
    
    $
    39,144Earnings (loss) per share:Basic and diluted earnings (loss)
per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    (0.02
    )
    
    $
    0.41
   - 2 -




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DIAMONDROCK HOSPITALITY COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Periods from January 1, 2009 to September 11, 2009 and January 1, 2008 to September 5, 2008
 (in thousands)
 Period from
    
    
    Period fromJanuary 1, 2009 to
    
    
    January 1, 2008 toSeptember 11, 2009
    
    
    September 5, 2008(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net (loss) income
    
    $
    (2,075
    )
    
    $
    39,144Adjustments to reconcile net (loss) income to net
cash provided by operating activities:Real estate depreciation
    
    
    57,312
    
    
    
    53,013Corporate asset depreciation as corporate expenses
    
    
    101
    
    
    
    115Non-cash ground rent
    
    
    5,350
    
    
    
    5,321Non-cash financing costs as interest
    
    
    556
    
    
    
    557Impairment of favorable lease asset
    
    
    1,286
    
    
    
    Amortization of unfavorable contract liabilities
    
    
    (1,190
    )
    
    
    (1,190
    )Amortization of deferred income
    
    
    (391
    )
    
    
    (383
    )Stock-based compensation
    
    
    3,892
    
    
    
    2,620Yield support received
    
    
    
    
    
    
    797Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    (1,982
    )
    
    
    (2,741
    )Restricted cash
    
    
    (1,700
    )
    
    
    (1,935
    )Due to/from hotel managers
    
    
    4,958
    
    
    
    (1,782
    )Accounts payable and accrued expenses
    
    
    (16,235
    )
    
    
    (7,799
    )Net cash provided by operating activities
    
    
    49,882
    
    
    
    85,737Cash flows from investing activities:Hotel capital expenditures
    
    
    (17,735
    )
    
    
    (49,703
    )Receipt of deferred key money
    
    
    
    
    
    
    5,000Change in restricted cash
    
    
    (2,702
    )
    
    
    (1,372
    )Net cash used in investing activities
    
    
    (20,437
    )
    
    
    (46,075
    )Cash flows from financing activities:Repayments of credit facility
    
    
    (57,000
    )
    
    
    (23,000
    )Draws on credit facility
    
    
    
    
    
    
    99,000Proceeds from mortgage debt
    
    
    43,000
    
    
    
    Repayment of mortgage debt
    
    
    (40,528
    )
    
    
    Scheduled mortgage debt principal payments
    
    
    (2,972
    )
    
    
    (1,963
    )Repurchase of common stock
    
    
    (309
    )
    
    
    (49,434
    )Proceeds from sale of common stock
    
    
    135,348
    
    
    
    Payment of costs related to sale of common stock
    
    
    (470
    )
    
    
    Payment of financing costs
    
    
    (1,008
    )
    
    
    (13
    )Payment of dividends
    
    
    (80
    )
    
    
    (70,383
    )Net cash provided by (used in) financing activities
    
    
    75,981
    
    
    
    (45,793
    )Net increase (decrease) in cash and cash equivalents
    
    
    105,426
    
    
    
    (6,131
    )Cash and cash equivalents, beginning of period
    
    
    13,830
    
    
    
    29,773Cash and cash equivalents, end of period
    
    $
    119,256
    
    
    $
    23,642Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    35,905
    
    
    $
    33,089Cash paid for income taxes
    
    $
    901
    
    
    $
    861Capitalized interest
    
    $
    19
    
    
    $
    183Non-Cash Financing Activities:Unpaid dividends
    
    
    
    
    
    $
    22,778
   - 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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Revenue Recognition
  Earnings (Loss) Per Share
  Stock-based Compensation
  Intangible Assets and Liabilities
   Straight-Line Rent
   - 5 -




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Concentration of Credit Risk
  Use of Estimates
  Risks and Uncertainties
  3. Property and Equipment
  September 11, 2009
    
    
    December 31, 2008Land
    
    $
    219,590
    
    
    $
    219,590Land improvements
    
    
    7,994
    
    
    
    7,994Buildings
    
    
    1,668,101
    
    
    
    1,658,227Furniture, fixtures and equipment
    
    
    266,190
    
    
    
    259,154CIP and corporate office equipment
    
    
    993
    
    
    
    1,6512,162,868
    
    
    
    2,146,616Less: accumulated depreciation
    
    
    (283,797
    )
    
    
    (226,400
    )$
    1,879,071
    
    
    $
    1,920,216
  4. Capital Stock
 Common Shares
  Follow-on Public Offering.
 Controlled Equity Offering Program.
  - 6 -




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Preferred Shares
  Operating Partnership Units
  5. Stock Incentive Plans
  Restricted Stock Awards
   Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueUnvested balance at January 1, 2009
    
    
    605,809
    
    
    $
    13.02Granted
    
    
    1,517,435
    
    
    
    2.82Vested
    
    
    (198,733
    )
    
    
    15.49Forfeited
    
    
    (7,184
    )
    
    
    14.61Unvested balance at September 11, 2009
    
    
    1,917,327
    
    
    $
    4.69
   - 7 -




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Deferred Stock Awards
  Stock Appreciation Rights and Dividend Equivalent Rights
  Weighted-AverageNumber of
    
    
    Grant DateSARs/DERs
    
    
    Fair ValueBalance at January 1, 2009
    
    
    300,225
    
    
    $
    6.62Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Balance at September 11, 2009
    
    
    300,225
    
    
    $
    6.62
  6. Earnings (Loss) Per Share
   - 8 -




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Fiscal Quarter
    
    
    Fiscal Quarter
    
    
    Period from
    
    
    Period fromEnded
    
    
    Ended
    
    
    January 1, 2009
    
    
    January 1, 2008September 11,
    
    
    September 5,
    
    
    to September 11,
    
    
    to September 5,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Basic Earnings (Loss) per Share Calculation:Numerator:Net income (loss)
    
    $
    761
    
    
    $
    12,212
    
    
    $
    (2,075
    )
    
    $
    39,144Less: dividends on unvested restricted common stock
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    (389
    )Net income (loss) after dividends on unvested
restricted common stock
    
    $
    761
    
    
    $
    12,061
    
    
    $
    (2,075
    )
    
    $
    38,755Weighted-average number of common shares
outstandingbasic
    
    
    110,426,611
    
    
    
    92,425,801
    
    
    
    101,636,354
    
    
    
    94,261,449Basic earnings (loss) per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    (0.02
    )
    
    $
    0.41Diluted Earnings (Loss) per Share Calculation:Numerator:Net income (loss)
    
    $
    761
    
    
    $
    12,212
    
    
    $
    (2,075
    )
    
    $
    39,144Less: dividends on unvested restricted common stock
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    (389
    )Net income (loss) after dividends on unvested
restricted common stock
    
    $
    761
    
    
    $
    12,061
    
    
    $
    (2,075
    )
    
    $
    38,755Weighted-average number of common shares
outstandingbasic
    
    
    110,426,611
    
    
    
    92,425,801
    
    
    
    101,636,354
    
    
    
    94,261,449Unvested restricted common stock
    
    
    875,735
    
    
    
    36,392
    
    
    
    
    
    
    
    163,168Unvested SARs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average number of common shares
outstandingdiluted
    
    
    111,302,346
    
    
    
    92,462,193
    
    
    
    101,636,354
    
    
    
    94,424,617Diluted earnings (loss) per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    (0.02
    )
    
    $
    0.41
 7. Debt
   - 9 -




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PrincipalBalance
    
    
    Interest RateCourtyard Manhattan / Midtown East
    
    $
    43,000
    
    
    
    8.81%Marriott Salt Lake City Downtown
    
    
    33,449
    
    
    
    5.50%Courtyard Manhattan / Fifth Avenue
    
    
    51,000
    
    
    
    6.48%Marriott Griffin Gate Resort
    
    
    27,882
    
    
    
    5.11%Renaissance Worthington
    
    
    57,289
    
    
    
    5.40%Frenchmans Reef & Morning Star Marriott Beach Resort
    
    
    61,633
    
    
    
    5.44%Marriott Los Angeles Airport
    
    
    82,600
    
    
    
    5.30%Orlando Airport Marriott
    
    
    59,000
    
    
    
    5.68%Chicago Marriott Downtown Magnificent Mile
    
    
    220,000
    
    
    
    5.975%Renaissance Austin
    
    
    83,000
    
    
    
    5.507%Renaissance Waverly
    
    
    97,000
    
    
    
    5.503%Bethesda Marriott Suites
    
    
    5,000
    
    
    
    LIBOR + 0.95
(1.235% as of September 11, 2009)Senior unsecured credit facility
    
    
    
    
    
    
    LIBOR + 0.95Total debt
    
    $
    820,853Weighted-Average Interest Rate
    
    
    
    
    
    
    5.80%
 Mortgage Debt
   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 at September 11,Covenant
    
    2009Maximum leverage ratio(1)
    
    65%
    
    47%Minimum fixed charge coverage ratio(2)
    
    1.6x
    
    2.2xMinimum tangible net worth(3)
    
    $839.6 million
    
    $1.4 billionUnhedged floating rate debt as a percentage of total indebtedness
    
    35%
    
    0.60%
 (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 range 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. The tangible net worth is increased by 75% of the net proceeds
from new equity offerings.  - 10 -




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Actual at September 11,Covenant
    
    2009Minimum implied debt service ratio
    
    1.5x
    
    N/AMaximum unencumbered leverage ratio
    
    65%
    
    0%Minimum number of unencumbered borrowing base properties
    
    4
    
    8Minimum unencumbered borrowing base value
    
    $150 million
    
    $533.5 millionPercentage of total asset value owned by borrowers or guarantors
    
    90%
    
    100%
  8. Fair Value of Financial Instruments
  As of September 11, 2009
    
    
    As of December 31, 2008Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueMortgage Debt
    
    $
    820,853
    
    
    $
    736,949
    
    
    $
    878,353
    
    
    $
    750,899
  9. Commitments and Contingencies
 Litigation
  Income Taxes
   - 11 -




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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 resort-focused branded real estate;
 
    
    conservative capital structure; and
 
    
    thoughtful asset management.
 High-Quality Urban- and Resort-Focused Branded Real Estate
      - 12 -




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##### Table of Contents



Capital Structure
    
    
    We completed a follow-on public offering of our common stock during the second quarter of
2009. We sold 17,825,000 shares of common stock, including the underwriters overallotment
of 2,325,000 shares, at an offering price of $4.85 per share. The net proceeds to us, after
deduction of offering costs, were approximately $82.1 million.
 
    
    We completed a $75.0 million controlled equity offering program, raising net proceeds of
$74.0 million through the sale of 10.2 million shares of our common stock at an average
price of $7.34 per share.
 
    
    Our Board of Directors recently authorized us to sell an additional $75 million of common
stock under a new controlled equity offering program.
 
    
    We repaid the entire $52 million outstanding on our senior unsecured credit facility
during the second quarter of 2009 with a portion of the proceeds from our follow-on
offering.
 
    
    On September 11, 2009, we refinanced the debt that was secured by a mortgage on our
Courtyard Manhattan/Midtown East hotel with $43.0 million of secured debt issued by
Massachusetts Mutual Life Insurance Company, which will mature on October 1, 2014.
 
    
    On October 1, 2009, we repaid the $27.9 million loan secured by a mortgage on our Griffin
Gate Marriott with cash on hand. The loan was scheduled to mature on January 1, 2010.
 
    
    On October 15, 2009, we repaid the $5 million mortgage debt on our Bethesda Marriott
Suites with cash on hand. The mortgage debt was scheduled to mature in July 2010.
 
    
    We intend to pay our next dividend to our stockholders of record as of December 31, 2009.
We expect the 2009 dividend will be in an amount equal to 100% of our 2009 taxable income.
We intend to pay up to 90% of our 2009 dividend in shares of our common stock, as permitted
by the Internal Revenue Services Revenue Procedure 2009-15.
 
    
    We have focused on minimizing capital spending during 2009 and expect to fund
approximately $6 million of 2009 capital expenditures from corporate cash.
   -13-




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##### Table of Contents



Thoughtful Asset Management
     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).
    -14-




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##### Table of Contents



Outlook
   Our Hotels
  %Number
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changeof
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    from 2008Property
    
    Location
    
    Rooms
    
    
    Occupancy
    
    
    ADR($)
    
    
    RevPAR($)
    
    
    RevPARChicago Marriott
    
    Chicago, Illinois
    
    
    1,198
    
    
    
    73.9
    %
    
    $
    169.30
    
    
    $
    125.07
    
    
    
    (16.6
    %)Los Angeles Airport Marriott
    
    Los Angeles, California
    
    
    1,004
    
    
    
    74.4
    %
    
    
    108.71
    
    
    
    80.92
    
    
    
    (18.8
    %)Westin Boston Waterfront Hotel (1)
    
    Boston, Massachusetts
    
    
    793
    
    
    
    68.7
    %
    
    
    191.91
    
    
    
    131.80
    
    
    
    (4.7
    %)Renaissance Waverly Hotel
    
    Atlanta, Georgia
    
    
    521
    
    
    
    63.8
    %
    
    
    133.06
    
    
    
    84.88
    
    
    
    (15.2
    %)Salt Lake City Marriott Downtown
    
    Salt Lake City, Utah
    
    
    510
    
    
    
    53.5
    %
    
    
    134.94
    
    
    
    72.22
    
    
    
    (24.5
    %)Renaissance Worthington
    
    Fort Worth, Texas
    
    
    504
    
    
    
    64.9
    %
    
    
    161.74
    
    
    
    104.90
    
    
    
    (19.5
    %)Frenchmans Reef & Morning Star Marriott Beach
Resort (1)
    
    St. Thomas, U.S. Virgin Islands
    
    
    502
    
    
    
    87.9
    %
    
    
    222.47
    
    
    
    195.52
    
    
    
    (9.9
    %)Renaissance Austin Hotel
    
    Austin, Texas
    
    
    492
    
    
    
    62.2
    %
    
    
    146.44
    
    
    
    91.02
    
    
    
    (17.9
    %)Torrance Marriott South Bay
    
    Los Angeles County, California
    
    
    487
    
    
    
    71.2
    %
    
    
    112.02
    
    
    
    79.77
    
    
    
    (22.9
    %)Orlando Airport Marriott
    
    Orlando, Florida
    
    
    486
    
    
    
    75.0
    %
    
    
    79.12
    
    
    
    59.35
    
    
    
    (11.6
    %)Marriott Griffin Gate Resort
    
    Lexington, Kentucky
    
    
    408
    
    
    
    62.8
    %
    
    
    122.79
    
    
    
    77.06
    
    
    
    (15.2
    %)Oak Brook Hills Marriott Resort
    
    Oak Brook, Illinois
    
    
    386
    
    
    
    42.9
    %
    
    
    117.40
    
    
    
    50.42
    
    
    
    (28.2
    %)Westin Atlanta North at Perimeter (1)
    
    Atlanta, Georgia
    
    
    369
    
    
    
    68.5
    %
    
    
    102.07
    
    
    
    69.93
    
    
    
    (20.7
    %)Vail Marriott Mountain Resort & Spa (1)
    
    Vail, Colorado
    
    
    346
    
    
    
    64.0
    %
    
    
    211.05
    
    
    
    135.05
    
    
    
    (23.6
    %)Marriott Atlanta Alpharetta
    
    Atlanta, Georgia
    
    
    318
    
    
    
    60.1
    %
    
    
    124.47
    
    
    
    74.79
    
    
    
    (18.7
    %)Courtyard Manhattan/Midtown East
    
    New York, New York
    
    
    312
    
    
    
    85.6
    %
    
    
    201.73
    
    
    
    172.60
    
    
    
    (34.0
    %)Conrad Chicago (1)
    
    Chicago, Illinois
    
    
    311
    
    
    
    73.6
    %
    
    
    180.41
    
    
    
    132.85
    
    
    
    (23.5
    %)Bethesda Marriott Suites
    
    Bethesda, Maryland
    
    
    272
    
    
    
    63.2
    %
    
    
    168.94
    
    
    
    106.75
    
    
    
    (22.8
    %)Courtyard Manhattan/Fifth Avenue
    
    New York, New York
    
    
    185
    
    
    
    89.4
    %
    
    
    208.92
    
    
    
    186.80
    
    
    
    (27.5
    %)The Lodge at Sonoma, a Renaissance Resort & Spa
    
    Sonoma, California
    
    
    182
    
    
    
    61.6
    %
    
    
    189.98
    
    
    
    116.96
    
    
    
    (26.1
    %)TOTAL/WEIGHTED AVERAGE
    
    
    
    
    9,586
    
    
    
    68.8
    %
    
    $
    153.49
    
    
    $
    105.55
    
    
    
    (18.9
    %)
 
 (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,
2009 to September 11, 2009 includes the operations for the period from January 1, 2009 to
August 31, 2009 for these five hotels.  -15-




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##### Table of Contents



Results of Operations
 Comparison of the Fiscal Quarter Ended September 11, 2009 to the Fiscal Quarter Ended September 5,
2008
  Revenue.
 Fiscal Quarter
    
    
    Fiscal QuarterEnded
    
    
    EndedSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeRooms
    
    $
    88,318
    
    
    $
    106,203
    
    
    
    (16.8
    %)Food and beverage
    
    
    40,836
    
    
    
    45,746
    
    
    
    (10.7
    %)Other
    
    
    8,646
    
    
    
    9,446
    
    
    
    (8.5
    %)Total revenues
    
    $
    137,800
    
    
    $
    161,395
    
    
    
    (14.6
    %)
  Fiscal Quarter
    
    
    Fiscal QuarterEnded
    
    
    EndedSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    %ChangeChicago Marriott
    
    $
    21.7
    
    
    $
    24.6
    
    
    
    (11.8
    %)Westin Boston Waterfront Hotel (1)
    
    
    18.5
    
    
    
    18.4
    
    
    
    0.5
    %Frenchmans Reef & Morning Star Marriott Beach Resort (1)
    
    
    11.4
    
    
    
    13.5
    
    
    
    (15.6
    %)Los Angeles Airport Marriott
    
    
    10.2
    
    
    
    13.2
    
    
    
    (22.7
    %)Renaissance Waverly Hotel
    
    
    6.9
    
    
    
    7.1
    
    
    
    (2.8
    %)Conrad Chicago (1)
    
    
    6.5
    
    
    
    7.9
    
    
    
    (17.7
    %)Renaissance Austin Hotel
    
    
    6.1
    
    
    
    7.5
    
    
    
    (18.7
    %)Oak Brook Hills Marriott Resort
    
    
    6.1
    
    
    
    6.8
    
    
    
    (10.3
    %)Marriott Griffin Gate Resort
    
    
    6.0
    
    
    
    6.7
    
    
    
    (10.4
    %)Renaissance Worthington
    
    
    5.5
    
    
    
    6.7
    
    
    
    (17.9
    %)Courtyard Manhattan/Midtown East
    
    
    4.9
    
    
    
    7.4
    
    
    
    (33.8
    %)Torrance Marriott South Bay
    
    
    4.8
    
    
    
    6.3
    
    
    
    (23.8
    %)Vail Marriott Mountain Resort & Spa (1)
    
    
    4.5
    
    
    
    5.2
    
    
    
    (13.5
    %)Salt Lake City Marriott Downtown
    
    
    4.4
    
    
    
    5.9
    
    
    
    (25.4
    %)The Lodge at Sonoma, a Renaissance Resort & Spa
    
    
    4.1
    
    
    
    4.9
    
    
    
    (16.3
    %)Orlando Airport Marriott
    
    
    3.9
    
    
    
    4.1
    
    
    
    (4.9
    %)Westin Atlanta North at Perimeter (1)
    
    
    3.7
    
    
    
    4.2
    
    
    
    (11.9
    %)Courtyard Manhattan/Fifth Avenue
    
    
    3.0
    
    
    
    4.2
    
    
    
    (28.6
    %)Bethesda Marriott Suites
    
    
    2.9
    
    
    
    3.8
    
    
    
    (23.7
    %)Marriott Atlanta Alpharetta
    
    
    2.7
    
    
    
    3.0
    
    
    
    (10.0
    %)Total
    
    $
    137.8
    
    
    $
    161.4
    
    
    
    (14.6
    %)
 (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
September 11, 2009 and September 5, 2008 include the operations for the period from June 1,
2009 to August 31, 2009 and June 1, 2008 to August 31, 2008, respectively, for these five
hotels.  -16-




---



##### Table of Contents



Fiscal Quarter
    
    
    Fiscal QuarterEnded
    
    
    EndedSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeOccupancy %
    
    
    73.3
    %
    
    
    76.5
    %
    
    (3.2) percentage pointsADR
    
    $
    146.73
    
    
    $
    169.05
    
    
    
    (13.2
    %)RevPAR
    
    $
    107.50
    
    
    $
    129.33
    
    
    
    (16.9
    %)
  Fiscal Quarter Ended
    
    
    Fiscal Quarter EndedSeptember 11, 2009
    
    
    September 5, 2008$ in millions
    
    
    % of Total
    
    
    $ in millions
    
    
    % of Total
    
    
    % ChangeBusiness Transient
    
    $
    20.4
    
    
    
    23.1
    %
    
    $
    29.6
    
    
    
    27.9
    %
    
    
    (31.1
    %)Group
    
    
    33.0
    
    
    
    37.4
    %
    
    
    39.3
    
    
    
    37.0
    %
    
    
    (16.0
    %)Leisure and Other
    
    
    34.9
    
    
    
    39.5
    %
    
    
    37.3
    
    
    
    35.1
    %
    
    
    (6.4
    %)Total
    
    $
    88.3
    
    
    
    100.0
    %
    
    $
    106.2
    
    
    
    100.0
    %
    
    
    (16.9
    %)
 
    
    Business Transient: Revenue from the business transient segment, traditionally
the most profitable segment for hotels, has declined more than any other customer segment.
Business transient revenue was partially replaced with lower-rated leisure and discount
business. We expect business transient demand to remain depressed until there is an
improvement in the overall economic climate in the United States.
 
    
    Group: A number of groups have postponed, cancelled or reduced their meetings in
response to the current economic recession. The deterioration in revenue is primarily due
to a decline in group room nights and, to a much lesser extent, rate. As of the end of the
third quarter, our 2009 group booking pace was 20% lower than at the same time last year,
which represents the continued deterioration of group booking trends during the year.
 
    
    Leisure and Other: The decline in revenue from leisure, discount and other
business was driven by lower average daily rates.
   -17-




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##### Table of Contents



Hotel operating expenses.
 Fiscal Quarter
    
    
    Fiscal QuarterEnded
    
    
    EndedSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    

% ChangeRooms departmental expenses
    
    $
    23.9
    
    
    $
    25.4
    
    
    
    (5.9
    %)Food and beverage departmental expenses
    
    
    29.1
    
    
    
    33.0
    
    
    
    (11.8
    %)Other departmental expenses
    
    
    7.0
    
    
    
    7.2
    
    
    
    (2.8
    %)General and administrative
    
    
    12.2
    
    
    
    13.1
    
    
    
    (6.9
    %)Utilities
    
    
    6.1
    
    
    
    7.7
    
    
    
    (20.8
    %)Repairs and maintenance
    
    
    6.7
    
    
    
    7.2
    
    
    
    (6.9
    %)Sales and marketing
    
    
    9.9
    
    
    
    11.3
    
    
    
    (12.4
    %)Base management fees
    
    
    3.6
    
    
    
    4.4
    
    
    
    (18.2
    %)Incentive management fees
    
    
    1.3
    
    
    
    2.4
    
    
    
    (45.8
    %)Property taxes
    
    
    5.9
    
    
    
    5.3
    
    
    
    11.3
    %Ground rent- Contractual
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.0
    %Ground rent- Non-cash
    
    
    1.8
    
    
    
    1.8
    
    
    
    0.0
    %Total hotel operating expenses
    
    $
    108.0
    
    
    $
    119.3
    
    
    
    (9.5
    %)
   Depreciation and amortization.
 Corporate expenses.
 Interest expense.
   -18-




---



##### Table of Contents



Interest income
 Income taxes.
 Comparison of the Period from January 1, 2009 to September 11, 2009 to the Period from January 1,
2008 to September 5, 2008
  Revenue.
 Period from
    
    
    Period fromJanuary 1,
    
    
    January 1,2009 to
    
    
    2008 toSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeRooms
    
    $
    253,661
    
    
    $
    308,141
    
    
    
    (17.7
    %)Food and beverage
    
    
    122,423
    
    
    
    141,525
    
    
    
    (13.5
    %)Other
    
    
    23,866
    
    
    
    25,609
    
    
    
    (6.8
    %)Total revenues
    
    $
    399,950
    
    
    $
    475,275
    
    
    
    (15.8
    %)
  -19-




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##### Table of Contents



Period from
    
    
    Period fromJanuary 1,
    
    
    January 1,2009 to
    
    
    2008 toSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeChicago Marriott
    
    $
    58.1
    
    
    $
    63.8
    
    
    
    (8.9
    %)Westin Boston Waterfront Hotel (1)
    
    
    43.6
    
    
    
    46.3
    
    
    
    (5.8
    %)Frenchmans Reef & Morning Star Marriott Beach Resort (1)
    
    
    36.1
    
    
    
    41.2
    
    
    
    (12.4
    %)Los Angeles Airport Marriott
    
    
    33.8
    
    
    
    41.1
    
    
    
    (17.8
    %)Renaissance Worthington
    
    
    21.4
    
    
    
    26.1
    
    
    
    (18.0
    %)Renaissance Waverly Hotel
    
    
    21.3
    
    
    
    24.4
    
    
    
    (12.7
    %)Renaissance Austin Hotel
    
    
    20.9
    
    
    
    24.1
    
    
    
    (13.3
    %)Vail Marriott Mountain Resort & Spa (1)
    
    
    16.1
    
    
    
    20.9
    
    
    
    (23.0
    %)Marriott Griffin Gate Resort
    
    
    15.9
    
    
    
    18.4
    
    
    
    (13.6
    %)Orlando Airport Marriott
    
    
    15.0
    
    
    
    17.5
    
    
    
    (14.3
    %)Courtyard Manhattan/Midtown East
    
    
    14.3
    
    
    
    21.2
    
    
    
    (32.5
    %)Torrance Marriott South Bay
    
    
    14.3
    
    
    
    18.0
    
    
    
    (20.6
    %)Salt Lake City Marriott Downtown
    
    
    14.2
    
    
    
    18.1
    
    
    
    (21.5
    %)Conrad Chicago (1)
    
    
    14.1
    
    
    
    17.7
    
    
    
    (20.3
    %)Oak Brook Hills Marriott Resort
    
    
    14.0
    
    
    
    17.0
    
    
    
    (17.6
    %)Westin Atlanta North at Perimeter (1)
    
    
    10.0
    
    
    
    12.4
    
    
    
    (19.4
    %)Bethesda Marriott Suites
    
    
    9.8
    
    
    
    12.2
    
    
    
    (19.7
    %)The Lodge at Sonoma, a Renaissance Resort & Spa
    
    
    9.5
    
    
    
    12.6
    
    
    
    (24.6
    %)Courtyard Manhattan/Fifth Avenue
    
    
    8.9
    
    
    
    12.0
    
    
    
    (25.8
    %)Marriott Atlanta Alpharetta
    
    
    8.7
    
    
    
    10.3
    
    
    
    (15.5
    %)Total
    
    $
    400.0
    
    
    $
    475.3
    
    
    
    (15.8
    %)
 (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 periods from January 1,
2009 to September 11, 2009 and January 1, 2008 to September 5, 2008 include the operations
for the periods from January 1 to August 31 for these five hotels.  Period from
    
    
    Period fromJanuary 1,
    
    
    January 1,2009 to
    
    
    2008 toSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeOccupancy %
    
    
    68.8
    %
    
    
    73.8
    %
    
    (5.0) percentage pointsADR
    
    $
    153.49
    
    
    $
    176.35
    
    
    
    (13.0
    %)RevPAR
    
    $
    105.55
    
    
    $
    130.12
    
    
    
    (18.9
    %)
  -20-




---



##### Table of Contents



Period from January 1, 2009
    
    
    Period from January 1, 2008to September 11, 2009
    
    
    to September 5, 2008$ in millions
    
    
    % of Total
    
    
    $ in millions
    
    
    % of Total
    
    
    % ChangeBusiness Transient
    
    $
    63.2
    
    
    
    24.9
    %
    
    $
    92.1
    
    
    
    29.9
    %
    
    
    (31.6
    %)Group
    
    
    94.1
    
    
    
    37.1
    %
    
    
    112.2
    
    
    
    36.4
    %
    
    
    (16.1
    %)Leisure and Other
    
    
    96.4
    
    
    
    38.0
    %
    
    
    103.8
    
    
    
    33.7
    %
    
    
    (6.9
    %)Total
    
    $
    253.7
    
    
    
    100.0
    %
    
    $
    308.1
    
    
    
    100.0
    %
    
    
    (17.7
    %)
 
    
    Business Transient: Revenue from the business transient segment, traditionally
the most profitable segment for hotels, has declined more than any other customer segment.
Business transient revenue was partially replaced with lower-rated leisure and discount
business. We expect business transient demand to remain depressed until there is an
improvement in the overall economic climate in the United States.
 
    
    Group: A number of groups have postponed, cancelled or reduced their meetings in
response to the current economic recession. The deterioration in revenue is primarily due
to a decline in group room nights and, to a much lesser extent, rate. As of September 11,
2009, our 2009 group booking pace was 20% lower than at the same time last year, which
represents the continued deterioration of group booking trends during the year.
 
    
    Leisure and Other: The decline in revenue from leisure, discount and other
business was driven by lower average daily rates.
  Hotel operating expenses.
 Period from
    
    
    Period fromJanuary 1,
    
    
    January 1,2009 to
    
    
    2008 toSeptember 11,
    
    
    September 5,2009
    
    
    2008
    
    
    % ChangeRooms departmental expenses
    
    $
    66.9
    
    
    $
    72.8
    
    
    
    (8.1
    %)Food and beverage departmental expenses
    
    
    86.0
    
    
    
    98.3
    
    
    
    (12.5
    %)Other departmental expenses
    
    
    20.8
    
    
    
    21.1
    
    
    
    (1.4
    %)General and administrative
    
    
    35.7
    
    
    
    39.5
    
    
    
    (9.6
    %)Utilities
    
    
    16.9
    
    
    
    19.2
    
    
    
    (12.0
    %)Repairs and maintenance
    
    
    19.7
    
    
    
    20.6
    
    
    
    (4.4
    %)Sales and marketing
    
    
    28.8
    
    
    
    32.7
    
    
    
    (11.9
    %)Base management fees
    
    
    10.5
    
    
    
    13.0
    
    
    
    (19.2
    %)Incentive management fees
    
    
    2.7
    
    
    
    6.9
    
    
    
    (60.9
    %)Property taxes
    
    
    18.2
    
    
    
    15.8
    
    
    
    15.2
    %Ground rent- Contractual
    
    
    1.3
    
    
    
    1.5
    
    
    
    (13.3
    %)Ground rent- Non-cash
    
    
    5.3
    
    
    
    5.3
    
    
    
    0.0
    %Total hotel operating expenses
    
    $
    312.8
    
    
    $
    346.7
    
    
    
    (9.8
    %)
    - 21 -




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##### Table of Contents



Depreciation and amortization.
 Corporate expenses.
 Interest expense.
  Interest income
 Income taxes.
 Liquidity and Capital Resources
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Our Financing Strategy
    
    
    We completed a follow-on public offering of our common stock on during the second quarter
of 2009. We sold 17,825,000 shares of common stock, including the underwriters
overallotment of 2,325,000 shares, at an offering price of $4.85 per share. The net
proceeds to us, after deduction of offering costs, were approximately $82.1 million.
 
    
    We completed a $75.0 million controlled equity offering program, raising net proceeds of
$74.0 million through the sale of 10.2 million shares of our common stock at an average
price of $7.34 per share.
 
    
    Our Board of Directors recently authorized us to sell an additional $75 million of common
stock under a new controlled equity offering program.
 
    
    We repaid the entire $52 million outstanding on our senior unsecured credit facility
during the second quarter of 2009 with a portion of the proceeds from our follow-on
offering.
 
    
    On September 11, 2009, we refinanced the debt that was secured by a mortgage on our
Courtyard Manhattan/Midtown East hotel with $43.0 million of secured debt issued by
Massachusetts Mutual Life Insurance Company, which will mature on October 1, 2014.
 
    
    On October 1, 2009, we repaid the $27.9 million loan secured by a mortgage on our Griffin
Gate Marriott with cash on hand. The loan was scheduled to mature on January 1, 2010.
 
    
    On October 15, 2009, we repaid the $5 million mortgage debt on our Bethesda Marriott
Suites with cash on hand. The mortgage debt was scheduled to mature in July 2010.
 
    
    We intend to pay our next dividend to our stockholders of record as of December 31, 2009.
We expect the 2009 dividend will be in an amount equal to 100% of our 2009 taxable income.
We intend to pay up to 90% of our 2009 dividend in shares of our common stock, as permitted
by the Internal Revenue Services Revenue Procedure 2009-15.
 
    
    We have focused on minimizing capital spending during 2009 and expect to fund
approximately $6 million of 2009 capital expenditures from corporate cash.
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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 at September 11,Covenant
    
    
    2009Maximum leverage ratio(1)
    
    
    65
    %
    
    
    47
    %Minimum fixed charge coverage ratio(2)
    
    
    1.6x
    
    
    
    2.2xMinimum tangible net worth(3)
    
    $839.6 million
    
    
    $1.4 billionUnhedged floating rate debt as a percentage of total indebtedness
    
    
    35
    %
    
    
    0.60
    %
 
 (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 range 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. The minimum
tangible net worth increases by 75% of the net proceeds from new equity offerings.  Actual at September 11,Covenant
    
    
    2009Minimum implied debt service ratio
    
    
    1.5x
    
    
    
    N/AMaximum unencumbered leverage ratio
    
    
    65
    %
    
    
    0
    %Minimum number of unencumbered borrowing base properties
    
    
    4
    
    
    
    8Minimum unencumbered borrowing base value
    
    $150 million
    
    
    $533.5 millionPercentage of total asset value owned by borrowers or
guarantors
    
    
    90
    %
    
    
    100
    %
  EBITDA Change from 2008Covenant
    
    
    -10%
    
    
    -20%
    
    
    -30%
    
    
    -40%
    
    
    -50%Maximum leverage ratio
    
    
    65
    %
    
    
    42
    %
    
    
    47
    %
    
    
    53
    %
    
    
    62
    %
    
    
    74
    %Minimum fixed charge coverage ratio
    
    
    1.6x
    
    
    
    2.6x
    
    
    
    2.3x
    
    
    
    2.0x
    
    
    
    1.7x
    
    
    
    1.4x
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Sources and Uses of Cash
  Cash Provided by Operating Activities.
  Cash Used In Investing Activities.
  Cash Provided by (Used in) Financing Activities.
  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.
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##### Table of Contents



Capital Expenditures
   Off-Balance Sheet Arrangements
  Non-GAAP Financial Measures
   Fiscal Quarter
    
    
    Fiscal Quarter
    
    
    Period from
    
    
    Period fromEnded
    
    
    Ended
    
    
    January 1, 2009
    
    
    January 1, 2008September 11,
    
    
    September 5,
    
    
    to September 11,
    
    
    to September 5,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    761
    
    
    $
    12,212
    
    
    $
    (2,075
    )
    
    $
    39,144Interest expense
    
    
    11,090
    
    
    
    11,632
    
    
    
    33,673
    
    
    
    33,757Income tax benefit
    
    
    (4,558
    )
    
    
    (2,994
    )
    
    
    (13,856
    )
    
    
    (5,830
    )Real estate related depreciation
    
    
    18,866
    
    
    
    18,257
    
    
    
    57,312
    
    
    
    53,013EBITDA
    
    $
    26,159
    
    
    $
    39,107
    
    
    $
    75,054
    
    
    $
    120,084
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##### Table of Contents



Fiscal Quarter
    
    
    Fiscal Quarter
    
    
    Period from
    
    
    Period fromEnded
    
    
    Ended
    
    
    January 1, 2009
    
    
    January 1, 2008September 11,
    
    
    September 5,
    
    
    to September 11,
    
    
    to September 5,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    761
    
    
    $
    12,212
    
    
    $
    (2,075
    )
    
    $
    39,144Real estate related depreciation
    
    
    18,866
    
    
    
    18,257
    
    
    
    57,312
    
    
    
    53,013FFO
    
    $
    19,627
    
    
    $
    30,469
    
    
    $
    55,237
    
    
    $
    92,157
 Critical Accounting Policies
  Investment in Hotels
  Revenue Recognition
 Stock-based Compensation Share-Based Payment
 Income Taxes.
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##### Table of Contents



Inflation
  Seasonality
  New Accounting Pronouncements Not Yet Implemented
  
 Item 3. Qualitative Disclosure about Market Risk
  
 Item 4. Controls and Procedures
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##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The market price of our common shares could be volatile and could decline, resulting in a
substantial or complete loss on our common stockholders investment.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 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 dated January 9, 2007)3.2.1
    
    
    Second Amended and Restated Bylaws 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))3.2.2
    
    
    Amendment No. 1 to Second 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 March 7, 2006)
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##### Table of Contents



Exhibit4.1
    
    
    Form of Certificate for Common Stock for 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))10.1
    
    
    Sales Agreement, dated July 27, 2009 by and among DiamondRock
Hospitality Company, DiamondRock Hospitality Limited Partnership
and Cantor Fitzgerald & Co. (incorporated by reference to the
Registrants Current Report on Form 8-K filed with the Securities
and Exchange Commission on July 27, 2009)10.2
    
    
    Sales Agreement, dated October 19, 2009 by and among DiamondRock
Hospitality Company, DiamondRock Hospitality Limited Partnership
and Cantor Fitzgerald & Co. (incorporated by reference to the
Registrants Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 19, 2009)31.1
    
    
    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.
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##### Table of Contents



SIGNATURE
  DiamondRock Hospitality CompanyOctober 20, 2009/s/ Sean M. Mahoney
    
    
    
    /s/ Michael D. SchecterSean M. Mahoney
    
    
    
    Michael D. SchecterExecutive Vice President and
    
    
    
    Executive Vice President,Chief Financial Officer
    
    
    
    General Counsel and Corporate Secretary
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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    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.
  - 32 -