Exhibit 99.1
| | |
For Immediate Release | | |
Contact: | | |
Mike Bauer | | Jerry Daly or Carol McCune |
Director, Finance | | Daly Gray Public Relations (Media) |
(703) 812-7202 | | (703) 435-6293 |
MeriStar Hospitality Corporation Reports Third-Quarter Results
ARLINGTON, Va., November 2, 2004—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 and nine months ended September 30, 2004.
RevPAR for the company’s comparable hotels in the third quarter increased 7.6 percent to $70.13, after adjusting for rooms out of service due to renovations and the impact of the Florida hurricanes. This growth was led by a 5.8 percent increase in average daily rate (ADR) to $98.02. Occupancy increased 1.8 percent to 71.5 percent.
“We continue to see solid evidence that the industry is recovering,” said Paul W. Whetsell, chairman and chief executive officer. “Business travel demand showed steady improvement, while leisure demand remained firm during the summer months. Room rate, an important indicator in this phase of the recovery, continued to strengthen. Also, operating margins improved 90 basis points at our comparable hotels in the quarter.
“We continued to upgrade our portfolio in the third quarter, completing $32 million in renovations,” he said. “Through the end of October, we have spent approximately $95 million on renovations at our properties, and we are on target to complete the $125 million budgeted for the full year. Our goal is to have a like-new hotel portfolio in peak operating condition by the end of next year.
“During the quarter, we focused on accelerating the renovation of public spaces,
including lobbies, meeting rooms, and the exterior of some hotels, which has the most immediate positive impact on guests. We also continued to aggressively renovate rooms. Both efforts had a short-term impact on our third quarter earnings.”
Results for the three and nine months ending September 30, 2004 and 2003, were as follows:
| | | | | | | | | | | | | | | | |
| | | 3Q 2004(a)(c)
| | | 3Q 2003(a)
| | | Nine Mos. 2004(a)(c)
| | | Nine Mos. 2003(a)
| |
Net loss | | $ | (27 | ) | | $ | (51 | ) | | $ | (79 | ) | | $ | (327 | ) |
Net loss per diluted share | | $ | (0.31 | ) | | $ | (1.05 | ) | | $ | (0.99 | ) | | $ | (6.99 | ) |
Total revenues from continuing operations | | $ | 191 | | | $ | 183 | | | $ | 610 | | | $ | 591 | |
Funds from operations (FFO)(b) | | $ | (1 | ) | | $ | (24 | ) | | $ | 5 | | | $ | (246 | ) |
FFO per diluted share | | $ | (0.01 | ) | | $ | (0.50 | ) | | $ | 0.07 | | | $ | (5.30 | ) |
Adjusted FFO(b) | | $ | 2 | | | $ | (7 | ) | | $ | 25 | | | $ | 23 | |
Adjusted FFO per diluted share | | $ | 0.02 | | | $ | (0.14 | ) | | $ | 0.31 | | | $ | 0.48 | |
Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization and other items)(b) | | $ | 34 | | | $ | 31 | | | $ | 123 | | | $ | 133 | |
| (a) | in millions, except per share data |
| (b) | 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. |
| (c) | The three and nine months ended September 30, 2004 results include the impact of an equity compensation adjustment. The company’s subsidiary operating partnership’s partnership agreement provides for Profits-Only OP Partnership Units, or POPs. Since July, we have been planning for the dissolution of the plan, pursuant to which POPs are issued, which will be completed over the following 15 months. Therefore, a substantial portion of this adjustment, which was recorded entirely in this quarter, due to a change in accounting had already been expected to occur this year. Had the current accounting been applied from the original grant dates, and taking this adjustment in isolation, our net loss, FFO, adjusted FFO, and adjusted EBITDA would have been lower for the three and nine months ended by $4.5 million ($0.05 per share) and $4.0 million ($0.05 per share), respectively. See the note regarding the equity compensation adjustment in the Notes to Financial Information included in the supplemental Earnings Release Financial Information. |
Whetsell added that the four hurricanes that struck Florida in the 2004 third quarter caused varying degrees of significant damage at nine of the company’s hotels there. “Our crews have been hard at work assessing the damage and making the necessary repairs. Based on current projections, we expect to have our five Sanibel properties (447 rooms) open for the high season. The Holiday Inn Walt Disney World and Hilton Cocoa Beach will be closed for a short time to accelerate repairs. The South Seas Resort on Captiva Island sustained more damage than
the other hotels and will be re-opened in stages. We have very good property and business interruption insurance coverage and do not expect the damage to have any significant impact on earnings, although the timing of our accounting recognition of business interruption proceeds may be somewhat affected by accounting rules.”
The company’s hotels in the Washington D.C. market continued their strong performance, experiencing RevPAR growth of 15.0 percent in the quarter, led by The Latham Hotel in Georgetown and the Hilton Crystal City at Reagan National Airport. The two hotels generated RevPAR gains of 25.1 percent and 21.0 percent during the quarter, respectively. “The Hilton Crystal City’s results are especially impressive as the hotel began a commercial area and meeting space renovation during the quarter. Its results however, reflect the rate gains produced by the renovation of 40 percent of its guestrooms earlier in the year. The Hilton Embassy Row, Hilton Arlington and Towers, and Radisson Alexandria also continue to post exceptional revenue growth rates,” said Bruce G. Wiles, chief operating officer.
Southern California continued to provide the company with excellent growth as well. The Marriott Los Angeles Downtown produced RevPAR growth of 20.3 percent in the quarter. The Courtyard Marina del Rey, which completed a softgoods renovation of all of its guestrooms during the first quarter, continued to produce strong year-over-year results with a third quarter RevPAR increase of 16.7 percent over the prior year.
Acquisitions
Whetsell noted that the company continued to execute its selective acquisition strategy. Following the end of the third quarter, MeriStar purchased an interest in the landmark, 705-room Radisson Lexington Avenue Hotel in New York City. The company made a $50 million structured investment, including a loan that will provide a $5.75 million cumulative annual preferred return and a 49.99 percent equity participation.
“New York has been one of the stars of this lodging recovery, and this property provides MeriStar entry into the dynamic Midtown Manhattan market. The transaction offers a strong current yield with substantial upside potential while limiting our downside exposure.
“We continue to recycle our capital into higher yielding investments, larger properties located in major urban markets or upscale resort destinations with high barriers to new competition, premium brand affiliations, significant meeting space and superior growth potential.”
Capital Structure
Donald D. Olinger, chief financial officer, said that the company continues to make progress improving its capital structure while maintaining financial flexibility. “We were able to fund our Lexington investment with cash on hand while maintaining adequate liquidity. Following this transaction, we have approximately $110 million of cash, $55 million of which is unrestricted. We also have the full $50 million available under our secured revolving credit facility.”
Outlook
“We are seeing tangible signs of strength in individual markets and are increasingly optimistic that improving economic fundamentals will provide additional momentum in the fourth quarter,” Whetsell said. “With the progress we are making on our renovation program, our properties will be in excellent physical condition and well-positioned to benefit from a full-fledged recovery. We will continue to focus on driving higher rates at our properties, which should help drive further RevPAR improvements.”
The company provides the following range of estimates for the fourth quarter and full-year 2004,
based on projected fourth-quarter 2004 RevPAR gains of 5.5 percent to 6.5 percent and a full-year 2004 RevPAR increase of 6.0 percent to 7.0 percent, all of which reflect adjustments for the estimated number of rooms out of service due to renovations and the impact of the Florida hurricanes:
| | • | Net loss of $(15) million to $(18) million for the fourth quarter and $(93) million to $(97) million for the full year; |
| | • | Net loss per diluted share of $(0.17) to $(0.21) for the fourth quarter and $(1.15) to $(1.19) for the full year; |
| | • | FFO per diluted share(d)of $0.07 to $0.11 for the fourth quarter and $0.13 to $0.18 for the full year; |
| | • | Adjusted FFO per diluted share(d)of $0.07 to $0.11 for the fourth quarter and $0.37 to $0.41 for the full year; |
| | • | Adjusted EBITDA(d)of $38 million to $42 million for the fourth quarter and $161 million to $165 million for the full year. |
| (d) | 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 supplemental earnings release financial information. Forecasted net loss does not include any possible future losses on asset impairments or gains or losses on the sales of assets. 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 regarding these non-GAAP financial measures in the notes to financial information included in the supplemental earnings release financial information. |
MeriStar will hold a conference call to discuss its third-quarter results today, November 2, 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 (303) 590-3000, reference number 11012486, to hear a telephone replay. The telephone replay will be available through midnight on Tuesday, November 9, 2004.
Arlington, Va.-based MeriStar Hospitality Corporation owns 76 principally upscale, full-service hotels in major markets and resort locations with 21,210 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 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; the 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; weather conditions and natural disasters; 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.
MERISTAR HOSPITALITY CORPORATION
EARNINGS RELEASE
FINANCIAL INFORMATION
Three and Nine Months Ended
September 30, 2004
MeriStar Hospitality Corporation
September 30, 2004
INDEX
| | |
| | | Page Number
|
Consolidated Statements of Operations | | |
Three and Nine Months Ended September 30, 2004 and 2003 | | 9 |
| |
Reconciliation of Net Loss to Funds From Operations | | |
Three and Nine Months Ended September 30, 2004 and 2003 | | 10 |
| |
Reconciliation of Net Loss to EBITDA | | |
Three and Nine Months Ended September 30, 2004 and 2003 | | 11 |
| |
Hotel Operational Data | | |
Schedule of Comparable Hotel Results | | |
Three and Nine Months Ended September 30, 2004 and 2003 | | 12 |
| |
Consolidated Balance Sheets | | |
September 30, 2004 and December 31, 2003 | | 14 |
| |
Portfolio Data | | |
Portfolio Distribution at September 30, 2004 | | |
By Market, Region, Brand and Location | | 15 |
| |
Detailed Operating Statistics | | |
By Market, Region and Location | | 16 |
| |
Capital Structure | | |
Total Enterprise Value and Total Debt | | 18 |
| |
Capital Expenditures Summary | | |
Three and Nine Months Ended September 30, 2004 and 2003 | | 19 |
| |
Acquisitions and Dispositions | | |
For the period from December 31, 2003 through September 30, 2004 | | 20 |
| |
Forecasted Reconciliation of Net Loss to Funds From Operations | | |
Three Months and Year Ending December 31, 2004 | | 21 |
| |
Forecasted Reconciliation of Net Loss to EBITDA | | |
Three Months and Year Ending December 31, 2004 | | 22 |
| |
Hotel Portfolio Listing | | 23 |
| |
Notes to Financial Information | | 25 |
8
MeriStar Hospitality Corporation
September 30, 2004
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Revenue: | | | | | | | | | | | | | | | | |
Hotel operations: | | | | | | | | | | | | | | | | |
Rooms | | $ | 128,309 | | | $ | 121,037 | | | $ | 401,815 | | | $ | 384,329 | |
Food and beverage | | | 47,043 | | | | 44,250 | | | | 156,261 | | | | 150,842 | |
Other hotel operations | | | 13,981 | | | | 15,696 | | | | 48,194 | | | | 51,314 | |
Office rental, parking and other revenue | | | 1,443 | | | | 1,958 | | | | 4,071 | | | | 4,502 | |
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Total revenue | | | 190,776 | | | | 182,941 | | | | 610,341 | | | | 590,987 | |
| | | | |
Hotel operating expenses: | | | | | | | | | | | | | | | | |
Rooms | | | 35,295 | | | | 32,856 | | | | 102,072 | | | | 95,097 | |
Food and beverage | | | 37,966 | | | | 35,171 | | | | 117,109 | | | | 110,131 | |
Other hotel operating expenses | | | 9,676 | | | | 9,584 | | | | 30,645 | | | | 29,798 | |
Office rental, parking and other expenses | | | 682 | | | | 933 | | | | 1,938 | | | | 2,161 | |
Other operating expenses: | | | | | | | | | | | | | | | | |
General and administrative, hotel | | | 32,202 | | | | 30,013 | | | | 97,172 | | | | 92,138 | |
General and administrative, corporate | | | 2,547 | | | | 2,617 | | | | 9,653 | | | | 8,721 | |
Property operating costs | | | 31,299 | | | | 30,305 | | | | 93,056 | | | | 88,893 | |
Depreciation and amortization | | | 25,779 | | | | 24,587 | | | | 76,829 | | | | 72,959 | |
Property taxes, insurance and other | | | 8,260 | | | | 14,960 | | | | 40,613 | | | | 48,901 | |
Loss on asset impairments | | | 1,845 | | | | 4,736 | | | | 3,680 | | | | 42,050 | |
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Operating expenses | | | 185,551 | | | | 185,762 | | | | 572,767 | | | | 590,849 | |
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Preferred return on investment in MIP | | | 1,600 | | | | 1,600 | | | | 4,800 | | | | 5,769 | |
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Operating (loss) income | | | 6,825 | | | | (1,221 | ) | | | 42,374 | | | | 5,907 | |
| | | | |
Minority interest | | | 775 | | | | 1,662 | | | | 2,392 | | | | 15,937 | |
Interest expense, net | | | (30,994 | ) | | | (35,199 | ) | | | (95,586 | ) | | | (102,386 | ) |
(Loss) gain on early extinguishments of debt | | | — | | | | 4,574 | | | | (7,903 | ) | | | 4,574 | |
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Loss before income taxes and discontinued operations | | | (23,394 | ) | | | (30,184 | ) | | | (58,723 | ) | | | (75,968 | ) |
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Income tax (expense) benefit | | | 281 | | | | 159 | | | | 705 | | | | (2,435 | ) |
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Loss from continuing operations | | | (23,113 | ) | | | (30,025 | ) | | | (58,018 | ) | | | (78,403 | ) |
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Discontinued operations: | | | | | | | | | | | | | | | | |
Loss from discontinued operations before income tax benefit | | | (3,703 | ) | | | (20,920 | ) | | | (20,804 | ) | | | (251,413 | ) |
Income tax (expense) benefit | | | 44 | | | | 251 | | | | 250 | | | | 3,016 | |
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Loss from discontinued operations | | | (3,659 | ) | | | (20,669 | ) | | | (20,554 | ) | | | (248,397 | ) |
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Net loss | | $ | (26,772 | ) | | $ | (50,694 | ) | | $ | (78,572 | ) | | $ | (326,800 | ) |
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Basic loss per share: | | | | | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.27 | ) | | $ | (0.63 | ) | | $ | (0.73 | ) | | $ | (1.69 | ) |
Loss from discontinued operations | | | (0.04 | ) | | | (0.43 | ) | | | (0.26 | ) | | | (5.35 | ) |
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Net loss per basic share | | $ | (0.31 | ) | | $ | (1.06 | ) | | $ | (0.99 | ) | | $ | (7.04 | ) |
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Diluted loss per share: | | | | | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.27 | ) | | $ | (0.64 | ) | | $ | (0.74 | ) | | $ | (1.93 | ) |
Loss from discontinued operations | | | (0.04 | ) | | | (0.41 | ) | | | (0.25 | ) | | | (5.06 | ) |
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Net loss per diluted share | | $ | (0.31 | ) | | $ | (1.05 | ) | | $ | (0.99 | ) | | $ | (6.99 | ) |
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9
MeriStar Hospitality Corporation
September 30, 2004
RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Funds From Operations: | | | | | | | | | | | | | | | | |
| | | | |
Net Loss (b) | | $ | (26,772 | ) | | $ | (50,694 | ) | | $ | (78,572 | ) | | $ | (326,800 | ) |
Depreciation and amortization of real estate assets | | | 24,614 | | | | 25,244 | | | | 72,734 | | | | 80,900 | |
Loss on disposal of assets | | | 2,232 | | | | 2,772 | | | | 13,762 | | | | 2,772 | |
Minority interest to common OP unit holders | | | (735 | ) | | | (1,056 | ) | | | (2,469 | ) | | | (3,154 | ) |
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Funds from operations | | $ | (661 | ) | | $ | (23,734 | ) | | $ | 5,455 | | | $ | (246,282 | ) |
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Weighted average number of shares of common stock outstanding | | | 89,662 | | | | 47,709 | | | | 82,060 | | | | 46,445 | |
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Funds from operations per diluted share | | $ | (0.01 | ) | | $ | (0.50 | ) | | $ | 0.07 | | | $ | (5.30 | ) |
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Funds From Operations, as adjusted: | | | | | | | | | | | | | | | | |
| | | | |
Funds from operations | | $ | (661 | ) | | $ | (23,734 | ) | | $ | 5,455 | | | $ | (246,282 | ) |
Loss on asset impairments | | | 2,581 | | | | 21,000 | | | | 10,022 | | | | 285,677 | |
Loss (gain) on early extinguishments of debt | | | — | | | | (4,574 | ) | | | 7,903 | | | | (4,574 | ) |
Write off of deferred financial fees | | | — | | | | 1,099 | | | | 1,719 | | | | 1,760 | |
Minority interest to common OP unit holders | | | — | | | | (661 | ) | | | — | | | | (13,212 | ) |
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Funds from operations, as adjusted | | $ | 1,920 | | | $ | (6,870 | ) | | $ | 25,099 | | | $ | 23,369 | |
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Weighted average number of shares of common stock and common OP units outstanding | | | 89,713 | | | | 47,709 | | | | 82,060 | | | | 49,133 | |
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Funds from operations per diluted share, as adjusted | | $ | 0.02 | | | $ | (0.14 | ) | | $ | 0.31 | | | $ | 0.48 | |
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| (a) | See the notes to the financial information for discussion of non-GAAP measures. |
| (b) | Net loss for the three and nine months ended September 30, 2004 includes adjustments of $4.5 million and $4.0 million, respectively, relating to a change in accounting treatment for an equity compensation plan. See “Equity Compensation Adjustment” in the notes to the financial information. |
10
MeriStar Hospitality Corporation
September 30, 2004
RECONCILIATION OF NET LOSS TO EBITDA (a)
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
EBITDA and Adjusted EBITDA: | | | | | | | | | | | | | | | | |
| | | | |
Loss from continuing operations | | $ | (23,113 | ) | | $ | (30,025 | ) | | $ | (58,018 | ) | | $ | (78,403 | ) |
Loss from discontinued operations | | | (3,659 | ) | | | (20,669 | ) | | | (20,554 | ) | | | (248,397 | ) |
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Net Loss (b) | | $ | (26,772 | ) | | $ | (50,694 | ) | | $ | (78,572 | ) | | $ | (326,800 | ) |
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Loss from continuing operations | | $ | (23,113 | ) | | $ | (30,025 | ) | | $ | (58,018 | ) | | $ | (78,403 | ) |
Interest expense, net | | | 30,994 | | | | 35,199 | | | | 95,586 | | | | 102,386 | |
Income tax (benefit) expense | | | (281 | ) | | | (159 | ) | | | (705 | ) | | | 2,435 | |
Depreciation and amortization (c) | | | 25,779 | | | | 24,587 | | | | 76,829 | | | | 72,959 | |
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EBITDA from continuing operations | | | 33,379 | | | | 29,602 | | | | 113,692 | | | | 99,377 | |
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Loss on asset impairments | | | 1,845 | | | | 4,736 | | | | 3,680 | | | | 42,050 | |
Minority interest | | | (775 | ) | | | (1,662 | ) | | | (2,392 | ) | | | (15,937 | ) |
Loss (gain) on early extinguishments of debt | | | — | | | | (4,574 | ) | | | 7,903 | | | | (4,574 | ) |
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Adjusted EBITDA from continuing operations | | $ | 34,449 | | | $ | 28,102 | | | $ | 122,883 | | | $ | 120,916 | |
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Loss from discontinued operations | | $ | (3,659 | ) | | $ | (20,669 | ) | | $ | (20,554 | ) | | $ | (248,397 | ) |
Interest expense, net | | | — | | | | 1,205 | | | | (478 | ) | | | 3,631 | |
Income tax (benefit) expense | | | (44 | ) | | | (250 | ) | | | (250 | ) | | | (3,016 | ) |
Depreciation and amortization | | | 195 | | | | 3,114 | | | | 1,739 | | | | 13,794 | |
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EBITDA from discontinued operations | | | (3,508 | ) | | | (16,600 | ) | | | (19,543 | ) | | | (233,988 | ) |
| | | | |
Loss on asset impairments | | | 736 | | | | 16,264 | | | | 6,342 | | | | 243,626 | |
Loss on disposal of assets | | | 2,231 | | | | 2,772 | | | | 13,762 | | | | 2,772 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Adjusted EBITDA from discontinued operations | | $ | (541 | ) | | $ | 2,436 | | | $ | 561 | | | $ | 12,410 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Adjusted EBITDA, total operations | | $ | 33,908 | | | $ | 30,538 | | | $ | 123,444 | | | $ | 133,326 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| (a) | See the notes to the financial information for discussion of non-GAAP measures. |
| (b) | Net loss for the three and nine months ended September 30, 2004 includes adjustments of $4.5 million and $4.0 million, respectively, relating to a change in accounting treatment for an equity compensation plan. See “Equity Compensation Adjustment” in the notes to the financial information. |
| (c) | Depreciation and amortization included the write-off of deferred financing costs totaling $1.1 million for the three months ended September 30, 2003, and $1.7 million and $1.8 million for the nine months ended September 30, 2004 and 2003, respectively, related to our early extinguishments of debt during these periods. |
11
MeriStar Hospitality Corporation
September 30, 2004
HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Number of hotels | | | 61 | | | | 61 | | | | 61 | | | | 61 | |
Number of rooms | | | 17,151 | | | | 17,151 | | | | 17,151 | | | | 17,151 | |
Operating profit margin under GAAP (b) | | | 3.6 | % | | | (0.7 | )% | | | 6.9 | % | | | 1.0 | % |
Comparable hotel adjusted operating profit margin (c) | | | 18.1 | % | | | 17.2 | % | | | 20.3 | % | | | 21.4 | % |
| | | | |
Comparable hotel revenues: | | | | | | | | | | | | | | | | |
Rooms | | $ | 106,791 | | | $ | 102,791 | | | $ | 326,267 | | | $ | 313,897 | |
Food and beverage | | | 38,324 | | | | 37,528 | | | | 129,547 | | | | 127,899 | |
Other hotel operations | | | 9,374 | | | | 9,785 | | | | 28,371 | | | | 28,619 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable hotel revenues (d) | | | 154,489 | | | | 150,104 | | | | 484,185 | | | | 470,415 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable hotel expenses: | | | | | | | | | | | | | | | | |
Room | | | 28,557 | | | | 27,733 | | | | 84,320 | | | | 79,471 | |
Food and beverage | | | 30,144 | | | | 29,836 | | | | 96,183 | | | | 93,200 | |
Other | | | 6,332 | | | | 6,017 | | | | 19,026 | | | | 17,907 | |
General and administrative, hotel | | | 26,970 | | | | 25,419 | | | | 81,272 | | | | 76,660 | |
Property operating costs | | | 26,319 | | | | 26,033 | | | | 78,575 | | | | 75,271 | |
Property taxes, insurance and other | | | 8,265 | | | | 9,216 | | | | 26,652 | | | | 27,255 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable hotel expenses (e) | | | 126,587 | | | | 124,254 | | | | 386,028 | | | | 369,764 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable Hotel Adjusted Operating Income | | | 27,902 | | | | 25,850 | | | | 98,157 | | | | 100,651 | |
| | | | |
Non-comparable results, net (f) | | | 6,051 | | | | 1,311 | | | | 25,508 | | | | 18,715 | |
Office rental, parking and other revenue | | | 1,443 | | | | 1,958 | | | | 4,071 | | | | 4,502 | |
General and administrative, corporate | | | (2,547 | ) | | | (2,617 | ) | | | (9,653 | ) | | | (8,721 | ) |
Depreciation and amortization | | | (25,779 | ) | | | (24,587 | ) | | | (76,829 | ) | | | (72,959 | ) |
Loss on asset impairments | | | (1,845 | ) | | | (4,736 | ) | | | (3,680 | ) | | | (42,050 | ) |
Preferred return on investment in MIP | | | 1,600 | | | | 1,600 | | | | 4,800 | | | | 5,769 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Profit (Loss) | | $ | 6,825 | | | $ | (1,221 | ) | | $ | 42,374 | | | $ | 5,907 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| (a) | See the notes to the financial information for discussion of non-GAAP measures, and comparable hotel results and statistics. |
| (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. |
12
MeriStar Hospitality Corporation
September 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
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Revenues per the consolidated statements of operations | | $ | 190.8 | | | $ | 182.9 | | | $ | 610.3 | | | $ | 591.0 | |
Non-comparable hotel revenues | | | (34.9 | ) | | | (30.9 | ) | | | (122.0 | ) | | | (116.1 | ) |
Office rental, parking and other revenue | | | (1.4 | ) | | | (1.9 | ) | | | (4.1 | ) | | | (4.5 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable hotel revenues | | $ | 154.5 | | | $ | 150.1 | | | $ | 484.2 | | | $ | 470.4 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| (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 September 30,
| | | Nine Months Ended September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Operating expenses per the consolidated statements of operations | | $ | 185.6 | | | $ | 185.8 | | | $ | 572.8 | | | $ | 590.8 | |
Non-comparable hotel expenses | | | (28.9 | ) | | | (29.6 | ) | | | (96.6 | ) | | | (97.2 | ) |
General and administrative, corporate | | | (2.5 | ) | | | (2.6 | ) | | | (9.7 | ) | | | (8.7 | ) |
Depreciation and amortization | | | (25.8 | ) | | | (24.6 | ) | | | (76.8 | ) | | | (73.0 | ) |
Loss on asset impairments | | | (1.8 | ) | | | (4.7 | ) | | | (3.7 | ) | | | (42.1 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Comparable hotel expenses | | $ | 126.6 | | | $ | 124.3 | | | $ | 386.0 | | | $ | 369.8 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| (f) | 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 and preferred return on investment in MIP. |
13
MeriStar Hospitality Corporation
September 30, 2004
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
| | | | | | | | |
| | | September 30,
2004
| | | December 31, 2003
| |
ASSETS | | | | | | | | |
Property and equipment | | $ | 2,572,234 | | | $ | 2,481,752 | |
Accumulated depreciation | | | (490,435 | ) | | | (446,032 | ) |
| | |
|
|
| |
|
|
|
| | | | 2,081,799 | | | | 2,035,720 | |
| | |
Assets held for sale | | | 7,786 | | | | 51,169 | |
Investment in affiliate | | | 15,000 | | | | 15,000 | |
Prepaid expenses and other assets | | | 44,333 | | | | 47,934 | |
Insurance claim receivable | | | 63,071 | | | | — | |
Accounts receivable, net of allowance for doubtful accounts of $5,043 and $2,040 | | | 64,404 | | | | 64,709 | |
Restricted cash | | | 59,710 | | | | 42,523 | |
Cash and cash equivalents – unrestricted | | | 117,794 | | | | 230,884 | |
| | |
|
|
| |
|
|
|
| | | $ | 2,453,897 | | | $ | 2,487,939 | |
| | |
|
|
| |
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Long-term debt | | $ | 1,581,766 | | | $ | 1,638,028 | |
Accounts payable and accrued expenses | | | 89,884 | | | | 83,458 | |
Accrued interest | | | 36,382 | | | | 46,813 | |
Due to Interstate Hotels & Resorts | | | 19,362 | | | | 16,411 | |
Other liabilities | | | 9,483 | | | | 11,831 | |
| | |
|
|
| |
|
|
|
Total liabilities | | | 1,736,877 | | | | 1,796,541 | |
| | |
|
|
| |
|
|
|
Minority interests | | | 14,541 | | | | 37,785 | |
| | |
Stockholders’ equity: | | | | | | | | |
Common stock, par value $0.01 per share
Authorized- 100,000 shares
Issued – 89,741 and 69,135 shares | | | 897 | | | | 691 | |
Additional paid-in capital | | | 1,465,373 | | | | 1,338,959 | |
Accumulated deficit | | | (720,665 | ) | | | (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 | | | 702,479 | | | | 653,613 | |
| | |
|
|
| |
|
|
|
| | | $
| 2,453,897
|
| | $
| 2,487,939
|
|
14
MeriStar Hospitality Corporation
September 30, 2004
PORTFOLIO DATA
Portfolio Distribution at September 30, 2004 (a)
| | | | | | | | | | |
Market
| | Hotels
| | Rooms
| | % of Total Rooms
| | | % of 2004 YTD Revenue
| |
Washington DC Metro | | 11 | | 2,478 | | 12.4 | % | | 17.5 | % |
Southwest Florida | | 6 | | 1,026 | | 5.1 | % | | 9.4 | % |
New Jersey | | 4 | | 1,120 | | 5.6 | % | | 6.2 | % |
Southern California | | 4 | | 1,519 | | 7.6 | % | | 9.0 | % |
Northern California | | 3 | | 968 | | 4.8 | % | | 5.2 | % |
Orlando | | 3 | | 1,545 | | 7.7 | % | | 5.3 | % |
Tampa/Clearwater | | 3 | | 1,111 | | 5.5 | % | | 5.5 | % |
Atlanta | | 2 | | 650 | | 3.2 | % | | 2.9 | % |
Chicago | | 2 | | 857 | | 4.3 | % | | 3.7 | % |
Colorado | | 2 | | 736 | | 3.7 | % | | 2.4 | % |
Dallas | | 2 | | 598 | | 3.0 | % | | 2.1 | % |
Houston | | 2 | | 597 | | 3.0 | % | | 3.2 | % |
All other markets | | 28 | | 6,859 | | 34.1 | % | | 27.6 | % |
Total Markets | | 72 | | 20,064 | | 100.0 | % | | 100.0 | % |
| | | | |
Region
| | Hotels
| | Rooms
| | % of
Total Rooms
| | | % of 2004 YTD
Revenue
| |
South Atlantic | | 20 | | 5,630 | | 28.0 | % | | 28.4 | % |
Middle Atlantic | | 17 | | 4,084 | | 20.3 | % | | 26.2 | % |
South Central | | 11 | | 3,281 | | 16.4 | % | | 14.0 | % |
Pacific | | 10 | | 3,282 | | 16.4 | % | | 17.8 | % |
North Central | | 7 | | 1,789 | | 8.9 | % | | 7.0 | % |
Mountain | | 6 | | 1,798 | | 9.0 | % | | 6.0 | % |
New England | | 1 | | 200 | | 1.0 | % | | 0.6 | % |
Total Regions | | 72 | | 20,064 | | 100.0 | % | | 100.0 | % |
| | | | |
Brand
| | Hotels
| | Rooms
| | % of Total Rooms
| | | % of 2004 YTD
Revenue
| |
Hilton | | | | | | | | | | |
Hilton | | 16 | | 4,442 | | 22.1 | % | | 22.6 | % |
Doubletree | | 8 | | 2,664 | | 13.3 | % | | 8.6 | % |
Embassy Suites | | 3 | | 728 | | 3.6 | % | | 3.1 | % |
Starwood | | | | | | | | | | |
Sheraton | | 5 | | 1,229 | | 6.1 | % | | 4.3 | % |
Westin | | 3 | | 972 | | 4.8 | % | | 3.6 | % |
Marriott | | | | | | | | | | |
Marriott | | 4 | | 1,696 | | 8.5 | % | | 9.3 | % |
Courtyard by Marriott | | 3 | | 587 | | 2.9 | % | | 2.2 | % |
Ritz-Carlton | | 1 | | 366 | | 1.8 | % | | 4.0 | % |
Intercontinental | | | | | | | | | | |
Holiday Inn | | 10 | | 3,220 | | 16.0 | % | | 16.1 | % |
Crowne Plaza | | 1 | | 495 | | 2.5 | % | | 2.3 | % |
| | | | |
Independent | | 9 | | 1,431 | | 7.1 | % | | 13.3 | % |
Radisson | | 5 | | 1,337 | | 6.7 | % | | 6.1 | % |
Other | | 4 | | 897 | | 4.5 | % | | 4.4 | % |
Total Brands | | 72 | | 20,064 | | 100.0 | % | | 100.0 | % |
| | | | |
Location
| | Hotels
| | Rooms
| | % of Total Rooms
| | | % of 2004 YTD Revenue
| |
Urban | | 20 | | 5,299 | | 26.4 | % | | 30.9 | % |
Resort | | 15 | | 4,207 | | 21.0 | % | | 23.3 | % |
Airport | | 13 | | 4,236 | | 21.1 | % | | 17.9 | % |
Suburban | | 24 | | 6,322 | | 31.5 | % | | 27.9 | % |
Total Locations | | 72 | | 20,064 | | 100.0 | % | | 100.0 | % |
| (a) | Portfolio data includes all hotels owned less four planned for disposition as of September 30, 2004. |
15
MeriStar Hospitality Corporation
September 30, 2004
DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION
Comparable hotels, same store basis (a)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | 3rd Quarter 2004
| | 3rd Quarter 2003
| | Percent
Change in
RevPAR
| |
Market
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Washington DC Metro (b) | | 10 | | 2,112 | | $ | 121.97 | | 78.9 | % | | $ | 96.19 | | $ | 109.44 | | 76.4 | % | | $ | 83.63 | | 15.0 | % |
New Jersey | | 4 | | 1,120 | | $ | 124.99 | | 59.4 | % | | $ | 74.26 | | $ | 118.06 | | 61.8 | % | | $ | 72.94 | | 1.8 | % |
Southern California (b) | | 3 | | 1,034 | | $ | 109.03 | | 82.3 | % | | $ | 89.68 | | $ | 104.28 | | 74.3 | % | | $ | 77.44 | | 15.8 | % |
Northern California | | 3 | | 968 | | $ | 130.68 | | 84.2 | % | | $ | 110.04 | | $ | 122.59 | | 83.4 | % | | $ | 102.24 | | 7.6 | % |
Orlando (c) | | 2 | | 1,231 | | $ | 69.13 | | 78.6 | % | | $ | 54.31 | | $ | 59.86 | | 76.2 | % | | $ | 45.64 | | 19.0 | % |
Tampa/Clearwater (c) | | 2 | | 685 | | $ | 70.03 | | 54.7 | % | | $ | 38.31 | | $ | 71.77 | | 51.7 | % | | $ | 37.10 | | 3.2 | % |
Atlanta | | 2 | | 650 | | $ | 84.31 | | 78.5 | % | | $ | 66.15 | | $ | 75.14 | | 83.8 | % | | $ | 62.96 | | 5.1 | % |
Chicago | | 2 | | 857 | | $ | 105.64 | | 72.7 | % | | $ | 76.80 | | $ | 104.36 | | 70.6 | % | | $ | 73.69 | | 4.2 | % |
Colorado | | 2 | | 736 | | $ | 84.01 | | 69.8 | % | | $ | 58.67 | | $ | 81.37 | | 69.7 | % | | $ | 56.74 | | 3.4 | % |
Dallas | | 2 | | 598 | | $ | 88.79 | | 63.9 | % | | $ | 56.75 | | $ | 81.13 | | 62.6 | % | | $ | 50.81 | | 11.7 | % |
Houston | | 2 | | 597 | | $ | 101.82 | | 67.8 | % | | $ | 69.07 | | $ | 103.75 | | 68.2 | % | | $ | 70.76 | | -2.4 | % |
All other markets | | 27 | | 6,563 | | $ | 87.65 | | 68.2 | % | | $ | 59.79 | | $ | 85.58 | | 67.6 | % | | $ | 57.87 | | 3.3 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Markets | | 61 | | 17,151 | | $ | 98.02 | | 71.5 | % | | $ | 70.12 | | $ | 92.68 | | 70.3 | % | | $ | 65.16 | | 7.6 | % |
| | | | | |
| | | | | | | 3rd Quarter 2004
| | 3rd Quarter 2003
| | Percent
Change in
RevPAR
| |
Region
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Middle Atlantic (b) | | 16 | | 3,718 | | $ | 122.54 | | 73.1 | % | | $ | 89.54 | | $ | 113.12 | | 71.9 | % | | $ | 81.31 | | 10.1 | % |
South Atlantic (c) | | 11 | | 3,568 | | $ | 76.77 | | 71.0 | % | | $ | 54.51 | | $ | 70.39 | | 71.4 | % | | $ | 50.25 | | 8.5 | % |
South Central | | 11 | | 3,281 | | $ | 90.31 | | 65.9 | % | | $ | 59.49 | | $ | 88.92 | | 62.9 | % | | $ | 55.95 | | 6.3 | % |
Pacific (b) | | 9 | | 2,797 | | $ | 115.54 | | 75.8 | % | | $ | 87.60 | | $ | 110.65 | | 72.8 | % | | $ | 80.52 | | 8.8 | % |
North Central | | 7 | | 1,789 | | $ | 94.57 | | 72.4 | % | | $ | 68.51 | | $ | 92.33 | | 71.8 | % | | $ | 66.27 | | 3.4 | % |
Mountain | | 6 | | 1,798 | | $ | 75.80 | | 71.2 | % | | $ | 53.97 | | $ | 74.99 | | 71.4 | % | | $ | 53.51 | | 0.9 | % |
New England | | 1 | | 200 | | $ | 77.81 | | 75.1 | % | | $ | 58.42 | | $ | 71.08 | | 85.7 | % | | $ | 60.93 | | -4.1 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Regions | | 61 | | 17,151 | | $ | 98.02 | | 71.5 | % | | $ | 70.12 | | $ | 92.68 | | 70.3 | % | | $ | 65.16 | | 7.6 | % |
| | | | | |
| | | | | | | 3rd Quarter 2004
| | 3rd Quarter 2003
| | Percent
Change in
RevPAR
| |
Location
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Urban (b) | | 19 | | 4,933 | | $ | 112.95 | | 79.1 | % | | $ | 89.35 | | $ | 108.05 | | 75.3 | % | | $ | 81.42 | | 9.7 | % |
Resort (c) | | 6 | | 2,145 | | $ | 76.22 | | 67.6 | % | | $ | 51.50 | | $ | 68.98 | | 67.8 | % | | $ | 46.75 | | 10.2 | % |
Airport (b) | | 12 | | 3,751 | | $ | 82.82 | | 71.4 | % | | $ | 59.10 | | $ | 77.24 | | 70.9 | % | | $ | 54.79 | | 7.9 | % |
Suburban | | 24 | | 6,322 | | $ | 100.96 | | 66.9 | % | | $ | 67.59 | | $ | 96.98 | | 66.9 | % | | $ | 64.84 | | 4.2 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Locations | | 61 | | 17,151 | | $ | 98.02 | | 71.5 | % | | $ | 70.12 | | $ | 92.68 | | 70.3 | % | | $ | 65.16 | | 7.6 | % |
| (a) | See notes to financial information for discussion of comparable hotel operating results and statistics. |
| (b) | Excludes hotels acquired during the second quarter. |
| (c) | Excludes hotels significantly affected by the hurricanes in Florida during the third quarter. |
16
MeriStar Hospitality Corporation
September 30, 2004
DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION
Comparable hotels, same store basis (a)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | September 2004 YTD
| | September 2003 YTD
| | Percent
Change in
RevPAR
| |
Market
| | Hotels
| | Rooms
| | ADR
| | OCC%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Washington DC Metro (b) | | 10 | | 2,112 | | $ | 124.69 | | 77.5 | % | | $ | 96.78 | | $ | 115.71 | | 72.6 | % | | $ | 84.05 | | 15.2 | % |
New Jersey | | 4 | | 1,120 | | $ | 127.78 | | 62.9 | % | | $ | 80.32 | | $ | 122.51 | | 60.6 | % | | $ | 74.25 | | 8.2 | % |
Southern California (b) | | 3 | | 1,034 | | $ | 109.76 | | 78.2 | % | | $ | 85.82 | | $ | 106.93 | | 70.8 | % | | $ | 75.73 | | 13.3 | % |
Northern California | | 3 | | 968 | | $ | 118.45 | | 78.2 | % | | $ | 92.63 | | $ | 113.91 | | 76.6 | % | | $ | 87.31 | | 6.1 | % |
Orlando (c) | | 2 | | 1,231 | | $ | 76.31 | | 76.3 | % | | $ | 58.24 | | $ | 71.54 | | 75.9 | % | | $ | 54.30 | | 7.3 | % |
Tampa/Clearwater (c) | | 2 | | 685 | | $ | 78.02 | | 64.9 | % | | $ | 50.65 | | $ | 80.56 | | 62.3 | % | | $ | 50.20 | | 0.9 | % |
Atlanta | | 2 | | 650 | | $ | 82.70 | | 81.2 | % | | $ | 67.17 | | $ | 77.60 | | 82.3 | % | | $ | 63.83 | | 5.2 | % |
Chicago | | 2 | | 857 | | $ | 99.04 | | 69.7 | % | | $ | 69.07 | | $ | 101.04 | | 69.1 | % | | $ | 69.84 | | -1.1 | % |
Colorado | | 2 | | 736 | | $ | 82.35 | | 64.1 | % | | $ | 52.75 | | $ | 77.75 | | 65.3 | % | | $ | 50.81 | | 3.8 | % |
Dallas | | 2 | | 598 | | $ | 88.58 | | 61.3 | % | | $ | 54.28 | | $ | 85.01 | | 63.2 | % | | $ | 53.72 | | 1.1 | % |
Houston | | 2 | | 597 | | $ | 110.04 | | 72.3 | % | | $ | 79.52 | | $ | 105.45 | | 70.8 | % | | $ | 74.69 | | 6.5 | % |
All other markets | | 27 | | 6,563 | | $ | 92.85 | | 69.4 | % | | $ | 64.47 | | $ | 91.09 | | 68.5 | % | | $ | 62.43 | | 3.3 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Markets | | 61 | | 17,151 | | $ | 99.87 | | 71.5 | % | | $ | 71.38 | | $ | 96.19 | | 69.7 | % | | $ | 67.05 | | 6.5 | % |
| | | | | |
| | | | | | | September 2004 YTD
| | September 2003 YTD
| | Percent
Change in
RevPAR
| |
Region
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Middle Atlantic (b) | | 16 | | 3,718 | | $ | 125.24 | | 73.1 | % | | $ | 91.57 | | $ | 118.25 | | 69.0 | % | | $ | 81.54 | | 12.3 | % |
South Atlantic (c) | | 11 | | 3,568 | | $ | 84.35 | | 73.5 | % | | $ | 61.98 | | $ | 80.49 | | 72.7 | % | | $ | 58.51 | | 5.9 | % |
South Central | | 11 | | 3,281 | | $ | 95.91 | | 66.8 | % | | $ | 64.07 | | $ | 93.50 | | 66.0 | % | | $ | 61.73 | | 3.8 | % |
Pacific (b) | | 9 | | 2,797 | | $ | 112.17 | | 73.9 | % | | $ | 82.89 | | $ | 109.38 | | 70.9 | % | | $ | 77.57 | | 6.9 | % |
North Central | | 7 | | 1,789 | | $ | 90.30 | | 70.0 | % | | $ | 63.17 | | $ | 90.57 | | 69.3 | % | | $ | 62.78 | | 0.6 | % |
Mountain | | 6 | | 1,798 | | $ | 77.83 | | 69.5 | % | | $ | 54.10 | | $ | 75.42 | | 69.1 | % | | $ | 52.11 | | 3.8 | % |
New England | | 1 | | 200 | | $ | 75.64 | | 78.8 | % | | $ | 59.63 | | $ | 75.21 | | 83.1 | % | | $ | 62.48 | | -4.6 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Regions | | 61 | | 17,151 | | $ | 99.87 | | 71.5 | % | | $ | 71.38 | | $ | 96.19 | | 69.7 | % | | $ | 67.05 | | 6.5 | % |
| | | | | |
| | | | | | | September 2004 YTD
| | September 2003 YTD
| | Percent
Change in
RevPAR
| |
Location
| | Hotels
| | Rooms
| | ADR
| | Occ%
| | | RevPAR
| | ADR
| | Occ%
| | | RevPAR
| |
Urban (b) | | 19 | | 4,933 | | $ | 114.50 | | 76.0 | % | | $ | 87.02 | | $ | 110.77 | | 72.4 | % | | $ | 80.17 | | 8.6 | % |
Resort (c) | | 6 | | 2,145 | | $ | 89.73 | | 72.0 | % | | $ | 64.40 | | $ | 85.64 | | 71.7 | % | | $ | 61.43 | | 5.2 | % |
Airport (b) | | 12 | | 3,751 | | $ | 83.45 | | 73.7 | % | | $ | 61.48 | | $ | 80.89 | | 72.1 | % | | $ | 58.29 | | 5.5 | % |
Suburban | | 24 | | 6,322 | | $ | 101.16 | | 66.3 | % | | $ | 67.03 | | $ | 97.50 | | 65.5 | % | | $ | 63.91 | | 5.0 | % |
| | |
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | |
All Locations | | 61 | | 17,151 | | $ | 99.87 | | 71.5 | % | | $ | 71.38 | | $ | 96.19 | | 69.7 | % | | $ | 67.05 | | 6.5 | % |
| (a) | See notes to financial information for discussion of comparable hotel operating results and statistics. |
| (b) | Excludes hotels acquired during the second quarter. |
| (c) | Excludes hotels significantly affected by the hurricanes in Florida during the third quarter. |
17
MeriStar Hospitality Corporation
September 30, 2004
CAPITAL STRUCTURE
Total Enterprise Value
(In thousands, except per share information, ratios and percentages)
| | | | | | | | |
| | | As of September 30,
2004
| | | As of December 31, 2003
| |
Common shares outstanding, net | | | 87,370 | | | | 66,790 | |
Operating partnership units | | | 2,954 | | | | 3,510 | |
| | |
|
|
| |
|
|
|
Combined shares and units | | | 90,324 | | | | 70,300 | |
Common stock price at end of period | | $ | 5.45 | | | $ | 6.51 | |
| | |
|
|
| |
|
|
|
Common equity capitalization | | $ | 492,266 | | | $ | 457,653 | |
Consolidated debt | | | 1,584,109 | | | | 1,638,028 | |
Total cash | | | (177,504 | ) | | | (273,407 | ) |
| | |
|
|
| |
|
|
|
Total enterprise value (TEV) | | $ | 1,898,871 | | | $ | 1,822,274 | |
| | |
|
|
| |
|
|
|
TEV per room | | $ | 90 | | | $ | 74 | |
Rooms owned | | | 21,210 | | | | 24,729 | |
Total Debt
Total debt as of September 30, 2004 and December 31, 2003 consisted of the following:
| | | | | | | | | | | | | | |
| | | Encumbered Hotels
| | Maturity
| | Interest Rate
| | | September 30, 2004
| | | December 31,
2003
|
Convertible Notes | | — | | 2004 | | 4.75 | % | | $ | 3,705 | | | $ | 3,705 |
Senior Subordinated Notes | | — | | 2007 | | 8.75 | % | | | 33,953 | | | | 82,768 |
Secured Revolver | | 6 | | 2007 | | LIBOR + 450 bps | | | | — | | | | — |
Senior Unsecured Notes | | — | | 2008 | | 9.00 | % | | | 270,100 | | | | 299,459 |
Senior Unsecured Notes | | — | | 2009 | | 10.50 | % | | | 223,295 | | | | 248,848 |
CMBS | | 19 | | 2009 | | LIBOR + 444 bps | | | | 304,539 | | | | 309,035 |
Convertible Notes | | — | | 2010 | | 9.50 | % | | | 170,000 | | | | 170,000 |
Senior Unsecured Notes | | — | | 2011 | | 9.13 | % | | | 353,075 | | | | 396,437 |
Mortgage Debt and other | | 3 | | Various | | Various | | | | 125,762 | | | | 27,011 |
CMBS | | 4 | | 2013 | | 6.88 | % | | | 99,680 | | | | 100,765 |
| | |
| | | | | | |
|
|
| |
|
|
| | | | | | | | | | | 1,584,109 | | | | 1,638,028 |
Fair value adjustment for interest rate swap | | | | | | | | | | (2,343 | ) | | | — |
| | | | | | | | | |
|
|
| |
|
|
| | | 32 | | | | | | | $ | 1,581,766 | | | $ | 1,638,028 |
| | |
| | | | | | |
|
|
| |
|
|
Average Maturity | | | | 5.3 years | | | | | | | | | | |
Average Interest Rate | | | | | | 8.39 | % | | | | | | | |
18
MeriStar Hospitality Corporation
September 30, 2004
CAPITAL EXPENDITURES SUMMARY
(In thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Nine Months Ended
September 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Capital expenditures | | $ | 32,047 | | | $ | 5,902 | | | $ | 79,911 | | | $ | 18,186 | |
Percent of total revenue | | | 17 | % | | | 3 | % | | | 13 | % | | | 3 | % |
Summary of significant capital expenditure projects for the
Nine months ended September 30, 2004:
| | | | | | | |
Hotel
| | State
| | Amount Spent
| | Description of Renovation
|
Doral Forrestal | | New Jersey | | $ | 5,049 | | Guest rooms (casegoods and softgoods), guest bathrooms, HVAC system upgrade |
South Seas Resort | | Florida | | | 4,453 | | Fiber-optic cable installation |
Hilton Cocoa Beach | | Florida | | | 4,089 | | Mechanical systems replacement, commencement of guest rooms renovation |
Hilton Sacramento | | California | | | 3,388 | | Guest rooms (casegoods and softgoods), guest bathrooms, lobby |
Hilton Crystal City | | Virginia | | | 3,292 | | Guest rooms (casegoods and softgoods), guest bathrooms |
Marriott Somerset | | New Jersey | | | 3,049 | | Guest rooms (casegoods and softgoods), guest bathrooms |
Doubletree Universal | | Florida | | | 2,834 | | Hotel conversion: lobby renovation, parking lot surfacing, meeting rooms, pool |
Hilton Houston Westchase | | Texas | | | 2,582 | | Guest rooms (casegoods and softgoods), guest bathrooms |
Sheraton Safari Lake Buena Vista | | Florida | | | 2,521 | | Mechanical systems replacement, roof replaced |
Hilton Arlington, TX | | Texas | | | 2,426 | | Guest rooms (casegoods and softgoods), guest bathrooms, public areas |
Doubletree Tampa | | Florida | | | 2,137 | | Guest rooms (casegoods and softgoods), guest bathrooms, public areas, exterior paint |
Radisson Chicago | | Illinois | | | 2,043 | | Guest rooms (casegoods and softgoods), guest bathrooms |
Crowne Plaza Chicago O’Hare | | Illinois | | | 1,929 | | Exterior concrete repair, landscaping, lobby |
Doubletree Indianapolis | | Indiana | | | 1,858 | | Guest rooms (casegoods and softgoods), guest bathrooms, corridors, roofs |
Doubletree Dallas | | Texas | | | 1,781 | | Hotel conversion: guest rooms (casegoods and softgoods), guest bathrooms, lobby, restaurant, meeting space |
Hilton Durham | | North Carolina | | | 1,780 | | Guest rooms (casegoods and softgoods), guest bathrooms, ballroom |
Hilton Detroit | | Michigan | | | 1,702 | | Guest rooms (casegoods and softgoods), guest bathrooms |
Hilton Irvine | | California | | | 1,573 | | Ballroom, lounge, public restrooms |
Westin Oklahoma City | | Oklahoma | | | 1,572 | | Guest rooms (casegoods and softgoods), guest bathrooms, corridors, mechanical HVAC |
Doubletree Austin | | Texas | | | 1,553 | | Guest rooms (casegoods and softgoods), guest bathrooms, corridors, public areas |
Sheraton Great Valley | | Pennsylvania | | | 1,510 | | Guest rooms (casegoods and softgoods), guest bathrooms, lobby |
Holiday Inn Walt Disney World Village | | Florida | | | 1,386 | | Hotel conversion: atrium, guest rooms (casegoods and softgoods) |
Sheraton San Francisco | | California | | | 1,129 | | Pool deck, Sweet Sleepers (sm), TV’s, equipment |
Radisson Annapolis | | Maryland | | | 1,124 | | Guest rooms (casegoods and softgoods), fitness center |
Hilton Grand Rapids | | Michigan | | | 1,105 | | Guest rooms (casegoods and softgoods), guest bathrooms, restaurant, lobby |
Westin Key Largo | | Florida | | | 1,061 | | Guest rooms, ADA upgrades |
Sheraton Bellevue | | Washington | | | 1,031 | | Public areas |
19
MeriStar Hospitality Corporation
September 30, 2004
ACQUISITIONS AND DISPOSITIONS
For the period from December 31, 2003 through September 30, 2004
(Dollars in thousands)
Acquisitions
| | | | | | | |
Property
| | Date Acquired
| | Rooms
| | Total Investment
|
The Ritz-Carlton, Pentagon City | | May 10, 2004 | | 366 | | $ | 92,908 |
Marriott Irvine | | June 25, 2004 | | 485 | | | 93,540 |
| | | | |
| |
|
|
Total Acquisitions | | | | 851 | | $ | 186,448 |
| | | | |
| |
|
|
Dispositions
| | | | | | | | |
Property
| | Date Disposed
| | Rooms
| | Total Gross Sales
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 2004 | | | | 896 | | $ | 30,798 | |
| | | | | | |
|
|
|
Wyndham San Jose | | July 8, 2004 | | 355 | | | | |
Hilton Hotel Toledo | | July 16, 2004 | | 213 | | | | |
Holiday Inn Select DFW South | | September 7,
2004 | | 409 | | | | |
| | | | |
| | | | |
Total Dispositions in Third Quarter 2004 | | | | 977 | | $ | 14,450 | * |
| | | | | | |
|
|
|
Total Dispositions Year-to-Date in 2004 | | | | 4,370 | | $ | 119,323 | * |
| | | | |
| |
|
|
|
| * | Does not include $11 million of debt release on Holiday Inn Select DFW South. |
20
MeriStar Hospitality Corporation
September 30, 2004
FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS
(In thousands, except per share amounts)
| | | | | | | | |
| | | Three Months Ending December 31, 2004
| |
| | | Low-end of range
| | | High-end of range
| |
Forecasted Funds from Operations: | | | | | | | | |
| | |
Net loss (a) | | $ | (18,274 | ) | | $ | (14,816 | ) |
Adjustments to forecasted net loss: | | | | | | | | |
Depreciation and amortization of real estate assets | | | 24,638 | | | | 24,638 | |
Minority interest to common OP unit holders | | | (488 | ) | | | (396 | ) |
| | |
|
|
| |
|
|
|
Funds from operations | | $ | 5,876 | | | $ | 9,426 | |
| | |
|
|
| |
|
|
|
Weighted average diluted shares of common stock and common OP units outstanding | | | 89,718 | | | | 89,718 | |
| | |
|
|
| |
|
|
|
Funds from operations per diluted share | | $ | 0.07 | | | $ | 0.11 | |
| | |
|
|
| |
|
|
|
Funds from operations, as adjusted: | | | | | | | | |
Funds from operations | | $ | 5,876 | | | $ | 9,426 | |
Loss on early extinguishments of debt | | | — | | | | — | |
Loss on asset impairment | | | — | | | | — | |
Write off of deferred financing fees | | | — | | | | — | |
| | |
|
|
| |
|
|
|
Funds from operations, as adjusted | | $ | 5,876 | | | $ | 9,426 | |
| | |
|
|
| |
|
|
|
Weighted average diluted shares of common stock and common OP units outstanding | | | 89,718 | | | | 89,718 | |
| | |
|
|
| |
|
|
|
Funds from operations per diluted share, as adjusted | | $ | 0.07 | | | $ | 0.11 | |
| | |
|
|
| |
|
|
|
| |
| | | Year Ending December 31, 2004
| |
| | | Low-end of range
| | | High-end of range
| |
Forecasted Funds from Operations: | | | | | | | | |
| | |
Net loss (a) | | $ | (96,847 | ) | | $ | (93,389 | ) |
Adjustments to forecasted net loss: | | | | | | | | |
Depreciation and amortization of real estate assets | | | 97,372 | | | | 97,372 | |
Minority interest to common OP unit holders | | | (3,021 | ) | | | (2,929 | ) |
Loss on disposal of assets | | | 13,762 | | | | 13,762 | |
| | |
|
|
| |
|
|
|
Funds from operations | | $ | 11,266 | | | $ | 14,816 | |
| | |
Weighted average number of shares of common stock and common OP units outstanding | | | 84,073 | | | | 84,073 | |
| | |
|
|
| |
|
|
|
Funds from operations per share | | $ | 0.13 | | | $ | 0.18 | |
| | |
|
|
| |
|
|
|
Funds from operations, as adjusted: | | | | | | | | |
Funds from operations | | $ | 11,266 | | | $ | 14,816 | |
Loss on early extinguishments of debt | | | 7,903 | | | | 7,903 | |
Loss on asset impairment | | | 10,022 | | | | 10,022 | |
Write off of deferred financing fees | | | 1,719 | | | | 1,719 | |
| | |
|
|
| |
|
|
|
Funds from operations, as adjusted | | $ | 30,910 | | | | 34,460 | |
| | |
|
|
| |
|
|
|
Weighted average diluted shares of common stock outstanding and common OP units outstanding | | | 84,073 | | | | 84,073 | |
| | |
|
|
| |
|
|
|
Funds from operations per diluted share, as adjusted | | $ | 0.37 | | | $ | 0.41 | |
| | |
|
|
| |
|
|
|
| (a) | Forecasted net loss does not include any possible future losses on asset impairments or gains or losses on the sale of assets. |
21
MeriStar Hospitality Corporation
September 30, 2004
FORECASTED RECONCILIATION OF NET LOSS TO EBITDA
(In thousands)
| | | | | | | | |
| | | Three Months Ending December 31, 2004
| |
| | | Low-end of range
| | | High-end of range
| |
EBITDA and Adjusted EBITDA: | | | | | | | | |
Net loss (a) | | $ | (18,274 | ) | | $ | (14,816 | ) |
Interest expense, net | | | 31,110 | | | | 31,107 | |
Income tax benefit | | | (278 | ) | | | (226 | ) |
Depreciation and amortization | | | 25,888 | | | | 25,888 | |
| | |
|
|
| |
|
|
|
EBITDA | | | 38,446 | | | | 41,953 | |
Minority interest to common OP unit holders | | | (488 | ) | | | (396 | ) |
| | |
|
|
| |
|
|
|
Adjusted EBITDA | | $ | 37,958 | | | $ | 41,557 | |
| | |
|
|
| |
|
|
|
| |
| | | Year Ending December 31, 2004
| |
| | | Low-end of range
| | | High-end of range
| |
EBITDA and Adjusted EBITDA: | | | | | | | | |
Net loss (a) | | $ | (96,847 | ) | | $ | (93,389 | ) |
Interest expense, net | | | 126,218 | | | | 126,215 | |
Write off of deferred financing fees | | | 1,719 | | | | 1,719 | |
Income tax benefit | | | (1,233 | ) | | | (1,180 | ) |
Depreciation and amortization | | | 102,736 | | | | 102,736 | |
| | |
|
|
| |
|
|
|
EBITDA | | | 132,593 | | | | 136,101 | |
| | |
Loss on early extinguishments of debt | | | 7,903 | | | | 7,903 | |
Loss on asset impairments | | | 10,022 | | | | 10,022 | |
Loss on disposal of assets | | | 13,762 | | | | 13,762 | |
Minority interest to common OP unit holders | | | (2,880 | ) | | | (2,788 | ) |
| | |
|
|
| |
|
|
|
Adjusted EBITDA | | $ | 161,400 | | | $ | 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. |
22
MeriStar Hospitality Corporation
September 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 |
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 | | | | |
Crowne Plaza Chicago O’Hare | | 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 |
Radisson Cross Keys | | Baltimore | | 148 |
23
MeriStar Hospitality Corporation
September 30, 2004
| | | | |
Hotel
| | Location
| | Guest Rooms
|
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 |
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 |
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 | | | | 21,210 |
| | | | |
|
| * | Represents properties that are held for sale and included in discontinued operations. |
24
MeriStar Hospitality Corporation
September 30, 2004
NOTES TO FINANCIAL INFORMATION
Funds From Operations
Substantially all of our non-current assets consist of real estate, and in accordance with accounting principles generally accepted in the United States, or GAAP, those assets are subject to straight-line depreciation, which reflects the assumption that the value of real estate assets, other than land, will decline ratably over time. That assumption is often not true with respect to the actual market values of real estate assets (and, in particular, hotels), which fluctuate based on economic, market and other conditions. As a result, management and many industry investors believe the presentation of GAAP operating measures for real estate companies to be more informative and useful when other measures, adjusted for depreciation and amortization, are also presented.
In an effort to address these concerns, the National Association of Real Estate Investment Trusts, or NAREIT, adopted a definition of Funds From Operations, or FFO. NAREIT defines FFO as net income (computed in accordance with GAAP) excluding gains (or losses) from sales of real estate, real estate-related depreciation and amortization, and after comparable adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. Extraordinary items and cumulative effect of changes in accounting principles as defined by GAAP are also excluded from the calculation of FFO. As defined by NAREIT, FFO also does not include reductions from asset impairment charges. The SEC, however, recommends that FFO include the effect of asset impairment charges, which is the presentation we have adopted for all historical presentations of FFO. We believe FFO is an indicative measure of our operating performance due to the significance of our hotel real estate assets and provides beneficial information to investors.
Adjusted FFO represents FFO excluding the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and, in accordance with the NAREIT definition of FFO, asset impairment charges. We exclude the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and asset impairment charges because we believe that including them in Adjusted FFO does not fully reflect the operating performance of our remaining assets. We believe
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MeriStar Hospitality Corporation
September 30, 2004
Adjusted FFO is useful for the same reasons we believe that FFO is useful, but we also believe that Adjusted FFO enables us and the investor to consider our operating performance without considering the items we exclude from our definition of Adjusted FFO, which have no cash effect in the periods considered.
Consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization
EBITDA represents consolidated earnings before interest, income taxes, depreciation and amortization and includes operations from the assets included in discontinued operations. We further adjust EBITDA for the effect of capital market transactions that would result in a gain or loss on early extinguishments of debt, as well as the earnings effect of asset dispositions and any impairment assessments, resulting in the measure that we refer to as “Adjusted EBITDA.” We exclude the effect of gains or losses on early extinguishments of debt as well as the earnings effect of asset dispositions and impairment assessments because we believe that including them in Adjusted EBITDA does not fully reflect the operating performance of our remaining assets.
We also believe Adjusted EBITDA provides useful information to investors regarding our financial condition and results of operations because Adjusted EBITDA is useful in evaluating our operating performance. Furthermore, we use Adjusted EBITDA to provide a measure of performance that can be isolated on an asset by asset basis, to determine overall property performance. We believe that the rating agencies and a number of our lenders also use Adjusted EBITDA for those purposes. We also use Adjusted EBITDA as one measure in determining the value of acquisitions and dispositions.
Comparable Hotel Operating Results and Statistics
We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses and adjusted 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 76 hotels that we owned as of September 30, 2004, 61 have been classified as comparable hotels. The operating results of nine hotels significantly affected by the hurricanes in Florida in August and September 2004, four hotels planned for disposition, and the two hotels acquired in 2004, that we owned as of September 30, 2004 are excluded from comparable hotel results for these periods. In addition, the operating statistics for the three and nine months ended September 30, 2004, exclude room nights that were out of service during the periods due to renovations and the impact of the Florida hurricanes.
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.
26
MeriStar Hospitality Corporation
September 30, 2004
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.
Equity Compensation Adjustment
Our third quarter 2004 results include a credit of $4.5 million for the reversal of compensation expense recorded in prior periods related to the termination of an equity linked compensation plan. During July 2004, our Board of Directors authorized the dissolution of the equity compensation plan, and consequently, we had expected that the majority of this income would be recognized in the third and fourth quarters of 2004 upon the dissolution. In resolving issues related to the plan, it was determined that the plan should appropriately be accounted for as a variable plan, rather than as a fixed plan, and as a result, we recognized this entire adjustment in the third quarter of 2004.
Of the $4.5 million third quarter adjustment, $4.0 million of this amount relates to the 2000, 2001, 2002 and 2003 fiscal years. Because this adjustment is a one-time compensation expense reduction, our 2004 compensation expense and results are not fully comparable to our 2003 compensation expense and results. This adjustment is included in the “General and administrative, corporate” line in our Consolidated Statements of Operations. Had variable accounting been applied from grant date, our net loss would have been $31.3 million ($(0.36) per dilutive share) and $82.6 million ($(1.04) per dilutive share) for the three and nine months ended September 30, 2004, respectively.
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