| WASHINGTON - Aug. 7, 2002 -- MeriStar Hospitality
Corporation (NYSE: MHX), the nation's third largest hotel real estate investment
trust (REIT), today announced financial results for the second quarter
ended June 30, 2002.
The results were impacted by a continued sluggish economy and a slower
than expected rebound in travel, especially the transient business travel
segment. Excluding the $3.1 million impact of non-hedging derivatives related
to debt that was repaid in the first quarter, funds from operations (FFO)
for the 2002 second quarter were $37.6 million, compared to $60.8 million
for the 2001 second quarter. FFO per diluted share was $0.70, compared
to $1.14 for the 2001 second quarter. FFO results were $0.01 ahead of the
consensus analysts' estimate.
Revenues declined 8.4 percent to $281.3 million. Earnings before interest
expense, income taxes, depreciation and amortization (EBITDA) fell 21.3
percent to $71.9 million. Diluted net income per share was $0.06, compared
to $0.52 per share in the 2001 second quarter. Hotel operating profit margins
declined 360 basis points to 33.7 percent.
Same-store revenue per available room (RevPAR) declined 11.3 percent
to $70.60. Average daily rate (ADR) decreased 7.2 percent to $101.65, while
occupancy fell 4.4 percent to 69.5 percent.
"The rebound in travel that was anticipated by the industry failed to
materialize in the second quarter," said Paul Whetsell, chairman and chief
executive officer. "Our group and leisure business have held up well in
most markets, but the transient business travel segment continues to lag.
We are pleased that our operator has been able to maintain margins at relatively
high levels despite the sharp decline in revenue. We believe many of the
cost-saving measures that have been initiated in the past year will be
permanent and will benefit us tremendously when business travel begins
to rebound."
Whetsell noted that its paper-clipped management company, MeriStar Hotels
& Resorts, had successfully completed a merger with Interstate Hotels
Corporation, effective July 31, and had taken on a new name, Interstate
Hotels & Resorts (NYSE: IHR). "We expect to see our hotels gain
greater economies of scale in marketing and purchasing with Interstate
Hotels & Resorts and believe the merger will have a long-term positive
effect on MeriStar Hospitality's results."
Following the close of the second quarter, MeriStar sold three hotels
as part of its on-going program to sell non-strategic assets. "The
hotels did not fit our long-term strategy of owning upscale, full-service
hotels in major markets with high barriers to entry. We have several more
hotels that fall into this category and will market them for sale as conditions
warrant."
Whetsell noted that MeriStar is seeing more hotels available for acquisition
at more reasonable prices than in several years. "While we have no immediate
plans to acquire assets, we intend to take full advantage of opportunities
as they arise," he said.
Operating Performance in Significant Markets
RevPAR declined in all major markets with Northern and Southern California,
the Northeast, Southwest Florida and Chicago reporting the largest declines.
The Mid-Atlantic region, which was particularly hard hit after the September
11 terrorist attacks, declined only 3.1 percent.
RevPAR and EBITDA contributions in significant markets for the second
quarter were:
Three Months Ended June 30, 2002
EBITDA
RevPAR Contribution
% of Total
Change (in 000s)
EBITDA
------------- ----------------- -----------------
Mid-Atlantic -3.1%
10,203
14.2%
New Jersey
-22.7%
6,005
8.4%
Northern California -26.1%
5,556
7.7%
Southern California -13.3%
4,530
6.3%
Southwest Florida -17.2%
3,832
5.3%
Tampa/Clearwater -10.8%
3,737
5.2%
Houston
-11.0%
3,018
4.2%
Orlando
-8.1%
2,646
3.7%
Chicago
-17.8%
2,492
3.5%
Atlanta
-5.9%
2,034
2.8%
Colorado
-5.8%
1,665
2.3%
Connecticut -16.8%
1,470
2.0%
Dallas
-11.3%
918
1.3% |
Balance Sheet Improved
During the second quarter, MeriStar paid off the remaining outstanding
balance on its $150 million revolving line of credit from cash flow, according
to John Emery, president and chief operating officer. "We have significantly
strengthened our balance sheet this year through the sale of $200 million
of senior unsecured notes in February, the pay down of our revolving credit
facility, and the sale of three hotels in July. Our balance sheet continues
to improve, despite the difficult economy. Our average debt maturity is
7.4 years at an average rate of 8.6 percent."
Key Financial Information
-
Total debt to annual EBITDA of 7.2x
-
Annual interest coverage ratio of 1.7x
-
Capital expenditures of $10.5 million for the quarter ended June 30, 2002
-
Notes receivable from MeriStar Hotels & Resorts of $59.1 million at
June 30, 2002
-
Cash balance of $44.3 million at June 30, 2002
Long-Term Debt
Long-term debt as of June 30, 2002 consists of the following:
(amounts in thousands)
Interest
Balance Rate
Maturity
Revolver
$ - LIBOR +
400bps 2003
Convertible Notes
154,300
4.75% 2004
Subordinated Notes
203,011
8.75% 2007
Senior Unsecured Notes 299,258
9.00% 2008
Senior Unsecured Notes 248,532
10.50% 2009
CMBS
317,258
7.76% 2009
Senior Unsecured Notes 395,751
9.13% 2011
Mortgage Debt and Other 51,025
9.00% Various
$ 1,669,135
Dividend and Guidance
"Due to the continued sluggish economy, we are revising our guidance
and dividend expectations for the third quarter," said Emery. "For
the 2002 third quarter, we estimate that RevPAR will be flat to down two
percent, compared to the same period in 2001. FFO per share is projected
to be $0.20 to $0.25, and EBITDA is estimated at $44 million to $47 million.
For the full year 2002, we project FFO per share of $1.70 to $1.80 and
EBITDA of $228 million to $233 million with RevPAR declining 4 percent
to 6 percent.
"Based on our current forecast, we expect to continue paying a $0.01
dividend for the third quarter, and we will evaluate the fourth-quarter
dividend as we gain more visibility on results for the second half of 2002."
MeriStar Hospitality Corporation
Statements of Operations
(Unaudited, in thousands except per share amounts and
operating statistics)
Three Months Ended Six Months Ended
June 30,
June 30,
2002 2001
2002 2001
Revenue
Hotel operations:
Rooms
$ 183,422 $ 202,380 $ 353,970 $ 402,760
Food and beverage
71,905 74,092 133,970
145,383
Other operating
departments
20,608 23,534 39,716
46,005
Participating lease
revenue
- 3,752
- 7,536
Office rental and
other revenue
5,320 3,409 10,263
8,167
Total revenue
281,255 307,167 537,919
609,851
Hotel operating
expenses by
department:
Rooms
43,443 46,565 82,378
92,287
Food and beverage
50,445 52,486 94,850
103,890
Other operating
departments
11,651 12,046 22,345
23,616
Office rental, parking
and other operating
expenses
790 688
1,604 1,625
Undistributed operating
expenses:
Administrative and
general
44,727 43,138 88,198
88,055
Property operating
costs
41,453 42,278 78,835
84,977
Property taxes,
insurance and other
16,842 18,654 36,903
37,041
Depreciation and
amortization
31,449 28,708 62,350
58,405
Interest expense, net
34,063 30,032 68,662
60,261
Change in fair value
of non-hedging
derivative
3,090 -
3,079 -
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
- 3,789
- 3,789
Costs to terminate
leases with Prime
Hospitality
Corporation
- 1,315
- 1,315
Total expenses
277,953 279,699 545,468
566,670
Income (loss) before
minority interests,
income taxes, loss on
sale of asset and
extraordinary loss
3,302 27,468 (7,549)
43,181
Minority interests
245 2,017 (382)
3,121
Income taxes
84 891
(197) 1,402
Income (loss) before loss
on sale of asset and
extraordinary loss
2,973 24,560 (6,970)
38,658
Loss on sale of asset,
net of taxes
- -
- (1,059)
Extraordinary loss, net
of taxes
- -
- (1,224)
Net income (loss)
$ 2,973 $ 24,560 $ (6,970) $ 36,375
Dividends paid on
unvested restricted
stock
(2) (202)
(3) (403)
Income (loss) available
to common stockholders
$ 2,971 $ 24,358 $ (6,973) $ 35,972
Net income (loss) per
diluted common share
$ 0.06 $ 0.52 $ (0.16)
$ 0.79
Recurring funds from
operations (1), diluted
Income (loss) before
loss on sale of
asset and
extraordinary loss
$ 2,973 $ 24,560 $ (6,970) $ 38,658
Minority interest to
common OP unit
holders
104 1,876 (664)
2,839
Interest on
convertible debt
1,833 1,833 3,665
3,665
Hotel depreciation and
amortization
29,598 27,613 58,249
56,232
Interest rate swaps
3,090 -
3,079 -
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
- 3,667
- 3,667
Costs to terminate
leases with Prime
Hospitality
Corporation
- 1,272
- 1,272
$ 37,598 $ 60,821 $ 63,464 $ 117,377
Weighted average number
of diluted shares of
common stock and
operating units
outstanding
53,484 53,517 53,357
53,396
Recurring funds from
operations per diluted
share
$ 0.70 $ 1.14 $ 1.19
$ 2.20
===========================================
Operating Information
Recurring EBITDA
$ 71,904 $ 91,312 $ 132,806 $ 178,360
Occupancy
69.5% 72.7% 66.4%
71.4%
ADR
$ 101.65 $ 109.48 $ 103.20 $ 112.45
RevPAR
$ 70.60 $ 79.61 $ 68.53
$ 80.33
RevPAR Decrease
-11.32%
-14.69%
(1) Recurring funds from operations
represents funds from
operations,
as defined by the National Assocation of Real
Estate Investment
Trusts, adjusted for the impact of
non-hedging
derivatives and significant non-recurring items. |
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.
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. |
