EXHIBIT 99.1
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[GRAPHIC OMITTED]
LOGO - MERISTAR]
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FEBRUARY 12, 2003
MERISTAR HOSPITALITY CORPORATION REPORTS FOURTH-QUARTER, FULL-YEAR RESULTS
WASHINGTON--Feb. 12, 2003--MeriStar Hospitality Corporation (NYSE: MHX), the
nation's third largest hotel real estate investment trust (REIT), today
announced results for the fourth quarter and year ended December 31, 2002.
For the 2002 fourth quarter, the company's net loss, which includes several
one-time charges described below, was $(124.9) million, or $(2.76) per diluted
share, compared to $(61.8) million, or $(1.37) per share in the 2001 fourth
quarter. Comparative funds from operations (FFO), assuming conversion of the
company's convertible notes, were $9.6 million, or $0.18 per share, compared to
$14.2 million, or $0.27 per share, in the 2001 fourth quarter. FFO per share
results were $0.01 higher than the consensus analysts' estimate of $0.17.
Comparative FFO represents funds from operations, as defined by the National
Association of Real Estate Investment Trusts, adjusted for significant
non-recurring or unusual items, and the effect of non-hedging derivatives. The
company has historically reported FFO per share results based on conversion of
its convertible notes, as the assumed conversion has been dilutive to annual FFO
per share results. For both the fourth quarter and full year 2002, conversion of
the notes was anti-dilutive. Comparative FFO for the 2002 fourth quarter,
assuming the convertible notes were not converted, was $7.8 million, or $0.16
per diluted share, compared to $12.4 million, or $0.26 per share in the 2001
fourth quarter.
Revenues increased 3.8 percent to $229.9 million for the fourth
quarter of 2002. Comparative earnings before interest expense, income taxes,
depreciation and amortization (EBITDA) decreased 1.6 percent to $43.1 million.
During the fourth quarter of 2002, the company recorded the following charges to
earnings:
o An asset impairment charge of $63.4 million related to the write-down
of hotel assets currently being marketed based on anticipated sales
values. The hotel assets currently being marketed are non-core assets,
consistent with the assets that were sold in 2002.
o A loss on discontinued operations of $30.5 million, which included an
asset impairment charge of $15.4 million on a hotel asset classified as
"held for sale."
o A $14.5 million charge to write down our note receivable from
Interstate Hotels & Resorts. In January 2003, the company received
$42.1 million, plus accrued interest, in settlement of the $56.1
million note.
o $3.2 million of costs related to the separation of management functions
between the company and Interstate Hotels & Resorts.
o A write-off of $1.6 million of deferred costs related to the credit
facility that was refinanced in the fourth quarter of 2002.
For the 2002 fourth quarter, comparable revenue per available room (RevPAR) rose
4.5 percent to $55.75 compared to the fourth quarter of 2001. A 5.9 percent
increase in occupancy to 59.1 percent was partially offset by a 1.4 percent
decline in average daily rate (ADR) to $94.27.
"We saw our first quarterly year-over-year RevPAR improvement since the first
quarter of 2001, yet we continued to feel the impact of the ongoing sluggish
economy," said Paul W. Whetsell, chairman and chief executive officer.
"Occupancy was up almost 6.0 percent for the quarter but a decline in average
rate was the primary reason for the softer than expected RevPAR results. We were
able to achieve FFO per share results in line with our guidance by controlling
owner expenses and generating stronger than anticipated food and beverage
revenue, despite weaker than expected RevPAR."
During the fourth quarter, the company continued to execute its strategy of
selling non-core assets with the sales of hotel assets in Las Vegas and San
Diego, and in January 2003, sold a second Las Vegas hotel. Total net proceeds
from the sales of these three assets were approximately $47 million. Whetsell
noted that the company has seven additional non-core assets actively being
marketed, which are expected to generate $50 million to $60 million in proceeds.
Also during the quarter, MeriStar made a number of executive changes in order to
separate management responsibilities from Interstate Hotels & Resorts, operator
of all 106 hotels. "With the challenging economic environment and Interstate's
increased size due to its recent merger, both companies required the full-time
attention of a dedicated management team," he explained. "Bruce Wiles was
promoted to chief operating officer, Donald Olinger joined MeriStar from Host
Marriott as chief financial officer, and Jerome Kraisinger will join MeriStar
shortly as general counsel." Whetsell remains chairman and chief executive
officer of both MeriStar Hospitality and Interstate Hotels & Resorts.
Full-Year Results
For the full year 2002, the company's net loss available to common stockholders
was $(161.3) million, or $(3.59) per diluted share, compared to a loss of
$(43.3) million, or $(0.97) per share in 2001. Revenues declined 7.0 percent to
$983.5 million in 2002. EBITDA dropped 19.4 percent from 2001 to $215.8 million.
Comparative FFO, assuming conversion of the convertible notes, was $79.8
million, or $1.49 per share, compared to $147.0 million, or $2.77 per share in
2001. Comparative FFO for the 2002 full year, assuming the convertible notes
were not converted, was $72.5 million, or $1.48 per share. RevPAR for all hotels
owned for the full year declined 8.6 percent to $63.69, with a 5.9 percent
decrease in average daily rate to $99.44 and a 2.9 percent decline in occupancy
to 64.0 percent.
Operating Performance in Significant Markets
MeriStar's fourth-quarter RevPAR increase was led by double-digit growth in six
of 13 major markets where the company has a significant concentration of
properties, including Chicago, the Mid-Atlantic, Orlando and Southwest Florida.
Only four markets showed declines, two of which, New Jersey and Connecticut,
continue to be heavily impacted by weak demand in New York City.
"We expect RevPAR improvements to continue to be difficult to achieve primarily
as a result of pressure on room rates," Whetsell said. "We have highly
sophisticated systems that allow us to monitor room rates and occupancy on a
real-time basis to help us achieve the best mix of business at our properties."
RevPAR and EBITDA contributions in significant markets for the
fourth quarter and full year 2002 are as follows:
THREE MONTHS ENDED
DECEMBER 31, 2002
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EBITDA % OF
REVPAR CONTRIBUTION TOTAL
CHANGE (IN 000S) EBITDA
----------- ------------ ------
Mid-Atlantic 10.8% 5,947 13.8%
New Jersey -17.7% 4,198 9.8%
Northern California 6.6% 1,048 2.4%
Southern California 7.9% 2,722 6.3%
Southwest Florida 15.4% (866) -2.0%
Tampa/Clearwater 2.7% 1,829 4.2%
Houston -2.2% 2,318 5.4%
Orlando 13.1% 1,702 3.9%
Chicago 17.4% 1,622 3.8%
Atlanta 14.8% 1,698 4.0%
Colorado 12.8% 557 1.3%
Connecticut -5.5% 574 1.3%
Dallas -1.2% 404 0.9%
TWELVE MONTHS ENDED
DECEMBER 31, 2002
-----------------
EBITDA % OF
REVPAR CONTRIBUTION TOTAL
CHANGE (IN 000S) EBITDA
----------- ----------- -------
Mid-Atlantic -1.7% 26,566 12.3%
New Jersey -22.8% 14,351 6.6%
Northern California -19.5% 11,953 5.5%
Southern California -9.2% 13,613 6.3%
Southwest Florida -9.5% 10,185 4.7%
Tampa/Clearwater -11.5% 12,152 5.6%
Houston -7.7% 9,827 4.6%
Orlando -7.3% 9,497 4.4%
Chicago -11.2% 6,184 2.9%
Atlanta 0.5% 7,876 3.6%
Colorado -5.7% 4,710 2.2%
Connecticut -13.6% 3,117 1.4%
Dallas -14.4% 2,096 1.0%
Increased Liquidity
"Improving liquidity will continue to be a major focus in 2003," said Donald D.
Olinger, executive vice president and chief financial officer. "The sale of the
two hotels in the fourth quarter generated proceeds of $35 million. Following
the close of the quarter, the company received a total of $54 million from the
sale of a hotel in Las Vegas and the settlement of the note receivable from
Interstate Hotels & Resorts."
At the end of January 2003, MeriStar had approximately $70 million of cash,
including $50 million of unrestricted cash. The company intends to carry a
similar or slightly larger balance throughout 2003. Depending on the timing of
additional asset sales and the operating climate, the company may use a portion
of its available cash to buy back its debt in the open market.
The sale of the three hotels and settlement of the note with Interstate impacted
the company's leverage covenant due to the loss of trailing EBITDA on a pro
forma basis. "We currently have no borrowings on our bank credit facility and do
not anticipate the need to draw on it during 2003," Olinger said. "We have
decided to increase our cash reserves with the proceeds from our most recent
transactions, as opposed to reducing our debt outstanding; therefore, we are not
able to draw on our credit facility at this time. We are currently in compliance
with all of our debt agreements. As we continue to sell non-core hotel assets
and hold the cash on our balance sheet, our credit facility leverage ratios will
decline on a trailing basis. Therefore, we intend to negotiate an amendment to
the facility to maintain our future compliance until such time as we apply this
unrestricted cash to reduce our leverage."
Key Financial Information
- - Total debt to annual EBITDA 7.7x
- - Total net debt to annual EBITDA 7.4x
- - Annual interest coverage ratio 1.5x
- - Capital expenditures, fourth quarter $9.7 million
- - Capital expenditures, full year $37.7 million
- - Cash balance at December 31, 2002 $54.3 million
Long-Term Debt
Long-term debt as of December 31, 2002 consists of the following (amounts in
thousands):
INTEREST
BALANCE RATE MATURITY
------- ---- --------
Revolver $ - LIBOR +388bps 2003
Convertible Notes 154,300 4.75% 2004
Subordinated Notes 203,205 8.75% 2007
Senior Unsecured Notes 299,325 9.00% 2008
Senior Unsecured Notes 248,637 10.50% 2009
CMBS 314,626 7.76% 2009
Senior Unsecured Notes 395,978 9.13% 2011
Mortgage Debt and Other 38,031 9.00% Various
-----------
$ 1,654,102
2003 Outlook
"At this time, we anticipate 2003 will be another challenging year for the hotel
industry," said Whetsell. "The state of the economy and the concerns over a
possible war with Iraq make visibility difficult. However, we will continue to
focus on maximizing operating profit margins and increasing market share, and we
expect industry fundamentals to begin to turn favorable in the second half of
2003."
As previously stated, the company increased cash reserves with proceeds from the
recent asset sales in 2002 and 2003, as well as from the settlement of the note
with Interstate in 2003 in lieu of repaying debt. The net effect of these
transactions is a reduction of $10 million in FFO from 2002 to 2003. The
company's estimates also exclude the potential benefit of interest savings from
any future debt repurchases.
Based on current projections, the company estimates that first-quarter 2003
RevPAR will be down 2 percent to 4 percent, compared to the 2002 first quarter.
First-quarter 2003 EBITDA is expected to be between $46 million and $50 million,
and FFO per share between $0.22 and $0.30. For the full year, the company
projects RevPAR to be flat to up two percent. The company projects full-year
EBITDA of $190 million to $200 million and FFO per share of $1.00 to $1.20.
Capital expenditures are expected to be between $40 million and $50 million.
Based on these anticipated operating levels, the company does not anticipate
paying a dividend in 2003.
MeriStar will hold a conference call to discuss its fourth-quarter and full-year
results today, February 12, at 10 a.m. Eastern time. Interested parties may
visit the company's Web site at www.meristar.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 522007 to hear a
telephone replay. The telephone replay will be available through Monday,
February 17, 2003.
Washington, D.C.-based MeriStar Hospitality Corporation owns 106 principally
upscale, full-service hotels in major markets and resort locations with 27,432
rooms in 26 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 includes various references to comparative FFO and EBITDA.
Comparative FFO represents funds from operations, as defined by the National
Association of Real Estate Investment Trusts, adjusted for significant
non-recurring or unusual items, and the effect of non-hedging derivatives. The
company considers comparative FFO and EBITDA to be indicative measures of its
operating performance due to the significance of its long-lived assets, and
because such data is considered useful by the investment community to better
understand the company's results, and can be used to measure its ability to
service debt, fund capital expenditures, and expand its business. However, such
information should not be considered as an alternative to net income, operating
profit, cash from operations, or any other operating or liquidity performance
measure prescribed by accounting principles generally accepted in the United
States. Cash expenditures for various long-term assets, interest expense (for
EBITDA purposes only) and other items that have been, and will be, incurred are
not reflected in the comparative FFO and EBITDA presentations. Although FFO and
EBITDA are considered standard benchmarks utilized by the investment community,
our comparative FFO and EBITDA may not be comparable to similarly titled
measures reported by other companies.
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;
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 the 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 TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue
Hotel operations:
Rooms $140,016 $133,423 $634,920 $689,215
Food and beverage 69,282 66,492 257,034 265,815
Other operating
departments 16,561 16,425 73,817 80,385
Participating lease
revenue - 448 - 5,094
Office rental and other
revenue 4,037 4,646 17,682 16,829
---------- --------- ---------- ----------
Total revenue 229,896 221,434 983,453 1,057,338
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Hotel operating expenses
by department:
Rooms 37,600 34,409 156,773 167,265
Food and beverage 48,169 45,309 184,913 191,838
Other operating
departments 10,154 9,333 43,003 43,032
Office rental, parking and
other operating expenses 720 613 3,004 3,057
Undistributed operating
expenses:
Administrative and
general (1) 43,598 39,995 170,456 166,726
Property operating costs 34,505 32,756 149,971 156,350
Property taxes,
insurance and other 15,552 17,113 67,732 73,418
Depreciation and
amortization 30,164 29,065 119,998 113,278
Interest expense, net 33,863 30,826 136,429 122,472
Change in fair value of
non-hedging derivatives 235 - 4,446 -
Loss on asset
impairments 63,364 32,335 63,364 32,335
Write down of note
receivable from
Interstate Hotels and
Resorts 14,517 - 14,517 -
Write off of deferred
costs 1,615 - 3,144 -
Loss on fair value of
non-hedging derivatives - 6,666 4,735 6,666
Swap termination costs - - - 9,297
Write down of investment
in STS Hotel Net - - - 2,112
FelCor merger costs - - - 5,817
Costs to terminate
leases with Prime
Hospitality Corporation - - - 1,315
---------- --------- ---------- ----------
Total expenses 334,056 278,420 1,122,485 1,094,978
---------- --------- ---------- ----------
Loss from continuing
operations before
minority interests,
loss on sale of
assets, income taxes,
discontinued opera-
tions, and
extraordinary loss (104,160) (56,986) (139,032) (37,640)
Minority interests 8,609 5,090 10,574 2,958
Loss on sale of assets - - - (2,176)
Income tax benefit 574 1,705 1,479 1,101
---------- --------- ---------- ----------
Loss from continuing
operations before
discontinued operations
and extraordinary loss (94,977) (50,191) (126,979) (35,757)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Discontinued operations (2):
Loss from discontinued
operations (3) (30,512) (10,442) (34,956) (4,413)
Income tax benefit 613 287 687 121
---------- --------- ---------- ----------
Loss from discontinued
operations (29,899) (10,155) (34,269) (4,292)
Loss before extraordinary
loss (124,876) (60,346) (161,248) (40,049)
Extraordinary loss on early
extinguishment of debt,
net of taxes - (1,489) - (2,713)
---------- --------- ---------- ----------
Net loss (124,876) (61,835) (161,248) (42,762)
Dividends declared on
unvested restricted stock - (4) (4) (502)
---------- --------- ---------- ----------
Loss available to common
stockholders $(124,876) $(61,839) $(161,252) $(43,264)
========== ========= ========== ==========
Loss per diluted common
share $(2.76) $(1.37) $(3.59) $(0.97)
========== ========= ========== ==========
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Comparative funds from
operations (4), diluted:
Loss before
extraordinary loss $(124,876) $(60,346) $(161,248) $(40,049)
Loss on asset
impairments, net of
minority interest 78,391 42,497 78,391 42,497
Loss on sold assets, net
of taxes 14,497 - 20,773 2,132
Minority interest to
common OP unit holders (8,750) (5,230) (11,139) (3,523)
Interest on convertible
debt - - - 7,329
Hotel depreciation and
amortization 28,941 28,970 115,786 113,167
---------- --------- ---------- ----------
Funds from operations (11,797) 5,891 42,563 121,553
Interest rate swaps 235 - 4,446 -
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Significant non-recurring
items, net of minority
interest and taxes:
Write down of note
receivable from
Interstate Hotels and
Resorts 14,511 - 14,511 -
Restructuring and
organization costs (1) 3,243 - 3,243 1,053
Write off of deferred
costs 1,614 - 3,103 -
Loss on fair value of
non-hedging derivatives - 6,500 4,617 6,500
Swap termination costs - - - 8,998
Write down of investment
in STS Hotel Net - - - 2,046
FelCor merger costs - - - 5,622
Costs to terminate
leases with Prime
Hospitality Corporation - - - 1,272
---------- --------- ---------- ----------
Comparative funds from
operations $7,806 $12,391 $72,483 $147,044
========== ========= ========== ==========
Weighted average number of
diluted shares of common
stock and operating units
outstanding 49,042 48,397 48,900 53,063
========== ========= ========== ==========
Comparative funds from
operations per diluted
share $0.16 $0.26 $1.48 $2.77
========== ========= ========== ==========
Comparative funds from
operations per diluted
share, adjusted for
convertible debt (5):
Adjusted funds from
operations $9,638 $14,223 $79,812 $147,044
========== ========= ========== ==========
Adjusted weighted average
number of diluted shares
of common stock and
operating units
outstanding 53,580 52,935 53,438 53,063
========== ========= ========== ==========
Adjusted comparative funds
from operations $0.18 $0.27 $1.49 $2.77
========== ========= ========== ==========
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Operating Information:
Comparative EBITDA (6) $43,070 $43,760 $215,839 $267,924
Occupancy 59.1% 55.8% 64.0% 65.9%
ADR $94.27 $95.60 $99.44 $105.72
RevPAR $55.75 $53.35 $63.69 $69.72
RevPAR increase (decrease) 4.5% -8.6%
(1) In 2002 we incurred $3,244 of costs related to the formal separation of
management functions from Interstate Hotels & Resorts. In 2001 we incurred
a restructuring charge of $1,080 in connection with operational changes at
our corporate headquarters. The costs for both years are included in
administrative and general expenses on our income statement. We excluded
the costs from our comparative FFO because we consider them to be
non-recurring in nature.
(2) 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, any income or loss from the assets prior to disposal and any income
or loss from assets classified as held for sale, are required to be
reported as discontinued operations. We sold three hotels during the third
quarter and two hotels during the fourth quarter of 2002. In January 2003,
we sold one hotel classified as held for sale at December 31, 2002. As
required by SFAS No. 144, we have reclassified prior year periods to
reflect operations of the six hotels as discontinued operations.
(3) Includes loss on sold assets of $14,793 and $21,197 for the three months
and twelve months ended in 2002, respectively. Also includes $15,368 loss
on asset impairment in 2002 for property sold in January 2003.
(4) 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.
(5) FFO and FFO per share as adjusted for the conversion of our convertible
debt, which was anti-dilutive for the three months ended December 31, 2002
and 2001, and for the twelve months ended December 31, 2002.
(6) Comparative EBITDA represents consolidated earnings before interest
expense, income taxes, depreciation and amortization and includes the
operations from the assets included in discontinued operations, adjusted
for non-recurring items.
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
Comparative EBITDA from
continuing operations $42,842 $41,906 $210,845 $256,732
Comparative EBITDA from
discontinued operations 228 1,854 4,994 11,192
---------- --------- ---------- ----------
Comparative EBITDA $43,070 $43,760 $215,839 $267,924
========== ========= ========== ==========
MERISTAR CONTACT: BRUCE RIGGINS, VP STRATEGIC PLANNING & ANALYSIS, (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