| | | |
For Immediate Release | | |
| Contact: | | |
| Bruce Riggins | | Jerry Daly or Carol McCune |
| VP, Strategic Planning & Analysis | | Daly Gray Public Relations (Media) |
| (703) 812-7223 | | (703) 435-6293 |
MeriStar Hospitality Corporation Reports Second-Quarter Results
ARLINGTON, Va., August 3, 2004—MeriStar Hospitality Corporation (NYSE: MHX), one of the nation’s largest hotel real estate investment trusts (REIT), today announced financial results for the second quarter and six months ended June 30, 2004:
| | | | | | | | | | | | | | | | | |
| | | 2Q | | 2Q | | Six Mos. | | Six Mos. |
| | | 2004* | | 2003* | | 2004* | | 2003* |
| Net loss | | $ | (12 | ) | | $ | (206 | ) | | $ | (52 | ) | | $ | (276 | ) |
| Net loss per share | | $ | (0.14 | ) | | $ | (4.47 | ) | | $ | (0.68 | ) | | $ | (5.99 | ) |
| Total revenues from continuing operations | | $ | 223 | | | $ | 216 | | | $ | 428 | | | $ | 417 | |
| Funds from operations (FFO)** | | $ | 16 | | | $ | (189 | ) | | $ | 6 | | | $ | (234 | ) |
| FFO per share | | $ | 0.19 | | | $ | (3.90 | ) | | $ | 0.08 | | | $ | (4.86 | ) |
| Adjusted FFO** | | $ | 21 | | | $ | 21 | | | $ | 23 | | | $ | 30 | |
| Adjusted FFO per share | | $ | 0.24 | | | $ | 0.39 | | | $ | 0.30 | | | $ | 0.60 | |
Adjusted EBITDA (earnings before interest,
income taxes, depreciation, amortization and
other items)** | | $ | 52 | | | $ | 56 | | | $ | 90 | | | $ | 103 | |
| | | *in millions, except per share data
**FFO, Adjusted FFO, and Adjusted EBITDA are non-GAAP financial measures and should not be considered as alternatives to any measures of operating results under GAAP. See the discussion included in the financial information section of this press release regarding these non-GAAP financial measures. |
Second quarter results, excluding charges related to the company’s asset disposition program, were within the company’s previous guidance range.
“The hotel industry is in the early stages of what we believe will be a sustained recovery,” said Paul W. Whetsell, chairman and chief executive officer. “In some of our strongest markets, our hotels experienced exceptional growth, such as the 15 percent growth in
- more -
MeriStar Hospitality
Page 2
RevPAR our Washington, D.C. area hotels achieved in the quarter; however, the industry recovery is not yet uniformly strong throughout the country. The economy continues to strengthen, and we look forward to experiencing the benefits of a broader based recovery throughout our portfolio.
“During the quarter, we accelerated our renovation program at several key locations, which will allow us to maximize operating results during the industry recovery. We also have completed five hotel brand conversions to date in 2004, with an additional five planned for the remainder of 2004. As a result, our second quarter results reflect some short-term impact due to the scope of our renovation program and the number of brand conversions. As these renovations and conversions are completed, we expect our properties to be well positioned to fully participate in the economic recovery,” he said.
Adjusting for rooms out of service at hotels experiencing significant renovations (not accounting for the overall impact on hotel operations) and hotels impacted by brand conversions, RevPAR increased 5.6 percent to $82.16, led by a 3.8 percent increase in average daily rate (ADR) to $110.99. Occupancy increased 1.8 percent to 74.0 percent. These operating statistics do not reflect the full effect of the renovation process, as work performed on lobby areas, meeting rooms, and the exterior of some hotels also have impacted the company’s second quarter results.
“We expect some short-term disruption from renovations to continue through the balance of the year, but we expect the impact to moderate progressively as we begin to see the benefit from completed work and the positive impact from full implementation of our ‘Velocity’ rooms
- more -
MeriStar Hospitality
Page 3
renovation program. We expect the long-term benefits of these renovations, however, to be significant, and we expect to generate exceptional returns over the next several years as these upgraded products put more pricing power in the hotels’ hands and we are able to raise rates accordingly,” Whetsell said.
Year to date, MeriStar has invested approximately $50 million in upgrades at its core hotels and is on track to spend approximately $125 million by year end.
Acquisitions/Conversions/Dispositions
“We completed two major hotel acquisitions in the second quarter in two of the nation’s strongest hotel markets,” Whetsell added. “We closed on the acquisition of the Ritz-Carlton, Pentagon City, in Arlington, Va., near Washington, D.C. and the Irvine Marriott in Orange County, Calif., for a total investment of $186 million. RevPAR at both of these hotels grew more than 13 percent in the quarter over the prior year, and operating results at these two properties already have exceeded our underwriting expectations. Both of these markets have excellent growth potential going forward.”
Whetsell added that the company remains a selective acquirer of larger properties, located in major urban markets or upscale resort destinations with high barriers to new competition, premium brand affiliations, significant meeting space and high growth potential. “To support those efforts, we announced the promotion of Bill Reynolds during the quarter to executive vice president and chief investment officer. Bill has led our asset disposition program and in his new position, he will direct MeriStar’s development team and oversee hotel
- more -
MeriStar Hospitality
Page 4
investment and divestment activities. He was instrumental in completing both of the hotel acquisitions we completed during the quarter.”
The company also is using brand conversions as another technique to enhance the quality of its hotel portfolio. “One of our five brand conversions in 2004 was the former Radisson hotel at the entrance to Universal Studios Theme Park that was converted to a Doubletree, a Hilton brand,” he said. “This hotel has more than 60,000 square feet of meeting space, and the conversion enables the property to benefit from the Hilton reservations system, group meeting sales force and Hilton HHonors guest frequency program. As a result, we expect to be able to attract significantly greater group business there. Even under renovation, the hotel already is experiencing a significant year-over-year sales backlog increase.”
During the 2004 second quarter, the company continued its asset disposition program with the sale of four hotels, comprising 896 rooms, for gross proceeds of $31 million. Two additional hotels with 568 rooms have been sold thus far in the third quarter for gross proceeds of $14 million. Since the beginning of 2003, the company has sold 32 non-core assets aggregating 6,809 rooms for $247 million in gross proceeds. The company has five remaining assets planned for disposition (1,555 rooms), which are expected to generate total gross proceeds of approximately $40 million.
Capital Structure
The company completed the following capital markets transactions during the 2004 second quarter:
| • | | Sold 12 million shares of common stock to the public at $6.25 per share, generating net |
- more -
MeriStar Hospitality
Page 5
proceeds of approximately $73 million, primarily to fund additional acquisitions.
| • | | Paid down $28 million of senior notes, for a total repayment of $100 million year to date. |
| |
| • | | Retired $11 million of senior subordinated notes, for a total repayment of $49 million year to date. |
| |
| • | | Placed two mortgages related to the two hotel acquisitions for $111 million. |
| |
| • | | Entered into an interest rate swap on its $307 million CMBS loan due 2009, converting the facility from a fixed rate to a floating rate. The new floating rate is LIBOR plus 444 basis points, or 5.91 percent currently, compared to the fixed rate of 8.01 percent. Total floating rate debt represents 19 percent of the company’s total debt outstanding. |
“We continued to strengthen our balance sheet in the quarter by lowering our average borrowing cost and reducing our overall leverage with debt repayments and acquisitions that were financed with modest levels of mortgage financing,” said Donald D. Olinger, chief financial officer. “We also maintained substantial liquidity, and as of June 30, 2004, we had $221 million of cash, $149 million of which was unrestricted, and $50 million available on our secured revolving credit facility.”
Termination of Intercompany Agreement with Interstate Hotels
Following the close of the second quarter, the company reached an agreement with Interstate Hotels & Resorts, Inc., the operator of a majority of its hotels, to terminate the intercompany agreement that had been in place between the two companies since 1998. Although the agreement provided MeriStar with a right to participate in equity investments made
- more -
MeriStar Hospitality
Page 6
by Interstate, it also afforded Interstate the opportunity to manage hotels newly-acquired by MeriStar, unless they were operated by a brand or were encumbered by management agreements.
In exchange for relinquishing its rights under the intercompany agreement, the company obtained an “at-will” termination right permitting it to terminate Interstate management agreements each year covering up to 600 rooms upon the payment of a termination fee. The company also may carry forward as many as 600 rooms for termination in a succeeding year. In addition, termination fees owed to Interstate now will become payable over 48 months, rather than the previously contracted 30 months.
Whetsell pointed out that “the termination of the intercompany agreement eliminates the last vestige of the company’s paper clip relationship with Interstate, and will greatly facilitate the company’s ability to reposition its portfolio.” He also stated that the company intended to maintain its strong relationship with Interstate, the operator of more than 70 of its hotels under long-term management agreements. “Interstate is an outstanding management company that offers economies of scale, management depth, proprietary operating systems and marketing expertise that are unparalleled in the industry,” Whetsell said.
Separately, the company reached an agreement with Interstate, which resolved an outstanding dispute between the companies over the calculation of termination fees. The new calculation is applicable to properties disposed of in the future. Although termination fees for the properties that have been sold or were included in MeriStar’s previously announced disposition program will be unchanged, the company will receive a $2.5 million credit, which will be applicable to future dispositions.
- more -
MeriStar Hospitality
Page 7
Outlook
“We feel confident that we are in the midst of a sustained industry-wide recovery,” Whetsell said. “For the third quarter, we expect continued strength in the economy to produce solid, rate-driven RevPAR gains, although we will continue to see some short-term impact from our renovation program.”
The company provides the following range of estimates for the third quarter and full-year 2004, based on projected third-quarter 2004 RevPAR gains of 5.0 percent to 6.0 percent and a full-year 2004 RevPAR increase of 5.0 percent to 6.0 percent, all of which reflect adjustment for the estimated number of room nights out of service for renovations:
| • | | Net loss of $(20) million to $(23) million for the third quarter and $(89) million to $(94) million for the full year; |
| |
| • | | Net loss per diluted share of $(0.23) to $(0.26) for the third quarter and $(1.10) to $(1.16) for the full year; |
| |
| • | | FFO per diluted share (a) of $0.00 to $0.04 for the third quarter and $0.14 to $0.19 for the full year; |
| |
| • | | Adjusted FFO per diluted share (a) of $0.00 to $0.04 for the third quarter and $0.36 to $0.42 for the full year; |
| |
| • | | Adjusted EBITDA (a) of $32 million to $35 million for the third quarter and $160 million to $165 million for the full year. |
(a) 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 guidance tables of this press release. Forecasted net loss does not include any possible future losses on asset impairments or gains or losses on the sales of assets.
- more -
MeriStar Hospitality
Page 8
Adjusted EBITDA, Adjusted FFO and FFO are non-GAAP financial measures that should not be considered as alternatives to any measures of operating results under GAAP. See the discussion included in this press release for information regarding these non-GAAP financial measures.
MeriStar will hold a conference call to discuss its second-quarter results today, August 3, at 10 a.m. Eastern time. Interested parties may visit the company’s Web site atwww.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) 218-8862, reference number 11002390, to hear a telephone replay. The telephone replay will be available through midnight on Tuesday, August 10, 2004.
Arlington, Va.-based MeriStar Hospitality Corporation owns 77 principally upscale, full-service hotels in major markets and resort locations with 21,619 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 Corporation, visit the company’s Web site:www.meristar.com.
This press release contains forward-looking statements about MeriStar Hospitality Corporation, including those statements regarding future operating results, the timing and composition of revenues, expected levels of capital expenditures, and expected proceeds from asset sales, among others. Except for historical information, the matters discussed in this press release are forward-looking statements that 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
- more -
MeriStar Hospitality
Page 9
conditions generally and the real estate market specifically; the effect 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; legislative/regulatory changes, including changes to laws governing the taxation of REITs; level of proceeds from asset sales; cash available for capital expenditures; the availability of capital; our ability to refinance debt; rising interest rates; rising insurance premiums; competition; 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; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs. Additional risks are discussed in the company’s filings with the Securities and Exchange Commission. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
- 30 -
MERISTAR HOSPITALITY CORPORATION
EARNINGS RELEASE FINANCIAL INFORMATION
THREE AND SIX MONTHS
ENDED JUNE 30, 2004
MeriStar Hospitality Corporation
June 30, 2004
INDEX
| | | | | |
| | | Page Number
|
| Consolidated Statements of Operations - Three and Six Months Ended June 30, 2003 and 2004 | | | 3 | |
| Reconciliation of Net Loss to Funds From Operations - Three and Six Months Ended June 30, 2003 and 2004 | | | 4 | |
| Reconciliation of Net Loss to EBITDA - Three and Six Months Ended June 30, 2003 and 2004 | | | 5 | |
| Hotel Operational Data - Schedule of Comparable Core Hotel Results | | | 6 | |
| Consolidated Balance Sheets - June 30, 2004 and December 31, 2003 | | | 8 | |
| Portfolio Data | | | | |
| Portfolio Distribution at June 30, 2004 - By Market, Region, Brand and Location | | | 9 | |
| Detailed Operating Statistics - By Market, Region and Location | | | 10 | |
| Capital Structure - Total Enterprise Value and Long-Term Debt | | | 12 | |
| Capital Expenditures Summary | | | 13 | |
| Acquisitions and Dispositions - For the period from December 31, 2003 through June 30, 2004 | | | 14 | |
| Forecasted Reconciliation of Net Loss to Funds From Operations - Three Months Ending September 30, 2004 and Year Ending December 31, 2004 | | | 15 | |
| Forecasted Reconciliation of Net Loss to EBITDA - Three Months Ending September 30, 2004 and Year Ending December 31, 2004 | | | 16 | |
| Hotel Portfolio Listing | | | 17 | |
| Non-GAAP Disclosures | | | 19 | |
2
MeriStar Hospitality Corporation
June 30, 2004
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
| Revenue: | | | | | | | | | | | | | | | | |
| Hotel operations: | | | | | | | | | | | | | | | | |
| Rooms | | $ | 143,156 | | | $ | 136,911 | | | $ | 277,284 | | | $ | 266,706 | |
| Food and beverage | | | 59,442 | | | | 56,404 | | | | 110,450 | | | | 107,520 | |
| Other hotel operations | | | 17,362 | | | | 19,201 | | | | 34,397 | | | | 35,754 | |
| Office rental, parking and other revenue | | | 2,929 | | | | 3,453 | | | | 5,828 | | | | 6,716 | |
| | | |
| | | |
| | | |
| | | |
| |
| Total revenue | | | 222,889 | | | | 215,969 | | | | 427,959 | | | | 416,696 | |
| Hotel operating expenses: | | | | | | | | | | | | | | | | |
| Rooms | | | 35,046 | | | | 32,467 | | | | 67,795 | | | | 63,163 | |
| Food and beverage | | | 41,739 | | | | 38,789 | | | | 79,923 | | | | 75,646 | |
| Other hotel operating expenses | | | 10,864 | | | | 10,936 | | | | 21,162 | | | | 20,392 | |
| Office rental, parking and other expenses | | | 670 | | | | 583 | | | | 1,255 | | | | 1,213 | |
| Other operating expenses: | | | | | | | | | | | | | | | | |
| General and administrative, hotel | | | 32,010 | | | | 31,864 | | | | 65,774 | | | | 62,906 | |
| General and administrative, corporate | | | 3,473 | | | | 3,132 | | | | 7,106 | | | | 6,105 | |
| Property operating costs | | | 31,909 | | | | 30,620 | | | | 62,941 | | | | 59,609 | |
| Depreciation and amortization | | | 25,289 | | | | 25,242 | | | | 51,333 | | | | 49,190 | |
| Property taxes, insurance and other | | | 16,006 | | | | 17,548 | | | | 32,860 | | | | 34,547 | |
| Loss on asset impairments | | | 1,291 | | | | 65,123 | | | | 1,536 | | | | 65,123 | |
| | | |
| | | |
| | | |
| | | |
| |
| Operating expenses | | | 198,297 | | | | 256,304 | | | | 391,685 | | | | 437,894 | |
| | | |
| | | |
| | | |
| | | |
| |
| Operating (loss) income | | | 24,592 | | | | (40,335 | ) | | | 36,274 | | | | (21,198 | ) |
| Minority interest | | | 671 | | | | 10,598 | | | | 1,617 | | | | 14,275 | |
| Interest expense, net | | | (29,724 | ) | | | (34,583 | ) | | | (64,103 | ) | | | (69,301 | ) |
| Loss on early extinguishments of debt | | | (1,980 | ) | | | — | | | | (7,903 | ) | | | — | |
| | | |
| | | |
| | | |
| | | |
| |
| Loss before income taxes and discontinued operations | | | (6,441 | ) | | | (64,320 | ) | | | (34,115 | ) | | | (76,224 | ) |
| Income tax (expense) benefit | | | (45 | ) | | | (12 | ) | | | 410 | | | | 164 | |
| | | |
| | | |
| | | |
| | | |
| |
| Loss from continuing operations | | | (6,486 | ) | | | (64,332 | ) | | | (33,705 | ) | | | (76,060 | ) |
| Discontinued operations: | | | | | | | | | | | | | | | | |
| Loss from discontinued operations before | | | | | | | | | | | | | | | | |
| income tax benefit | | | (5,131 | ) | | | (142,016 | ) | | | (18,314 | ) | | | (200,054 | ) |
| Income tax (expense) benefit | | | 62 | | | | (13 | ) | | | 220 | | | | 8 | |
| | | |
| | | |
| | | |
| | | |
| |
| Loss from discontinued operations | | | (5,069 | ) | | | (142,029 | ) | | | (18,094 | ) | | | (200,046 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Net loss | | $ | (11,555 | ) | | $ | (206,361 | ) | | $ | (51,799 | ) | | $ | (276,106 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Basic loss per share: | | | | | | | | | | | | | | | | |
| Loss from continuing operations | | $ | (0.08 | ) | | $ | (1.40 | ) | | $ | (0.45 | ) | | $ | (1.66 | ) |
| Loss from discontinued operations | | | (0.06 | ) | | | (3.08 | ) | | | (0.24 | ) | | | (4.37 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Net loss per basic share | | $ | (0.14 | ) | | $ | (4.48 | ) | | $ | (0.69 | ) | | $ | (6.03 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Diluted loss per share: | | | | | | | | | | | | | | | | |
| Loss from continuing operations | | $ | (0.08 | ) | | $ | (1.55 | ) | | $ | (0.45 | ) | | $ | (1.87 | ) |
| Loss from discontinued operations | | | (0.06 | ) | | | (2.92 | ) | | | (0.23 | ) | | | (4.12 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Net loss per diluted share | | $ | (0.14 | ) | | $ | (4.47 | ) | | $ | (0.68 | ) | | $ | (5.99 | ) |
| | | |
| | | |
| | | |
| | | |
| |
3
MeriStar Hospitality Corporation
June 30, 2004
RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
Funds From Operations: | | | | | | | | | | | | | | | | |
| Net Loss | | $ | (11,555 | ) | | $ | (206,361 | ) | | $ | (51,799 | ) | | $ | (276,106 | ) |
| Depreciation and amortization of real estate assets | | | 23,617 | | | | 28,042 | | | | 48,120 | | | | 55,656 | |
| Loss on disposal of assets | | | 4,584 | | | | — | | | | 11,530 | | | | — | |
| Minority interest to common OP unit holders | | | (671 | ) | | | (10,260 | ) | | | (1,759 | ) | | | (13,628 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Funds from operations as reported in SEC filings | | $ | 15,975 | | | $ | (188,579 | ) | | $ | 6,092 | | | $ | (234,078 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Weighted average number of shares of common stock outstanding | | | 85,333 | | | | 48,392 | | | | 78,234 | | | | 48,127 | |
| | | |
| | | |
| | | |
| | | |
| |
Funds from operations per diluted share | | $ | 0.19 | | | $ | (3.90 | ) | | $ | 0.08 | | | $ | (4.86 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Funds From Operations, as adjusted: | | | | | | | | | | | | | | | | |
| Funds from operations as reported in SEC filings | | $ | 15,975 | | | $ | (188,579 | ) | | $ | 6,092 | | | $ | (234,078 | ) |
| Loss on asset impairments | | | 2,430 | | | | 208,000 | | | | 7,441 | | | | 264,677 | |
| Loss on early extinguishments of debt | | | 1,980 | | | | — | | | | 7,903 | | | | — | |
| Write off of deferred financial fees | | | 453 | | | | — | | | | 1,719 | | | | — | |
| Minority interest to common OP unit holders | | | — | | | | (478 | ) | | | — | | | | (930 | ) |
| Interest on convertible debt | | | — | | | | 1,805 | | | | — | | | | — | |
| | | |
| | | |
| | | |
| | | |
| |
Funds from operations, as adjusted | | $ | 20,838 | | | $ | 20,748 | | | $ | 23,155 | | | $ | 29,669 | |
| | | |
| | | |
| | | |
| | | |
| |
| Weighted average number of shares of common stock and common OP units outstanding | | | 85,333 | | | | 53,573 | | | | 78,234 | | | | 49,040 | |
| | | |
| | | |
| | | |
| | | |
| |
Funds from operations per diluted share, as adjusted | | $ | 0.24 | | | $ | 0.39 | | | $ | 0.30 | | | $ | 0.60 | |
| | | |
| | | |
| | | |
| | | |
| |
| (a) | | See the notes to the financial information for discussion of non-GAAP measures. |
4
MeriStar Hospitality Corporation
June 30, 2004
RECONCILIATION OF NET LOSS TO EBITDA (a)
(In thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
EBITDA and Adjusted EBITDA are comprised of the following: | | | | | | | | | | | | | | | | |
| Loss from continuing operations | | $ | (6,486 | ) | | $ | (64,332 | ) | | $ | (33,705 | ) | | $ | (76,060 | ) |
| Loss from discontinued operations | | | (5,069 | ) | | | (142,029 | ) | | | (18,094 | ) | | | (200,046 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Net Loss | | $ | (11,555 | ) | | $ | (206,361 | ) | | $ | (51,799 | ) | | $ | (276,106 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Loss from continuing operations | | $ | (6,486 | ) | | $ | (64,332 | ) | | $ | (33,705 | ) | | $ | (76,060 | ) |
| Interest, expense, net | | | 29,724 | | | | 34,583 | | | | 64,103 | | | | 69,301 | |
| Income tax benefit | | | 45 | | | | 12 | | | | (410 | ) | | | (164 | ) |
| Depreciation and amortization (b) | | | 25,289 | | | | 25,242 | | | | 51,333 | | | | 49,190 | |
| | | |
| | | |
| | | |
| | | |
| |
EBITDA from continuing operations | | | 48,572 | | | | (4,495 | ) | | | 81,321 | | | | 42,267 | |
| Loss on asset impairments | | | 1,291 | | | | 65,123 | | | | 1,536 | | | | 65,123 | |
| Minority interest | | | (671 | ) | | | (10,598 | ) | | | (1,617 | ) | | | (14,275 | ) |
| Loss on early extinguishments of debt | | | 1,980 | | | | — | | | | 7,903 | | | | — | |
| | | |
| | | |
| | | |
| | | |
| |
Adjusted EBITDA from continuing operations | | $ | 51,172 | | | $ | 50,030 | | | $ | 89,143 | | | $ | 93,115 | |
| | | |
| | | |
| | | |
| | | |
| |
| Loss from discontinued operations | | $ | (5,069 | ) | | $ | (142,029 | ) | | $ | (18,094 | ) | | $ | (200,046 | ) |
| Interest, expense, net | | | — | | | | 153 | | | | 11 | | | | 312 | |
| Income tax benefit | | | (62 | ) | | | 13 | | | | (220 | ) | | | (8 | ) |
| Depreciation and amortization | | | 145 | | | | 4,820 | | | | 1,261 | | | | 9,865 | |
| | | |
| | | |
| | | |
| | | |
| |
EBITDA from discontinued operations | | | (4,986 | ) | | | (137,043 | ) | | | (17,042 | ) | | | (189,877 | ) |
| Loss on asset impairments | | | 1,139 | | | | 142,876 | | | | 5,905 | | | | 199,553 | |
| Loss on disposal of assets | | | 4,584 | | | | — | | | | 11,530 | | | | — | |
| | | |
| | | |
| | | |
| | | |
| |
Adjusted EBITDA from discontinued operations | | $ | 737 | | | $ | 5,833 | | | $ | 393 | | | $ | 9,676 | |
| | | |
| | | |
| | | |
| | | |
| |
Adjusted EBITDA, total operations | | $ | 51,909 | | | $ | 55,863 | | | $ | 89,536 | | | $ | 102,791 | |
| | | |
| | | |
| | | |
| | | |
| |
| (a) | | See the notes to the financial information for discussion of non-GAAP measures. |
| (b) | | Depreciation and amortization included the write-off of unamortized deferred financing costs totaling $0.5 million and $0.7 million for the three months ended June 30, 2004 and 2003, respectively, and $1.7 million and $0.7 million for the six months ended June 30, 2004 and 2003, respectively, related to our early extinguishments of debt during these periods. |
5
MeriStar Hospitality Corporation
June 30, 2004
HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
| Number of hotels | | | 70 | | | | 70 | | | | 70 | | | | 70 | |
| Number of rooms | | | 19,213 | | | | 19,213 | | | | 19,213 | | | | 19,213 | |
| Operating profit margin under GAAP (b) | | | 11.0 | % | | | (18.7 | )% | | | 8.5 | % | | | (5.1) | % |
| Comparable hotel adjusted operating profit margin (c) | | | 23.0 | % | | | 24.6 | % | | | 21.2 | % | | | 23.5 | % |
| Comparable hotel revenues: | | | | | | | | | | | | | | | | |
| Rooms | | $ | 135,754 | | | $ | 132,481 | | | $ | 265,648 | | | $ | 257,501 | |
| Food and beverage | | | 56,040 | | | | 54,643 | | | | 105,323 | | | | 103,786 | |
| Other hotel operations | | | 15,651 | | | | 15,889 | | | | 31,292 | | | | 31,208 | |
| | | |
| | | |
| | | |
| | | |
| |
| Comparable hotel revenues (d) | | | 207,445 | | | | 203,013 | | | | 402,263 | | | | 392,495 | |
| | | |
| | | |
| | | |
| | | |
| |
| Comparable hotel expenses: | | | | | | | | | | | | | | | | |
| Room | | | 33,190 | | | | 31,415 | | | | 65,087 | | | | 60,964 | |
| Food and beverage | | | 39,106 | | | | 37,565 | | | | 76,225 | | | | 73,143 | |
| Other | | | 9,571 | | | | 9,258 | | | | 18,878 | | | | 17,858 | |
| General Administrative, hotel | | | 31,771 | | | | 30,291 | | | | 64,165 | | | | 59,902 | |
| Property operating costs | | | 30,780 | | | | 29,486 | | | | 60,997 | | | | 57,784 | |
| Property taxes, insurance and other | | | 15,340 | | | | 15,124 | | | | 31,435 | | | | 30,696 | |
| | | |
| | | |
| | | |
| | | |
| |
| Comparable hotel expenses (e) | | | 159,758 | | | | 153,139 | | | | 316,787 | | | | 300,347 | |
| | | |
| | | |
| | | |
| | | |
| |
Comparable Hotel Adjusted Operating Income | | | 47,687 | | | | 49,874 | | | | 85,476 | | | | 92,148 | |
| Non-comparable results, net (f) | | | 4,029 | | | | (165 | ) | | | 4,945 | | | | 356 | |
| Office rental, parking and other revenue | | | 2,929 | | | | 3,453 | | | | 5,828 | | | | 6,716 | |
| General and administrative, corporate | | | (3,473 | ) | | | (3,132 | ) | | | (7,106 | ) | | | (6,105 | ) |
| Depreciation and amortization | | | (25,289 | ) | | | (25,242 | ) | | | (51,333 | ) | | | (49,190 | ) |
| Loss on asset impairments | | | (1,291 | ) | | | (65,123 | ) | | | (1,536 | ) | | | (65,123 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Operating Profit (loss) | | $ | 24,592 | | | $ | (40,335 | ) | | $ | 36,274 | | | $ | (21,198 | ) |
| | | |
| | | |
| | | |
| | | |
| |
Note: Our comparable hotel results include the revenues and expenses of 70 hotels, representing our 72 core hotels, less two hotels recently acquired. Our 72 core hotels exclude seven hotels planned for disposition as of June 30, 2004.
| (a) | | See the notes to the financial information for discussion of non-GAAP measures. |
| |
| (b) | | Operating profit margin under GAAP is calculated as the operating income (loss) divided by the total revenues per the consolidated statements of operations. |
| |
| (c) | | Comparable hotel adjusted operating profit margin is calculated as the comparable hotel adjusted operating income divided by the comparable hotel revenues per the schedule above. |
6
MeriStar Hospitality Corporation
June 30, 2004
| (d) | | The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel sales is as follows (in millions): |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
| Revenues per the consolidated statements of operations | | $ | 222.9 | | | $ | 216.0 | | | $ | 428.0 | | | $ | 416.7 | |
| Non-comparable hotel revenues | | | (12.6 | ) | | | (9.5 | ) | | | (19.9 | ) | | | (17.5 | ) |
| Office rental, parking and other revenue | | | (2.9 | ) | | | (3.5 | ) | | | (5.8 | ) | | | (6.7 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Comparable hotel revenues | | $ | 207.4 | | | $ | 203.0 | | | $ | 402.3 | | | $ | 392.5 | |
| | | |
| | | |
| | | |
| | | |
| |
| (e) | | The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions): |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
| Operating expenses per the consolidated statements of | | | | | | | | | | | | | | | | |
| operations | | $ | 198.3 | | | $ | 256.3 | | | $ | 391.7 | | | $ | 437.9 | |
| Non-comparable hotel expenses | | | (8.4 | ) | | | (9.8 | ) | | | (15.0 | ) | | | (17.2 | ) |
| General and administrative, corporate | | | (3.5 | ) | | | (3.1 | ) | | | (7.1 | ) | | | (6.1 | ) |
| Depreciation and amortization | | | (25.3 | ) | | | (25.2 | ) | | | (51.3 | ) | | | (49.2 | ) |
| Loss on asset impairments | | | (1.3 | ) | | | (65.1 | ) | | | (1.5 | ) | | | (65.1 | ) |
| | | |
| | | |
| | | |
| | | |
| |
| Comparable hotel expenses | | $ | 159.8 | | | $ | 153.1 | | | $ | 316.8 | | | $ | 300.3 | |
| | | |
| | | |
| | | |
| | | |
| |
| (f) | | Non-comparable results, net represent all revenues and expenses other than those of our 70 comparable properties and specific revenues and expenses identified above: office rental, parking and other revenue; general and administrative, corporate; depreciation and amortization; and loss on asset impairments. |
7
MeriStar Hospitality Corporation
June 30, 2004
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
| | | | | | | | | |
| | | June 30, | | December 31, |
| | | 2004
| | 2003
|
ASSETS | | | | | | | | |
| Property and equipment | | $ | 2,633,167 | | | $ | 2,481,752 | |
| Accumulated depreciation | | | (488,371 | ) | | | (446,032 | ) |
| | | |
| | | |
| |
| | | | 2,144,796 | | | | 2,035,720 | |
| Assets held for sale | | | 21,826 | | | | 51,169 | |
| Investment in affiliate | | | 15,000 | | | | 15,000 | |
| Prepaid expenses and other assets | | | 41,113 | | | | 47,934 | |
| Accounts receivable, net of allowance for doubtful accounts of $3,728 and $2,040 | | | 72,173 | | | | 64,709 | |
| Restricted cash | | | 72,478 | | | | 42,523 | |
| Cash and cash equivalents — unrestricted | | | 148,819 | | | | 230,884 | |
| | | |
| | | |
| |
| | | $ | 2,516,205 | | | $ | 2,487,939 | |
| | | |
| | | |
| |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Long-term debt | | $ | 1,587,404 | | | $ | 1,638,028 | |
| Accounts payable and accrued expenses | | | 91,450 | | | | 83,458 | |
| Accrued interest | | | 41,121 | | | | 46,813 | |
| Due to Interstate Hotels & Resorts | | | 21,887 | | | | 16,411 | |
| Other liabilities | | | 19,703 | | | | 11,831 | |
| | | |
| | | |
| |
| Total liabilities | | | 1,761,565 | | | | 1,796,541 | |
| | | |
| | | |
| |
| Minority interests | | | 26,880 | | | | 37,785 | |
| Stockholders’ equity: | | | | | | | | |
Common stock, par value $0.01 per share
Authorized – 100,000 shares
Issued – 89,307 and 69,135 shares | | | 893 | | | | 691 | |
| Additional paid-in capital | | | 1,463,886 | | | | 1,338,959 | |
| Accumulated deficit | | | (693,893 | ) | | | (642,094 | ) |
| Accumulated other comprehensive loss | | | — | | | | (977 | ) |
| Common stock held in treasury – 2,371 and 2,345 shares | | | (43,126 | ) | | | (42,966 | ) |
| | | |
| | | |
| |
| Total stockholders’ equity | | | 727,760 | | | | 653,613 | |
| | | |
| | | |
| |
| | | $ | 2,516,205 | | | $ | 2,487,939 | |
| | | |
| | | |
| |
8
MeriStar Hospitality Corporation
June 30, 2004
PORTFOLIO DATA
Portfolio Distribution at June 30, 2004
72 core hotels (a)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | % of | | % of 2004 YTD |
Market
| | Hotels
| | Rooms
| | Total Rooms
| | Revenue
|
| Washington DC Metro | | | 11 | | | | 2,478 | | | | 12.4 | % | | | 15.2 | % |
| Southwest Florida | | | 6 | | | | 1,026 | | | | 5.1 | % | | | 12.0 | % |
| New Jersey | | | 4 | | | | 1,120 | | | | 5.6 | % | | | 6.4 | % |
| Southern California | | | 4 | | | | 1,519 | | | | 7.6 | % | | | 5.5 | % |
| Northern California | | | 3 | | | | 968 | | | | 4.8 | % | | | 4.8 | % |
| Orlando | | | 3 | | | | 1,545 | | | | 7.7 | % | | | 5.8 | % |
| Tampa/Clearwater | | | 3 | | | | 1,111 | | | | 5.5 | % | | | 6.2 | % |
| Atlanta | | | 2 | | | | 650 | | | | 3.2 | % | | | 3.1 | % |
| Chicago | | | 2 | | | | 857 | | | | 4.3 | % | | | 3.6 | % |
| Colorado | | | 2 | | | | 736 | | | | 3.7 | % | | | 2.3 | % |
| Dallas | | | 2 | | | | 598 | | | | 3.0 | % | | | 2.2 | % |
| Houston | | | 2 | | | | 597 | | | | 3.0 | % | | | 3.5 | % |
| All other markets | | | 28 | | | | 6,859 | | | | 34.1 | % | | | 29.4 | % |
Total Markets | | | 72 | | | | 20,064 | | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | % of | | % of 2004 YTD |
Region
| | Hotels
| | Rooms
| | Total Rooms
| | Revenue
|
| South Atlantic | | | 20 | | | | 5,630 | | | | 28.0 | % | | | 33.0 | % |
| Middle Atlantic | | | 17 | | | | 4,084 | | | | 20.3 | % | | | 24.0 | % |
| South Central | | | 11 | | | | 3,281 | | | | 16.4 | % | | | 15.1 | % |
| Pacific | | | 10 | | | | 3,282 | | | | 16.4 | % | | | 14.3 | % |
| North Central | | | 7 | | | | 1,789 | | | | 8.9 | % | | | 6.8 | % |
| Mountain | | | 6 | | | | 1,798 | | | | 9.0 | % | | | 6.1 | % |
| New England | | | 1 | | | | 200 | | | | 1.0 | % | | | 0.7 | % |
Total Regions | | | 72 | | | | 20,064 | | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | % of | | % of 2004 YTD |
Brand
| | Hotels
| | Rooms
| | Total Rooms
| | Revenue
|
Hilton | | | | | | | | | | | | | | | | |
| Hilton | | | 16 | | | | 4,442 | | | | 22.1 | % | | | 23.8 | % |
| Doubletree | | | 8 | | | | 2,664 | | | | 13.3 | % | | | 9.3 | % |
| Embassy Suites | | | 3 | | | | 728 | | | | 3.6 | % | | | 3.1 | % |
Starwood | | | | | | | | | | | | | | | | |
| Sheraton | | | 9 | | | | 2,825 | | | | 14.1 | % | | | 14.8 | % |
| Westin | | | 2 | | | | 890 | | | | 4.4 | % | | | 4.1 | % |
Marriott | | | | | | | | | | | | | | | | |
| Marriott | | | 4 | | | | 1,696 | | | | 8.5 | % | | | 6.0 | % |
| Courtyard by Marriott | | | 3 | | | | 587 | | | | 2.9 | % | | | 2.3 | % |
| Ritz-Carlton | | | 1 | | | | 366 | | | | 1.8 | % | | | 1.3 | % |
Intercontinental | | | | | | | | | | | | | | | | |
| Holiday Inn | | | 6 | | | | 1,736 | | | | 8.7 | % | | | 6.6 | % |
| Crowne Plaza | | | 2 | | | | 465 | | | | 2.3 | % | | | 1.7 | % |
| Independent | | | 9 | | | | 1,431 | | | | 7.1 | % | | | 16.2 | % |
| Radisson | | | 5 | | | | 1,337 | | | | 6.7 | % | | | 6.0 | % |
| Other | | | 4 | | | | 897 | | | | 4.5 | % | | | 4.8 | % |
Total Brands | | | 72 | | | | 20,064 | | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | % of | | % of 2004 YTD |
Location
| | Hotels
| | Rooms
| | Total Rooms
| | Revenue
|
| Urban | | | 20 | | | | 5,299 | | | | 26.4 | % | | | 28.7 | % |
| Resort | | | 15 | | | | 4,207 | | | | 21.0 | % | | | 27.8 | % |
| Airport | | | 13 | | | | 4,236 | | | | 21.1 | % | | | 15.0 | % |
| Suburban | | | 24 | | | | 6,322 | | | | 31.5 | % | | | 28.5 | % |
Total Locations | | | 72 | | | | 20,064 | | | | 100.0 | % | | | 100.0 | % |
| (a) | | 72 core hotels represents 79 hotels owned less seven hotels planned for disposition as of June 30, 2004. |
9
MeriStar Hospitality Corporation
June 30, 2004
DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION
66 comparable hotels, same store basis (a)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2nd Quarter 2004 | | 2nd Quarter 2003 | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Market
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| Washington DC Metro (b) | | | 10 | | | | 2,112 | | | $ | 133.46 | | | | 83.3 | % | | $ | 111.20 | | | $ | 122.56 | | | | 78.7 | % | | $ | 96.41 | | | | 15.3 | % |
| Southwest Florida | | | 6 | | | | 1,026 | | | $ | 242.10 | | | | 71.8 | % | | $ | 173.83 | | | $ | 248.32 | | | | 71.1 | % | | $ | 176.48 | | | | -1.5 | % |
| New Jersey | | | 4 | | | | 1,120 | | | $ | 131.79 | | | | 67.2 | % | | $ | 88.62 | | | $ | 123.71 | | | | 68.2 | % | | $ | 84.38 | | | | 5.0 | % |
| Southern California (b) | | | 3 | | | | 1,034 | | | $ | 105.94 | | | | 75.4 | % | | $ | 79.90 | | | $ | 105.43 | | | | 69.8 | % | | $ | 73.64 | | | | 8.5 | % |
| Northern California | | | 3 | | | | 968 | | | $ | 117.24 | | | | 78.0 | % | | $ | 91.48 | | | $ | 111.16 | | | | 79.3 | % | | $ | 88.09 | | | | 3.8 | % |
| Orlando (c) | | | 1 | | | | 489 | | | $ | 78.34 | | | | 81.1 | % | | $ | 63.52 | | | $ | 71.17 | | | | 82.3 | % | | $ | 58.56 | | | | 8.5 | % |
| Tampa/Clearwater | | | 3 | | | | 1,111 | | | $ | 100.02 | | | | 68.2 | % | | $ | 68.21 | | | $ | 95.80 | | | | 69.4 | % | | $ | 66.50 | | | | 2.6 | % |
| Atlanta | | | 2 | | | | 650 | | | $ | 81.37 | | | | 80.3 | % | | $ | 65.37 | | | $ | 74.45 | | | | 80.3 | % | | $ | 59.79 | | | | 9.3 | % |
| Chicago | | | 2 | | | | 857 | | | $ | 101.37 | | | | 80.6 | % | | $ | 81.69 | | | $ | 105.15 | | | | 76.6 | % | | $ | 80.53 | | | | 1.4 | % |
| Colorado | | | 2 | | | | 736 | | | $ | 83.33 | | | | 64.4 | % | | $ | 53.65 | | | $ | 77.15 | | | | 70.1 | % | | $ | 54.07 | | | | -0.8 | % |
| Dallas (c) | | | 1 | | | | 309 | | | $ | 94.68 | | | | 77.8 | % | | $ | 73.71 | | | $ | 91.42 | | | | 70.0 | % | | $ | 63.97 | | | | 15.2 | % |
| Houston | | | 2 | | | | 597 | | | $ | 106.26 | | | | 71.7 | % | | $ | 76.23 | | | $ | 104.60 | | | | 72.5 | % | | $ | 75.86 | | | | 0.5 | % |
| All other markets (c) | | | 27 | | | | 6,680 | | | $ | 94.71 | | | | 71.8 | % | | $ | 67.96 | | | $ | 91.95 | | | | 70.4 | % | | $ | 64.74 | | | | 5.0 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| All Markets | | | 66 | | | | 17,689 | | | $ | 110.99 | | | | 74.0 | % | | $ | 82.16 | | | $ | 106.96 | | | | 72.7 | % | | $ | 77.80 | | | | 5.6 | % |
| | | | | | | | | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2nd Quarter 2004 | | 2nd Quarter 2003 | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Region
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| South Atlantic (c) | | | 18 | | | | 4,574 | | | $ | 122.47 | | | | 73.2 | % | | $ | 89.62 | | | $ | 118.78 | | | | 73.7 | % | | $ | 87.51 | | | | 2.4 | % |
| Middle Atlantic (b) | | | 16 | | | | 3,718 | | | $ | 131.84 | | | | 78.4 | % | | $ | 103.37 | | | $ | 122.91 | | | | 75.2 | % | | $ | 92.48 | | | | 11.8 | % |
| South Central (c) | | | 10 | | | | 2,992 | | | $ | 100.80 | | | | 70.8 | % | | $ | 71.38 | | | $ | 98.19 | | | | 69.5 | % | | $ | 68.24 | | | | 4.6 | % |
| Pacific (b), (c) | | | 8 | | | | 2,618 | | | $ | 109.32 | | | | 73.9 | % | | $ | 80.84 | | | $ | 106.90 | | | | 71.7 | % | | $ | 76.65 | | | | 5.5 | % |
| North Central | | | 7 | | | | 1,789 | | | $ | 92.11 | | | | 75.9 | % | | $ | 69.89 | | | $ | 92.81 | | | | 72.8 | % | | $ | 67.55 | | | | 3.5 | % |
| Mountain | | | 6 | | | | 1,798 | | | $ | 78.12 | | | | 70.2 | % | | $ | 54.80 | | | $ | 74.43 | | | | 70.6 | % | | $ | 52.53 | | | | 4.3 | % |
| New England | | | 1 | | | | 200 | | | $ | 77.14 | | | | 81.4 | % | | $ | 62.80 | | | $ | 76.68 | | | | 86.6 | % | | $ | 66.40 | | | | -5.4 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| All Regions | | | 66 | | | | 17,689 | | | $ | 110.99 | | | | 74.0 | % | | $ | 82.16 | | | $ | 106.96 | | | | 72.7 | % | | $ | 77.80 | | | | 5.6 | % |
| | | | | | | | | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2nd Quarter 2004 | | 2nd Quarter 2003 | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Location
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| Urban (b) | | | 19 | | | | 4,933 | | | $ | 120.84 | | | | 79.2 | % | | $ | 95.72 | | | $ | 115.69 | | | | 76.0 | % | | $ | 87.87 | | | | 8.9 | % |
| Resort (c) | | | 13 | | | | 3,151 | | | $ | 143.81 | | | | 73.2 | % | | $ | 105.29 | | | $ | 140.73 | | | | 73.6 | % | | $ | 103.62 | | | | 1.6 | % |
| Airport (b) | | | 12 | | | | 3,751 | | | $ | 83.51 | | | | 75.2 | % | | $ | 62.82 | | | $ | 81.46 | | | | 73.7 | % | | $ | 60.05 | | | | 4.6 | % |
| Suburban (c) | | | 22 | | | | 5,854 | | | $ | 101.95 | | | | 69.1 | % | | $ | 70.50 | | | $ | 97.64 | | | | 68.9 | % | | $ | 67.32 | | | | 4.7 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| All Locations | | | 66 | | | | 17,689 | | | $ | 110.99 | | | | 74.0 | % | | $ | 82.16 | | | $ | 106.96 | | | | 72.7 | % | | $ | 77.80 | | | | 5.6 | % |
| (a) | | Operating statistics are shown for 66 comparable hotels which represent 72 core hotels less two hotels acquired during the second quarter and four hotels impacted by brand conversions. |
| |
| (b) | | Operating statistics excludes hotel acquired during the second quarter. |
| |
| (c) | | Operating statistics excludes hotel(s) impacted by brand conversions. |
10
MeriStar Hospitality Corporation
June 30, 2004
DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION
66 comparable hotels, same store basis (a)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | June 2004 Year-to-Date | | June 2003 Year-to-Date | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Market
| | Hotels
| | Rooms
| | ADR
| | OCC%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| Washington DC Metro (b) | | | 10 | | | | 2,112 | | | $ | 126.50 | | | | 76.0 | % | | $ | 96.18 | | | $ | 119.15 | | | | 70.7 | % | | $ | 84.26 | | | | 14.1 | % |
| Southwest Florida | | | 6 | | | | 1,026 | | | $ | 280.86 | | | | 69.5 | % | | $ | 195.15 | | | $ | 285.20 | | | | 68.5 | % | | $ | 195.23 | | | | 0.0 | % |
| New Jersey | | | 4 | | | | 1,120 | | | $ | 129.19 | | | | 61.0 | % | | $ | 78.85 | | | $ | 124.85 | | | | 60.0 | % | | $ | 74.91 | | | | 5.3 | % |
| Southern California (b) | | | 3 | | | | 1,034 | | | $ | 110.15 | | | | 76.1 | % | | $ | 83.87 | | | $ | 108.37 | | | | 69.1 | % | | $ | 74.86 | | | | 12.0 | % |
| Northern California | | | 3 | | | | 968 | | | $ | 111.52 | | | | 75.2 | % | | $ | 83.83 | | | $ | 108.89 | | | | 73.2 | % | | $ | 79.72 | | | | 5.2 | % |
| Orlando (c) | | | 1 | | | | 489 | | | $ | 79.77 | | | | 84.0 | % | | $ | 67.00 | | | $ | 71.93 | | | | 77.9 | % | | $ | 56.02 | | | | 19.6 | % |
| Tampa/Clearwater | | | 3 | | | | 1,111 | | | $ | 103.08 | | | | 72.3 | % | | $ | 74.54 | | | $ | 101.58 | | | | 71.1 | % | | $ | 72.18 | | | | 3.3 | % |
| Atlanta | | | 2 | | | | 650 | | | $ | 81.95 | | | | 82.5 | % | | $ | 67.59 | | | $ | 78.88 | | | | 81.5 | % | | $ | 64.27 | | | | 5.2 | % |
| Chicago | | | 2 | | | | 857 | | | $ | 95.39 | | | | 68.2 | % | | $ | 65.06 | | | $ | 99.30 | | | | 68.4 | % | | $ | 67.89 | | | | -4.2 | % |
| Colorado | | | 2 | | | | 736 | | | $ | 81.40 | | | | 61.1 | % | | $ | 49.76 | | | $ | 75.72 | | | | 63.1 | % | | $ | 47.79 | | | | 4.1 | % |
| Dallas (c) | | | 1 | | | | 309 | | | $ | 93.07 | | | | 70.8 | % | | $ | 65.93 | | | $ | 89.98 | | | | 64.6 | % | | $ | 58.16 | | | | 13.4 | % |
| Houston | | | 2 | | | | 597 | | | $ | 113.47 | | | | 74.3 | % | | $ | 84.29 | | | $ | 106.26 | | | | 72.2 | % | | $ | 76.69 | | | | 9.9 | % |
| All other markets (c) | | | 27 | | | | 6,680 | | | $ | 94.80 | | | | 69.8 | % | | $ | 66.17 | | | $ | 92.98 | | | | 69.3 | % | | $ | 64.47 | | | | 2.6 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| All Markets | | | 66 | | | | 17,689 | | | $ | 111.35 | | | | 71.5 | % | | $ | 79.57 | | | $ | 108.59 | | | | 69.6 | % | | $ | 75.54 | | | | 5.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2nd Quarter 2004 | | 2nd Quarter 2003 | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Region
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| South Atlantic (c) | | | 18 | | | | 4,574 | | | $ | 130.05 | | | | 74.3 | % | | $ | 96.59 | | | $ | 128.14 | | | | 72.8 | % | | $ | 93.32 | | | | 3.5 | % |
| Middle Atlantic (b) | | | 16 | | | | 3,718 | | | $ | 126.64 | | | | 71.4 | % | | $ | 90.36 | | | $ | 121.03 | | | | 67.5 | % | | $ | 81.66 | | | | 10.7 | % |
| South Central (c) | | | 10 | | | | 2,992 | | | $ | 99.72 | | | | 68.7 | % | | $ | 68.55 | | | $ | 96.74 | | | | 68.1 | % | | $ | 65.88 | | | | 4.0 | % |
| Pacific (b), (c) | | | 8 | | | | 2,618 | | | $ | 109.51 | | | | 73.5 | % | | $ | 80.48 | | | $ | 107.76 | | | | 69.9 | % | | $ | 75.32 | | | | 6.8 | % |
| North Central | | | 7 | | | | 1,789 | | | $ | 87.97 | | | | 68.0 | % | | $ | 59.80 | | | $ | 89.62 | | | | 68.1 | % | | $ | 61.01 | | | | -2.0 | % |
| Mountain | | | 6 | | | | 1,798 | | | $ | 78.88 | | | | 68.7 | % | | $ | 54.16 | | | $ | 75.65 | | | | 68.0 | % | | $ | 51.41 | | | | 5.4 | % |
| New England | | | 1 | | | | 200 | | | $ | 74.65 | | | | 80.7 | % | | $ | 60.22 | | | $ | 77.41 | | | | 81.7 | % | | $ | 63.27 | | | | -4.8 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | | |
| All Regions | | | 66 | | | | 17,689 | | | $ | 111.35 | | | | 71.5 | % | | $ | 79.57 | | | $ | 108.59 | | | | 69.6 | % | | $ | 75.54 | | | | 5.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 2nd Quarter 2004 | | 2nd Quarter 2003 | | Percent |
| | | | | | | | | | |
| |
| | Change in |
Location
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | RevPAR
| | ADR
| | Occ%
| | RevPAR
| | RevPAR
|
| Urban (b) | | | 19 | | | | 4,933 | | | $ | 115.31 | | | | 74.4 | % | | $ | 85.77 | | | $ | 112.23 | | | | 70.9 | % | | $ | 79.53 | | | | 7.8 | % |
| Resort (c) | | | 13 | | | | 3,151 | | | $ | 155.82 | | | | 74.1 | % | | $ | 115.39 | | | $ | 153.97 | | | | 72.9 | % | | $ | 112.18 | | | | 2.9 | % |
| Airport (b) | | | 12 | | | | 3,751 | | | $ | 83.75 | | | | 74.5 | % | | $ | 62.38 | | | $ | 82.71 | | | | 72.6 | % | | $ | 60.08 | | | | 3.8 | % |
| Suburban (c) | | | 22 | | | | 5,854 | | | $ | 101.29 | | | | 65.6 | % | | $ | 66.48 | | | $ | 97.61 | | | | 64.8 | % | | $ | 63.27 | | | | 5.1 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| All Locations | | | 66 | | | | 17,689 | | | $ | 111.35 | | | | 71.5 | % | | $ | 79.57 | | | $ | 108.59 | | | | 69.6 | % | | $ | 75.54 | | | | 5.3 | % |
| (a) | | Operating statistics are shown for 66 comparable hotels which represent 72 core hotels less two hotels acquired during the second quarter and four hotels impacted by brand conversions. |
| |
| (b) | | Operating statistics for market excludes hotel acquired during the second quarter. |
| |
| (c) | | Operating statistics for market excludes hotel(s) impacted by brand conversions. |
11
MeriStar Hospitality Corporation
June 30, 2004
CAPITAL STRUCTURE
Total Enterprise Value
(In thousands, except per share information, ratios and percentages)
| | | | | | | | | |
| | | As of June 30, | | As of December 31, |
| | | 2004
| | 2003
|
| Common shares outstanding, net | | | 86,936 | | | | 66,790 | |
| Operating partnership units | | | 3,068 | | | | 3,510 | |
| | | |
| | | |
| |
| Combined shares and units | | | 90,004 | | | | 70,300 | |
| Common stock price at end of period | | $ | 6.84 | | | $ | 6.51 | |
| | | |
| | | |
| |
| Common equity capitalization | | $ | 615,627 | | | $ | 457,653 | |
| Consolidated debt | | | 1,597,478 | | | | 1,638,028 | |
| Total cash | | | (221,297 | ) | | | (273,407 | ) |
| | | |
| | | |
| |
| Total enterprise value (TEV) | | $ | 1,991,808 | | | $ | 1,822,274 | |
| | | |
| | | |
| |
| TEV per room | | $ | 90 | | | $ | 74 | |
| Rooms owned | | | 22,187 | | | | 24,729 | |
Long-Term Debt
Long-term debt as of June 30, 2004 and December 31, 2003 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | |
| | | Encumbered | | | | | | | | | | June 30, | | December 31, |
| | | Hotels
| | Maturity
| | Interest Rate
| | 2004
| | 2003
|
| Convertible Notes | | | — | | | | 2004 | | | | 4.75 | % | | $ | 3,705 | | | $ | 3,705 | |
| Senior Subordinated Notes | | | — | | | | 2007 | | | | 8.75 | % | | | 33,871 | | | | 82,768 | |
| Secured Revolver | | | 6 | | | | 2007 | | | LIBOR +450 bps | | | — | | | | — | |
| Senior Unsecured Notes | | | — | | | | 2008 | | | | 9.00 | % | | | 270,070 | | | | 299,459 | |
| Senior Unsecured Notes | | | — | | | | 2009 | | | | 10.50 | % | | | 223,248 | | | | 248,848 | |
| CMBS | | | 19 | | | | 2009 | | | LIBOR +444 bps | | | 306,067 | | | | 309,035 | |
| Convertible Notes | | | — | | | | 2010 | | | | 9.50 | % | | | 170,000 | | | | 170,000 | |
| Senior Unsecured Notes | | | — | | | | 2011 | | | | 9.13 | % | | | 352,972 | | | | 396,437 | |
| Mortgage Debt and other | | | 4 | | | Various | | | 6.34 | % | | | 137,504 | | | | 27,011 | |
| CMBS | | | 4 | | | | 2013 | | | | 6.88 | % | | | 100,041 | | | | 100,765 | |
| | |
| | | | | | | | | | | |
| | | |
| |
| | | | | | | | | | | | | | | 1,597,478 |
| | 1,638,028 |
| Fair value adjustment for interest rate swap | | | | | | | | | | | | | | | (10,074 | ) | | | — | |
| | | | | | | | | | | | | | | |
| | | |
| |
| | | 33 | | | | | | | | | | | $ | 1,587,404 | | | $ | 1,638,028 | |
| | |
| | | | | | | | | | | |
| | | |
| |
| Average Maturity | | | | | | 5.5 years | | | | | | | | | | | | |
| Average Interest Rate | | | | | | | | | | | 8.3 | % | | | | | | | | |
12
MeriStar Hospitality Corporation
June 30, 2004
CAPITAL EXPENDITURES SUMMARY
(In thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | June 30,
| | June 30,
|
| | | 2004
| | 2003
| | 2004
| | 2003
|
| Capital expenditures | | $ | 26,161 | | | $ | 5,925 | | | $ | 49,898 | | | $ | 14,547 | |
| Percent of total revenue | | | 11.7 | % | | | 2.7 | % | | | 11.7 | % | | | 3.5 | % |
Summary of significant capital expenditure projects for the six months ended June 30, 2004:
| | | | | | | | | |
| | | | | Amount | | |
Hotel
| | State
| | Spent
| | Description of Renovation
|
| Doral Forrestal | | New Jersey | | $ | 4,684 | | | Guest rooms (casegoods and softgoods), guest bathrooms, HVAC system upgrade |
| Hilton Sacramento | | California | | | 2,611 | | | Guest rooms (casegoods and softgoods), guest bathrooms, lobby |
| South Seas Resort | | Florida | | | 2,471 | | | Fiber-optic cable installation |
| Hilton Crystal City | | Virginia | | | 2,388 | | | Guest rooms (casegoods and softgoods), guest bathrooms |
| Doubletree Universal | | Florida | | | 2,295 | | | Hotel conversion: lobby renovation, parking lot surfacing, meeting rooms, pool |
| Marriott Somerset | | New Jersey | | | 2,225 | | | Guest rooms (casegoods and softgoods), guest bathrooms |
| Hilton Cocoa Beach | | Florida | | | 1,978 | | | Mechanical systems replacement, commencement of guest rooms renovation |
| Sheraton Safari Lake Buena Vista | | Florida | | | 1,831 | | | Mechanical systems replacement, roof replaced |
| Hilton Arlington | | Texas | | | 1,546 | | | Guest rooms (casegoods and softgoods), guest bathrooms, public areas |
| Hilton Durham | | North Carolina | | | 1,360 | | | Guest rooms (casegoods and softgoods), guest bathrooms, ballroom |
| Sheraton Great Valley | | Pennsylvania | | | 1,334 | | | Guest rooms (casegoods and softgoods), guest bathrooms, lobby |
| Hilton Houston Westchase | | Texas | | | 1,253 | | | Guest rooms (casegoods and softgoods), guest bathrooms |
| Radisson Chicago | | Illinois | | | 1,191 | | | Guest rooms (casegoods and softgoods), guest bathrooms |
| Hilton Irvine | | California | | | 1,180 | | | Ballroom, lounge, public restrooms |
| Hilton Detroit | | Michigan | | | 1,127 | | | Guest rooms (casegoods and softgoods), guest bathrooms |
| Radisson Annapolis | | Maryland | | | 983 | | | Guest rooms (casegoods and softgoods), fitness center |
| Holiday Inn Chicago O’Hare | | Illinois | | | 978 | | | Exterior concrete repair, landscaping |
| Doubletree Dallas | | Texas | | | 881 | | | Hotel conversion: guest rooms (casegoods and softgoods), guest bathrooms, lobby, restaurant, meeting space |
Holiday Inn Walt Disney World
Village | | Florida | | | 879 | | | Hotel conversion: atrium, guest rooms (casegoods and softgoods) |
| Westin Atlanta | | Georgia | | | 819 | | | Recarpeting of ballroom, corridors and guest rooms |
| Hilton Grand Rapids | | Michigan | | | 751 | | | Guest rooms (casegoods and softgoods), guest bathrooms, restaurant, lobby |
| Westin Oklahoma City | | Oklahoma | | | 680 | | | Guest rooms (casegoods and softgoods), guest bathrooms, corridors, mechanical HVAV |
13
MeriStar Hospitality Corporation
June 30, 2004
ACQUISITIONS AND DISPOSITIONS
For the period from December 31, 2003 through June 30, 2004
(Dollars in thousands)
Acquisitions
| | | | | | | | | | | |
Property
| | Date Acquired
| | Rooms
| | Total Investment
|
| The Ritz-Carlton, Pentagon City | | May 10, 2004 | | | 366 | | | $ | 92,869 | |
| Marriott Irvine | | June 25, 2004 | | | 485 | | | | 93,378 | |
| | | | |
| | | |
| |
| Total Acquisitions | | | | | 851 | | | $ | 186,247 | |
| | | | |
| | | |
| |
Dispositions
| | | | | | | | | | | |
| | | | | | | | | Total Gross Sales |
Property
| | Date Disposed
| | Rooms
| | Price Per Quarter
|
| Holiday Inn Select Bucks County | | January 7, 2004 | | | 215 | | | | | |
| Ramada Plaza Meriden | | January 7, 2004 | | | 150 | | | | | |
| Westin Morristown New Jersey | | January 7, 2004 | | | 199 | | | | | |
| Sheraton Dallas Brookhollow | | February 12, 2004 | | | 348 | | | | | |
| Ramada Plaza Shelton | | February 26, 2004 | | | 155 | | | | | |
| Hilton Midland | | February 27, 2004 | | | 249 | | | | | |
| Holiday Inn DFW Airport West | | March 1, 2004 | | | 243 | | | | | |
| Crowne Plaza Phoenix | | March 1, 2004 | | | 250 | | | | | |
| Hilton Hartford | | March 8, 2004 | | | 388 | | | | | |
| Howard Johnson Resort Key Largo | | March 26, 2004 | | | 100 | | | | | |
| Holiday Inn Colorado Springs Garden of Gods | | March 31, 2004 | | | 200 | | | | | |
| | | | |
| | | | | |
| Total Dispositions in First Quarter 2004 | | | | | 2,497 | | | $ | 74,075 | |
| Park Plaza Cleveland | | April 28, 2004 | | | 237 | | | | | |
| Courtyard Century City | | May 4, 2004 | | | 134 | | | | | |
| Park Plaza Arlington Heights | | May 11, 2004 | | | 247 | | | | | |
| Sheraton Guildford | | June 4, 2004 | | | 278 | | | | | |
| | | | |
| | | | | |
| Total Dispositions in Second Quarter | | | | | 896 | | | $ | 30,798 | |
| | | | |
| | | |
| |
| Total Dispositions Year-to-Date in 2004* | | | | | 3,393 | | | $ | 104,873 | |
| | | | |
| | | |
| |
| * | | In the third quarter of 2004, we sold the Wyndham San Jose and Hilton Toledo hotels totaling 568 rooms for gross proceeds of $14.5 million. |
14
MeriStar Hospitality Corporation
June 30, 2004
FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS
(In thousands, except per share amounts)
| | | | | | | | | |
| | | Three Months Ending September 30, 2004
|
| | | Low-end of range
| | High-end of range
|
Forecasted Funds from Operations: | | | | | | | | |
| Net loss (a) | | $ | (23,032 | ) | | $ | (20,153 | ) |
| Adjustments to forecasted net loss: | | | | | | | | |
| Depreciation and amortization of real estate assets | | | 23,956 | | | | 23,956 | |
| Minority interest to common OP unit holders | | | (661 | ) | | | (580 | ) |
| | | |
| | | |
| |
| Funds from operations as reported in SEC filings | | $ | 263 | | | $ | 3,223 | |
| | | |
| | | |
| |
| Weighted average diluted shares of common stock and common OP units outstanding | | | 89,341 | | | | 89,341 | |
| | | |
| | | |
| |
Funds from operations per diluted share | | $ | 0.00 | | | $ | 0.04 | |
| | | |
| | | |
| |
Funds from operations, as adjusted: | | | | | | | | |
| Funds from operations as reported in SEC filings | | $ | 263 | | | $ | 3,223 | |
| Loss on early extinguishments of debt | | | — | | | | — | |
| Loss on asset impairment | | | — | | | | — | |
| Write off of deferred financing fees | | | — | | | | — | |
| | | |
| | | |
| |
| Funds from operations, as adjusted | | $ | 263 | | | $ | 3,223 | |
| | | |
| | | |
| |
| Weighted average diluted shares of common stock and common OP units outstanding | | | 89,341 | | | | 89,341 | |
| | | |
| | | |
| |
Funds from operations per diluted share, as adjusted | | $ | 0.00 | | | $ | 0.04 | |
| | | |
| | | |
| |
| | | | | | | | | |
| | | Year Ending December 31, 2004
|
| | | Low-end of range
| | High-end of range
|
Forecasted Funds from Operations: | | | | | | | | |
| Net loss (a) | | $ | (93,983 | ) | | $ | (89,179 | ) |
| Adjustments to forecasted net loss: | | | | | | | | |
| Depreciation and amortization of real estate assets | | | 96,713 | | | | 96,713 | |
| Minority interest to common OP unit holders | | | (2,911 | ) | | | (2,776 | ) |
| Loss on disposal of assets | | | 11,531 | | | | 11,531 | |
| | | |
| | | |
| |
| Funds from operations as reported in SEC filings | | $ | 11,350 | | | $ | 16,289 | |
| Weighted average number of shares of common stock and common OP units outstanding | | | 83,887 | | | | 83,887 | |
| | | |
| | | |
| |
Funds from operations per share | | $ | 0.14 | | | $ | 0.19 | |
| | | |
| | | |
| |
Funds from operations, as adjusted: | | | | | | | | |
| Funds from operations as reported in SEC filings | | $ | 11,350 | | | $ | 16,289 | |
| Loss on early extinguishments of debt | | | 9,156 | | | | 9,156 | |
| Loss on asset impairment | | | 7,441 | | | | 7,441 | |
| Write off of deferred financing fees | | | 1,928 | | | | 1,928 | |
| | | |
| | | |
| |
| Funds from operations, as adjusted | | $ | 29,875 | | | | 34,814 | |
| | | |
| | | |
| |
| Weighted average diluted shares of common stock outstanding and common OP units outstanding | | | 83,887 | | | | 83,887 | |
| | | |
| | | |
| |
Funds from operations per diluted share, as adjusted | | $ | 0.36 | | | $ | 0.42 | |
| | | |
| | | |
| |
15
MeriStar Hospitality Corporation
June 30, 2004
FORECASTED RECONCILIATION OF NET LOSS TO EBITDA
(In thousands)
| | | | | | | | | |
| | | Three Months Ending September 30, 2004
|
| | | Low-end of range
| | High-end of range
|
EBITDA and Adjusted EBITDA are comprised of the following: | | | | | | | | |
| Net loss (a) | | $ | (23,032 | ) | | $ | (20,153 | ) |
| Interest expense, net | | | 30,845 | | | | 30,842 | |
| Income tax benefit | | | (358 | ) | | | (315 | ) |
| Depreciation and amortization | | | 25,206 | | | | 25,206 | |
| | | |
| | | |
| |
EBITDA | | | 32,661 | | | | 35,580 | |
| Minority interest to common OP unit holders | | | (661 | ) | | | (580 | ) |
| | | |
| | | |
| |
Adjusted EBITDA | | $ | 32,000 | | | $ | 35,000 | |
| | | |
| | | |
| |
| | | | | | | | | |
| | | Year Ending December 31, 2004
|
| | | Low-end of range
| | High-end of range
|
EBITDA and Adjusted EBITDA are comprised of the following: | | | | | | | | |
| Net loss (a) | | $ | (93,983 | ) | | $ | (89,179 | ) |
| Interest expense, net | | | 125,987 | | | | 125,975 | |
| Write off of deferred financing fees | | | 1,928 | | | | 1,928 | |
| Income tax benefit | | | (1,257 | ) | | | (1,184 | ) |
| Depreciation and amortization | | | 101,967 | | | | 101,967 | |
| | | |
| | | |
| |
EBITDA | | | 134,642 | | | | 139,507 | |
| Loss on early extinguishments of debt | | | 9,156 | | | | 9,156 | |
| Loss on asset impairments | | | 7,441 | | | | 7,441 | |
| Minority interest to common OP unit holders | | | (2,770 | ) | | | (2,635 | ) |
| Loss on disposal of assets | | | 11,531 | | | | 11,531 | |
| | | |
| | | |
| |
Adjusted EBITDA | | $ | 160,000 | | | $ | 165,000 | |
| | | |
| | | |
| |
| (a) | | Forecasted net loss does not include any possible future losses on asset impairments or gains or losses on the sale of assets. |
16
MeriStar Hospitality Corporation
June 30, 2004
HOTEL PORTFOLIO LISTING
| | | | | | | |
Hotel
| | Location
| | Guest Rooms
|
| Arizona | | | | | | |
| Embassy Suites Tucson | | Tucson | | | 204 | |
| California | | | | | | |
| Courtyard by Marriott Marina del Ray | | Marina Del Rey | | | 276 | |
| Crowne Plaza San Jose | | San Jose | | | 239 | |
| Doral Palm Springs | | Palm Springs | | | 285 | |
| Hilton Irvine | | Irvine | | | 289 | |
| Hilton Monterey | | Monterey | | | 204 | |
| Hilton Sacramento | | Sacramento | | | 331 | |
| Marina Hotel San Pedro * | | San Pedro | | | 226 | |
| LA Marriott Downtown | | Los Angeles | | | 469 | |
| Marriott Irvine | | Irvine | | | 485 | |
| Sheraton Fisherman’s Wharf | | San Francisco | | | 525 | |
| Wyndham San Jose * | | San Jose | | | 355 | |
| Colorado | | | | | | |
| Embassy Suites Denver | | Englewood | | | 236 | |
| Sheraton Colorado Springs | | Colorado Springs | | | 500 | |
| Connecticut | | | | | | |
| Doubletree Hotel Bradley International Airport | | Windsor Locks | | | 200 | |
| Florida | | | | | | |
| Best Western Sanibel Island Resort | | Sanibel Island | | | 46 | |
| Doubletree Hotel Westshore | | Tampa | | | 496 | |
| Doubletree Universal | | Orlando | | | 742 | |
| Hilton Clearwater | | Clearwater | | | 426 | |
| Hilton Hotel Cocoa Beach | | Cocoa Beach | | | 296 | |
| Holiday Inn Fort Lauderdale Beach | | Ft. Lauderdale | | | 240 | |
| Holiday Inn Walt Disney World Village | | Lake Buena Vista | | | 314 | |
| Safety Harbor Resort and Spa | | Safety Harbor | | | 189 | |
| Sanibel Inn | | Sanibel Island | | | 96 | |
| Seaside Inn | | Sanibel Island | | | 32 | |
| Sheraton Beach Resort Key Largo | | Key Largo | | | 200 | |
| Sheraton Safari Lake Buena Vista | | Lake Buena Vista | | | 489 | |
| Song of the Sea | | Sanibel Island | | | 30 | |
| South Seas Plantation Resort & Yacht Harbor | | Captiva | | | 579 | |
| Sundial Beach Resort | | Sanibel Island | | | 243 | |
| Georgia | | | | | | |
| Doubletree Atlanta | | Atlanta | | | 155 | |
| Westin Atlanta | | Atlanta | | | 495 | |
| Wyndham Marietta | | Marietta | | | 218 | |
| Illinois | | | | | | |
| Holiday Inn Chicago O-Hare International | | | | | | |
| Airport | | Rosemont | | | 507 | |
| Radisson Chicago | | Chicago | | | 350 | |
| Indiana | | | | | | |
| Doubletree Indianapolis | | Indianapolis | | | 137 | |
| Kentucky | | | | | | |
| Hilton Seelbach | | Louisville | | | 321 | |
| Radisson Lexington | | Lexington | | | 367 | |
| Louisiana | | | | | | |
| Hilton Lafayette | | Lafayette | | | 327 | |
| Holiday Inn Select New Orleans | | Kenner | | | 303 | |
| Hotel Maison de Ville | | New Orleans | | | 23 | |
| Maryland | | | | | | |
| Radisson Annapolis | | Annapolis | | | 219 | |
17
MeriStar Hospitality Corporation
June 30, 2004
| | | | | | | |
| Radisson Cross Keys | | Baltimore | | | 148 | |
| Sheraton Columbia | | Columbia | | | 287 | |
| Michigan | | | | | | |
| Hilton Detroit | | Romulus | | | 151 | |
| Hilton Hotel Grand Rapids | | Grand Rapids | | | 224 | |
| New Jersey | | | | | | |
| Courtyard by Marriott Secaucus | | Secaucus | | | 165 | |
| Doral Forrestal | | Princeton | | | 290 | |
| Marriott Somerset | | Somerset | | | 440 | |
| Sheraton Crossroads Hotel Mahwah | | Mahwah | | | 225 | |
| New Mexico | | | | | | |
| Doubletree Albuquerque | | Albuquerque | | | 295 | |
| Wyndham Albuquerque Airport Hotel | | Albuquerque | | | 276 | |
| North Carolina | | | | | | |
| Courtyard by Marriott Durham | | Durham | | | 146 | |
| Hilton Hotel Durham | | Durham | | | 194 | |
| Sheraton Charlotte Airport | | Charlotte | | | 222 | |
| Ohio | | | | | | |
| Hilton Hotel Toledo * | | Toledo | | | 213 | |
| Oklahoma | | | | | | |
| Westin Oklahoma City | | Oklahoma City | | | 395 | |
| Pennsylvania | | | | | | |
| Embassy Suites Philadelphia | | Philadelphia | | | 288 | |
| Sheraton Great Valley | | Frazer | | | 198 | |
| Texas | | | | | | |
| Doubletree Austin | | Austin | | | 350 | |
| Doubletree Hotel Dallas Galleria | | Dallas | | | 289 | |
| Hilton Arlington | | Arlington | | | 309 | |
| Hilton Austin | | Austin | | | 320 | |
| Hilton Houston Westchase | | Houston | | | 295 | |
| Holiday Inn Select DFW South | | Irving | | | 409 | |
| Marriott West Loop Houston | | Houston | | | 302 | |
| Sheraton Houston | | Houston | | | 382 | |
| Utah | | | | | | |
| Hilton Salt Lake City Airport | | Salt Lake City | | | 287 | |
| Virginia | | | | | | |
| Hilton Arlington | | Arlington | | | 209 | |
| Hilton Crystal City | | Arlington | | | 386 | |
| Holiday Inn Historic District Alexandria | | Alexandria | | | 178 | |
| Radisson Old Town Alexandria | | Alexandria | | | 253 | |
| The Ritz-Carlton, Pentagon City | | Arlington | | | 366 | |
| Washington | | | | | | |
| Sheraton Bellevue | | Bellevue | | | 179 | |
| Washington, D.C. | | | | | | |
| Georgetown Inn | | Washington, D.C. | | | 96 | |
| Hilton Embassy Row | | Washington, D.C. | | | 193 | |
| Latham Georgetown | | Washington, D.C. | | | 143 | |
| Wisconsin | | | | | | |
| Crowne Plaza Madison | | Madison | | | 226 | |
| Holiday Inn Madison | | Madison | | | 194 | |
| | | | |
| |
| Total Rooms | | | | | 22,187 | |
| | | | |
| |
| * | | Represents properties that are held for sale and included in discontinued operations. |
18
MeriStar Hospitality Corporation
June 30, 2004
NON-GAAP DISCLOSURES
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 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 that it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. We also use FFO in our annual budget process.
Adjusted FFO represents FFO excluding the effects of 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 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. We also use Adjusted FFO in our annual budget process.
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 and our capacity to incur and service debt, fund capital expenditures and expand our business. Furthermore, we use Adjusted EBITDA to provide a measure of unleveraged cash flow that can be isolated on an asset by asset basis, to determine overall property performance and to measure our ability to service debt. 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 and, like FFO, it is also widely used in our annual budget process.
19
MeriStar Hospitality Corporation
June 30, 2004
Comparable Hotel Operating Results
We present certain operating results for our core hotels, such as hotel revenues, expenses and adjusted operating profit, on a comparable hotel, or “same store,” basis as supplemental information for investor’s information. Our comparable hotel results present operating results for our core hotels owned during the entirety of the periods being compared without giving effect to any acquisitions or dispositions during these periods. Our core hotels include all but those properties which are non-strategic to our portfolio; some of these properties may be classified in continuing operations. 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.
20
