Meristar (NYSE:MHX)
Historical Stock Chart
From Jul 2019 to Jul 2024
MeriStar Hospitality Corporation (NYSE: MHX), one of the
nation's largest hotel real estate investment trusts (REIT), today
announced financial results for the third quarter ended September 30,
2005. Highlights of the company's strong quarterly performance
include(1):
-- Net loss of $(117) million or $(1.34) per diluted share
compared to a net loss of $(27) million or $(0.31) per diluted
share for the 2004 third quarter. The 2005 third quarter net
loss includes the previously announced $(92) million or
$(1.02) per diluted share impact of the defeasance cost,
impairment and interest rate swap termination fee related to
debt refinancing;
-- Adjusted funds from operations (FFO) per diluted share of
$0.09 increased 350 percent compared to $0.02 per diluted
share for the 2004 third quarter;
-- Adjusted EBITDA of $39.6 million increased nearly 17 percent
compared to $33.9 million in the 2004 third quarter;
-- Revenue per available room (RevPAR) increased 11.5 percent for
the comparable hotels, as average daily rate (ADR) rose 11.1
percent and occupancy improved 0.3 percent; and
-- Comparable hotel gross operating profit margins improved 137
basis points, and comparable hotel EBITDA margins improved 166
basis points.
(1)FFO, Adjusted FFO, Adjusted EBITDA, and comparable hotel EBITDA
margins are non-GAAP financial measures. See the notes to financial
information for further discussion of these non-GAAP financial
measures.
"We are pleased with the excellent results generated by our
properties during the quarter," said Paul W. Whetsell, chairman and
chief executive officer. "Our strategy of reshaping our portfolio to
one able to drive rate and improve margins is continuing to produce
superior results and increase shareholder value. RevPAR exceeded the
upper end of our guidance for the period and was driven almost
entirely by rate." The Marriott Irvine in southern California and The
Ritz-Carlton, Pentagon City in Arlington, Va., which were acquired
mid-2004 and excluded from the comparable hotel RevPAR and margin
results, achieved RevPAR gains of 26.4 percent and 15.7 percent,
respectively, in the third quarter.
The company experienced operating strength in several key markets,
including southern California and Washington, D.C., where RevPAR grew
18.6 percent and 11.7 percent, respectively. Additionally, the
company's New Jersey properties experienced a 17.1 percent growth in
RevPAR as several renovated properties were able to take advantage of
a strong market and drive both occupancy and ADR. The Radisson
Lexington Avenue in Midtown Manhattan continued to perform well
resulting in $561,000 in distributable cash in the quarter on the
company's equity interest, in addition to the $1.4 million return on
the $40 million mezzanine loan.
Renovation Update
In the third quarter, the company invested $19.3 million in
non-hurricane related capital improvements at its properties. "As part
of our overall capital improvement program, we have invested $78.4
million in renovations and upgrades to our properties over the past
nine months, and we are on track to reach our target of $115 million
in 2005," Whetsell said. "Property results are reflecting the positive
impacts of this program. For example, the Radisson Chicago, which
recently completed improvements to both the guest rooms and public
space, including a reconcepting of the street-front restaurant,
experienced a 22.1 percent increase in RevPAR for the quarter driven
primarily by a 17.1 percent increase in ADR," Whetsell continued.
"We expect our 2006 capital investment program to be well below
2005 levels as we near completion of our multi-year investment
initiative and begin to approach more traditional levels of capital
spending," he added.
Asset Sales
The company sold three hotels, the Marina Hotel San Pedro, the
Wyndham Garden Marietta and the DoubleTree Albuquerque, during the
third quarter for total gross proceeds of $25.3 million. On a combined
basis, these properties sold for nearly 16 times their trailing
twelve-month EBITDA. "Including the sale of the Hilton Monterey in
May, we have generated total gross proceeds of $45.8 million year to
date," Whetsell said. "As we indicated last quarter, we have expanded
our asset disposition activity to take advantage of the favorable
market conditions. Based on our current outlook, we now expect to sell
an additional $150 million to $200 million in assets by year-end, with
the balance of the dispositions completed in the first quarter of
2006."
Capital Structure
The company completed several key capital market transactions
during the quarter. "We made significant progress toward our objective
of strengthening our balance sheet and improving our credit
statistics," said Donald D. Olinger, chief financial officer. "Most
significantly, we refinanced our $300 million CMBS loan and
repurchased an additional $28.7 million of senior unsecured notes,
bringing our total senior unsecured note repurchase for the year to
more than $50 million. We also redeemed the remaining $33 million of
our 8.75 percent senior subordinated notes at par and expanded our
bank facility by $100 million. These transactions resulted in a
substantial lowering of our weighted average cost of debt and annual
interest expense, greater cash flow, and significant improvement in
our overall credit statistics. In addition, the new CMBS structure
provides the company greater flexibility with respect to substituting
or selling assets in the collateral pool. As demonstrated by the
recent sale of the DoubleTree Albuquerque, we now have the ability to
sell those collateral assets that do not fit with our long-term
strategy, thus reducing future capital requirements and generating
proceeds to further reduce our debt."
The company expects to use asset sale proceeds to continue to
reduce its outstanding debt, with particular focus on the company's
$206 million of 10.5 percent senior unsecured notes, which become
callable in December 2005. Pending the timing of asset sales, the
company currently expects to call between $100 million and $150
million in 2005 with the balance being redeemed in the first quarter
of 2006.
Hurricane Update
Damage associated with Hurricane Katrina resulted in the temporary
closure of the company's two New Orleans properties, the 303-room
Holiday Inn Select New Orleans Airport and the 23-room boutique Hotel
Maison de Ville. The potential financial impact of the closure of
these properties on company operations is not expected to be
significant.
Three of MeriStar's Florida properties that suffered damage from
the hurricanes last fall remain closed. The Best Western Sanibel
Island is expected to open in November, the South Seas Island Resort
on Captiva is expected to open in December and the Holiday Inn Walt
Disney World re-opening is scheduled for 2006.
Guidance
The company is maintaining its full year adjusted EBITDA guidance
of $185 million to $190 million and projects a net loss of $(138)
million to $(143) million. The guidance includes $4 million of
additional business interruption (BI) insurance gain in the fourth
quarter. This BI gain amount reflects the minimum cumulative amount of
lost profit expected in the year from the properties impacted by the
hurricanes last fall. Recognition of BI gain is subject to numerous
requirements, and timing of the recognition of BI gain cannot be
certain. RevPAR for the fourth quarter is estimated to increase 9 to
11 percent and 8.5 to 9.5 percent for the full year. Additionally, the
company provided the following range of estimates for the fourth
quarter and full year:
-- Net loss of $(9) million to $(14) million in the fourth
quarter;
-- Adjusted EBITDA of $40 million to $45 million in the fourth
quarter;
-- Net loss per diluted share of $(0.10) to $(0.16) in the fourth
quarter and $(1.57) to $(1.63) for the full year;
-- FFO per diluted share of $0.10 to $0.16 in the fourth quarter
and $(0.50) to $(0.56) for the full year; and
-- Adjusted FFO per diluted share of $0.10 to $0.16 in the fourth
quarter and $0.64 to $0.70 for the full year.
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.
Conference Call
MeriStar will hold a conference call to discuss its third-quarter
results today, November 1, 2005, at 11 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) 405-2236, reference
number 11041610, to hear a telephone replay. The telephone replay will
be available through midnight on Tuesday, November 8, 2005.
Arlington, Va.-based MeriStar Hospitality Corporation owns 69
principally upscale, full-service hotels in major markets and resort
locations with 19,376 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; the level of proceeds from asset sales; 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 insurance premiums; rising interest rates; and changes in U.S.
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)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Revenue:
Hotel operations:
Rooms $130,674 $121,053 $389,870 $378,807
Food and beverage 48,035 44,483 158,322 147,936
Other hotel operations 12,036 12,518 34,787 43,100
Office rental, parking and
other revenue 1,908 1,426 4,941 4,021
--------- --------- --------- ---------
Total revenue 192,653 179,480 587,920 573,864
--------- --------- --------- ---------
Hotel operating expenses:
Rooms 33,041 32,000 95,766 94,565
Food and beverage 36,323 34,762 112,613 109,284
Other hotel operating
expenses 7,708 8,182 22,124 27,290
Office rental, parking and
other expenses 945 682 2,381 1,938
Other operating expenses:
General and
administrative, hotel 32,328 28,770 93,643 88,950
General and
administrative,
corporate 4,000 2,547 10,361 9,653
Property operating
costs 30,947 28,292 89,622 85,796
Depreciation and
amortization 25,728 24,599 73,021 73,058
Property taxes,
insurance and other 11,092 12,567 33,439 43,337
Loss on asset
impairments 40,343 - 40,343 -
Contract termination
costs 1,081 - 1,081 -
--------- --------- --------- ---------
Operating expenses 223,536 172,401 574,394 533,871
--------- --------- --------- ---------
Equity in income/loss of and
interest earned from
unconsolidated affiliates 2,682 1,600 7,257 4,800
Hurricane business
interruption gain - - 4,290 -
--------- --------- --------- ---------
Operating (loss) income (28,201) 8,679 25,073 44,793
Minority interest income 3,062 775 3,370 2,392
Interest expense, net (30,152) (30,994) (91,563) (95,586)
Loss on early
extinguishments of debt (56,151) - (57,158) (7,903)
--------- --------- --------- ---------
Loss before income taxes and
discontinued operations (111,442) (21,540) (120,278) (56,304)
Income tax (expense) benefit (33) 289 (867) 796
--------- --------- --------- ---------
Loss from continuing
operations (111,475) (21,251) (121,145) (55,508)
--------- --------- --------- ---------
Discontinued operations:
Loss from discontinued
operations before
income tax (5,832) (5,557) (8,672) (23,223)
Income tax benefit - 36 - 159
--------- --------- --------- ---------
Loss from discontinued
operations (5,832) (5,521) (8,672) (23,064)
--------- --------- --------- ---------
Net loss $(117,307) $(26,772) $(129,817) $(78,572)
========= ========= ========= =========
Basic loss per share:
Loss from continuing
operations $(1.27) $(0.24) $(1.39) $(0.70)
Loss from discontinued
operations (0.07) (0.07) (0.09) (0.29)
--------- --------- --------- ---------
Loss per basic share $(1.34) $(0.31) $(1.48) $(0.99)
========= ========= ========= =========
Diluted loss per share:
Loss from continuing
operations $(1.28) $(0.25) $(1.39) $(0.71)
Loss from discontinued
operations (0.06) (0.06) (0.09) (0.28)
--------- --------- --------- ---------
Loss per diluted share $(1.34) $(0.31) $(1.48) $(0.99)
========= ========= ========= =========
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
September 30, December 31,
2005 2004
---- ----
ASSETS
Property and equipment $ 2,569,041 $ 2,581,720
Accumulated depreciation (513,559) (506,632)
------------- -------------
2,055,482 2,075,088
Assets held for sale 23,058 -
Investment in and advances to
unconsolidated affiliates 71,465 84,796
Prepaid expenses and other assets 35,969 34,533
Insurance claim receivable 37,070 76,056
Accounts receivable, net of allowance for
doubtful accounts of $528 and $691 41,922 32,979
Restricted cash 18,839 58,413
Cash and cash equivalents 35,296 60,540
------------- -------------
$ 2,319,101 $ 2,422,405
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term debt $ 1,613,982 $ 1,573,276
Accounts payable and accrued expenses 81,638 75,527
Accrued interest 31,719 41,165
Due to Interstate Hotels and Resorts 16,881 21,799
Other liabilities 7,618 11,553
------------- -------------
Total liabilities 1,751,838 1,723,320
------------- -------------
Minority interests 10,050 14,053
Stockholders' equity:
Preferred stock, par value $0.01 per
share
Authorized - 100,000 shares
Issued - none - -
Common stock, par value $0.01 per share
Authorized - 100,000 shares
Issued - 89,982 and 89,739 shares 900 897
Additional paid-in capital 1,468,504 1,465,658
Accumulated deficit (868,210) (738,393)
Common stock held in treasury - 2,491
and 2,372 shares (43,981) (43,130)
------------- -------------
Total stockholders' equity 557,213 685,032
------------- -------------
$ 2,319,101 $ 2,422,405
============= =============
RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Funds From Operations:
Net loss $(117,307) $(26,772) $(129,817) $(78,572)
Depreciation and
amortization of real
estate assets 22,149 24,614 68,146 72,734
Loss on disposal of
assets 1,490 2,232 2,527 13,762
Unconsolidated
affiliate adjustments 990 - 3,407 -
Minority interest to
common OP unit holders (3,028) (735) (1,882) (2,469)
---------- --------- ---------- ---------
Funds from operations $(95,706) $(661) $(57,619) $5,455
========== ========= ========== =========
Weighted average number of
shares of common stock
outstanding 89,750 89,662 87,452 82,060
========== ========= ========== =========
Funds from operations per
diluted share $(1.07) $(0.01) $(0.66) $0.07
========== ========= ========== =========
Funds From Operations, as
adjusted:
Funds from operations $(95,706) $(661) $(57,619) $5,455
Loss on asset
impairments 44,153 2,581 46,989 10,022
Loss on early
extinguishments of
debt 56,151 - 57,158 7,903
Write off of deferred
financing fees 2,321 - 2,531 1,719
Contract termination
costs 1,081 - 1,081 -
Minority interest to
common OP unit holders (201) - (2,737) -
---------- --------- ---------- ---------
Funds from operations, as
adjusted $7,799 $1,920 $47,403 $25,099
========== ========= ========== =========
Weighted average number of
shares of common stock and
common stock equivalents
outstanding 87,668 89,713 87,579 82,060
========== ========= ========== =========
Funds from operations per
diluted share, as adjusted $0.09 $0.02 $0.54 $0.31
========== ========= ========== =========
(a) See the notes to the financial information for discussion of
non-GAAP measures.
RECONCILIATION OF NET LOSS TO EBITDA (a)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
EBITDA and Adjusted EBITDA:
Net loss $(117,307) $(26,772) $(129,817) $(78,572)
Loss from discontinued
operations (5,832) (5,521) (8,672) (23,064)
---------- --------- ---------- ---------
Loss from continuing
operations (111,475) (21,251) (121,145) (55,508)
Interest expense, net 30,152 30,994 91,563 95,586
Income tax expense (benefit) 33 (289) 867 (796)
Depreciation and
amortization (b) 25,728 24,599 73,021 73,058
---------- --------- ---------- ---------
EBITDA from continuing
operations (55,562) 34,053 44,306 112,340
Loss on asset impairments 40,343 - 40,343 -
Contract termination costs 1,081 - 1,081 -
Minority interest income (3,062) (775) (3,370) (2,392)
Loss on early
extinguishments of debt 56,151 - 57,158 7,903
Equity investment
adjustments:
Equity in loss of
affiliates 178 - 1,342 -
Distributions from equity
investments 561 - 1,352 -
---------- --------- ---------- ---------
Adjusted EBITDA from
continuing operations $39,690 $33,278 $142,212 $117,851
========== ========= ========== =========
Loss from discontinued
operations $(5,832) $(5,521) $(8,672) $(23,064)
Interest expense, net - - - (478)
Income tax benefit - (36) - (159)
Depreciation and
amortization 443 1,375 2,111 5,510
---------- --------- ---------- ---------
EBITDA from discontinued
operations (5,389) (4,182) (6,561) (18,191)
Loss on asset impairments 3,810 2,581 6,646 10,022
Loss on disposal of assets 1,490 2,231 2,527 13,762
---------- --------- ---------- ---------
Adjusted EBITDA from
discontinued operations $(89) $630 $2,612 $5,593
========== ========= ========== =========
Adjusted EBITDA, total
operations $39,601 $33,908 $144,824 $123,444
========== ========= ========== =========
(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 $2.3 million for the three months ended
September 30, 2005 and $2.5 million and $1.7 million for the nine
months ended September 30, 2005 and 2004, respectively, related to
our early extinguishments of debt during these periods.
HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Number of hotels 57 57 57 57
Number of rooms 16,619 16,619 16,619 16,619
Comparable hotel revenues:
Rooms $116,864 $104,312 $348,342 $320,493
Food and beverage 42,632 38,017 139,134 129,126
Other hotel operations 8,638 8,278 25,076 24,485
-------- -------- -------- --------
Comparable hotel
revenues (b) 168,134 150,607 512,552 474,104
-------- -------- -------- --------
Comparable hotel expenses:
Room 29,914 27,504 86,697 81,685
Food and beverage 32,202 29,459 98,875 94,489
Other 5,747 5,691 17,094 16,989
General and
administrative 28,547 25,964 83,264 78,677
Property operating costs,
less management fees 24,458 21,712 69,494 64,697
-------- -------- -------- --------
Comparable hotel
expenses (c) 120,868 110,330 355,424 336,537
-------- -------- -------- --------
-------- -------- -------- --------
Comparable Hotel Gross
Operating Profit 47,266 40,277 157,128 137,567
-------- -------- -------- --------
Margin 28.1% 26.7% 30.7% 29.0%
Management Fees (c) 4,196 3,754 12,800 11,828
Property taxes, insurance and
other (c) 8,891 8,402 26,664 25,854
-------- -------- -------- --------
Comparable Hotel EBITDA,
excluding BI (d) $ 34,179 $ 28,121 $117,664 $ 99,885
-------- -------- -------- --------
Margin 20.3% 18.7% 23.0% 21.1%
Hurricane business
interruption gain - - 969 -
-------- -------- -------- --------
Comparable Hotel EBITDA,
including BI (d) $ 34,179 $ 28,121 $118,633 $ 99,885
======== ======== ======== ========
Margin 20.3% 18.7% 23.1% 21.1%
(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):
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Revenues per the consolidated
statements of operations $192,653 $179,480 $587,920 $573,864
Non-comparable hotel revenues (22,611) (27,447) (70,427) (95,739)
Office rental, parking and
other revenue (1,908) (1,426) (4,941) (4,021)
--------- --------- --------- ---------
Comparable hotel revenues $168,134 $150,607 $512,552 $474,104
========= ========= ========= =========
(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):
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Operating expenses per the
consolidated statements of
operations $223,536 $172,401 $574,394 $533,871
Non-comparable hotel expenses (18,429) (22,769) (54,700) (76,941)
General and administrative,
corporate (4,000) (2,547) (10,361) (9,653)
Depreciation and amortization (25,728) (24,599) (73,021) (73,058)
Loss on asset impairments (40,343) - (40,343) -
Contract termination costs (1,081) - (1,081) -
--------- --------- --------- ---------
Comparable hotel
expenses, management
fees, property taxes,
insurance and other $133,955 $122,486 $394,888 $374,219
========= ========= ========= =========
(d) The reconciliation of comparable hotel EBITDA to operating income
per the consolidated statements of operations is as follows (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Comparable hotel EBITDA,
including BI $34,179 $28,121 $118,633 $99,885
Non-comparable results, net
(e) 4,182 4,678 15,727 18,798
Office rental, parking and
other revenue 1,908 1,426 4,941 4,021
General and administrative,
corporate (4,000) (2,547) (10,361) (9,653)
Depreciation and amortization (25,728) (24,599) (73,021) (73,058)
Loss on asset impairments (40,343) - (40,343) -
Contract termination costs (1,081) - (1,081) -
Equity in income/loss of and
interest earned from
unconsolidated affiliates 2,682 1,600 7,257 4,800
Hurricane business
interruption gain at non-
comparable hotels - - 3,321 -
--------- --------- -------- ----------
Operating Income $(28,201) $8,679 $25,073 $44,793
========= ========= ========= =========
(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; general and administrative, corporate; depreciation and
amortization; loss on asset impairments; contract termination
costs and equity in income/loss of and interest earned from
unconsolidated affiliates.
FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS
(In millions, except per share amounts)
Three Months Ending December 31, 2005
-------------------------------------
Low-end of range High-end of range
---------------- -----------------
Forecasted Funds from
Operations:
Net loss (a) $ (14) $ (9)
Adjustments to forecasted net
loss:
Depreciation and
amortization of real
estate assets 22 22
Unconsolidated affiliate
adjustments 1 1
Minority interest to common
OP unit holders - -
------------------ ------------------
Funds from operations $ 9 $ 14
Weighted average diluted shares
of common stock and common OP
units outstanding 90 90
------------------ ------------------
Funds from operations per
diluted share $ 0.10 $ 0.16
================== ==================
Funds From Operations, as
adjusted:
Funds from operations $ 9 $ 14
Loss on asset impairments - -
Loss on early
extinguishments of debt - -
------------------ ------------------
Funds from operations, as
adjusted $ 9 $ 14
Weighted average number of
shares of common stock and
common stock equivalents
outstanding 90 90
------------------ ------------------
Funds from operations per
diluted share, as adjusted $ 0.10 $ 0.16
================== ==================
Year Ending December 31, 2005
-----------------------------
Low-end of range High-end of range
---------------- -----------------
Forecasted Funds from Operations:
Net loss (a) $ (143) $ (138)
Adjustments to forecasted net loss:
Depreciation and amortization
of real estate assets 90 90
Unconsolidated affiliate
adjustments 4 4
Minority interest to common OP
unit holders (4) (4)
Loss on disposal of assets 3 3
---------------- -----------------
Funds from operations $ (50) $ (45)
Weighted average number of shares
of common stock and common OP
units outstanding 90 90
---------------- -----------------
Funds from operations per diluted
share $ (0.56) $ (0.50)
================ =================
Funds From Operations, as adjusted:
Funds from operations $ (50) $ (45)
Loss on asset impairments 47 47
Contract termination fees 1 1
Loss on early extinguishments
of debt 57 57
Write-off of deferred
financing costs 3 3
---------------- -----------------
Funds from operations, as adjusted $ 58 $ 63
Weighted average number of shares
of common stock and common stock
equivalents outstanding 90 90
---------------- -----------------
Funds from operations per diluted
share, as adjusted $ 0.64 $ 0.70
================ =================
(a) Forecasted net 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.
FORECASTED RECONCILIATION OF NET LOSS TO EBITDA
(In millions)
Three Months Ending December 31, 2005
-------------------------------------
Low-end of range High-end of range
---------------- -----------------
EBITDA and Adjusted EBITDA:
Net loss (a) $ (14) $ (9)
Interest expense, net 30 30
Depreciation and amortization 24 24
------------------- -----------------
EBITDA 40 45
Equity investment adjustments:
Equity in income of
affiliates (1) (1)
Distributions from equity
investments 1 1
Minority interest to common OP
unit holders - -
------------------- -----------------
Adjusted EBITDA $ 40 45
=================== =================
Year Ending December 31, 2005
-----------------------------
Low-end of range High-end of range
---------------- -----------------
EBITDA and Adjusted EBITDA:
Net loss (a) $ (143) $ (138)
Interest expense, net 122 122
Depreciation and amortization 96 96
Write-off of deferred financing
costs 3 3
---------------- -----------------
EBITDA 78 83
Loss on asset impairments 47 47
Contract termination fees 1 1
Loss on early extinguishments of
debt 57 57
Equity investment adjustments:
Equity in income of affiliates - -
Distributions from equity
investments 3 3
Minority interest to common OP unit
holders (4) (4)
Loss on disposal of assets 3 3
---------------- -----------------
Adjusted EBITDA $ 185 190
================ =================
(a) Forecasted net 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
includes 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, contract termination 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, contract termination 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.
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, contract termination
costs, the earnings effect and distributions related to equity method
investments, 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, contract termination costs, the
earnings effect and distributions related to equity method
investments, 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 69 hotels that we owned as of
September 30, 2005, 57 have been classified as comparable hotels. The
operating results of one hotel classified as held-for-sale and
reflected in discontinued operations, nine hotels significantly
affected by the hurricanes, and the two hotels acquired in 2004 that
we owned as of September 30, 2005, are excluded from comparable hotel
results for these periods. Additionally, changes in estimates to
property tax expense, which are recorded when known, have been
allocated to the period to which they relate, in order to maintain
comparability between periods.
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 management and investors.