EXHIBIT 99.1
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[GRAPHIC OMITTED]
[LOGO - MERISTAR]
OCTOBER 30, 2002
MERISTAR HOSPITALITY CORPORATION REPORTS THIRD-QUARTER RESULTS
Refinances Senior Credit Facility
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WASHINGTON--Oct. 30, 2002--MeriStar Hospitality Corporation (NYSE: MHX), the
nation's third largest hotel real estate investment trust (REIT), today
announced financial results for the third quarter ended September 30, 2002.
In addition, the company announced that it completed the refinancing of its
senior credit facility.
The lingering softness in the economy and general drop-off in travel during the
weeks around the anniversary of the September 11 terrorist attacks contributed
to lower than anticipated transient business travel during the third quarter.
For the 2002 third quarter, net loss was $(29.4) million compared to $(17.3)
million in the 2001 third quarter. Diluted net loss per share was $(0.65),
compared to $(0.39) in the 2001 third quarter. Comparative funds from operations
(FFO) were $6.7 million, compared to $15.4 million for the 2001 third quarter.
Comparative FFO represents funds from operations, as defined by the National
Association of Real Estate Investment Trusts, adjusted for significant
non-recurring items, and the effect of non-hedging derivatives. Comparative FFO
per diluted share was $0.13, compared to $0.29 for the 2001 third quarter.
Revenues decreased 3.4 percent to $235.8 million. Comparative earnings before
interest expense, income taxes, depreciation and amortization (EBITDA) declined
12.8 percent to $40.0 million. Hotel operating profit margins declined 220 basis
points to 26.5 percent.
Same-store revenue per available room (RevPAR) declined 5.3 percent to $60.95.
Average daily rate (ADR) was off 3.5 percent to $94.36, while occupancy
decreased 1.8 percent to 64.6 percent.
The challenging economic environment continues to have a direct influence on
business travel," said Paul Whetsell, chairman and chief executive officer. "To
offset weakness in the transient business sector, we shifted our marketing
efforts to lower rated group and leisure business to boost occupancy. This put
more pressure on profit margins, but our operator, Interstate Hotels & Resorts,
continues to focus on controlling costs to mitigate the shift in customer mix.
We expect to achieve economies of scale and other cost benefits going forward as
a result of the increased size and scale of our operator following the
completion of its merger in July."
New Credit Facility
The company closed earlier this week on a new, three-year $100 million senior
revolving credit facility. The initial rate of the facility will be LIBOR plus
388 basis points, slightly lower than the rate under the previous credit
facility. "Our new revolver gives us the flexibility to operate within our
business plan and to weather these difficult economic conditions," Whetsell
said. "The $14 million balance on the previous revolver was paid off in
conjunction with the closing of the facility. We have approximately $50 million
of availability on the revolver based on our trailing 12-month EBITDA. We expect
to generate $90 million to $100 million of cash flow before capital expenditures
through 2003; therefore, we would anticipate using the revolver only sparingly
going forward." SG Cowen Securities Corporation is the lead arranger and book
runner for the new facility. Lehman Brothers, Inc. is the syndication agent and
Salomon Smith Barney Inc. is the documentation agent.
During the quarter, the company sold three hotels, using the proceeds to pay
down existing debt. Whetsell noted that the company currently is marketing eight
to 10 additional non-core assets for sale, which, if successful, are expected to
generate net proceeds of $80 million to $100 million and will be used to further
reduce outstanding debt.
Operating Performance in Significant Markets
RevPAR was down in July and August compared to the previous year but improved
9.3 percent in September. "While we are encouraged to see our first
year-over-year RevPAR improvement since February 2001, the increase fell short
of our expectations as travel was down significantly in the first two weeks of
the month," Whetsell said. "We see continued improvements in RevPAR for the
remainder of the year, with October RevPAR expected to increase approximately
8.0 percent over October of 2001."
The Mid-Atlantic region showed a 4.9 percent improvement in RevPAR and was the
largest contributor to EBITDA during the quarter. Atlanta experienced
significant improvement, with an 11.0 percent increase. Hardest hit were New
Jersey, Dallas, Houston, Connecticut and Northern California, where declines in
business travel were particularly significant. "Our Mid-Atlantic properties
performed well, and we believe they are well-positioned to benefit when the
economy begins to turn around," he commented.
RevPAR and EBITDA contributions in significant markets for the third quarter
were:
Three Months Ended September 30, 2002
EBITDA
RevPAR Contribution % of Total
Change (in 000s) EBITDA
------------- ----------------- ---------------
Mid-Atlantic 4.9% 5,838 14.6%
Southern California -5.0% 4,268 10.7%
Northern California -10.7% 3,294 8.2%
Chicago -7.2% 2,141 5.4%
Colorado -1.3% 1,916 4.8%
Atlanta 11.0% 1,722 4.3%
Tampa/Clearwater -4.0% 1,649 4.1%
Houston -11.6% 1,600 4.0%
New Jersey -26.6% 1,522 3.8%
Orlando -9.5% 972 2.4%
Connecticut -11.2% 424 1.1%
Dallas -14.0% (124) -0.3%
Southwest Florida -2.2% (978) -2.5%
Balance Sheet
"With the completion of the refinancing of our line of credit, we are very
comfortable with our current liquidity position, which consists of approximately
$75 million of cash and availability," said John Emery, president and chief
operating officer. "We plan to further enhance our liquidity through asset sales
and generation of free cash flow and have ample cushion to withstand any future
geo-political events."
Key Financial Information
o Total debt to annual EBITDA of 7.5x
o Annual interest coverage ratio of 1.6x
o Capital expenditures of $6.8 million and $28.0 million, respectively, for
the three and nine months ended September 30, 2002
o Notes receivable from Interstate Hotels & Resorts of $56.1 million at
September 30, 2002
o Cash balance of $41.2 million at September 30, 2002
Long-Term Debt
Long-term debt as of September 30, 2002 consists of the following:
(amounts in thousands)
Interest
Balance Rate Maturity
Revolver (subsequently
refinanced) $ 14,000 LIBOR + 400bps 2003
Convertible Notes 154,300 4.75% 2004
Subordinated Notes 203,108 8.75% 2007
Senior Unsecured Notes 299,292 9.00% 2008
Senior Unsecured Notes 248,584 10.50% 2009
CMBS 315,955 7.76% 2009
Senior Unsecured Notes 395,865 9.13% 2011
Mortgage Debt and Other 38,550 9.00% Various
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$ 1,669,654
Guidance Outlook
For the 2002 fourth quarter, the company expects RevPAR to increase 7.0 percent
to 8.0 percent over the fourth quarter of 2001. EBITDA is projected to be $43
million to $45 million, and FFO per share is estimated to be $0.18 to $0.22. For
the full year 2002, the company expects a RevPAR decline of 8.0 percent to 8.5
percent, EBITDA of $216 million to $218 million and FFO per share of $1.49 to
$1.53. 2003 RevPAR is projected to increase 2.0 percent to 3.0 percent.
To listen to a webcast of the company's third-quarter conference call today,
October 30, at 10 a.m. Eastern time, interested parties may visit the company's
Web site and click on Investor Relations and then Third-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, reference code 503877, to hear a
telephone replay. The telephone replay will be available through November 4,
2002.
Washington, D.C.-based MeriStar Hospitality Corporation owns 109 principally
upscale, full-service hotels in major markets and resort locations with 28,099
rooms in 27 states, the District of Columbia and Canada. The company owns hotels
under such internationally known brands as Hilton, Sheraton, Marriott, Westin,
Radisson and Doubletree. 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 and the timing and composition of revenues, among others. 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
following: the current slowdown of the national economy; economic conditions
generally and the real estate market specifically; the impact of the September
11, 2001 terrorist attacks or actual or threatened future terrorist incidents;
governmental actions; legislative/regulatory changes, including changes to laws
governing the taxation of REITs; availability of capital; interest rates;
competition; supply and demand for hotel rooms in our current and proposed
market areas; and changes in general accounting principles, policies and
guidelines applicable to REITs. Additional risks are discussed in the Company's
filings with Securities and Exchange Commission, including the Company's annual
report on Form 10-K for the year ended December 31, 2001.
MeriStar Hospitality
Corporation
Statements of Operations
(Unaudited, in thousands except per
share amounts and operating statistics)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Revenue
Hotel operations:
Rooms $156,935 $163,568 $506,054 $562,497
Food and
beverage 56,548 55,886 189,423 200,273
Other operating
departments 18,306 18,721 57,715 64,511
Participating
lease revenue - 1,841 - 8,146
Office rental and
other revenue 4,017 4,016 14,282 12,183
-------- -------- -------- --------
Total revenue 235,806 244,032 767,474 847,610
Hotel operating expenses by
department:
Rooms 40,895 42,715 122,194 134,225
Food and beverage 44,187 44,122 138,234 147,320
Other operating
departments 10,967 10,353 33,159 33,845
Office rental, parking and
other operating expenses 767 819 2,372 2,444
Undistributed operating
expenses:
Administrative
and general 42,136 39,610 129,098 126,774
Property
operating costs 40,166 40,716 117,842 124,812
Property taxes,
insurance and
other 16,490 20,789 52,937 57,275
Depreciation and
amortization 30,348 28,810 92,168 86,522
Interest expense,
net 33,846 31,354 102,543 91,661
Change in fair
value of non-
hedging
derivatives 1,132 - 4,211 -
Write off of
deferred costs - - 1,529 -
Loss on fair
value of non-
hedging
derivatives - - 4,735 -
Swap termination
costs - - - 9,297
Write down of
investment in
STS Hotel Net - - - 2,112
FelCor merger
costs - 2,028 - 5,817
Costs to
terminate leases
with Prime
Hospitality
Corporation - - - 1,315
Restructuring
charge - 1,080 - 1,080
-------- -------- -------- --------
Total expenses 260,934 262,396 801,022 824,499
-------- -------- -------- --------
Income (loss) from continuing
operations before minority
interests, income taxes,
discontinued operations, loss
on sale of assets
and extraordinary
loss (25,128) (18,364) (33,548) 23,111
Minority interests (1,584) (989) (1,965) 2,132
Income taxes (654) (588) (851) 814
-------- -------- -------- --------
Income (loss) from continuing operations
before discontinued operations,
loss on sale of
assets and
extraordinary
loss (22,890) (16,787) (30,732) 20,165
Discontinued operations (1):
Income (loss) from
operations of
assets sold
(including loss
on disposal of
$6,403) (6,640) 558 (5,768) 2,264
Income tax benefit 128 - 128 -
-------- -------- -------- --------
Loss on
discontinued
operations (6,512) 558 (5,640) 2,264
Loss on sale of asset, net of
taxes - (1,073) - (2,132)
Extraordinary loss, net of
taxes - - - (1,224)
-------- -------- -------- --------
Net income (loss) (29,402) (17,302) (36,372) 19,073
Dividends paid on unvested
restricted stock (2) (198) (5) (593)
-------- -------- -------- --------
Income (loss) available to
common stockholders $(29,404) $(17,500) $(36,377) $18,480
======== ======== ======== ========
Net income (loss) per diluted
common share $(0.65) $(0.39) $(0.81) $0.42
======== ======== ======== ========
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Comparative funds from
operations (2), diluted:
Comparative income
(loss) before
loss on sale of
assets and
extraordinary
loss $(23,127) $(16,229) $(30,097) $22,429
Minority interest
to common OP unit
holders (1,725) (1,132) (2,389) 1,707
Interest on
convertible debt 1,832 1,832 5,497 5,497
Hotel depreciation
and amortization 28,594 27,965 86,844 84,197
Interest rate
swaps 1,132 - 4,211 -
Significant non-
recurring items
(net of income
taxes):
Write off of
deferred costs - - 1,490 -
Loss on fair
value of non-
hedging
derivatives - - 4,615 -
Swap termination
costs - - - 8,998
Write down of
investment in
STS Hotel Net - - - 2,046
FelCor merger
costs - 1,955 - 5,622
Costs to
terminate leases
with Prime
Hospitality
Corporation - - - 1,272
Restructuring - 1,053 - 1,053
-------- -------- -------- --------
$6,706 $15,444 $70,171 $132,821
========= ========= ========= ========
Weighted average number of
diluted shares of common
stock and operating
units outstanding 53,492 53,455 53,386 53,415
========= ========= ========= ========
Comparative funds from
operations per diluted share $0.13 $0.29 $1.31 $2.49
========= ========= ========= ========
Operating Information:
Comparative EBITDA (3) $39,961 $45,804 $172,768 $224,164
Occupancy 64.6% 65.8% 65.9% 69.6%
ADR $94.36 $97.79 $100.56 $108.01
RevPAR $60.95 $64.36 $66.24 $75.19
RevPAR Decrease -5.30% -11.90%
(1) We adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets," effective January 1, 2002.
Gains and losses from all asset sales, as well as any income
or loss from the asset prior to disposal, are required to be
recorded as discontinued operations. We sold three hotels in
August 2002. All operating results, including the loss on
disposal, are recorded as discontinued operations. As required
by SFAS No. 144, we have reclassified prior year periods to
reflect operations of the three hotels as discontinued
operations.
(2) Comparative funds from operations represents funds from
operations, as defined by the National Association of Real
Estate Investment Trusts, adjusted for the impact of
non-hedging derivatives and significant non-recurring items.
Comparative income (loss) before loss on sale of assets and
extraordinary loss is calculated as follows:
Income (loss) from
continuing operations
before discontinued
operations, loss
on sale of assets and
extraordinary
loss $(22,890) $(16,787) $(30,732) $20,165
Income (loss) on
discontinued
operations,
excluding loss on
sale of assets (237) 558 635 2,264
-------- -------- -------- --------
Comparative income
(loss) before
loss on sale of
assets and
extraordinary
loss $(23,127) $(16,229) $(30,097) $22,429
======== ======== ======== ========
(3) Comparative EBITDA represents consolidated earnings before
interest expense, income taxes, depreciation and amortization
and includes the operations from the assets sold during the
quarter, adjusted for non-recurring items.
EBITDA from
continuing
operations $40,198 $44,908 $171,638 $220,915
EBITDA from assets
sold (237) 896 1,130 3,249
-------- -------- -------- --------
Comparative EBITDA $39,961 $45,804 $172,768 $224,164
========= ========= ========= ========
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