EXHIBIT 99.1
------------
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
INTERSTATE HOTELS & RESORTS REPORTS SECOND-QUARTER RESULTS
WASHINGTON, D.C., August 8, 2002--Interstate Hotels & Resorts (NYSE:
IHR), the nation's largest independent hotel management company, today reported
pro forma results for the second quarter ended June 30, 2002. The company was
formed July 31, 2002, following the merger of MeriStar Hotels & Resorts (NYSE:
MMH) and Interstate Hotels Corporation (Nasdaq: IHCO). Both combined pro forma
financial data (assuming the merger was completed on January 1, 2001) and
historical financial data for the two former companies for the 2002 second
quarter are included in the tables of this press release.
Second-quarter pro forma revenues for 2002 declined 0.7 percent to
$316.8 million. Excluding non-recurring items, pro forma net income for the
quarter was $0.1 million, or $0.01 per share on a diluted basis, compared to pro
forma net loss of $(0.7) million, or $(0.03) per share, in the 2001 second
quarter. Recurring pro forma earnings before interest, taxes, depreciation and
amortization (EBITDA) rose 14.6 percent to $7.7 million.
The pro forma statement of operations for the 2002 second quarter
includes the following non-recurring charges:
o $7.2 million gain related to the assignment of 47 leases to a
subsidiary of Winston Hotels
(NYSE: WXH).
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o $0.7 million charge related to the closing of corporate
housing operations in Sunnyvale, Calif.
o $1.6 million of costs related to the merger of MeriStar Hotels
& Resorts and Interstate Hotels Corporation and a tender offer
made by an unrelated third party.
Same-store revenue per available room (RevPAR) for all full-service
managed hotels in the 2002 second quarter decreased 10.4 percent to $74.69. The
decline was driven by a 6.9 percent fall-off in average daily rate (ADR) to
$106.40 and a 3.7 percent drop in occupancy to 70.2 percent.
Same-store RevPAR for all limited-service managed hotels in the 2002
second quarter fell 5.7 percent to $60.67. ADR decreased 5.2 percent to $85.33,
and occupancy declined 0.4 percent to 71.1 percent.
On a historical basis, net income for MeriStar Hotels & Resorts was
$6.9 million, or $0.18 per diluted share, in the 2002 second quarter, compared
to net loss of $(1.4) million, or $(0.03) per diluted share, in the second
quarter of 2001. Net loss available to common stockholders for Interstate Hotels
Corporation was $(12.7) million, or $(2.08) per diluted share, in the 2002
second quarter, compared to net loss of $(0.1) million, or $(0.01) per diluted
share, in the second quarter of 2001.
"The merger creates a stronger company with an excellent balance sheet,
great geographic dispersion and a solid platform for growth," said Paul W.
Whetsell, chairman and chief executive officer. "We have been working hard for
the past three months to ensure that this merger would be as smooth and
transparent as possible, especially at the property level. We are
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fortunate that our operating philosophies and cultures are quite similar, and we
already are operating as a unified company."
Whetsell said that both MeriStar Hotels & Resorts and Interstate Hotels
Corporation's results exceeded their internal plans for the first half of the
year. In addition, he noted that the assignment of the remaining 47 leases for
$17 million to a subsidiary of Winston Hotels during the second quarter was a
significant de-leveraging event and would benefit both companies. "The
conversion of the leases to management contracts provides for a more stable and
predictable earnings stream and reflects a much better business model for both
Winston Hotels and Interstate Hotels & Resorts going forward."
The company's corporate housing division, BridgeStreet Corporate
Housing Worldwide, achieved improved results within its U.S. markets. "The
improvement domestically can be attributed to an inventory adjustment in the
second half of 2001 when we reduced our number of leased apartments and a
restructuring of our operations within the division. European operations
experienced a decline in demand due to a decrease in business travel both to and
within Europe."
MERGER COMPLETED
Following the end of the second quarter, MeriStar Hotels & Resorts and
Interstate Hotels Corporation completed their merger. The combined company,
Interstate Hotels & Resorts, Inc. (NYSE: IHR), began trading on August 1. In
conjunction with the merger, Interstate Hotels & Resorts will evaluate and
consolidate its operating activities, including personnel and offices. The
company will record a restructuring charge in the third quarter for the costs
associated with the consolidation of these functions.
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"With over 400 hotels and approximately 86,000 rooms under management,
our size allows us to achieve significant economies of scale," said John Emery,
president and chief operating officer. "We are on target to realize annualized
synergistic corporate savings of approximately $8 million to $10 million."
OUTLOOK
"The anticipated economic recovery has been delayed, and nationwide
travel, particularly among business transient travelers, has remained sluggish,"
Emery said. "We are working diligently to improve our transient business
traveler base for our managed properties. The struggling economy and the
heightened security measures at airports, however, continue to negatively impact
this sector, especially for shorter trips. This lingering slowdown is expected
to make it more difficult to achieve significant incentive fees in the second
half of the year."
With regard to growth opportunities available to the company, Emery
commented, "We have a joint venture in place to acquire $300 million to $500
million of hotel assets, and we are beginning to see more attractively priced
properties that represent significant turnaround opportunities."
For the third quarter of 2002, the company expects pro forma EBITDA of
$6 million to $8 million and net income per share of $(0.05) to $0.01. For the
full year 2002, the company expects pro forma EBITDA of $30 million to $34
million and net income per share of $(0.07) to $0.05.
KEY FINANCIAL INFORMATION
Pro forma as of June 30, 2002:
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o Total debt of $130.2 million
o Cash balance of $16.1 million
o Total debt to annual EBITDA of 4.0x
o Senior debt to annual EBITDA of 2.1x
o Annual interest coverage ratio of 2.3x
o Average cost of debt of 7.1 percent
To listen to a webcast of the company's second-quarter conference call
today, August 8, at 11 a.m. Eastern time, interested parties may visit the
company's Web site at www.ihrco.com and click on Investor Relations and then
Second-Quarter Conference Call. Interested parties also may listen to an
archived webcast of the conference call on the Web site, or may dial (800)
405-2236, pass code 489283, to hear a telephone replay. The telephone replay
will be available through Monday, August 12, 2002. The archived webcast will be
available on Interstate Hotels & Resorts' Web site.
Interstate Hotels & Resorts operates more than 400 hospitality
properties with approximately 86,000 rooms in 45 states, the District of
Columbia, Canada and Russia, including 55 properties managed by Flagstone
Hospitality Management, a subsidiary of Interstate Hotels & Resorts.
BridgeStreet Corporate Housing Worldwide, an Interstate Hotels & Resorts
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 Interstate Hotels & Resorts, visit the
company's Web site: www.ihrco.com.
THIS PRESS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS," WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, ABOUT
INTERSTATE HOTELS & RESORTS, INCLUDING
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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, AND THE COMPANY'S
ABILITY TO MANAGE INTEGRATION AND GROWTH. ADDITIONAL RISKS ARE DISCUSSED IN
INTERSTATE HOTELS & RESORTS' FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING INTERSTATE HOTELS & RESORTS' ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2001 AND JOINT PROXY STATEMENT AND PROSPECTUS,
FILED ON JULY 2, 2002.
INTERSTATE HOTELS & RESORTS, INC.
PRO FORMA STATEMENTS OF OPERATIONS (1) (2)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND OPERATING STATISTICS)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue
Lodging revenues $ 37,146 $ 45,492 $ 69,430 $ 89,211
Net mangement fees 15,749 17,700 29,909 33,377
Corporate housing 27,424 26,488 51,670 50,937
Other fees 6,492 4,437 11,263 9,821
-------- -------- -------- --------
86,811 94,117 162,272 183,346
Other revenue from managed properties 229,954 224,981 404,794 415,226
-------- -------- -------- --------
Total revenue 316,765 319,098 567,066 598,572
Operating expenses by department:
Lodging expenses 9,960 12,566 18,764 24,748
Corporate housing 20,415 19,464 39,236 36,805
Property operating costs 7,787 9,616 14,852 33,584
Administrative and general 25,985 28,431 48,817 55,409
Lease expense 14,917 17,277 27,569 18,431
Depreciation and amortization 4,842 5,455 9,759 10,657
Charges to investments in and advances to
affiliates, accounts and notes
receivable, and other - - - 15,298
Gain on Winston lease conversion (7,229) - (7,229) -
Merger costs 1,622 614 2,001 4,385
Restructuring expenses 682 912 682 912
-------- -------- -------- --------
78,981 94,335 154,451 200,229
Other expenses from managed properties 229,954 224,981 404,794 415,226
-------- -------- -------- --------
Total operating expenses 308,935 319,316 559,245 615,455
-------- -------- -------- --------
Net operating income (loss) 7,830 (218) 7,821 (16,883)
Interest expense, net 2,488 2,559 5,398 4,962
Equity in (income) loss of affiliates 298 (468) 712 (758)
-------- -------- -------- --------
Loss before minority interests
and income taxes 5,044 (2,309) 1,711 (21,087)
Minority interests 52 166 34 15
Income tax benefit (670) (765) (1,771) (7,991)
-------- -------- -------- --------
Net income (loss ) $ 5,662 $ (1,710) $ 3,448 $(13,111)
======== ======== ======== ========
Weighted average number of:
Basic shares of common stock outstanding (3) 20,179 20,179 20,179 20,179
======== ======== ======== ========
Diluted shares of common stock outstanding (3) 20,718 20,179 20,688 20,179
======== ======== ======== ========
Net income (loss) per basic common share $ 0.28 $ (0.08) $ 0.17 $ (0.65)
======== ======== ======== ========
Net income (loss) per diluted common share $ 0.27 $ (0.08) $ 0.17 $ (0.65)
======== ======== ======== ========
Net operating income (loss) $ 7,830 $ (218) $ 7,821 $(16,883)
Depreciation and amortization 4,842 5,455 9,759 10,657
Gain on Winston lease conversion (7,229) (7,229) -
Charges to investments in and advances to
affiliates, accounts and notes
receivable, and other - - - 15,298
Merger costs 1,622 614 2,001 4,385
Restructuring expenses 682 912 682 912
-------- -------- -------- --------
Recurring EBITDA $ 7,747 $ 6,763 $ 13,034 $ 14,369
======== ======== ======== ========
Net income (loss ) $ 5,662 $ (1,710) $ 3,448 $(13,111)
Adjustments to net loss, net of income taxes:
Gain on Winston lease conversion (7,229) - (7,229) -
Charges to investments in and advances
to affiliates, accounts and notes
receivable, and other - - - 9,485
Merger costs 1,135 424 1,361 2,719
Restructuring expenses 477 629 464 565
Minority interests 60 (19) (22) (226)
-------- -------- -------- --------
Net income (loss), excluding non-recurring items $ 105 $ (676) $ (1,978) $ (568)
======== ======== ======== ========
(1) Excludes the effect of EITF 98-9.
(2) Assumes merger transaction between Interstate Hotels Corporation and
MeriStar Hotels & Resorts, Inc. was completed on January 1, 2001.
(3) On August 1, 2002 Interstate Hotels and Resorts effected a one-for-five
reverse stock split. The weighted average number of basic and diluted
common shares outstanding is presented assuming the reverse stock split
occurred on January 1, 2001
Pro forma hotel operating statistics:
Full-service hotels:
Occupancy 70.2% 72.9% 66.8% 71.4%
ADR $ 106.40 $ 114.33 $ 106.11 $ 115.23
RevPAR $ 74.69 $ 83.33 $ 70.91 $ 82.29
Limited-service hotels:
Occupancy 71.1% 71.4% 68.2% 69.8%
ADR $ 85.33 $ 90.06 $ 84.44 $ 89.05
RevPAR $ 60.67 $ 64.34 $ 57.60 $ 62.20
MERISTAR HOTELS & RESORTS, INC.
STATEMENTS OF OPERATIONS (1)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND OPERATING STATISTICS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue
Rooms $ 32,827 $ 39,121 $ 61,418 $ 76,661
Food and beverage 2,037 3,107 3,806 6,241
Other operating departments 1,502 1,841 2,751 3,785
Corporate housing 27,424 26,488 51,670 50,937
Management and other fees 11,925 12,960 22,580 25,643
-------- -------- -------- --------
75,715 83,517 142,225 163,267
Other revenue from managed properties 158,080 154,527 270,479 275,367
-------- -------- -------- --------
Total revenue 233,795 238,044 412,704 438,634
Operating expenses by department:
Rooms 7,275 8,771 13,781 17,276
Food and beverage 1,508 2,304 2,826 4,644
Other operating departments expenses 973 1,171 1,762 2,213
Corporate housing 20,415 19,464 39,236 36,805
Undistributed operating expenses:
Administrative and general 17,402 20,383 34,599 39,545
Property operating costs 7,442 9,185 14,217 18,149
Participating lease expense 14,926 17,089 27,569 33,034
Depreciation and amortization 2,230 3,411 4,459 6,546
Gain on Winston lease conversion (7,229) - (7,229) -
Charges to investments in and advances
to affiliates,
accounts and notes receivable, and other - - - 15,298
Merger costs 741 614 1,001 4,385
Restructuring expenses 682 912 682 912
-------- -------- -------- --------
66,365 83,304 132,903 178,807
Other expenses from managed properties 158,080 154,527 270,479 275,367
-------- -------- -------- --------
Total operating expenses 224,445 237,831 403,382 454,174
-------- -------- -------- --------
Net operating income (loss) 9,350 213 9,322 (15,540)
Interest expense, net 2,427 2,777 5,263 5,662
Equity in (income) loss of affiliates (118) (327) 116 (440)
-------- -------- -------- --------
Income (loss) before minority interests
and income taxes 7,041 (2,237) 3,943 (20,762)
Minority interests 325 69 190 (594)
Income tax benefit (206) (922) (1,391) (8,067)
-------- -------- -------- --------
Net income (loss ) $ 6,922 $ (1,384) $ 5,144 $ (12,101)
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Weighted average number of:
Basic shares of common stock outstanding 37,188 37,172 37,188 36,787
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Diluted shares of common stock outstanding 39,684 37,172 39,610 36,787
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Net income (loss) per basic common share $ 0.19 $ (0.03) $ 0.14 $ (0.32)
======== ========= ======== ==========
Net income (loss) per diluted common share $ 0.18 $ (0.03) $ 0.13 $ (0.32)
======== ========= ======== ==========
Net operating income (loss) $ 9,350 $ 213 $ 9,322 $ (15,540)
Depreciation and amortization 2,230 3,411 4,459 6,546
Charges to investments in and advances to
affiliates, accounts and notes
receivable, and other - - - 15,298
Gain on Winston lease conversion (7,229) - (7,229) -
Merger costs 741 614 1,001 4,385
Restructuring expenses 682 912 682 912
-------- -------- -------- --------
Recurring EBITDA $ 5,774 $ 5,150 $ 8,235 $ 11,601
======== ========= ======== ==========
Net income (loss) $ 6,922 $ (1,384) $ 5,144 $(12,101)
Adjustments to net loss, net of income taxes:
Gain on Winston lease conversion (7,229) - (7,229) -
Charges to investments in and advances
to affiliates, accounts and notes
receivable, and other - - - 9,179
Merger costs 445 368 601 2,631
Restructuring expenses 409 547 409 547
Minority interests 160 (42) 153 (553)
-------- -------- -------- --------
Net income (loss), excluding
non-recurring items $ 707 $ (511) $ (922) $ (297)
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(1) Excludes the effect of EITF 98-9.
INTERSTATE HOTELS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Lodging revenues $ 779 $ 1,423 $ 1,455 $ 2,524
Net management fees 6,336 6,404 11,994 12,880
Other fees 5,451 4,437 9,464 7,945
--------- ------- --------- -------
12,566 12,264 22,913 23,349
Other revenue from managed properties 71,874 70,454 134,315 139,859
--------- ------- --------- -------
Total revenue 84,440 82,718 157,228 163,208
Lodging expenses 549 939 1,030 1,718
Administrative and general 3,742 2,911 5,685 5,748
Payroll and related benefits 5,279 5,461 9,522 10,818
Depreciation and amortization 2,582 2,694 5,110 5,400
Accelerated vesting of preferred stock held
by executives 1,000 - 1,000 -
Tender offer costs 881 - 1,000 -
--------- ------- --------- -------
14,033 12,005 23,347 23,684
Other expenses from managed properties 71,874 70,454 134,315 139,859
--------- ------- --------- -------
Total operating expenses 85,907 82,459 157,662 163,543
--------- ------- --------- -------
Net operating income (loss) (1,467) 259 (434) (335)
Interest expense, net 937 165 1,912 232
Accelerated amortization of financing fees from
conversion of debt 1,223 - 1,223 -
Other, net (16) (16)
Equity in (income) loss of affiliates 416 (141) 596 (318)
--------- ------- --------- -------
Income (loss) before minority interests
and income taxes (4,043) 251 (4,165) (233)
Minority interests (12) 54 52 90
Income tax expense (benefit) (1,105) 79 (1,176) (129)
--------- ------- --------- -------
Net income (loss) (2,926) 118 (3,041) (194)
Mandatorily redeemable preferred stock:
Dividends 148 159 307 318
Accretion 340 15 355 30
Conversion incentive payments 9,250 - 9,250 -
--------- ------- --------- -------
Net loss available to common stockholders $ (12,664) $ (56) $ (12,953) $ (542)
========= ======= ========= =======
Weighted average number of basic and diluted
shares of common stock outstanding 6,094 6,539 5,913 6,510
========= ======= ========= =======
Net loss per basic and diluted common share $ (2.08) $ (0.01) (2.19) $ (0.08)
========= ======= ========= =======
Net operating income (loss) $ (1,467) $ 259 $ (434) $ (335)
Depreciation and amortization 2,582 2,694 5,110 5,400
accelerated vesting of preferred stock
held by executives 1,000 - 1,000 -
Tender offer costs 881 - 1,000 -
--------- ------- --------- -------
Recurring EBITDA $ 2,996 $ 2,953 $ 6,676 $ 5,065
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