WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands)
Three months ended
September 30,
2004 2003 $ Change % Change
Revenue:
Hotels and restaurants
$50,469 $49,230 $1,239 2.5%
Franchise, central
services and
development
759 973 (214) -22.0%
Entertainment
2,533 2,023 510
25.2%
Real estate
2,144 2,177 (33)
-1.5%
Corporate services
82 81
1 1.2%
Total revenues
55,987 54,484 1,503 2.8%
Operating expenses:
Hotels and restaurants
38,807 38,848 (41) -0.1%
Franchise, central
services and
development
416 376 40
10.6%
Entertainment
2,349 1,845 504
27.3%
Real estate
1,270 1,191 79
6.6%
Corporate services
78 83
(5) -6.0%
Depreciation and
amortization 3,283
4,284 (1,001) -23.4%
Gain on asset dispositions,
net (134)
(117) (17) 14.5%
Conversion expenses
-- 24 (24)
-100.0%
Total direct expenses
46,069 46,534 (465) -1.0%
Undistributed corporate
expenses 672
712 (40) -5.6%
Total expenses
46,741 47,246 (505) -1.1%
Operating income
9,246 7,238 2,008 27.7%
Other income (expense):
Interest expense
(4,082) (2,886) (1,196) 41.4%
Interest income
115 96
19 19.8%
Other income, net
17 87 (70)
-80.5%
Equity income in
investments, net 81
20 61 305.0%
Minority interest
in
partnerships,
net
(52) 14 (66) -471.4%
Income before income tax expense
5,325 4,569 756
16.5%
Income tax expense
1,827 1,337 490
36.6%
Net income
3,498 3,232 266
8.2%
Preferred stock dividend
-- (634) 634 -100.0%
Income applicable to common
shareholders
$3,498 $2,598 $900 34.6%
EBITDA(1)
$12,690 $11,739 $951 8.1%
EBITDA as a percentage of revenues
22.7% 21.5%
(1) The definition of "EBITDA" and how that measure
relates to net income is discussed below under Non-GAAP Financial Measures.
EBITDA represents net income or loss before interest expense, income tax
benefit or expense, depreciation, and amortization. EBITDA is not intended
to represent net income as defined by generally accepted accounting principles
in the United States and such information should not be considered as an
alternative to net income, cash flows from operations or any other measure
of performance prescribed by generally accepted accounting principles in
the United States. We utilize EBITDA because management believes that investors
find it to be a useful tool to perform more meaningful comparisons of past,
present and future operating results and as a means to evaluate the results
of core on-going operations.
WestCoast Hospitality Corporation
Earnings Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Three months ended
September 30,
2004 2003 $ Change % Change
Earnings per common share:
Basic
$0.27 $0.20
Diluted
$0.26 $0.20
Weighted average shares - basic
13,059 13,003
Weighted average shares - diluted
(1) 13,345 13,289
Comparable Hotel Statistics:
Combined (owned,
leased, managed and
franchised)
(2)
Average occupancy(3) (6)
70.5% 67.3%
ADR(4)
$74.72 $73.23 $1.49 2.0%
RevPAR(5) (6)
$52.71 $49.27 $3.44 7.0%
(1) For the three months ended September
30, 2004 and 2003 options to purchase common stock were anti-dilutive and
are therefore not included in the calculation of earnings per common share.
286,161 convertible operating partnership ("OP") units are reflected in
the calculation of diluted weighted average shares for those same periods.
(2) Includes hotels owned, leased,
managed and franchised for greater than one year by WestCoast Hospitality
Corporation.
(3) Average occupancy represents total
paid rooms divided by total available rooms. Total available rooms
represents the number of rooms available multiplied by the number of days
in the reported period.
(4) Average daily rate ("ADR") represents
total room revenues divided by the total number of paid rooms occupied
by hotel guests.
(5) Revenue per available room ("RevPAR")
represents total room and related revenues divided by total available rooms.
(6) Rooms under significant renovation
were excluded from total available rooms. Due to the short duration
of renovation, in the opinion of management, excluding these rooms did
not have a material impact on RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands)
Nine months ended
September 30,
2004 2003 $ Change % Change
Revenue:
Hotels and restaurants
$129,476 $126,671 $2,805 2.2%
Franchise, central services
and
development
2,050 2,950 (900) -30.5%
Entertainment
7,952 6,008 1,944
32.4%
Real estate
6,828 6,843 (15)
-0.2%
Corporate services
248 256
(8) -3.1%
Total revenues
146,554 142,728 3,826 2.7%
Operating expenses:
Hotels and restaurants
109,548 106,603 2,945 2.8%
Franchise, central services
and
development
1,008 1,268 (260) -20.5%
Entertainment
6,998 5,327 1,671
31.4%
Real estate
3,774 3,624 150
4.1%
Corporate services
224 242 (18)
-7.4%
Depreciation and amortization
9,574 10,047 (473) -4.7%
(Gain) loss on asset dispositions,
net
(530) 579 (1,109) -191.5%
Conversion expenses
-- 392 (392) -100.0%
Total direct expenses
130,596 128,082 2,514 2.0%
Undistributed corporate
expenses 2,305
2,040 265 13.0%
Total expenses
132,901 130,122 2,779 2.1%
Operating income
13,653 12,606 1,047
8.3%
Other income (expense):
Interest expense
(11,452) (8,241) (3,211) 39.0%
Interest income
343 303
40 13.2%
Other income (expense),
net
37 (205) 242 -118.0%
Equity income in investments,
net 89
99 (10) -10.1%
Minority interest in
partnerships, net
68 144 (76)
-52.8%
Income before income tax expense
2,738 4,706 (1,968) -41.8%
Income tax expense
783 1,449 (666) -46.0%
Net income
1,955 3,257 (1,302) -40.0%
Preferred stock dividend
(377) (1,915) 1,538 -80.3%
Income applicable to common
shareholders
$1,578 $1,342 $236
17.6%
EBITDA(1)
$23,764 $22,994 $770
3.3%
EBITDA as a percentage of revenues
16.2% 16.1%
(1) The definition of "EBITDA" and
how that measure relates to net income is discussed below under Non-GAAP
Financial Measures. EBITDA represents net income or loss before interest
expense, income tax benefit or expense, depreciation, and amortization.
EBITDA is not intended to represent net income as defined by generally
accepted accounting principles in the United States and such information
should not be considered as an alternative to net income, cash flows from
operations or any other measure of performance prescribed by generally
accepted accounting principles in the United States. We utilize EBITDA
because management believes that investors find it to be a useful tool
to perform more meaningful comparisons of past, present and future operating
results and as a means to evaluate the results of core on-going operations.
WestCoast Hospitality Corporation
Earnings Per Share and Hotel Statistics
(unaudited)
(shares in thousands)
Nine months ended
September 30,
2004 2003 $ Change % Change
Earnings per common share:
Basic and Diluted
$0.12 $0.10
Weighted average shares - basic
13,043 12,997
Weighted average shares - diluted
(1) 13,330 13,283
Comparable Hotel Statistics:
Combined (owned,
leased, managed and
franchised)
(2)
Average occupancy (3) (6)
61.4% 58.0%
ADR (4)
$71.65 $71.14 $0.51 0.7%
RevPAR (5) (6)
$44.01 $41.25 $2.76 6.7%
(1) For the nine months ended September
30, 2004, 752 options to purchase common stock were dilutive and are included
in the calculation of diluted earnings per common share. For the
nine months ended September 30, 2003 all options to purchase common stock
were anti-dilutive and are therefore not included in the calculation of
earnings per common share.
286,161 convertible
operating partnership ("OP") units are reflected in the calculation of
diluted weighted average shares for both periods.
(2) Includes hotels owned, leased,
managed and franchised for greater than one year by WestCoast Hospitality
Corporation.
(3) Average occupancy represents total
paid rooms divided by total available rooms. Total available rooms
represents the number of rooms available multiplied by the number of days
in the reported period.
(4) Average daily rate ("ADR") represents
total room revenues divided by the total number of paid rooms occupied
by hotel guests.
(5) Revenue per available room ("RevPAR")
represents total room and related revenues divided by total available rooms.
(6) Rooms under significant renovation
were excluded from total available rooms. Due to the short duration
of renovation, in the opinion of management, excluding these rooms did
not have a material impact on RevPAR or average occupancy.
WestCoast Hospitality Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
September 30, December 31,
2004
2003 Assets:
Current assets:
Cash and cash
equivalents
$16,261
$8,121
Restricted
cash
4,632
4,952
Accounts receivable,
net
10,753
9,306
Inventories
2,037
2,140
Prepaid expenses
and other
2,879
2,137
Total current assets
36,562
26,656
Property and equipment,
net
292,339 264,039
Goodwill
28,042
28,042
Intangible assets, net
13,838
14,412
Other assets, net
10,933
20,076
Total assets
$381,714 $353,225
Liabilities:
Current liabilities:
Accounts payable
$5,547
$6,990
Accrued payroll
and related
benefits
6,034
4,849
Accrued interest
payable
800
775
Advance deposits
217
253
Other accrued
expenses
10,882
8,069
Long-term
debt, due within one
year
8,581
5,667
Total current liabilities
32,061
26,603
Long-term debt, due after
one year 147,546
145,770
Deferred income
8,713
9,279
Deferred income taxes
18,808
16,761
Minority interest in partnerships
2,555
2,623
Debentures due WestCoast
Hospitality Capital
Trust
47,423
--
Total liabilities
257,106 201,036
Stockholders' equity:
Preferred stock - 5,000,000
shares
authorized;
$0.01 par value
588,236 issued and
outstanding at
December 31, 2003
--
6
Additional paid-in capital,
preferred stock
--
29,406
Common stock - 50,000,000
shares
authorized; $0.01
par value;
13,060,919 and 13,006,361
shares
issued and outstanding
131
130
Additional paid-in capital,
common
stock
84,448
84,196
Retained earnings
40,029
38,451
Total stockholders' equity
124,608 152,189
Total liabilities and
stockholders' equity
$381,714 $353,225
WestCoast Hospitality Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Nine months ended
September 30,
Operating activities:
2004
2003
Net income
$1,955
$3,257
Adjustments to reconcile
net income
to net cash
provided by
operating activities:
Depreciation and amortization
9,574
10,047
(Gain) loss on disposition of
property and equipment and
other assets
(530)
579
Non-cash reduction of preferred
stock resulting in gain
--
(522)
Write-off of deferred loan fees
--
790
Deferred income tax provision
2,047
500
Minority interest in
partnerships
(68)
(144)
Equity in investments
(89)
(99)
Compensation expense related to
stock issuance
--
5
Provision for doubtful accounts
188
337
Change in current assets and
liabilities:
Restricted cash
320 (2,140)
Accounts receivable
(1,635)
(314)
Inventories
103
80
Prepaid expenses and other
(742)
114
Accounts payable
(1,443)
476
Accrued payroll and related
benefits
1,185
118
Accrued interest payable
25
85
Other accrued expenses and
advance deposits
3,411
997
Net cash provided by operating
activities
14,301
14,166
Investing activities:
Purchases of property
and equipment (19,069)
(5,141) Proceeds from disposition of property and equipment
198
398 Proceeds from disposition of investment
94
441 Investment in WestCoast Hospitality Capital Trust
(1,423)
--
Advances to WestCoast
Hospitality
Capital Trust
(2,116)
--
Proceeds from collections
under
note receivable
1,725
--
Distributions from equity
investee
449
--
Other, net
30
62
Net cash
used in investing activities
(20,112) (4,240)
Financing activities:
Proceeds from note payable
to bank
11,000
47,700
Repayment of note payable
to bank
(11,000) (99,800)
Proceeds from debenture
issuance
47,423
--
Repurchase and retirement
of
preferred stock
(29,412)
--
Proceeds from long-term
debt
83 55,200
Proceeds from short-term
debt
--
2,658
Repayment of long-term
debt
(3,335) (2,806)
Proceeds from issuance
of common
stock under
employee stock purchase
plan
113
99
Preferred stock dividend
payments
(1,011) (1,927)
Principal payments on
capital lease
obligations
--
(268)
Proceeds from option exercises
140
--
Additions to deferred
financing costs
(50) (1,466)
Net
cash provided by (used in) financing activities
13,951
(610)
Change in cash and cash equivalents:
Net increase in cash and
cash
equivalents
8,140
9,316
Cash and cash equivalents
at
beginning of period
8,121
752
Cash and cash equivalents
at end of
period
$16,261 $10,068
WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income
(unaudited)
($ in thousands)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004
2003
EBITDA
$12,690 $11,739 $23,764 $22,994
Income tax expense
(1,827) (1,337) (783) (1,449)
Interest expense
(4,082) (2,886) (11,452) (8,241)
Depreciation and
amortization (3,283) (4,284)
(9,574) (10,047)
Net income
$3,498 $3,232 $1,955 $3,257
NON-GAAP FINANCIAL MEASURES
EBITDA is defined as net income or
loss, before interest, taxes, depreciation and amortization. EBITDA
is considered a non-GAAP financial measurement. We believe it is
a useful financial performance measure for us and for our shareholders
and is a complement to net income and other financial performance measures
provided in accordance with generally accepted accounting principles in
the United States ("GAAP").
We use EBITDA to measure the financial
performance of our owned and leased hotels because it excludes interest,
taxes, depreciation and amortization, which bear little or no relationship
to operating performance. By excluding interest expense, EBITDA measures
our financial performance irrespective of our capital structure or how
we finance our properties and operations. We generally pay federal and
state income taxes on a consolidated basis, taking into account how the
applicable taxing laws apply to our company in the aggregate. By excluding
taxes on income, we believe EBITDA provides a basis for measuring the financial
performance of our operations excluding factors that our hotels cannot
control. By excluding depreciation and amortization expense, which can
vary from hotel to hotel based on historical cost and other factors unrelated
to the hotels' financial performance, EBITDA measures the financial performance
of our hotels without regard to their historical cost. For all of
these reasons, we believe that EBITDA provides us and investors with information
that is relevant and useful in evaluating our business.
However, because EBITDA excludes depreciation
and amortization, it does not measure the capital we require to maintain
or preserve our long-lived assets. In addition, because EBITDA does not
reflect interest expense, it does not take into account the total amount
of interest we pay on outstanding debt nor does it show trends in interest
costs due to changes in our borrowings or changes in interest rates. EBITDA,
as defined by us, may not be comparable to EBITDA as reported by other
companies that do not define EBITDA exactly as we define the term. Because
we use EBITDA to evaluate our financial performance, we reconcile it to
net income, which is the most comparable financial measure calculated and
presented in accordance with GAAP. EBITDA does not represent cash generated
from operating activities determined in accordance with GAAP, and should
not be considered as an alternative to operating income or net income determined
in accordance with GAAP as an indicator of performance or as an alternative
to cash flows from operating activities as an indicator of liquidity. |
