of $3.7 million Compared to Net Income of $4.4 million
in the 2003 1st Qtr;
RevPAR Improved 7.2% and Occupancy Up 4.6% to 66.3%
|ARLINGTON, Va. - May 5, 2004 -- Interstate Hotels & Resorts (NYSE:
IHR), the nation's largest independent hotel management company, today
reported results for the first quarter ended March 31, 2004.
For the 2004 first quarter, net loss was $(3.7) million, or $(0.12) per diluted share, compared to net income of $4.4 million, or $0.21 per diluted share, in the 2003 first quarter. In the 2004 first quarter, Adjusted EBITDA, excluding non-recurring items and special charges, was $3.3 million, up from $3.1 million in the 2003 first quarter. Net loss, excluding non-recurring items and special charges, was $(1.0) million, or $(0.03) per share, for the first-quarter reporting period, compared to $(2.7) million, or $(0.13) per share, for the same period in 2003. Interstate's results were within its previously estimated range for Adjusted EBITDA and EPS, excluding non-recurring items and special charges for the 2004 first quarter.
Total revenue for the 2004 first quarter was $237.4 million, compared to $257.4 million in the same period a year earlier. Total revenue, excluding other revenue from managed properties (reimbursable costs), was $43.2 million in the 2004 first quarter, compared to $44.9 million in 2003 first quarter. This decline of $1.7 million reflects fewer hotels in the company's management portfolio due primarily to a series of events, including the sale of hotels since January 1, 2003 by MeriStar Hospitality Corporation; the acquisition of RFS Hotel Investors, Inc. by CNL Hospitality; and the termination of management contracts with Winston Hotels, Inc. Termination fees in the first quarter of 2004 related to the loss of contracts totaled $1.1 million.
Same-store revenue per available room (RevPAR) for all managed hotels not currently held for sale by the owner or undergoing extensive renovations improved 7.2 percent to $69.41 from the prior year's first quarter. Occupancy rose 4.6 percent to 66.3 percent, and average daily rate (ADR) increased 2.4 percent to $104.73.
Same-store RevPAR for all full-service managed hotels improved 5.2 percent to $72.47 from the prior year's first quarter. Occupancy rose 2.8 percent to 65.5 percent, and ADR increased 2.3 percent to $110.62.
Same-store RevPAR for all select-service managed hotels improved 4.0 percent to $51.10, with occupancy increasing 2.6 percent to 63.8 percent and ADR rising 1.4 percent to $80.09.
"We saw strengthening fundamentals across our entire portfolio, a trend that is continuing as the economy and the hotel industry continue to recover," said Steve Jorns, chief executive officer. "Leisure travel remains at solid levels, and we are seeing some improvement in business travel. We continue to gain confidence that a sustainable recovery is underway."
During the 2004 first quarter, Interstate assumed management of the Ontario (Calif.) Airport Hilton. "We have an active pipeline of opportunities to add new management contracts due to an increasing number of hotels changing hands, which is when most owners change management companies," Jorns said, "Our operating and marketing systems, along with the depth of our support systems and purchasing power as well as other economies of scale continue to give us a competitive advantage over smaller hotel management companies."
The statement of operations for the 2004 first quarter includes the following non-recurring items and special charges:
* $3.3 million of intangible assets written off related
to the termination of 11 management contracts with MeriStar Hospitality
Corporation as a result of the sale of those properties;
Adjusted EBITDA and net income, excluding non-recurring items and special charges, are non-GAAP financial measures within the meaning of the Securities and Exchange Commission (SEC) regulations. See the discussion below in the "Non-GAAP Financial Measures" section of this press release. Reconciliations of Adjusted EBITDA and net income and Adjusted EBITDA and net income, excluding non-recurring items and special charges, are provided in the tables of this press release.
Interstate's BridgeStreet Corporate Housing Worldwide subsidiary made substantial improvements in the 2004 first quarter, compared to the same period a year earlier, as a result of restructuring several markets in the 2003 fourth and 2004 first quarters. In addition, the corporate housing market is showing signs of improvement, especially when compared to the first quarter of 2003 when SARS- and war-related concerns substantially dampened demand.
"We are beginning to see expected improvements in U.S. markets, especially Chicago, Washington, D.C. and New York, where our unit count has increased by an aggregate 122 units from last quarter," said Jorns. "Our London market is also seeing faster improvement than anticipated."
Jorns noted that inventory control is a key to profitability in the corporate housing market. "We will continue to respond quickly to changes in individual markets as conditions warrant," he said.
Proprietary Investment Fund
The company currently is moving forward on the formation of a proprietary investment fund to acquire hotels. "Our goal will be to acquire approximately $500 million to $600 million of hotels over the next 18 to 24 months," Jorns noted. "We believe this strategy will better balance our business model and allow us to participate in the recovery of the hotel sector through ownership."
Senior Management Team Enhanced
During the 2004 first quarter, Interstate strengthened its management team with the addition of J. William Richardson as chief financial officer and Kenneth E. Barr as chief accounting officer. "Our financial management team is now up to full strength, which will allow us to take greater advantage of the opportunities available to us as the economy rebounds," said Jorns.
The company continues to move forward on its plan to refinance its bank facility, which is expected to be completed by the end of the 2004 second quarter. The new facility is expected to reduce the company's average cost of debt and provide Interstate with the capacity and flexibility to acquire hotels through joint ventures.
Key Financial Information
On March 31, 2004, Interstate had:
* Total cash of $5.3 million
Outlook and Guidance
"We were encouraged by positive growth in both occupancy and ADR in the first quarter, which is continuing into the second quarter," Jorns said. "Preliminary results for April 2004 indicate RevPAR improvement of 8.5 percent over the same month last year. As the hotel industry recovery gains momentum, we will realize higher base and incentive fees."
Expected non-recurring charges and special items of $3.2 million of intangible assets to be written off related to the sale of eight properties owned by MeriStar Hospitality Corporation and potential restructuring charges related to BridgeStreet Corporate Housing, will contribute to Interstate's expected net loss in the range of $(1.9) million to $(1.3) million, or $(0.06) to $(0.04) per share, in the 2004 second quarter. Forecasted net income for the 2004 second quarter, excluding anticipated non-recurring items and special charges, is between $0.0 million and $0.6 million, or $0.00 to $0.02 per share. The company's Adjusted EBITDA estimate for the 2004 second quarter, excluding anticipated non-recurring items and special charges, is in the range of $4.9 million to $5.9 million.
For 2004, Interstate expects net income in the range of $1.1 million
to $3.5 million, or $0.03 to $0.11 per share. Interstate continues to expect
net income, excluding non-recurring items and special charges, in the range
of $5.9 million and $8.3 million, or $0.19 to $0.27; and Adjusted EBITDA,
excluding anticipated non-recurring items and special charges, of $27.0
million to $31.0 million.
Interstate Hotels & Resorts operates approximately 275 hospitality properties with more than 62,000 rooms in 40 states, the District of Columbia, Canada, Russia and Portugal. 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.
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.
Interstate Hotels & Resorts
Melissa Thompson, 703-387-3377
|Also See:||Interstate Hotels & Resorts Selected to Manage 548-Room Renaissance Hotel in Las Vegas and The Pantages Suites Hotel & Spa in Toronto / February 2004|
|JER Partners Acquires the Hilton Ontario Airport Hotel for $30 million; Signs Long Term Management Contract with Interstate Hotels & Resorts / March 2004|