EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
Contact:
Bruce Riggins Melissa Thompson Jerry Daly or Carol McCune
Director of Finance Director of Corporate Daly Gray Public Relations (Media)
(202) 295-2276 Communications (703) 435-6293
(202) 295-2228
MAY 7, 2002
MERISTAR HOTELS & RESORTS REPORTS FIRST-QUARTER RESULTS
RESULTS EXCEED ANALYSTS' ESTIMATES BY $0.03
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WASHINGTON--May 7, 2002--MeriStar Hotels & Resorts (NYSE: MMH), the nation's
largest independent hotel management company, today announced results for the
first quarter ended March 31, 2002.
First-quarter revenues for 2002 declined 16.6 percent to $66.5 million.
Excluding non-recurring items, net loss for the quarter was $(1.6) million, or
$(0.04) per share on a diluted basis, compared to net income of $0.2 million, or
$0.01 per share, in the 2001 first quarter. Pro forma net income in the 2001
first quarter (excluding non-recurring items and adjusted for the elimination of
goodwill amortization as a result of a new accounting rule pertaining to
goodwill and intangible assets) was $0.7 million, or $0.02 per share. Recurring
earnings before interest, taxes, depreciation and amortization (EBITDA) was $2.2
million, compared to $6.6 million for the 2001 first quarter. During the first
quarter, the company recorded a $0.3 million non-recurring charge related to the
company's proposed merger with Interstate Hotels Corporation (Nasdaq: IHCO -
news). Excluding non-recurring items, the net loss per share was $0.03 ahead of
the consensus analysts' estimate of $(0.07).
Same-store revenue per available room (RevPAR) for all full-service managed
hotels in the 2002 first quarter decreased 17.7 percent to $66.45. Occupancy
declined 9.4 percent to 62.9 percent and average daily rate (ADR) fell 9.1
percent to $105.73.
Same-store RevPAR for all limited-service leased hotels in the 2002 first
quarter fell 9.7 percent to $48.28. ADR decreased 5.3 percent to $77.85, and
occupancy declined 4.6 percent to 62.0 percent.
"The first quarter saw a nice rebound in group business and encouraging signs
from leisure travel," said Paul W. Whetsell, chairman and chief executive
officer of MeriStar. "However, we remain disappointed with the continued
sluggishness in the transient business traveler segment.
"We continued to focus heavily on cost containment, which had a positive impact
on operating profit margins," he noted. "We have permanently changed the way we
manage hotels by eliminating a whole layer of middle management and by focusing
more on cross training so that employees can handle more functions, especially
during the hotel's busiest periods of the day."
He added that the company's corporate housing division, BridgeStreet Corporate
Housing Worldwide, also reaped the benefits of reductions in its cost structure.
"We are now realizing the benefits of reducing the number of leased apartments
in the second half of 2001, as well as restructuring our operations within the
corporate housing division," said Whetsell. "In the second quarter, we will shut
down our Sunnyvale, Calif., operation, a market that has been hit hard by the
reversals in the technology industry and is no longer profitable. Unlike hotels,
which are fixed assets, BridgeStreet can rapidly expand and contract its
inventory in response to shifts in the economy. We will continue to adjust our
corporate housing inventory as local market conditions warrant."
The company continues to look for additional revenue sources, according to John
Emery, president and chief operating officer. In the first quarter, the company
announced the formation of a new subsidiary, The NetEffect Alliance, which
specializes in information technology consulting and telecommunications services
tailored for the unique needs of the hotel industry. "The NetEffect Alliance is
already contributing to revenue growth. By offering the benefit of our existing
technology programs and expertise to hotel owners and operators, we are able to
deliver services and products to the industry at reduced costs," said Emery.
INTERSTATE MERGER UPDATE
On May 2, 2002, MeriStar and Interstate Hotels Corporation announced that they
had signed a definitive merger agreement. Upon approval of both companies'
shareholders and appropriate regulatory bodies, the merged company will manage
more than 400 hotels, representing more than 30 franchise brands in North
America and Europe. The new company will retain the name Interstate Hotels
Corporation and will have estimated 2002 pro forma revenues of $340 million, and
estimated pro forma EBITDA of $33 million to $35 million. The merger is expected
to close in the 2002 third quarter.
OUTLOOK
"We are seeing steady improvements in demand and are buoyed by the recent
positive economic news," Emery said. "We are working diligently to improve our
transient business traveler base. However, the sluggish economy and the delays
and difficulties due to heightened security measures at airports continue to
dampen this sector, especially for shorter duration trips. We remain cautiously
optimistic about the second half of the year as the economy continues to
rebound."
For the second quarter of 2002, MeriStar expects EBITDA of $5.5 million to $6.0
million and net income per common share of $0.01 to $0.02.
KEY FINANCIAL INFORMATION
As of March 31, 2002:
o Total debt of $138.1 million
o Total debt to annual EBITDA of 7.6x
o Senior debt to annual EBITDA of 4.4x
o Annual interest coverage ratio of 1.6x
o Average cost of debt of 8.2 percent.
MeriStar Hotels & Resorts operates 276 hospitality properties with more than
58,000 rooms in 42 states, the District of Columbia, and Canada, including 55
properties managed by Flagstone Hospitality Management, a subsidiary of MeriStar
Hotels & Resorts. BridgeStreet Corporate Housing Worldwide, a MeriStar
subsidiary, is one of the world's largest corporate housing providers, offering
upscale, fully furnished corporate housing throughout the United States, Canada,
the United Kingdom, France and 39 additional countries through its network
partners.
For more information about MeriStar Hotels & Resorts, visit the company's Web
site: www.meristar.com. To listen to a webcast of the company's first-quarter
conference call today, May 7 at 2 p.m. Eastern time, go to the Web site and
click on Investor Relations and then First-Quarter Conference Calls.
This press release contains "forward-looking statements," within the meaning of
the Private Securities Litigation Reform Act of 1995, about the Companies,
including those statements regarding future operating results and the timing and
composition of revenues, among others, and statements containing words such as
"expects," "believes" or "will," which indicate that those statements are
forward-looking. Except for historical information, the matters discussed in
this press release are forward-looking statements that are subject to certain
risks and uncertainties that could cause the actual results to differ
materially, including the current slowdown of the national economy, economic
conditions generally and the real estate market specifically, the impact of the
events of September 11, 2001, legislative and regulatory changes, availability
of debt and equity capital, interest rates, competition, supply and demand for
lodging facilities in our current and proposed market areas, the ability of the
Company and Interstate Hotels Corporation to complete their merger, the merged
company's ability to manage integration and growth, and the potential de-listing
of MeriStar Hotels & Resorts by the NYSE. Additional risks are discussed in the
Companies' filings with the Securities and Exchange Commission, including the
Companies' annual reports on Form 10-K for the year ended December 31, 2001.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy any securities nor shall there be any sale of any securities in
any state or province in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under applicable securities
laws. MeriStar plans to file a registration statement on Form S-4 with the SEC
in connection with the merger transaction. The Form S-4 will contain a
prospectus, a proxy statement, and other documents for the stockholders'
meetings of MeriStar and Interstate at which time the proposed transaction will
be considered. MeriStar and Interstate plan to mail the proxy statement and
prospectus contained in the Form S-4 to their respective stockholders. The Form
S-4, proxy statement and prospectus will contain important information about
MeriStar, Interstate, the merger and related matters. Investors and stockholders
should read the Form S-4, proxy statement and prospectus and the other documents
filed with the SEC in connection with the merger carefully before they make any
decision with respect to the merger. A copy of the merger agreement will be
filed with the SEC by both MeriStar and Interstate. The Form S-4, proxy
statement and prospectus, and all other documents filed with the SEC in
connection with the merger transaction will be available when filed free of
charge at the SEC's Web site, at www.sec.gov. In addition, the proxy statement
and prospectus, and all other documents filed with the SEC in connection with
the merger will be made available to investors free of charge by writing to the
MeriStar and Interstate contact addresses set forth in this press release.
In addition to the Form S-4, the proxy statement, and the other documents filed
with the SEC in connection with the merger, both MeriStar and Interstate are
obligated to file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
and other information filed with the SEC at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Filings
with the SEC also are available to the public from commercial document-retrieval
services and at the Web site maintained by the SEC at www.sec.gov.
Pursuant to Instruction 3 of Item 4 of Schedule 14A, the participants in the
solicitation include MeriStar, Interstate, their respective directors, and may
include certain executive officers of each. Information concerning the MeriStar
directors and executive officers and their direct and indirect interests in
MeriStar is contained in its annual report on Form 10-K/A filed with the SEC on
April 30, 2002. Information concerning the Interstate directors and executive
officers and their direct and indirect interests in Interstate is contained in
its annual report on Form 10-K/A filed with the SEC on April 19, 2002. The
identity of the people who, under SEC rules, may be considered participants in
the solicitation of Interstate and MeriStar stockholders in connection with the
proposed merger, and a description of their interests, is available on Schedule
14A filed by Interstate on May 2, 2002, and a filing under Rule 425 under the
Securities Act by MeriStar on May 2, 2002. As of the date of this communication,
none of the foregoing participants beneficially owned in excess of 1% of the
MeriStar Common Stock, except Paul W. Whetsell, and Steven D. Jorns, each a
director and/or executive officer of MeriStar, or beneficially owned in excess
of 1% of Interstate Common Stock, except Thomas F. Hewitt and J. William
Richardson, Karim Alibhai and Sherwood Weiser, each a director and/or executive
officer of Interstate.
MeriStar Hotels & Resorts, Inc. Statements of Operations (1) (Unaudited, in
thousands except per share amounts and operating statistics)
Three Months Ended March 31,
2002 2001
Revenue
Rooms $ 28,591 $ 37,540
Food and beverage 1,769 3,134
Other operating departments 1,249 1,944
Corporate housing 24,246 24,449
Management and other fees 10,655 12,683
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Total revenue 66,510 79,750
Operating expenses by department:
Rooms 6,506 8,505
Food and beverage 1,318 2,340
Other operating departments expenses 789 1,042
Corporate housing 18,821 17,341
Undistributed operating expenses:
Administrative and general 17,197 19,162
Property operating costs 6,775 8,964
Participating lease expense 12,643 15,945
Depreciation and amortization 2,229 3,135
Loss on asset impairment - 15,298
Merger costs 260 3,771
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Total operating expenses 66,538 95,503
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Net operating loss (28) (15,753)
Interest expense, net 2,836 2,885
Equity in (income) loss of affiliates 234 (113)
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Loss before minority interests
and income taxes (3,098) (18,525)
Minority interests (135) (663)
Income taxes (1,185) (7,145)
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Net loss $ (1,778) $ (10,717)
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Weighted average number of diluted
shares of common stock outstanding 37,189 36,401
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Net loss per diluted common share $ (0.05) $ (0.29)
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Net operating loss $ (28) $ (15,753)
Equity in income (loss) of affiliates (234) 113
Depreciation and amortization 2,229 3,135
Loss on asset impairment - 15,298
Merger costs 260 3,771
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Recurring EBITDA $ 2,227 $ 6,564
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Net loss $ (1,778) $ (10,717)
Adjustments to net loss,
net of income taxes:
Loss on asset impairment - 9,179
Merger costs 156 2,263
Minority interests (7) (511)
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Net income (loss), excluding
non-recurring items $ (1,629) $ 214
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(1) Excludes the effect of EITF 98-9.
Pro forma hotel operating statistics: Full-service managed hotels:
Occupancy 62.9% 69.4%
ADR $ 105.73 $ 116.31
RevPAR $ 66.45 $ 80.77
Limited-service leased hotels:
Occupancy 62.0% 65.0%
ADR $ 77.85 $ 82.23
RevPAR $ 48.28 $ 53.48
MERISTAR CONTACT: BRUCE RIGGINS, DIRECTOR OF FINANCE, (202) 295-2276 OR
MELISSA THOMPSON, DIRECTOR OF CORPORATE COMMUNICATIONS, (202) 295-2228
MEDIA CONTACT: JERRY DALY OR CAROL MCCUNE, MEDIA DALY GRAY PUBLIC RELATIONS,
(703) 435-6293