| ARLINGTON, Va. - May 5, 2005 -- Interstate Hotels & Resorts (NYSE:
IHR), the nation's largest independent hotel management company, today
reported results for the first quarter ended March 31, 2005. In addition,
the company has raised earnings guidance for the full year.
For the 2005 first quarter, net loss was $(1.4) million, or $(0.05)
per diluted share, compared to $(3.7) million, or $(0.12) per diluted share,
in the same period a year earlier. Adjusted EBITDA, excluding non-recurring
items, special charges and discontinued operations, in the 2005 first quarter
was $3.5 million, equal to the 2004 first quarter. Net loss, excluding
non-recurring items, special charges and discontinued operations, was $(0.8)
million, or $(0.03) per share, for the 2005 first quarter, compared to
a net loss of $(0.9) million, or $(0.03) per share, for the 2004 first
quarter. First-quarter 2005 results were within the company's previously
announced guidance range for Adjusted EBITDA and EPS, both excluding non-recurring
items, special charges and discontinued operations.
Total revenue, excluding other revenue from managed properties (reimbursable
costs), was $46.9 million in the 2005 first quarter, compared to $41.9
million in the 2004 first quarter. The increase in revenue over the prior
year is primarily due to the acquisition of the Hilton Concord hotel and
higher apartment rental rates at the company's BridgeStreet Corporate Housing
Worldwide subsidiary.
Same-store revenue per available room (RevPAR) for all managed hotels,
excluding those hotels affected by the hurricanes that struck Florida in
2004, improved 9.3 percent to $71.49. Average daily rate (ADR) improved
7.3 percent to $106.33, while occupancy rose 1.8 percent to 67.2 percent
in the 2005 first quarter.
Same-store RevPAR for all full-service managed hotels, excluding those
hotels affected by the hurricanes, improved 9.5 percent to $75.87. ADR
rose 7.7 percent to $111.63, and occupancy improved 1.8 percent to 68.0
percent.
Same-store RevPAR for all select-service managed hotels, excluding those
hotels affected by the hurricanes, increased 8.2 percent to $54.56, led
by a 5.5 percent improvement in ADR to $84.70 and a 2.6 percent increase
in occupancy to 64.4 percent.
"Our operating strategy was to aggressively raise rates in the first
quarter, which had a positive impact on margins and profitability for our
owners," said Thomas F. Hewitt, chief executive officer. "We expect to
continue to capitalize on improved market conditions throughout the year."
The statement of operations for the 2005 first quarter includes the
following non-recurring items and special charges:
-
$3.7 million of earnings of affiliates, representing the company's portion
of the gain on the sale of the Hilton San Diego Gaslamp hotel, which was
owned by one of Interstate's joint ventures;
-
$2.0 million of severance costs primarily for the company's former chief
executive officer;
-
$1.8 million of deferred financing costs that were written off in conjunction
with the refinancing of our senior credit facility;
-
$1.1 million of asset impairments and other write-offs;
-
$0.4 million gain on the sale of investments, representing the company's
gain on the sale of stock of an unaffiliated company held for investment;
-
$0.3 million of equity in losses of affiliates, representing the company's
portion of deferred financing costs written off by one of the company's
equity investments in connection with the refinancing of the joint venture's
senior note debt.
Hilton Concord Hotel Acquisition
In February 2005, Interstate acquired the 329-room Hilton Concord in
the East Bay area of San Francisco, California for $29.2 million. The acquisition
was financed with a $19.0 million mortgage loan and borrowings under the
company's senior secured credit facility.
"This is our second wholly owned hotel," said J. William Richardson,
chief financial officer. "As part of our strategy to diversify our earnings
stream, we expect hotel ownership to become an increasingly important factor
in our future growth, whether it is for our own account, in joint ventures
or as part of an investment fund."
New Management Contracts
During the quarter, Interstate obtained management contracts for 22
upscale hotels recently acquired by a partnership consisting of a private
investment fund managed by Goldman Sachs and affiliates of Highgate Holdings.
In the past two quarters, the company has added a net of 61 hotels to its
management portfolio.
"Our size and geographic diversity allow us to seamlessly add large
portfolios like this 22-hotel portfolio," Hewitt said. "We also aggressively
seek to manage individual hotel assets and smaller portfolios, both for
their immediate profit potential and the opportunity they give us to add
additional managed properties from their owners," Hewitt said. "We continue
to seek to add properties from both existing and potential new clients."
Capital Structure
The company refinanced its existing senior secured credit facility during
the first quarter of 2005. The facility's capacity was increased to $108
million, from $65 million, and the maturity was extended to 2008. The new
loan is expected to result in annual interest savings in excess of $1 million.
Outlook and Guidance
"Interstate and the hotel industry as a whole reported very positive
results for the first quarter, and we expect these trends to continue for
the balance of the year," Richardson said. "We see nothing on the immediate
horizon that will impede the continued recovery of the industry. Our focus
remains on improving rate and flow-through for our owners."
Interstate has raised its guidance for 2005 due to the transactions
announced in the first quarter and the strong performance of the existing
portfolio. The company provides the following range of estimates for the
second quarter and full year 2005:
-
RevPAR is expected to increase 9.5 to 10.5 percent in the 2005 second quarter
and 7.5 to 8.5 percent for 2005;
-
Net income of $1.2 million to $1.8 million for the second quarter and net
income of $7.9 million to $9.1 million for the full year;
-
Net income per diluted share of $0.04 to $0.06 for the second quarter and
net income per diluted share of $0.25 to $0.29 for the full year;
-
Excluding non-recurring charges, special items and discontinued operations,
net income of $1.4 million to $2.2 million for the second quarter and net
income of $10.2 million to $11.6 million for the full year;
-
Excluding non-recurring charges, special items and discontinued operations,
net income per diluted share of $0.05 to $0.07 for the second quarter and
net income per diluted share of $0.33 to $0.37 for the full year;
-
Excluding non-recurring charges, special items and discontinued operations,
Adjusted EBITDA of $6.5 million to $7.5 million for the second quarter
and $31 million to $33 million for the full year.
Interstate Hotels & Resorts, Inc.
Historical Statements of Operations
(Unaudited, in thousands except per share amounts)
Three Months Ending
March 31,
2005 2004
--------- ----------
Revenue:
Lodging revenue
$2,562 $723
Management fees
13,999 13,678
Corporate housing
27,399 24,250
Other revenue
2,955 3,252
--------- ----------
46,915 41,903
Other revenue from managed properties
(7) 204,297 179,540
--------- ----------
Total revenue
251,212 221,443
Operating expenses by department:
Lodging expenses
1,950 518
Corporate housing
23,409 20,382
Undistributed operating expenses:
Administrative and general
18,031 17,464
Depreciation and amortization
2,239 2,395
Restructuring expenses
2,023 127
Asset impairments and write-offs
(4) 1,062
4,493
--------- ----------
48,714 45,379
Other expenses from managed properties
(7) 204,297 179,540
--------- ----------
Total operating expenses
253,011 224,919
--------- ----------
OPERATING LOSS
(1,799) (3,476)
Interest expense, net (5)
(3,794) (1,722)
Equity in earnings (losses) of affiliates
2,842 (776)
Gain on sale of investments
385 -
--------- ----------
LOSS BEFORE MINORITY INTEREST AND INCOME TAXES
(2,366) (5,974)
Income tax benefit
924 2,554
Minority interest benefit
18 46
--------- ----------
LOSS FROM CONTINUING OPERATIONS
(1,424) (3,374)
Loss from discontinued operations, net
- (370)
--------- ----------
NET LOSS
$(1,424) $(3,744)
========= ==========
Basic loss per share
Basic loss per share from continuing
operations
$(0.05) $(0.11)
Basic loss per share from discontinued
operations
- (0.01)
--------- ----------
Basic loss per share
$(0.05) $(0.12)
========= ==========
Diluted loss per share
Diluted loss per share from continuing
operations
$(0.05) $(0.11)
Diluted loss per share from discontinued
operations
- (0.01)
--------- ----------
Diluted loss per share
$(0.05) $(0.12)
========= ==========
Weighted average number of common shares
outstanding (in thousands):
Basic
30,656 30,070
Diluted (1)
30,656 30,070
Reconciliations of Non-GAAP financial measures
Three Months Ending
March 31,
2005 2004
--------- ----------
Net loss
$(1,424) $(3,744)
Adjustments:
Depreciation and amortization
2,239 2,395
Interest expense, net
3,794 1,722
Equity in (earnings) losses
of affiliates (2,842)
776
Discontinued operations
- 370
Income tax benefit
(924) (2,554)
Minority interest benefit
(18) (46)
--------- ----------
Adjusted EBITDA (2)
825 (1,081)
Restructuring expenses
2,023 127
Asset impairments and write-offs
(4) 1,062
4,493
Gain on sale of investments
(385) -
--------- ----------
Adjusted EBITDA, excluding non-recurring
items,special charges and discontinued
operations (2)
$3,525 $3,539
========= ==========
Net loss
$(1,424) $(3,744)
Adjustments to net loss:
Restructuring expenses
2,023 127
Asset impairments and write-offs
(4) 1,062
4,493
Gain on sale of investments
(385) -
Deferred financing costs write-offs
(5) 1,847
-
Equity interest in the gain
on sale of
Hilton San Diego (8)
(3,653) -
MIP deferred financing costs
write-off (9) 295
-
Discontinued operations
- 264
Minority interest expense (benefit)
(9) (12)
Income tax rate adjustment (6)
(597) (2,043)
--------- ----------
Net loss, excluding non-recurring items, special
charges and discontinued operations (2)
$(841) $(915)
========= ==========
Basic loss per share, excluding non-recurring
items, special charges and discontinued
operations (2)
$(0.03) $(0.03)
========= ==========
Diluted loss per share, excluding non-recurring
items, special charges and discontinued
operations (2)
$(0.03) $(0.03)
========= ==========
Weighted average number of common shares
outstanding (in thousands):
Basic
30,656 30,070
Diluted (1)
30,656 30,070
Same-store hotel operating statistics (excluding
10 properties damaged in 2004 hurricanes):
Full-service hotels:
Occupancy
68.0% 66.8%
ADR
$111.63 $103.67
RevPAR
$75.87 $69.30
Select-service hotels:
Occupancy
64.4% 62.8%
ADR
$84.70 $80.29
RevPAR
$54.56 $50.42
Total:
Occupancy
67.2% 66.0%
ADR
$106.33 $99.10
RevPAR
$71.49 $65.42
Outlook Reconciliation (3)
Forecast
Three
months Year
ending ending
June December
30, 2005 31, 2005
Net income (loss)
$1,500 $8,500
Depreciation and amortization
2,450 9,200
Interest expense, net (5)
1,800 8,150
Equity in losses of affiliates
250 (2,100)
Minority interest expense (benefit)
- 150
Income tax expense (benefit)
1,000 5,500
--------- ----------
Adjusted EBITDA (2)
7,000 29,400
Restructuring expenses
- 2,000
Asset impairments and write-offs
(4)
1,000
Gain on sale of investments
(400)
--------- ----------
Adjusted EBITDA, excluding non-recurring items
and special charges (2)
$7,000 $32,000
========= ==========
Net income (loss)
$1,500 $8,500
Adjustments to net income (loss), net of income
taxes:
Restructuring expenses
- 2,000
Asset impairments and write-offs
(4)
- 1,000
Gain on sale of investments
(400)
Deferred financing costs write-offs
(5)
- 1,850
Equity interest in the gain
on sale of
Hilton San Diego (8)
- (3,650)
MIP deferred financing costs
write-off (9) -
300
Income Tax rate adjustment (6)
300 1,300
--------- ----------
Net income, excluding non-recurring items and
special charges (2)
$1,800 $10,900
========= ==========
Income per diluted share, excluding non-recurring
items and special charges
$0.06 $0.35
========= ==========
(1) Diluted shares outstanding are calculated as the weighted
average
number of shares of common stock outstanding
plus other
potentially dilutive securities. Dilutive
securities may include
shares granted under our stock incentive
plans and operating
partnership units held by minority
partners. No effect is shown
for any securities that are anti-dilutive.
(2) See discussion of Adjusted EBITDA and net income
and Adjusted EBITDA and net income, excluding non-recurring items, special
charges and discontinued operations located in the "Non-GAAP Financial
Measures" section, described earlier in this press release.
(3) Our outlook reconciliation uses the mid-point of
our estimates of Adjusted EBITDA, net income, and diluted EPS, all excluding
non-recurring items, special charges and discontinued operations.
(4) This amount is included in undistributed operating
expenses and
primarily represents write-offs of
intangible costs associated
with terminated management contracts
and other terminated
activities and other asset impairments.
(5) For the first quarter of 2005, Interest expense, net,
includes
$1,847 of deferred financing fees
written off in connection with
the refinancing of our senior secured
credit facility.
(6) This amount represents an adjustment to recorded income
tax expense to bring our overall effective tax rate to an estimated normalized
rate of 28% in 2005 and 40% in 2004. This effective tax rate will differ
from the effective tax rate reported in our historical statements of operations.
(7) Other revenue from managed properties and other expenses
from managed properties have been revised in the same amount for the first
quarter of 2004 for certain amounts previously included in error. This
revision has no impact on EBITDA, net income or our balance sheet and cash
flows.
(8) This amount is included in equity in earnings (losses)
of
affiliates and represents our portion
of the gain on the sale of
the Hilton San Diego Gaslamp, which
was owned by one of our joint
ventures.
(9) This amount is included in equity in earnings (losses)
of
affiliates and represents our portion
of deferred financing costs
written off in connection with the
refinancing of the MIP joint
venture's senior debt.
|
Interstate Hotels & Resorts operates more than 300 hospitality properties
with nearly 72,000 rooms in 41 states, the District of Columbia, Canada,
and Russia.
BridgeStreet Worldwide, an Interstate Hotels & Resorts' subsidiary,
is one of the world's largest corporate housing providers. BridgeStreet
and its network of Global Partners offer more than 8,700 corporate apartments
located in 91 MSAs throughout the United States and internationally.
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.
|
