MeriStar Hospitality Corporation
Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
2004 2003
Revenue:
Hotel operations:
Rooms
$135,666 $131,567
Food
and beverage
51,879 52,176
Other
hotel operations
17,043 16,647
Office rental, parking
and other revenue 2,970
3,263
--------- ---------
Total revenue
207,558 203,653
Hotel operating expenses:
Rooms
33,224 31,209
Food and beverage
38,881 37,566
Other hotel operating expenses
10,363 9,505
Office rental, parking and other expenses
585 630
Other operating expenses:
General and administrative
38,021 34,681
Property operating costs
31,488 29,505
Depreciation and amortization
26,218 24,169
Property taxes, insurance
and other 17,061
17,193
Loss on asset impairments
1,238 -
--------- ---------
Operating expenses
197,079 184,458
--------- ---------
Operating income
10,479 19,195
Minority interest
946 3,677
Interest expense, net
(34,380) (34,718)
Loss on early extinguishments of debt
(5,923) -
--------- ---------
Loss before income taxes and discontinued
operations
(28,878) (11,846)
Income tax benefit
433 175
--------- ---------
Loss from continuing operations
(28,445) (11,671)
Discontinued operations:
Loss from discontinued operations
before
tax benefit
(11,980) (58,096)
Income tax benefit
180 21
--------- ---------
Loss from discontinued operations
(11,800) (58,075)
--------- ---------
Net loss
$(40,245) $(69,746)
========= =========
Weighted average number of diluted shares of
common stock outstanding
68,640 45,548
========= =========
Loss per diluted common share
$ (0.59) $ (1.53)
========= =========
Funds From Operations:
(in thousands, except per share amounts)
Three Months Ended
March 31,
2004 2003
Net loss
$(40,245) $(69,746)
Depreciation and amortization
of real
estate assets
24,502 27,613
Loss on disposal of assets
6,946 -
Minority interest to common
OP unit
holders
(996) (1,412)
--------- ---------
Funds from operations as reported in SEC
filings
$ (9,793) $(43,545)
========= =========
Weighted average number of shares of common
stock outstanding
68,640 45,548
========= =========
Funds from operations per share
$ (0.14) $ (0.96)
========= =========
Funds From Operations, as adjusted:
Funds from operations as reported
in SEC
filings
$ (9,793) $(43,545)
Loss on asset impairments
5,011 56,677
Loss on early extinguishments
of debt 5,923
-
Write off of deferred financing
fees 1,266
-
Minority interest to common
OP unit
holders, assuming conversion
(91) (2,406)
--------- ---------
Funds from operations, as adjusted
$ 2,316 $ 10,726
========= =========
Weighted average number of shares of common
stock and common OP units outstanding
71,820 49,033
========= =========
Funds from operations per diluted share, as
adjusted
$ 0.03 $ 0.22
========= =========
EBITDA and Adjusted EBITDA are comprised of
the following:
(in thousands)
Three Months Ended
March 31,
2004 2003
--------- ---------
Loss from continuing operations
$(28,445) $(11,671)
Loss from discontinued operations
(11,800) (58,075)
--------- ---------
Net loss
$(40,245) $(69,746)
========= =========
Loss from continuing operations
$(28,445) $(11,671)
Interest expense, net
34,380 34,718
Income tax benefit
(433) (175)
Depreciation and amortization (a)
26,218 24,169
--------- ---------
EBITDA from continuing operations
31,720 47,041
Loss on asset impairments
1,238 -
Minority interest
(946) (3,677)
Loss on early extinguishments of debt
5,923 -
--------- ---------
Adjusted EBITDA from continuing operations
$ 37,935 $ 43,364
========= =========
Loss from discontinued operations
$(11,800) $(58,075)
Interest expense, net
11 158
Income tax benefit
(180) (21)
Depreciation and amortization
943 4,825
--------- ---------
EBITDA from discontinued operations
(11,026) (53,113)
Loss on asset impairments
3,773 56,677
Loss on disposal of assets
6,946 -
--------- ---------
Adjusted EBITDA from discontinued operations
$ (307) $ 3,564
========= =========
Adjusted EBITDA, total operations
$ 37,628 $ 46,928
========= =========
(a) Depreciation and amortization included the write-off
of unamortized deferred financing costs totaling $1.3 million for the three
months ended March 31, 2004 related to our early extinguishments of debt
during this period.
Operating Information for Core
Assets (73 Properties) (b):
Three Months Ended
March 31,
2004 2003
Occupancy
67.4% 66.5%
ADR
$ 109.27 $ 107.97
RevPAR
$ 73.70 $ 71.76
(b) As of March 31, 2004, we owned 81 hotels. We have
73 hotels we consider our core assets. Eight assets remained in our disposition
program, five of which are classified as held for sale and included in
discontinued operations.
Selected Balance Sheet Data:
(in thousands)
March 31, December
31,
2004 2003
Common shares and operating partnership
units outstanding
76,200 69,908
Property and equipment, net
$1,972,035 $2,035,720
Restricted cash
44,656 42,523
Cash and cash equivalents
194,977 230,884
Total assets
2,376,025 2,487,939
Long-term debt
1,527,278 1,638,028
Total stockholders' equity
653,640 653,613
-0-
MeriStar Hospitality Corporation
Reconciliation of 2004 forecasted net loss to funds from
operations
and funds from operations, as adjusted per diluted
share and net
loss to EBITDA and Adjusted EBITDA:
(in thousands, except per share amounts)
Three Months Ending
June 30, 2004
Forecast
Low-end High-end
of range of range
Forecasted funds from operations:
Forecasted net loss (c)
$ (5,883) $ (3,033)
Adjustments to forecasted net loss:
Depreciation and
amortization of real
estate assets
23,077 23,077
Minority interest
to common OP unit
holders
(88) 20
--------- ---------
Funds from operations
$ 17,106 $ 20,064
========= =========
Forecasted funds from operations,
as adjusted:
Funds from operations
$ 17,106 $ 20,064
Loss on early extinguishments of debt
2,878 2,878
Write off of deferred financing fees
561 561
--------- ---------
Funds from operations, as adjusted
$ 20,545 $ 23,503
========= =========
Weighted average number of diluted
shares
of common stock outstanding
82,935 82,935
Common OP units outstanding
3,099 3,099
--------- ---------
Weighted average number of
diluted shares of common stock outstanding
and common OP units
86,034 86,034
========= =========
Funds from operations per diluted share
$ 0.20 $ 0.23
========= =========
Funds from operations per diluted share, as
adjusted
$ 0.24 $ 0.27
========= =========
Forecasted EBITDA and Adjusted EBITDA:
Forecasted net loss (c)
$ (5,883) $ (3,033)
Interest expense, net
30,251 30,249
Write off of deferred financing fees
561 561
Income tax benefit
(46) (2)
Depreciation and amortization
24,327 24,327
--------- ---------
EBITDA, total operations
49,210 52,102
Loss on early extinguishments of debt
2,878 2,878
Minority interest to
common OP unit holders
(88) 20
--------- ---------
Adjusted EBITDA, total operations
$ 52,000 $ 55,000
========= =========
Year Ending
December 31, 2004
Forecast
Low-end High-end
of range of range
Forecasted funds from operations:
Forecasted net loss (c)
$(87,329) $(79,699)
Adjustments to forecasted net loss:
Depreciation and
amortization of real
estate assets
96,173 96,173
Minority interest
to common OP unit
holders
(2,554) (2,272)
Loss on disposal
of assets
6,946 6,946
--------- ---------
Funds from operations
$ 13,236 $ 21,148
========= =========
Forecasted funds from operations, as adjusted:
Funds from operations
$ 13,236 $21,148
Loss on early extinguishments of debt
11,403 11,403
Loss on asset impairment
5,011 5,011
Write-off of deferred financing costs
2,332 2,332
--------- ---------
Funds from operations, as adjusted
$ 31,982 $ 39,894
========= =========
Weighted average number of diluted
shares
of common stock outstanding
81,362 81,362
Common OP units outstanding
3,102 3,102
--------- ---------
Weighted average number of diluted
shares of common stock outstanding
and common OP units
84,464 84,464
========= =========
Funds from operations per diluted share
$ 0.16 $ 0.25
========= =========
Funds from operations per diluted share, as
adjusted
$ 0.38 $ 0.47
========= =========
Forecasted EBITDA and Adjusted EBITDA:
Forecasted net loss (c)
$(87,329) $(79,699)
Interest expense, net
123,981 123,953
Write off of deferred financing fees
2,332 2,332
Income tax benefit
(1,246) (1,130)
Depreciation and amortization
101,315 101,315
--------- ---------
EBITDA, total operations
139,053 146,771
Loss on early extinguishments of debt
11,403 11,403
Loss on asset impairment
5,011 5,011
Loss on disposal of assets
6,946 6,946
Minority interest to common OP unit
holders (2,413) (2,131)
--------- ---------
Adjusted EBITDA, total operations
$160,000 $168,000
========= =========
(c) Forecasted net loss does not include any possible
future losses on asset impairments or gains or losses on the sale of assets.
* (a) See reconciliations of net loss
to FFO per diluted share and Adjusted FFO per diluted share and net loss
to Adjusted EBITDA included in the tables of this press release. Forecasted
net loss does not include any possible future losses on asset impairments
or gains or losses on the sales of assets.
* (b) This press release includes
various references to FFO, Adjusted FFO, and Adjusted EBITDA. Substantially
all of our non-current assets consist of real estate, and in accordance
with GAAP, those assets are subject to straight-line depreciation, which
reflects the assumption that the value of real estate assets, other than
land, will decline ratably over time. That assumption is often not true
with respect to the actual market values of real estate assets (and, in
particular, hotels), which fluctuate based on economic, market and other
conditions. As a result, management and many industry investors believe
the presentation of GAAP operating measures for real estate companies to
be more informative and useful when other measures, adjusted for depreciation
and amortization, are also presented.
In an effort to address these concerns, NAREIT adopted
a definition of Funds From Operations, or FFO. NAREIT defines FFO as net
income (computed in accordance with GAAP) excluding gains (or losses) from
sales of real estate, real estate-related depreciation and amortization,
and after comparable adjustments for our portion of these items related
to unconsolidated partnerships and joint ventures. Extraordinary items
and cumulative effect of changes in accounting principles as defined by
GAAP are also excluded from the calculation of FFO. As defined by NAREIT,
FFO also does not include reductions from asset impairment charges. The
SEC, however, recommends that FFO include the effect of asset impairment
charges, which presentation we have adopted for all historical presentations
of FFO. We believe FFO is an indicative measure of our operating performance
due to the significance of our hotel real estate assets, and that it can
be used to measure our ability to service debt, fund capital expenditures,
and expand our business. We also use FFO in our annual budget process.
Adjusted FFO represents FFO excluding the effects of
losses on early extinguishments of debt, write-offs of deferred financing
costs and, in accordance with the NAREIT definition of FFO, asset impairment
charges. We exclude the effects of losses on early extinguishments of debt,
write-offs of deferred financing costs and asset impairment charges because
we believe that including them in Adjusted FFO does not fully reflect the
operating performance of our remaining assets. We believe Adjusted FFO
is useful for the same reasons we believe that FFO is useful, but we also
believe that Adjusted FFO enables us and the investor to consider our operating
performance without considering the items we exclude from our definition
of Adjusted FFO, which have no cash effect in the periods considered. We
also use Adjusted FFO in our annual budget process.
EBITDA represents consolidated earnings before interest,
income taxes, depreciation and amortization and includes operations from
the assets included in discontinued operations. We further adjust EBITDA
for the effect of capital market transactions that would result in a gain
or loss on early extinguishments of debt, as well as the earnings effect
of asset dispositions and any impairment assessments, resulting in the
measure that we refer to as "Adjusted EBITDA." We exclude the effect of
gains or losses on early extinguishments of debt as well as the earnings
effect of asset dispositions and impairment assessments because we believe
that including them in Adjusted EBITDA does not fully reflect the operating
performance of our remaining assets.
We also believe Adjusted EBITDA provides useful information
to investors regarding our financial condition and results of operations
because Adjusted EBITDA is useful in evaluating our operating performance
and our capacity to incur and service debt, fund capital expenditures and
expand our business. Furthermore, we use Adjusted EBITDA to provide a measure
of unleveraged cash flow that can be isolated on an asset by asset basis,
to determine overall property performance and to measure our ability to
service debt. We believe that the rating agencies and a number of our lenders
also use Adjusted EBITDA for those purposes. We also use Adjusted EBITDA
as one measure in determining the value of acquisitions and dispositions
and, like FFO, it is also widely used in our annual budget process. |