EXHIBIT 99.1
------------
FOR IMMEDIATE RELEASE
Contact:
Melissa Thompson Jerry Daly or Carol McCune
Director of Corporate Communications Daly Gray Public Relations (Media)
(202) 295-2228 (703) 435-6293
INTERSTATE HOTELS & RESORTS REPORTS FOURTH-QUARTER, YEAR-END RESULTS
WASHINGTON, D.C., February 11, 2003--Interstate Hotels & Resorts (NYSE:
IHR), the nation's largest independent hotel management company, today reported
historical and pro forma results for the fourth quarter and year ended December
31, 2002. The company was formed July 31, 2002, following the merger of MeriStar
Hotels & Resorts and Interstate Hotels Corporation. Both historical financial
data and combined pro forma financial data (assuming the merger was completed on
January 1, 2001) are included in the tables of this press release. Historical
financial data represents results for Interstate Hotels Corporation through July
31, 2002, and results for Interstate Hotels & Resorts subsequent to July 31,
2002.
For the 2002 fourth quarter, net loss was $(3.4) million, or $(0.17)
per share. On a historical basis, net loss available to common shareholders was
$(3.1) million, or $(0.60) per share, in the 2001 fourth quarter.
On a pro forma basis, recurring earnings before interest, taxes,
depreciation and amortization (EBITDA) was $9.9 million for the 2002 fourth
quarter. Pro forma fourth-quarter 2002 revenues were $247.9 million. Excluding
non-recurring items, pro forma net income for the 2002 fourth quarter was $1.8
million, or $0.09 per share, $0.03 above consensus analysts' estimates.
- more -
Interstate Hotels & Resorts
Page 2
The statement of operations for the 2002 fourth quarter includes the
following non-recurring charges:
o $2.7 million for the impairment of a joint venture investment.
o $1.1 million for the write-off of certain intangible management
contract assets due to the disposition of the related properties and
the termination of Interstate's management contracts on these
properties.
o $0.2 million of net benefit related to restructuring within the
BridgeStreet Corporate Housing Worldwide subsidiary and the closing of
operations in one corporate housing market, offset by an adjustment to
previously recorded restructuring expenses related to the
MeriStar/Interstate merger.
o $3.7 million of merger and integration costs, including the write-down
of fixed assets, professional fees, travel, and other transition costs.
Same-store revenue per available room (RevPAR) for all full-service
managed hotels in the 2002 fourth quarter increased 8.4 percent to $62.38.
Occupancy rose 7.8 percent to 60.9 percent, while average daily rate (ADR)
increased 0.6 percent to $102.50. Same-store RevPAR for all limited-service
managed hotels in the 2002 fourth quarter increased 2.7 percent to $46.58.
Occupancy increased 2.7 percent to 59.8 percent, and ADR was flat at $77.91.
"The integration of MeriStar and Interstate has gone quite smoothly,"
said Paul W. Whetsell, chairman and chief executive officer. "During the fourth
quarter, the company made a number of executive changes in order to separate
management responsibilities from MeriStar Hospitality. With approximately 400
hotels under management following the merger, we now
- more -
Interstate Hotels & Resorts
Page 3
have a fully dedicated management team." Whetsell retained his dual roles as
chairman and chief executive officer of both Interstate and MeriStar
Hospitality, and is the only executive to hold dual positions.
"We are receiving significant financial benefits from the merger and
expect to achieve corporate synergistic savings of approximately $10 million on
an annual basis, which is at the upper end of our previous estimates," said John
Emery, president and chief operating officer. "Our development team signed eight
new hotel management contracts in the fourth quarter, including the Lakeway Inn
Conference Resort and The Creeks at Beechwood Resort & Conference Center, and we
expect that growth trend to continue in 2003. With the economic outlook for 2003
pointing to a third difficult year in a row, we are seeing an upswing in owners
who seek operators like Interstate that can add value with stronger operating
systems, extensive marketing reach, cutting edge technology and economies of
scale."
Emery added that while BridgeStreet Corporate Housing Worldwide results
have been impacted by the reduction in business travel, global contract sales
reached 15 percent of revenue in 2002. "Global contract sales, which
BridgeStreet projects will account for more than 20 percent of its total
revenues in 2003, help drive the licensing program, which will provide
substantial growth through broader product distribution."
"Uncertainty in the economy has dampened activity in joint venture
acquisitions," he said. "However, we continue to look for attractive
opportunities and expect to see increasing activity in this area in 2003."
- more -
Interstate Hotels & Resorts
Page 4
FULL-YEAR RESULTS
On a historical basis, net loss available to common shareholders for
full year 2002 was $(38.8) million, or $(2.86) per share, compared to $(8.0)
million, or $(1.41) per share, in 2001.
Excluding non-recurring items, pro forma net loss for the full year was
$(0.5) million, or $(0.02) per share on a diluted basis, compared to pro forma
net loss of $(3.8) million, or $(0.19) per share, in 2001. Pro forma EBITDA for
2002 was up slightly to $30.2 million, compared to 2001 pro forma EBITDA of
$29.6 million.
Same-store RevPAR for all full-service managed hotels for the 2002 full
year declined 6.7 percent to $68.13. Average daily rate (ADR) was down 5.7
percent to $104.52, and occupancy decreased 1.1 percent to 65.2 percent.
Same-store RevPAR for all limited-service managed hotels for the 2002 full year
fell 4.2 percent to $51.60. ADR was off 3.3 percent to $79.27, and occupancy
dropped 1.1 percent to 65.1 percent.
CAPITAL STRUCTURE
"Following the close of the year, our capital structure benefited
substantially from the early repayment of a $56.1 million loan to MeriStar
Hospitality for $42.1 million," said James A. Calder, chief financial officer.
"The early repayment reduced our total outstanding debt by approximately 10
percent, further strengthening our balance sheet." Interstate made the repayment
with proceeds from a recently issued $40 million subordinated term loan that
matures in January 2007 and $2.1 million from available cash.
"Our balance sheet continues to improve, with approximately $45 million
of cash and availability on our line of credit," Calder said. "In addition, we
are participants in a joint venture
- more -
Interstate Hotels & Resorts
Page 5
with the capacity to acquire $300 million to $500 million of hotel assets. We
are in a strong financial position with great flexibility to take advantage of
growth opportunities as they arise."
KEY FINANCIAL INFORMATION
As of December 31, 2002:
o Total debt of $134.3 million
o Cash balance of $7.1 million
o Total debt to annual EBITDA of 3.9x
o Senior debt to annual EBITDA of 2.2x
o Annual interest coverage ratio of 2.8x
o Average cost of debt of 7.1 percent
OUTLOOK AND GUIDANCE
"Despite predictions of another difficult operating year in the hotel
industry, we anticipate an approximate 20 percent increase in EBITDA in 2003,
driven by the cost benefits resulting from merger-related synergies," Emery
said.
For the 2003 first quarter, Interstate estimates pro forma EBITDA of
$2.5 million to $3.5 million and a net loss per share of $(0.15) to $(0.11). For
the full year 2003, the company projects EBITDA of $34 million to $38 million,
net income per share of $0.26 to $0.36, free cash flow of $22 million to $26
million, and free cash flow per share of $1.08 to $1.28.
Interstate will hold a conference call to discuss its fourth-quarter
results today, February 11, at 10 a.m. Eastern time. Interested parties may
visit the company's Web site at www.ihrco.com and click on Investor Relations
and then Fourth-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 522003,
to hear a telephone replay. The
- more -
Interstate Hotels & Resorts
Page 6
telephone replay will be available through Friday, February 14, 2003.
Interstate Hotels & Resorts operates approximately 400 hospitality
properties with nearly 86,000 rooms in 44 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 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, GOVERNMENTAL
ACTIONS, 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 MERISTAR
HOTELS & RESORTS' AND INTERSTATE HOTELS CORPORATION'S ANNUAL REPORTS ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2001 AND JOINT PROXY STATEMENT AND
PROSPECTUS, FILED ON JULY 2, 2002.
- 30 -
INTERSTATE HOTELS & RESORTS, INC.
PRO FORMA STATEMENTS OF OPERATIONS (1) (2)
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS
AND OPERATING STATISTICS)
THREE MONTHS
ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------ -----------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue
Lodging revenues $ 621 $ 30,472 $ 70,883 $ 160,461
Management fees and other 23,612 25,620 83,927 85,800
Corporate housing 27,039 24,446 108,680 103,638
----------- ----------- ----------- -----------
51,272 80,538 263,490 349,899
Other revenue from managed properties 196,581 152,320 826,311 764,806
----------- ----------- ----------- -----------
Total revenue 247,853 232,858 1,089,801 1,114,705
Operating expenses by department:
Lodging expenses 533 105 36,415 79,465
Corporate housing 22,663 18,603 83,399 76,019
Undistributed operating expenses:
Administrative and general 18,156 23,962 85,866 104,960
Lease expense -- 25,832 27,569 59,857
Depreciation and amortization 4,925 4,646 19,449 20,367
Charges to investments in and advances to affiliates,
accounts and notes receivable, and other -- -- -- 16,098
Gain on Winston lease conversion -- -- (7,229) --
Merger costs 3,710 -- 8,006 4,239
Restructuring expenses (206) 1,649 13,296 3,479
Tender offer costs -- -- 1,000 --
Asset impairment and write-offs 3,787 -- 3,787 3,026
----------- ----------- ----------- -----------
53,568 74,797 271,558 367,510
Other expenses from managed properties 196,581 152,320 826,311 764,806
----------- ----------- ----------- -----------
Total operating expenses 250,149 227,117 1,097,869 1,132,316
----------- ----------- ----------- -----------
Net operating income (loss) (2,296) 5,741 (8,068) (17,611)
Interest expense, net 2,121 3,250 9,825 10,841
Equity in (income) loss of affiliates 739 3,013 2,470 4,437
----------- ----------- ----------- -----------
Loss before minority interests and income taxes (5,156) (522) (20,363) (32,889)
Minority interests (492) (71) (699) (243)
Income tax expense (benefit) (1,694) 44 (10,002) (12,159)
----------- ----------- ----------- -----------
Net loss $ (2,970) $ (495) $ (9,662) $ (20,487)
=========== =========== =========== ===========
Weighted average number of:
Basic and diluted shares of common stock outstanding (3) 20,419 20,163 20,261 20,127
=========== =========== =========== ===========
Net loss per basic and diluted common share $ (0.15) $ (0.02) $ (0.48) $ (1.02)
=========== =========== =========== ===========
Net operating income (loss) $ (2,296) $ 5,741 $ (8,068) $ (17,611)
Depreciation and amortization 4,925 4,646 19,449 20,367
Charges to investments in and advances to affiliates,
accounts and notes receivable, and other -- -- -- 16,098
Gain on Winston lease conversion -- -- (7,229) --
Merger costs 3,710 -- 8,006 4,239
Restructuring expenses (206) 1,649 13,296 3,479
Tender offer costs -- -- 1,000 --
Asset impairment and write-offs 3,787 -- 3,787 3,026
----------- ----------- ----------- -----------
-----------
Recurring EBITDA $ 9,920 $ 12,036 $ 30,241 $ 29,598
=========== =========== =========== ===========
Net loss $ (2,970) $ (495) $ (9,662) $ (20,487)
Adjustments to net loss, net of income taxes:
Charges to investments in and advances to affiliates,
accounts and notes receivable, and other -- -- -- 9,981
Gain on Winston lease conversion -- -- (7,229) --
Merger costs 2,287 -- 5,028 2,628
Restructuring expenses 123 1,023 8,351 2,157
Tender offer costs -- -- 630 --
Asset impairment and write-offs 2,378 -- 2,378 1,876
----------- ----------- ----------- -----------
Net income (loss), excluding non-recurring items $ 1,818 $ 528 $ (504) $ (3,845)
=========== =========== =========== ===========
Net income (loss) per basic and diluted common share,
excluding non-recurring items $ 0.09 $ 0.03 $ (0.02) $ (0.19)
=========== =========== =========== ===========
(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 60.9% 56.5% 65.2% 65.9%
ADR $ 102.50 $ 101.87 $ 104.52 $ 110.83
RevPAR $ 62.38 $ 57.56 $ 68.13 $ 73.00
Limited-service hotels:
Occupancy 59.8% 58.2% 65.1% 65.8%
ADR $ 77.91 $ 77.91 $ 79.27 $ 81.94
RevPAR $ 46.58 $ 45.37 $ 51.60 $ 53.88
INTERSTATE HOTELS & RESORTS, INC.
HISTORICAL STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS
ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------ -----------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue
Lodging revenues $ 621 $ 679 $ 2,908 $ 4,426
Management fees and other 23,106 9,937 57,201 39,599
Corporate housing 27,039 -- 46,818 --
--------- --------- --------- ---------
50,766 10,616 106,927 44,025
Other revenue from managed properties 196,581 67,127 494,243 274,801
--------- --------- --------- ---------
Total revenue 247,347 77,743 601,170 318,826
Operating expenses by department:
Lodging expenses 533 485 2,139 2,647
Corporate housing 22,663 -- 37,990 --
Undistributed operating expenses:
Administrative and general 18,156 7,296 48,166 31,123
Lease expense -- 8 -- 482
Depreciation and amortization 4,925 2,309 14,058 10,394
Merger costs 3,710 -- 9,363 --
Restructuring expenses (206) -- 12,614 --
Tender offer costs -- -- 1,000 --
Asset impairment and write-offs 3,787 -- 3,787 3,026
--------- --------- --------- ---------
53,568 10,098 129,117 47,672
Other expenses from managed properties 196,581 67,127 494,243 274,801
--------- --------- --------- ---------
Total operating expenses 250,149 77,225 623,360 322,473
--------- --------- --------- ---------
Net operating income (loss) (2,802) 518 (22,190) (3,647)
Interest expense, net 2,121 843 5,595 1,635
Equity in loss of affiliates 739 2,947 2,409 5,169
--------- --------- --------- ---------
Loss before minority interests and income taxes (5,662) (3,272) (30,194) (10,451)
Minority interests (492) 64 (197) 194
Income tax benefit (1,774) (371) (1,133) (3,295)
--------- --------- --------- ---------
Net loss (3,396) (2,965) (28,864) (7,350)
Mandatorily redeemable preferred stock:
Dividends -- 158 307 634
Accretion -- 16 356 62
Conversion incentive payments -- -- 9,250 --
--------- --------- --------- ---------
Net loss available to common shareholders $ (3,396) $ (3,139) $ (38,777) $ (8,046)
========= ========= ========= =========
Weighted average number of:
Basic and diluted shares of common
stock outstanding (1) 20,419 5,250 13,563 5,704
========= ========= ========= =========
Net loss per basic and diluted common share $ (0.17) $ (0.60) $ (2.86) $ (1.41)
========= ========= ========= =========
(1) Effected for the issuance of 4.6 shares of common stock on July 31, 2002
and the 1:5 reverse stock split