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Results Exceed Analysts' Estimates by $0.04
WASHINGTON - Jan. 30, 2002 - 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, 2001.
For comparative purposes, the results for the three and 12 months ended
December 31, 2000, are presented on a pro forma basis as if the 106 leases
with MeriStar Hotels & Resorts (NYSE: MMH) that were converted to management
contracts on January 1, 2001, had been converted on January 1, 2000.
Results continue to reflect a sluggish economy and significantly lower
levels of travel nationwide following the terrorist attacks on September
11. Recurring funds from operations (Recurring FFO) for the 2001 fourth
quarter were $14.2 million, compared to $45.0 million for the 2000 fourth
quarter. Recurring FFO represents funds from operations, as defined by
the National Association of Real Estate Investment Trusts, adjusted for
significant non-recurring items. Recurring FFO per diluted share was $0.27,
compared to $0.84 for the 2000 fourth quarter. FFO results were $0.04 higher
than the consensus analysts' estimate of $0.23. Revenues decreased 20.8
percent to $227.5 million. Recurring earnings before interest expense,
income taxes, depreciation and amortization (EBITDA) declined 41.3 percent
to $43.8 million. Operating profit margins for owned hotels decreased 270
basis points to 29.6 percent.
During the fourth quarter, the company recorded the following non-recurring
charges:
-
An asset impairment charge of $43.6 million related to the write-down of
certain hotel assets. These write-downs resulted from the negative
impact of changes in the economic climate on the value of these assets.
-
A $6.7 million charge to recognize the effect of interest rate swaps that
were converted to non-hedging derivatives upon the repayment of portions
of the company's senior secured credit facility in December 2001.
Revenue per available room (RevPAR) for the 2001 fourth quarter declined
24.1 percent to $53.05. Average daily rate (ADR) decreased 10.0 percent
to $95.09, while occupancy fell 15.6 percent to 55.8 percent.
"MeriStar and the entire travel industry continued to feel the negative
effects of the sluggish economy and the dramatic post-September 11 falloff
in business and leisure travel nationwide, particularly at urban and resort
properties in `fly-to' locations,'' said Paul W. Whetsell, chairman and
CEO of MeriStar Hospitality. ``Although our RevPAR decline in the fourth
quarter was dramatic, our gross operating profit margins were down only
270 basis points, a testament to the effectiveness of cost-cutting measures
that were implemented subsequent to September 11. Since September when
RevPAR dropped 31 percent, we have seen a steady, gradual improvement in
our hotel operating results, with RevPAR declining less in each successive
month--26 percent in October, 24 percent in November and 22 percent in
December. We expect this trend to continue into 2002.''
Full-Year Results
For the full year 2001, recurring FFO decreased to $147.0 million, and
FFO per diluted share declined to $2.77. Revenues were off 9.4 percent
to $1.08 billion, and EBITDA declined 21.5 percent to $267.9 million. RevPAR
for all hotels owned for the full year fell 10.4 percent to $69.37. ADR
decreased 2.5 percent to $105.04, and occupancy decreased 8.2 percent to
66.0 percent.
Operating Performance in Significant Markets
RevPAR and EBITDA contributions in significant markets for the fourth
quarter and full year 2001 are as follows:
Three Months Ended
December 31, 2001
EBITDA % of
RevPAR Contribution
Total
Change (in 000s)
EBITDA
------
-----------
------
New Jersey
-19.8%
6,240 14.3%
Mid-Atlantic
-18.7%
6,223 14.2%
Houston
-3.0%
3,142
7.2%
Southern California
-25.8%
2,904
6.6%
Tampa/Clearwater
-19.0%
2,025
4.6%
Atlanta
-26.6%
1,551
3.5%
Orlando
-34.9%
1,343
3.1%
Connecticut
-15.3%
1,272
2.9%
0Northern California
-53.1%
1,129
2.6%
Chicago
-38.0%
795 1.8%
Dallas
-29.0%
625 1.4%
Colorado
-27.6%
591 1.3%
Southwest Florida
-33.7%
(578) -1.3%
Twelve Months Ended
December 31, 2001
EBITDA
% of
RevPAR Contribution
Total
Change (in 000s)
EBITDA
------ ------------
------
New Jersey
-9.9% 27,682
10.3%
Mid-Atlantic
-5.8% 27,848
10.4%
Houston
0.7% 11,944
4.5%
Southern California
-10.3% 20,023
7.5%
Tampa/Clearwater
-1.2% 16,038
6.0%
Atlanta
-12.6%
7,884
2.9%
Orlando
-14.3% 12,868
4.8%
Connecticut
-9.3%
6,227
2.3%
Northern California
-27.7% 18,850
7.0%
Chicago
-25.3%
7,133
2.7%
Dallas
-15.9%
4,652
1.7%
Colorado
-11.5%
5,379
2.0%
Southwest Florida
-7.0% 19,740
7.4% |
Improved Balance Sheet
"During the quarter, we made several improvements to our balance sheet
that will give us greater flexibility going forward,'' said John Emery,
MeriStar president and chief operating officer. "We amended the terms of
our senior credit facility, relaxing the financial covenants and allowing
us to extend the maturity. With the successful issuance of $250 million
in senior unsecured notes in December, we reduced our revolver to 13 percent
of our total debt at December 31. Our total debt is now $1.7 billion, with
an average maturity of six years at an average rate of 8.6 percent. Our
balance sheet remains prudently leveraged, and we are well prepared to
weather the current economic conditions and to take advantage of the expected
rebound in the economy later this year.''
Key Financial Information
-
Total debt to annual EBITDA of 6.1x
-
Annual interest coverage ratio of 2.2x
-
Capitalized interest of $0.8 million and $6.1 million, respectively, for
the three months and year ended December 31, 2001, compared to $2.9 million
and $8.6 million for the same periods in 2000
-
Capital expenditures of $11.8 million and $45.8 million, respectively,
for the three months and year ended December 31, 2001
-
Note receivable from MeriStar Hotels & Resorts was $36.0 million at
December 31, 2001
-
Cash balance of $44.8 million at December 31, 2001
Long-Term Debt
Long-term debt as of December 31, 2001, consists of the
following (in 000s):
Balance
Interest Rate Maturity
---------
--------------- --------
Revolver
$ 224,000 LIBOR + 400bps
2003
Convertible Notes
154,300
4.75% 2004
Subordinated Notes
202,817
8.75% 2007
Senior Unsecured Notes
299,192
9.00% 2008
Senior Unsecured Notes
248,420
10.50% 2009
CMBS
319,788
7.76% 2009
Senior Unsecured Notes
199,282
9.13% 2011
Mortgage Debt and Other
52,335
9.00% Various
$1,700,134 |
Dividend Policy
Whetsell noted that the challenging economic climate coupled with the
unprecedented decline in business travel since mid-September caused the
company to reduce its fourth quarter dividend from $0.505 to $0.01. ``During
these difficult times, we want to maintain a conservative approach toward
the dividend,'' Whetsell added. ``Based on the current outlook, we expect
to retain
the dividend at the $0.01 level through the second quarter. Based on
our forecast for 2002, we anticipate increasing the dividend to $0.25 in
the third quarter; however, the actual increase, if any, will be determined
by factors including our operating results, capital expenditure requirements,
the economic outlook and IRS dividend payout requirements for REITs.''
Earnings Guidance
Based on current trends, MeriStar estimates 2002 first-quarter RevPAR
to decline 14 to 18 percent, compared to the 2001 first quarter. EBITDA
in the first quarter is projected to be $58 million to $60 million, and
FFO per diluted share is expected to be $0.46 to $0.50. The company expects
full-year 2002 EBITDA to be $245 million and FFO per diluted share to be
$2.05. RevPAR in 2002 is expected to decline 2.5 percent compared to full
year 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,
2001 2000(1)
2001 2000(1)
-------- --------
-------- --------
Revenue
Hotel operations:
Rooms
$137,366 $176,113 $706,381
$782,288
Food and beverage
67,492 78,465 269,382
290,792
Other operating departments 17,047
19,938 81,971
84,660
Participating lease revenue 3,118
8,533 17,295
27,513
Office rental
and other revenue
2,476 4,216
9,859 11,929
-------- -------- --------- ---------
Total revenue
227,499 287,265 1,084,888 1,197,182
Hotel operating
expenses by department:
Rooms
35,358 44,524 170,925
184,791
Food and beverage
46,044 55,442 194,495
209,962
Other
operating departments
9,488 11,569
43,558 48,263
Office rental, parking
and other
operating expenses
613 826
3,057 2,731
Undistributed
operating expenses:
Administrative and general 40,995
45,385 169,279 176,997
Property operating costs 33,660
38,900 160,041 161,007
Property taxes,
insurance and other
17,581 16,063
75,609 72,310
Depreciation
and amortization
30,166 28,817 117,732
111,947
Interest expense, net
30,774 29,999 122,376
117,524
Write down of investment
in STS Hotel Net
- -
2,112 -
Loss on asset impairment 43,582
- 43,582
-
Swap termination costs
- -
9,297 -
Loss on fair value of
non-hedging derivatives
6,666 -
6,666 -
Felcor merger costs
- -
5,817 -
Costs to terminate
leases with Prime
Hospitality Corporation
- -
1,315 -
Restructuring charge
- -
1,080 -
-------- -------- ---------- ---------
Total expenses
294,927 271,525 1,126,941 1,085,532
-------- -------- ---------- ---------
Income before minority
interests, income taxes,
(loss)/gain on sale of
asset and extraordinary
(loss)/gain
(67,428) 15,740 (42,053)
111,650
Minority interests
(5,090) 1,444
(2,958) 10,240
Income taxes
(1,992) 286
(1,178) 2,028
-------- -------- --------- --------
Income before (loss)/gain
on sale of asset and
extraordinary (loss)/gain (60,346)
14,010 (37,917) 99,382
(Loss)/gain on sale
of asset, net of taxes
- -
(2,132) 3,425
Extraordinary
(loss)/gain, net of taxes (1,489)
- (2,713) 3,054
--------- -------- ---------- ---------
Net income
$ (61,835) $ 14,010 $ (42,762) $ 105,861
========= ======== ========== =========
Recurring funds from
operations (2), diluted
Income before (loss)/gain
on sale of asset and
extraordinary (loss)/gain $(60,346) $ 14,010
$ (37,917) 99,382
Minority interest to
common OP unit holders
(5,230) 1,302
(3,523) 9,675
Interest on
convertible debt
1,832 1,832
7,329 7,488
Hotel depreciation
and amortization
28,970 27,812 113,167
107,996
Non-recurring items
(net of income taxes):
Swap termination costs
- -
8,998 -
Loss on fair value of
non-hedging derivatives
6,500 -
6,500 -
Write down of investment
in STS Hotel Net
- -
2,046 -
Loss on asset impairment 42,497
- 42,497
-
Costs to terminate
leases with Prime
Hospitality Corporation
- -
1,272 -
Felcor merger costs
- -
5,622 -
Restructuring
- -
1,053 -
Deferred cost
on sale of asset
- -
- 1,542
--------- --------- --------- --------
$ 14,223 $ 44,956 $ 147,044
226,083
========= ========= ========= ========
Weighted average number
of diluted shares of
common stock outstanding 52,935
53,504 53,063
54,944
========= ========= ========= ========
Recurring funds
from operations
per diluted share
$ 0.27 $ 0.84
$ 2.77 4.11
========= ========= ========= ========
Operating Information
Recurring EBITDA
$ 43,760 $ 74,556 $ 267,924 $ 341,121
Occupancy
55.8% 66.1%
66.0% 71.9%
ADR
$ 95.09 $ 105.65 $ 105.04
$ 107.69
RevPAR
$ 53.05 $ 69.85 $ 69.37
$ 77.46
RevPAR Decrease
-24.05%
-10.44%
(1) For comparative purposes, the results
for the three and twelve months ended December 31, 2000 are presented on
a proforma basis assuming the leases with MeriStar Hotels & Resorts
were converted to management contracts on January 1, 2000.
(2) Recurring funds from operations
represents funds from
operations,
as defined by the National Assocation of Real
Estate Investment
Trusts, adjusted for significant
non-recurring
items. |
Washington, D.C.-based MeriStar Hospitality Corporation owns 112 principally
upscale, full-service hotels in major markets and resort locations with
28,597 rooms in 27 states, the District of Columbia and Canada.
This press release contains ``forward-looking statements,'' within the
meaning of the Private Securities Litigation Reform Act of 1995. |
