Meristar (NYSE:MHX)
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MeriStar Hospitality Corporation (NYSE:MHX), one of the
nation's largest hotel real estate investment trusts (REIT), today
announced financial results for the first quarter ended March 31,
2005. Highlights of the company's strong quarterly performance
include(1):
-- Net loss narrowed to $(13.4) million or $(0.15) per diluted
share compared to a net loss of $(40.2) million or $(0.58) per
diluted share for the 2004 first quarter;
-- Adjusted EBITDA of $43.3 million increased 15.0 percent
compared to $37.6 million in the 2004 first quarter;
-- Adjusted funds from operations (FFO) per share of $0.12
increased 300 percent compared to $0.03 per share for the 2004
first quarter;
-- A 140 basis point improvement in comparable hotel gross
operating profit margins and a 220 basis point improvement in
comparable hotel EBITDA margins;
-- Revenue per available room (RevPAR) increased 5.1 percent for
the comparable hotels, adjusted for rooms out-of-service;
-- Estimated RevPAR growth of 7.5 percent assuming all Florida
properties were fully open and realized market RevPAR growth
rates and were included in the comparable hotels; and
-- Business interruption ("BI") insurance income of $2.3 million
included in net loss, adjusted EBITDA and adjusted FFO.
(1) See the notes to financial information for further discussion
on certain of these non-GAAP financial measures.
"We had a great first quarter, as evidenced by the improvements in
net income, adjusted EBITDA, and adjusted FFO per share. All of these
measures exceeded our prior year amounts by a wide margin," said Paul
W. Whetsell, chairman and chief executive officer. "Our ability to
increase room rates has lead to strong flow through, generating an
increase in comparable hotel gross operating profit margins of 140
basis points along with comparable EBITDA margins of 220 basis points,
well ahead of the 50 to 100 basis point EBITDA margin increase we
targeted in our first quarter guidance. Our efforts to strengthen the
portfolio through well executed capital expenditures, planned asset
sales and new property investments are positioning us well for revenue
growth and margin expansion.
"A number of our markets reported strong increases in RevPAR.
Washington, D.C., where we own 11 properties (2,478 rooms), continues
as one of the nation's leading markets. Our comparable hotels in and
around the nation's capital enjoyed adjusted RevPAR gains of 11.8
percent," Whetsell stated.
Strong rate increases drove the average daily rate (ADR) for the
company's comparable hotels up 8.1 percent to $108.69 in the first
quarter. Following the company's strategy to increase room rates and
displace lower-rated contract business, occupancy decreased slightly
by 1.9 percentage points to 67.8 percent after adjusting for rooms
out-of-service for the company's extensive renovation program.
The comparable properties' adjusted RevPAR increase of 5.1 percent
exceeded the company's guidance of 4 to 5 percent for the first
quarter and was realized despite the continued closure during the
quarter of seven properties in the strong Florida market where RevPAR
gains have been exceptionally strong. The company estimates that the
adjusted RevPAR would have increased 7.5 percent had all of its
Florida properties been fully open with market type RevPAR
performance.
The company acquired two properties during 2004, The Ritz-Carlton,
Pentagon City and the Marriott Irvine, which had a combined adjusted
RevPAR increase of 12 percent for the quarter. "The Marriott Irvine
property completed its major room renovation program during the
quarter," Whetsell stated. These two properties are not currently
included in the company's comparable results as they were not owned in
both years. During 2004 the company also acquired a 49.99 percent
interest in the landmark Radisson Lexington in Midtown Manhattan,
which recorded a RevPAR increase of 14 percent in the first quarter.
"All three of our 2004 investment properties are performing
exceptionally well and are out-performing our original expectations,"
Whetsell added.
Renovation Program
In the first quarter, the company invested approximately $35.8
million in capital improvements at its properties as part of its $100
million renovation program for 2005. "We are clearly experiencing the
benefits of our property investment program that began in 2004. The
upgrading we are doing allows us to position properties for
higher-rated and more profitable business."
Examples of the program's impact include the Hilton hotel in
Durham, N.C. During 2004, the company renovated the guest rooms,
meeting space, sports bar and restaurant. In the first quarter 2005,
the property reported a 16 percent improvement in adjusted RevPAR and
significantly outperformed its competitive set. Another property, the
company's Courtyard in Marina del Ray, Calif., also completed a
renovation in 2004 and reported RevPAR growth of 17 percent for the
2005 first quarter. "This hotel's RevPAR index in the quarter of over
115 demonstrates the property's strength and its ability to grow share
in its market," Whetsell added. "We expect to see similar examples
across our portfolio as we continue to complete projects throughout
the year."
Florida Hotels Update
Florida continued to see outstanding growth as evidenced by
reports of double-digit RevPAR gains across the state. The company's
two open Orlando hotels both produced nearly 30 percent RevPAR gains
in the first quarter. Also, the company's two hotels in the
Tampa/Clearwater market achieved nearly 25 percent RevPAR growth,
adjusted for rooms out-of-service.
Whetsell noted that, of the seven properties substantially closed
in the first quarter due to hurricane damage last fall, five will be
reopening in the second quarter. "We expect to have all but our South
Seas Resort on Captiva open by summer. South Seas, which suffered the
most damage, is expected to re-open this fall in time for the high
season."
Total company adjusted EBITDA of $43.3 million in the first
quarter included $2.3 million of BI insurance income recognition
related to the ongoing claim for the Florida properties affected by
last year's hurricanes. Including BI insurance income, the company's
seven Florida hotels substantially closed during the first quarter and
the Dunes Golf and Tennis Club on Sanibel Island contributed $2.5
million of EBITDA ($0.9 million of net income) in the first quarter
2005, compared to $6.4 million of EBITDA ($3.8 million of net income)
in the first quarter 2004. In addition, total revenue reported by
these properties was $4.0 million in the 2005 first quarter compared
to $28.9 million in the quarter a year ago.
"The operating results from our comparable hotels provided for a
strong first quarter, despite recognizing a very conservative BI
insurance gain in the quarter," said Donald D. Olinger, chief
financial officer. "The $2.3 million of BI recognized in the quarter
represents minimum profit recognition independent from the claim
payment process and is below both what we ultimately expect to
recognize and the $6 to $8 million originally contemplated in our
guidance for the quarter. The claim negotiation process was not
sufficiently advanced on several of our more complex properties to
enable us to recognize profit in the first quarter, and we did not
believe that forcing the issue was in the best interest of the overall
claim resolution. We are very confident that we ultimately will be
compensated for lost profits at a level well in excess of what we
recognized in this quarter, however the timing of the recognition
between this year's quarters will continue to be challenging to
predict."
To date, the company has received approximately $70 million of
hurricane recovery insurance payments. "We have been receiving regular
cash payments from our insurance carriers and expect these payments to
continue as we work through our claim," Olinger added. "However, in
order to recognize gains resulting from BI insurance for lost income,
all contingencies related to the recoveries must be resolved, which is
difficult to achieve with the insurance companies until the claim is
more advanced."
Capital Structure
"We continued to improve our capital structure in the first
quarter, taking advantage of lower interest rate debt opportunities,
and lengthening our maturities," Olinger said. In January 2005, the
company placed a 5.8 percent fixed-rate, 10-year, $38 million mortgage
on the Hilton Crystal City hotel in Arlington, Virginia. In the
short-term, proceeds will be used to temporarily fund capital projects
at properties damaged by last year's hurricanes. "We ultimately plan
to reduce debt carrying higher rates or use the proceeds to fund
selected investments. We will continue to look for opportunities to
reduce our borrowing costs and to improve our credit statistics in
2005," he added.
Guidance
Following the strength of the first quarter results, the company
has increased full year 2005 guidance for adjusted EBITDA, FFO per
share, RevPAR growth and comparable hotel EBITDA margin growth. RevPAR
increase has been raised to 8 to 9 percent for the full year 2005 with
RevPAR growth of 9 to 10 percent anticipated in the second quarter
2005. Comparable hotel EBITDA margins are expected to increase 125 to
175 basis points in the second quarter and for the full year.
Additionally, the company provides the following range of estimates
for the second quarter and full year:
-- Net income (loss) of break-even to $3 million for the second
quarter and $(38) million to $(43) million for the full year;
-- Net income (loss) per diluted share of $0.00 to $0.03 for the
second quarter and $(0.43) to $(0.49) for the full year;
-- FFO per diluted share of $0.28 to $0.31 for the second quarter
and $0.59 to $0.64 for the full year;
-- Adjusted FFO per diluted share of $0.28 to $0.31 for the
second quarter and $0.59 to $0.64 for the full year;
-- Adjusted EBITDA of $60 million to $63 million for the second
quarter and $190 million to $195 million for the full year;
and
-- BI insurance profit of $2.5 million to $5 million is included
in the second quarter adjusted EBITDA guidance of $60 to $63
million.
See reconciliations of net loss to FFO per diluted share and
Adjusted FFO per diluted share and net loss to Adjusted EBITDA
included in the tables of this press release. FFO, Adjusted FFO, and
Adjusted EBITDA (earnings before interest, income taxes, depreciation,
amortization and other items) are non-GAAP financial measures and
should not be considered as alternatives to any measures of operating
results under GAAP. See the notes to financial information for further
discussion of these non-GAAP financial measures.
MeriStar will hold a conference call to discuss its first-quarter
results today, May 4, at 10 a.m. Eastern time. Interested parties may
visit the company's Web site at www.meristar.com and click on Investor
Relations and then the webcast link.
Interested parties also may listen to an archived webcast of the
conference call on the Web site, or may dial (800) 240-7305, reference
number 11028922, to hear a telephone replay. The telephone replay will
be available through midnight on Wednesday, May 11, 2005.
Arlington, Va.-based MeriStar Hospitality Corporation owns 73
principally upscale, full-service hotels in major markets and resort
locations with 20,319 rooms in 22 states and the District of Columbia.
The company owns hotels under such internationally known brands as
Hilton, Sheraton, Marriott, Ritz-Carlton, Westin, Doubletree and
Radisson. For more information about MeriStar Hospitality, visit the
company's Web site: www.meristar.com.
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Forward-looking statements,
which are based on various assumptions and describe our future plans,
strategies and expectations, are generally identified by our use of
words such as "intend," "plan," "may," "should," "will," "project,"
"estimate," "anticipate," "believe," "expect," "continue,"
"potential," "opportunity," and similar expressions, whether in the
negative or affirmative. We cannot guarantee that we actually will
achieve these plans, intentions or expectations. All statements
regarding our expected financial position, business and financing
plans are forward-looking statements. Except for historical
information, matters discussed in this press release are subject to
known and unknown risks, uncertainties and other factors which may
cause our actual results, performance or achievements to be materially
different from future results, performance or achievements expressed
or implied by such forward-looking statements. Factors which could
have a material adverse effect on our operations and future prospects
include, but are not limited to: economic conditions generally and the
real estate market specifically; supply and demand for hotel rooms in
our current and proposed market areas; other factors that may
influence the travel industry, including health, safety and economic
factors; competition; cash flow generally, including the availability
of capital generally, cash available for capital expenditures, and our
ability to refinance debt; the effects of threats of terrorism and
increased security precautions on travel patterns and demand for
hotels; the threatened or actual outbreak of hostilities and
international political instability; governmental actions, including
new laws and regulations and particularly changes to laws governing
the taxation of real estate investment trusts; weather conditions
generally and natural disasters; rising interest rates; and changes in
generally accepted accounting principles, policies and guidelines
applicable to real estate investment trusts. These risks and
uncertainties should be considered in evaluating any forward-looking
statements contained in this press release or incorporated by
reference herein. All forward-looking statements speak only as of the
date of this press release or, in the case of any document
incorporated by reference, the date of that document. All subsequent
written and oral forward-looking statements attributable to us or any
person acting on our behalf are qualified by the cautionary statements
in this section. We undertake no obligation to update or publicly
release any revisions to forward-looking statements to reflect events,
circumstances or changes in expectations after the date of this press
release.
-0-
*T
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005 2004
--------------- -------------
Revenue:
Hotel operations:
Rooms $ 125,995 $ 129,992
Food and beverage 51,858 49,110
Other hotel operations 11,384 15,340
Office rental, parking and other
revenue 1,858 1,368
--------------- -------------
Total revenue 191,095 195,810
--------------- -------------
Hotel operating expenses:
Rooms 31,359 31,686
Food and beverage 37,509 36,907
Other hotel operating expenses 7,116 9,475
Office rental, parking and other
expenses 824 585
Other operating expenses:
General and administrative,
hotel 32,105 32,264
General and administrative,
corporate 3,533 3,882
Property operating costs 29,682 29,735
Depreciation and amortization 24,888 25,517
Property taxes, insurance and
other 10,989 16,334
Loss on asset impairments - 184
--------------- -------------
Operating expenses 178,005 186,569
--------------- -------------
Equity in income/loss of and interest
earned from unconsolidated
affiliates 1,634 1,600
Hurricane business interruption
income 2,281 -
--------------- -------------
Operating income 17,005 10,841
Minority interest 347 946
Interest expense, net (30,714) (34,502)
Loss on early extinguishments of debt (60) (5,923)
--------------- -------------
Loss before income taxes and
discontinued operations (13,422) (28,638)
Income tax (expense) benefit (22) 524
--------------- -------------
Loss from continuing operations (13,444) (28,114)
--------------- -------------
Discontinued operations:
Loss from discontinued operations
before income tax benefit - (12,220)
Income tax benefit - 89
--------------- -------------
Loss from discontinued operations - (12,131)
--------------- -------------
Net loss $ (13,444) $ (40,245)
=============== =============
Basic loss per share:
Loss from continuing operations $ (0.15) $ (0.41)
Loss from discontinued operations - (0.18)
--------------- -------------
Net loss per basic share $ (0.15) $ (0.59)
=============== =============
Diluted loss per share:
Loss from continuing operations $ (0.15) $ (0.41)
Loss from discontinued operations - (0.17)
--------------- -------------
Net loss per diluted share $ (0.15) $ (0.58)
=============== =============
RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005 2004
Funds From Operations:
Net Loss $ (13,444) $ (40,245)
Depreciation and amortization
of real estate assets 23,494 24,503
Loss on disposal of assets - 6,946
Unconsolidated affiliate
adjustments 1,254 -
Minority interest to common OP
unit holders (634) (997)
--------------- -------------
Funds from operations $ 10,670 $ (9,793)
=============== =============
Weighted average number of shares
of common stock outstanding 87,495 68,640
=============== =============
Funds from operations per diluted
share $ 0.12 $ (0.14)
=============== =============
Funds From Operations, as adjusted:
Funds from operations $ 10,670 $ (9,793)
Loss on asset impairments - 5,011
Loss on early extinguishments
of debt 60 5,923
Write off of deferred
financing fees 11 1,266
Minority interest to common
OP unit holders (1) (387)
--------------- -------------
Funds from operations, as adjusted $ 10,740 $ 2,020
=============== =============
Weighted average number of shares of
common stock and common stock
equivalents outstanding 87,495 68,711
=============== =============
Funds from operations per diluted
share, as adjusted $ 0.12 $ 0.03
=============== =============
(a) See the notes to the financial information for discussion of
non-GAAP measures.
RECONCILIATION OF NET LOSS TO EBITDA (a)
(In thousands)
Quarter Ended
March 31,
-------------------------------
2005 2004
EBITDA and Adjusted EBITDA:
Loss from continuing operations $ (13,444) $ (28,114)
Loss from discontinued operations - (12,131)
--------------- -------------
Net Loss $ (13,444) $ (40,245)
=============== =============
Loss from continuing operations $ (13,444) $ (28,114)
Interest expense, net 30,714 34,502
Income tax expense (benefit) 22 (524)
Depreciation and amortization (b) 24,888 25,517
--------------- -------------
EBITDA from continuing operations 42,180 31,381
Loss on asset impairments - 184
Minority interest (347) (946)
Loss on early extinguishments
of debt 60 5,923
Equity investment adjustments:
Equity in loss of affiliates 1,370 -
--------------- -------------
Adjusted EBITDA from continuing
operations $ 43,263 $ 36,542
=============== =============
Loss from discontinued operations $ - $ (12,131)
Interest expense, net - (111)
Income tax benefit - (89)
Depreciation and amortization - 1,643
--------------- -------------
EBITDA from discontinued operations - (10,688)
Loss on asset impairments - 4,827
Loss on disposal of assets - 6,946
--------------- -------------
Adjusted EBITDA from discontinued
operations $ - $ 1,085
=============== =============
Adjusted EBITDA, total operations $ 43,263 $ 37,627
=============== =============
(a) See the notes to the financial information for discussion of
non-GAAP measures.
(b) Depreciation and amortization includes the write-off of
deferred financing costs totaling $1.3 million for the Quarter
Ended March 31, 2004 related to our early extinguishments of debt
during this period.
HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a)
(In thousands, except per share amounts)
Quarter Ended
March 31,
-------------------------------
2005 2004
--------------- -------------
Number of hotels 62 62
Number of rooms 17,684 17,684
Comparable hotel gross operating
profit margin 28.8% 27.4%
Comparable hotel EBITDA margin 20.9% 18.7%
Comparable hotel revenues:
Rooms $ 114,037 $ 110,041
Food and beverage 45,406 43,983
Other hotel operations 8,185 8,330
--------------- -------------
Comparable hotel revenues (b) 167,628 162,354
--------------- -------------
Comparable hotel expenses:
Room 28,833 28,152
Food and beverage 32,903 33,002
Other 5,726 5,831
General and administrative 28,771 28,140
Property operating costs, less
management fees 23,177 22,686
--------------- -------------
Comparable hotel expenses (c) 119,410 117,811
--------------- -------------
--------------- -------------
Comparable Hotel Gross Operating
Profit 48,218 44,543
--------------- -------------
Management fees (c) (4,188) (4,055)
Property taxes, insurance and
other (c) (9,226) (10,084)
Hurricane business interruption
income 278 -
--------------- -------------
Comparable Hotel EBITDA (d) $ 35,082 $ 30,404
=============== =============
(a) See the notes to the financial information for discussion of
non-GAAP measures, and comparable hotel results and statistics.
(b) The reconciliation of total revenues per the consolidated
statements of operations to the comparable hotel revenues is as
follows (in thousands):
Quarter Ended
March 31,
-------------------------------
2005 2004
Revenues per the consolidated
statements of operations $ 191,095 $ 195,810
Non-comparable hotel revenues (21,609) (32,088)
Office rental, parking and other
revenue (1,858) (1,368)
--------------- -------------
Comparable hotel revenues $ 167,628 $ 162,354
=============== =============
(c) The reconciliation of operating costs per the consolidated
statements of operations to the comparable hotel expenses,
management fees, property taxes, insurance, and other is as
follows (in thousands):
Quarter Ended
March 31,
-------------------------------
2005 2004
Operating expenses per the
consolidated statements of
operations $ 178,005 $ 186,569
Non-comparable hotel expenses (16,760) (25,036)
General and administrative, corporate (3,533) (3,882)
Depreciation and amortization (24,888) (25,517)
Loss on asset impairments - (184)
--------------- -------------
Comparable hotel expenses,
management fees, property taxes,
insurance, and other $ 132,824 $ 131,950
=============== =============
(d) The reconciliation of comparable hotel EBITDA to operating
income per the consolidated statements of operations is as follows
(in thousands):
Quarter Ended
March 31,
-------------------------------
2005 2004
--------------- -------------
Comparable hotel EBITDA $ 35,082 $ 30,404
Non-comparable results, net (e) 4,849 7,052
Office rental, parking and other
revenue 1,858 1,368
General and administrative, corporate (3,533) (3,882)
Depreciation and amortization (24,888) (25,517)
Loss on asset impairments - (184)
Equity in income/loss of and interest
earned from
unconsolidated affiliates 1,634 1,600
Hurricane business interruption
income at non-comparable hotels 2,003 -
--------------- -------------
Operating Income $ 17,005 $ 10,841
=============== =============
(e) Non-comparable results, net represent all revenues and
expenses, other than those of our comparable hotels, and specific
revenues and expenses identified above: office rental, parking and
other revenue and expense; general and administrative, corporate;
depreciation and amortization; loss on asset impairments; and
equity in income/loss of and interest earned from unconsolidated
affiliates.
RECONCILIATION OF NET INCOME TO EBITDA (HURRICANE PROPERTIES)
(In thousands)
*T
In August and September of 2004, Florida was hit by hurricanes.
Twelve hotels in Florida and the golf course on Sanibel Island were
impacted by varying degrees by the hurricanes. The operations at nine
of these hotels were very significantly affected. Of the nine, the
Hilton Clearwater continued to operate with a number of rooms out of
service and the Hilton Cocoa Beach was initially shutdown then
partially reopened in December. These two properties were open in the
first quarter 2005 and included in the 62 comparable hotels.
The following seven hotels were still substantially closed during
the first quarter of 2005: Best Western Sanibel Island, Holiday Inn
Walt Disney World, Sanibel Inn, Seaside Inn, Song of the Sea, South
Seas Resort, and Sundial Beach Resort.
The following is a reconciliation of Net Income to EBITDA for
those seven hotels and Dunes Golf and Tennis Club on Sanibel Island:
-0-
*T
Quarter Ended
March 31,
-------------------------------
2005 2004
--------------- -------------
EBITDA:
Net Income (a) $ 884 $ 3,801
Depreciation and amortization 1,644 2,646
--------------- -------------
EBITDA (a) $ 2,528 $ 6,447
=============== =============
(a) Includes $2.0 million of business interruption insurance
income at these seven hotels and Dunes Golf and Tennis Club in
2005; we received an additional $0.3 million of business
interruption income included in the 62 comparable hotels.
DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION
Comparable hotels, same store basis (a)
1st Quarter 2005
-------------------------------
Market/Region/Location Hotels Rooms ADR Occ% RevPAR
---------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 $ 138.62 66.9% $ 92.68
New Jersey 4 1,120 $ 127.75 57.7% $ 73.77
Southern California (b) 3 1,034 $ 121.03 76.4% $ 92.51
Northern California 3 968 $ 112.61 67.8% $ 76.33
Orlando (c) 2 1,231 $ 100.74 81.0% $ 81.61
Tampa /Clearwater 2 922 $ 124.69 81.9% $ 102.08
Chicago 2 857 $ 99.54 52.3% $ 52.05
Colorado 2 736 $ 83.25 48.1% $ 40.07
Atlanta 2 650 $ 93.74 78.3% $ 73.37
Dallas 2 598 $ 90.01 62.2% $ 55.99
Houston 2 597 $ 108.14 70.1% $ 75.82
Other Hotels 28 6,859 $ 99.98 67.2% $ 67.22
---------------------------------------------------------------------
All Markets 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 $ 133.83 64.4% $ 86.24
South Central 11 3,281 $ 96.40 64.5% $ 62.22
South Atlantic (c) 12 4,101 $ 109.89 78.3% $ 86.01
Pacific (b) 9 2,797 $ 116.37 70.1% $ 81.61
North Central 7 1,789 $ 90.10 56.8% $ 51.15
Mountain 6 1,798 $ 84.02 64.0% $ 53.75
New England 1 200 $ 85.41 67.4% $ 57.54
---------------------------------------------------------------------
All Regions 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Urban (b) 19 4,933 $ 118.71 67.9% $ 80.54
Resort (c) 7 2,678 $ 121.65 80.0% $ 97.35
Airport (b) 12 3,751 $ 94.82 70.0% $ 66.35
Suburban 24 6,322 $ 102.59 61.3% $ 62.90
---------------------------------------------------------------------
All Locations 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
---------------------------------------------------------------------
Comparable Hotels 62 17,684 $ 108.69 67.8% $ 73.64
Closed Hurricane Hotels
(d) 7 1,340 n/a n/a $ 211.92
---------------------------------------------------------------------
Total 69 19,024 n/a n/a $ 82.48
---------------------------------------------------------------------
1st Quarter 2004
--------------------------------
Market/Region/Location Hotels Rooms ADR Occ% RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 $ 118.19 70.1% $ 82.89
New Jersey 4 1,120 $ 126.09 62.0% $ 78.22
Southern California (b) 3 1,034 $ 114.28 76.9% $ 87.84
Northern California 3 968 $ 105.35 72.3% $ 76.18
Orlando (c) 2 1,231 $ 84.87 74.9% $ 63.55
Tampa /Clearwater 2 922 $ 105.93 77.5% $ 82.08
Chicago 2 857 $ 87.09 56.2% $ 48.96
Colorado 2 736 $ 79.25 57.9% $ 45.87
Atlanta 2 650 $ 82.49 84.8% $ 69.97
Dallas 2 598 $ 87.25 59.1% $ 51.56
Houston 2 597 $ 119.95 76.7% $ 92.04
Other Hotels 28 6,859 $ 95.71 68.8% $ 65.89
---------------------------------------------------------------------
All Markets 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 $ 120.39 67.7% $ 81.49
South Central 11 3,281 $ 97.41 65.9% $ 64.22
South Atlantic (c) 12 4,101 $ 96.82 76.3% $ 73.89
Pacific (b) 9 2,797 $ 110.67 72.6% $ 80.36
North Central 7 1,789 $ 82.85 61.5% $ 50.91
Mountain 6 1,798 $ 79.67 67.2% $ 53.52
New England 1 200 $ 72.10 79.9% $ 57.64
---------------------------------------------------------------------
All Regions 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Urban (b) 19 4,933 $ 109.07 69.8% $ 76.07
Resort (c) 7 2,678 $ 108.31 75.4% $ 81.72
Airport (b) 12 3,751 $ 84.00 74.5% $ 62.55
Suburban 24 6,322 $ 100.61 64.1% $ 64.48
---------------------------------------------------------------------
All Locations 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
---------------------------------------------------------------------
Comparable Hotels 62 17,684 $ 100.57 69.7% $ 70.05
Closed Hurricane Hotels
(d) 7 1,340 $ 250.76 69.7% $ 174.86
---------------------------------------------------------------------
Total 69 19,024 $ 110.08 69.7% $ 76.69
---------------------------------------------------------------------
Market/Region/Location Hotels Rooms Percent Change in RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 11.8%
New Jersey 4 1,120 -5.7%
Southern California (b) 3 1,034 5.3%
Northern California 3 968 0.2%
Orlando (c) 2 1,231 28.4%
Tampa /Clearwater 2 922 24.4%
Chicago 2 857 6.3%
Colorado 2 736 -12.6%
Atlanta 2 650 4.9%
Dallas 2 598 8.6%
Houston 2 597 -17.6%
Other Hotels 28 6,859 2.0%
----------------------------------------------------------------------
All Markets 62 17,684 5.1%
----------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 5.8%
South Central 11 3,281 -3.1%
South Atlantic (c) 12 4,101 16.4%
Pacific (b) 9 2,797 1.6%
North Central 7 1,789 0.5%
Mountain 6 1,798 0.4%
New England 1 200 -0.2%
----------------------------------------------------------------------
All Regions 62 17,684 5.1%
----------------------------------------------------------------------
Urban (b) 19 4,933 5.9%
Resort (c) 7 2,678 19.1%
Airport (b) 12 3,751 6.1%
Suburban 24 6,322 -2.5%
----------------------------------------------------------------------
All Locations 62 17,684 5.1%
----------------------------------------------------------------------
Estimated RevPAR, including closed hurricane
hotels at market rates (d)
----------------------------------------------------------------------
Comparable Hotels 62 17,684 5.1%
Closed Hurricane Hotels
(d) 7 1,340 21.2%
----------------------------------------------------------------------
Total 69 19,024 7.5%
----------------------------------------------------------------------
(a) See notes to financial information for discussion of
comparable hotel operating results and statistics.
(b) Excludes hotels acquired in 2004.
(c) Excludes hotels substantially closed during the first quarter
2005 due to the Florida hurricanes.
(d) Estimated RevPAR increase reflects an assumed weighted average
growth rate of 21.2% based on market type RevPAR performance at
the seven hotels substantially closed during the first quarter
2005.
FORECASTED RECONCILIATION OF NET INCOME (LOSS)
TO FUNDS FROM OPERATIONS
(In millions, except per share amounts)
Three Months Ending
June 30, 2005
--------------------------------
Low-end of High-end of
range range
---------------- --------------
Forecasted Funds from Operations:
Net income (a) $ - $ 3
Adjustments to forecasted net income:
Depreciation and amortization of
real estate assets 25 25
Minority interest to common OP unit
holders - -
--------------- -------------
Funds from operations $ 25 $ 28
Weighted average diluted shares of
common stock and common OP units
outstanding 90 90
--------------- -------------
Funds from operations per diluted
share (a) $ 0.28 $ 0.31
=============== =============
Year Ending
December 31, 2005
---------------------------------
Low-end of High-end of
range range
---------------- ---------------
Forecasted Funds from Operations:
Net loss (a) $ (43) $ (38)
Adjustments to forecasted net loss:
Depreciation and amortization of
real estate assets 97 97
Minority interest to common OP unit
holders (1) (1)
--------------- -------------
Funds from operations $ 53 $ 58
Weighted average number of shares
of common stock and common OP
units outstanding 90 90
--------------- -------------
Funds from operations per diluted
share (a) $ 0.59 $ 0.64
=============== =============
(a) Forecasted net income (loss) does not include any possible
future losses on asset impairments, gains or losses on the sale of
assets, gains or losses on early extinguishment of debt, or gains
or losses on property damage insurance recoveries; therefore,
forecasted funds from operations is equivalent to forecasted
adjusted funds from operations.
FORECASTED RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
(In millions)
Three Months Ending
June 30, 2005
---------------------------------
Low-end of High-end of
range range
---------------- ---------------
EBITDA and Adjusted EBITDA:
Net income (a) $ - $ 3
Interest expense, net 34 34
Depreciation and amortization 26 26
--------------- --------------
EBITDA 60 63
Minority interest to common OP
unit holders - -
--------------- --------------
Adjusted EBITDA $ 60 $ 63
=============== ==============
Year Ending
December 31, 2005
---------------------------------
Low-end of High-end of
range range
---------------- ---------------
EBITDA and Adjusted EBITDA:
Net loss (a) $ (43) $ (38)
Interest expense, net 132 132
Depreciation and amortization 102 102
--------------- -------------
EBITDA 191 196
Minority interest to common OP
unit holders (1) (1)
--------------- -------------
Adjusted EBITDA $ 190 $ 195
=============== =============
(a) Forecasted net income (loss) does not include any possible
future losses on asset impairments, gains or losses on the sale of
assets, gains or losses on early extinguishment of debt, or gains
or losses on property damage insurance recoveries.
*T
NOTES TO FINANCIAL INFORMATION
Funds From Operations
Substantially all of our non-current assets consist of real
estate, and, in accordance with accounting principles generally
accepted in the United States, or GAAP, those assets are subject to
straight-line depreciation, which reflects the assumption that the
value of real estate assets, other than land, will decline ratably
over time. That assumption is often not true with respect to the
actual market values of real estate assets (and, in particular,
hotels), which fluctuate based on economic, market and other
conditions. As a result, management and many industry investors
believe the presentation of GAAP operating measures for real estate
companies to be more informative and useful when other measures,
adjusted for depreciation and amortization, are also presented.
In an effort to address these concerns, the National Association
of Real Estate Investment Trusts, or NAREIT, adopted a definition of
Funds From Operations, or FFO. NAREIT defines FFO as net income
(computed in accordance with GAAP) excluding gains or losses from
sales of real estate, real estate-related depreciation and
amortization, and after comparable adjustments for our portion of
these items related to unconsolidated partnerships and joint ventures.
Extraordinary items and cumulative effect of changes in accounting
principles as defined by GAAP are also excluded from the calculation
of FFO. As defined by NAREIT, FFO also does not include reductions
from asset impairment charges. The SEC, however, recommends that FFO
include the effect of asset impairment charges, which is the
presentation we have adopted for all historical presentations of FFO.
We believe FFO is an indicative measure of our operating performance
due to the significance of our hotel real estate assets and provides
beneficial information to investors.
Adjusted FFO represents FFO excluding the effects of gains or
losses on early extinguishments of debt, write-offs of deferred
financing costs and, in accordance with the NAREIT definition of FFO,
asset impairment charges. We exclude the effects of gains or losses on
early extinguishments of debt, write-offs of deferred financing costs
and asset impairment charges because we believe that including them in
Adjusted FFO does not fully reflect the operating performance of our
remaining assets. We believe Adjusted FFO is useful for the same
reasons we believe that FFO is useful, but we also believe that
Adjusted FFO enables us and the investor to consider our operating
performance without considering the items we exclude from our
definition of Adjusted FFO, which have no cash effect in the periods
considered.
Consolidated Earnings Before Interest, Income Taxes, Depreciation
and Amortization
EBITDA represents consolidated earnings before interest, income
taxes, depreciation and amortization and includes operations from the
assets included in discontinued operations. We further adjust EBITDA
for the effect of capital market transactions that would result in a
gain or loss on early extinguishments of debt, as well as the earnings
effect of asset dispositions and any impairment assessments, resulting
in the measure that we refer to as "Adjusted EBITDA." We exclude the
effect of gains or losses on early extinguishments of debt as well as
the earnings effect of asset dispositions and impairment assessments
because we believe that including them in Adjusted EBITDA does not
fully reflect the operating performance of our remaining assets.
We also believe Adjusted EBITDA provides useful information to
investors regarding our financial condition and results of operations
because Adjusted EBITDA is useful in evaluating our operating
performance. Furthermore, we use Adjusted EBITDA to provide a measure
of performance that can be isolated on an asset by asset basis to
determine overall property performance. We believe that the rating
agencies and a number of our lenders also use Adjusted EBITDA for
those purposes. We also use Adjusted EBITDA as one measure in
determining the value of acquisitions and dispositions.
Comparable Hotel Operating Results and Statistics
We present certain operating statistics (i.e., RevPAR, ADR and
average occupancy) and operating results (revenues, expenses and
operating profit) for the periods included in this report on a
comparable hotel basis as supplemental information for investors. We
define our comparable hotels as properties (i) that are owned by us
and the operations of which are included in our consolidated results
for the entirety of the reporting periods being compared, (ii) that
have not sustained substantial property damage during the reporting
periods being compared, and (iii) that are not planned for disposition
as of the end of the period. Of the 73 hotels that we owned as of
March 31, 2005, 62 have been classified as comparable hotels. The
operating results of seven hotels significantly affected by the
hurricanes in Florida in August and September 2004 that were
substantially closed in the first quarter 2005, two hotels planned for
disposition, and the two hotels acquired in 2004, that we owned as of
March 31, 2005 are excluded from comparable hotel results for these
periods. In addition, the operating statistics for the quarter ended
March 31, 2005 exclude room nights that were out of service during the
periods due to renovations and the impact of the Florida hurricanes at
our 62 comparable hotels.
We present these comparable hotel operating results by eliminating
corporate-level revenues and expenses, as well as depreciation and
amortization and loss on asset impairments. We eliminate
corporate-level revenues and expenses to arrive at property-level
results because we believe property-level results provide investors
with supplemental information into the ongoing operating performance
of our hotels and the effectiveness of management in running our
business on a property-level basis. We eliminate depreciation and
amortization because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based on
historical cost accounting for real estate assets, implicitly assume
that the value of real estate assets diminishes over time. Because
real estate values have historically risen or fallen with market
conditions, many industry investors have considered presentation of
operating results for real estate companies that use historical cost
accounting to be insufficient by themselves. We eliminate loss on
asset impairments because these non-cash expenses are primarily
related to our non-comparable properties, and do not reflect the
operating performance of our comparable assets.
As a result of the elimination of corporate-level costs and
expenses and depreciation and amortization, the comparable hotel
operating results we present do not represent our total revenues,
expenses or operating profit and should not be used to evaluate our
performance as a whole. Management compensates for these limitations
by separately considering the impact of these excluded items to the
extent that they are material to operating decisions or assessments of
our operating performance. Our consolidated statements of operations
include such amounts, all of which should be considered by investors
when evaluating our performance.
We present these hotel operating results on a comparable hotel
basis because we believe that doing so provides investors and
management with useful information for evaluating the period-to-period
performance of our hotels and facilitates comparisons with other hotel
REITs and hotel owners. In particular, these measures assist
management and investors in distinguishing whether increases or
decreases in revenues and/or expenses are due to growth or decline of
operations at comparable hotels (which represent the vast majority of
our portfolio) or from other factors, such as the effect of
acquisitions or dispositions. While management believes that
presentation of comparable hotel results is a "same store"
supplemental measure that provides useful information in evaluating
the ongoing performance of the Company, this measure is not used to
allocate resources or to assess the operating performance of each of
these hotels, as these decisions are based on data for individual
hotels and are not based on comparable hotel results. For these
reasons, we believe that comparable hotel operating results, when
combined with the presentation of GAAP operating profit, revenues and
expenses, provide useful information to investors and management.