Interstate Hotels & Resorts Reports Fourth-Quarter, Full-Year
2008 Results
ARLINGTON, Va., March 12, 2009 - Interstate Hotels & Resorts (OTC:
IHRI) , a leading hotel real estate investor and the nation's largest independent
hotel management company, today reported operating results for the fourth
quarter and year ended December 31, 2008. The company's performance for
the fourth quarter and full year include the following (in millions, except
per share amounts):
Fourth Quarter
Full Year
--------------
---------
2008(4) 2007(5)
2008(4) 2007(5)
------ ------
------ ------
Total revenue(1)
$53.9 $58.6
$170.2 $156.0
Net income (loss)
$(16.5) $6.7
$(18.0) $22.8
Diluted earnings
(loss) per share
$(0.52) $0.21
$(0.57) $0.71
Adjusted EBITDA(2)(3) $22.5
$22.7 $48.7
$45.9
Adjusted net income(2) $8.6
$10.5 $6.4
$14.6
Adjusted diluted EPS(2) $0.27
$0.33 $0.20
$0.46
(1) Total revenue excludes other revenue from managed
properties
(reimbursable costs).
(2) Adjusted EBITDA, Adjusted net income, and Adjusted
diluted EPS are
non-GAAP financial measures
and should not be considered as an
alternative to any measures
of operating results under GAAP. See the
definition and further discussion
of non-GAAP financial measures and
reconciliation to net income
later in this press release.
(3) Includes the company's share of adjusted EBITDA
from investments in
unconsolidated entities
in the amounts of $1.4 million and $1.3
million in the fourth quarters
of 2008 and 2007, respectively, and
$7.4 million and $4.4 million
for the full years of 2008 and 2007,
respectively.
(4) The 2008 results include (i) a non-cash impairment
charge of $11.0
million related to our wholly
owned hotel, Hilton Arlington (ii)
non-cash impairment charges
and write-offs of $4.1 million relating
to three joint venture investments
(iii) a $2.4 million gain on the
sale of the Doral Tesoro
Hotel & Golf Club in the first quarter 2008
(iv) $0.1 million and $1.5
million of write-offs of intangible assets
related to the sale of certain
managed hotels in the fourth quarter
2008 and full year, respectively,
(v) a $0.3 million allowance in the
fourth quarter for bad debts
related to a note receivable, and (vi)
income tax expense of $12.9
million for the fourth quarter and $12.3
million full year which
includes the recognition of additional
valuation allowance for
our deferred tax assets of $16.1 million.
All of these items have
been excluded from the calculation of
Adjusted EBITDA, Adjusted
net income, and Adjusted diluted EPS.
(5) The 2007 results include (i) a $2.9 million allowance
for bad debts
related to a note receivable
(ii) $2.4 million and $11.1 million of
write-offs of intangible
assets related to the sale of certain
managed hotels during the
fourth quarter 2007 and full year,
respectively, and (iii)
a $20.4 million gain related to the sale of
BridgeStreet Corporate Housing
(completed in the first quarter 2007),
which along with the operations
through the date of sale, are
included in Income from
Discontinued Operations on the company's
statement of operations
for the first quarter 2007. All of these
items have been excluded
from the calculation of Adjusted EBITDA,
Adjusted net income, and
Adjusted diluted EPS.
"The economy deteriorated throughout the year, with the fourth quarter
turning down sharply for the hotel industry," said Thomas F. Hewitt, chief
executive officer. "RevPAR at our managed properties declined 8.9 percent
for the quarter, compared to a 9.8 percent decline for the industry. For
the full year, we achieved a slight RevPAR gain compared to an industry
decline of 1.9 percent, as reported by Smith Travel Research. In a very
difficult environment, Adjusted EBITDA was higher for the full year, a
testament to our cost containment efforts at the corporate and property
levels. Overall, our results were in line with our latest guidance provided.
"We have continued our aggressive approach to cost reduction, which
began early last year in anticipation of an industry downturn. Earlier
this year, we announced a corporate wide cost-reduction initiative that
is expected to result in savings of at least $13 million in corporate overhead
costs, compared to 2008."
Hewitt noted that in a difficult economy, owners gravitate to experienced
operators with sophisticated operating and financial systems who can better
guide properties through a tough operating environment. "We expect that
hotel real estate transaction activity will pick up as the year progresses
and significant debt comes due. The most common time a hotel will change
management is when it changes ownership. As a result, our focus in 2009
will be on third-party management opportunities, both in the U.S. and overseas,
with a special focus on distressed situations."
Wholly Owned Hotel Results
EBITDA from the company's seven owned hotels was $5.9 million in the
2008 fourth quarter and $26.8 million for the full year 2008 as outlined
below (in millions):
Owned
Hotels
Fourth Quarter Full Year
------------
-------------- -----------
2008 2007 2008
2007
Net income (loss)
$(1.1) $(0.8) $(1.2) $1.1
Interest expense, net
3.9 4.0
14.0 12.3
Depreciation and amortization
3.1 2.8
14.0 8.3
--- ---
---- ---
EBITDA
$5.9 $6.0 $26.8
$21.7
=== ===
==== ====
"As of today, we have completed, on time and on budget, major renovations
at our Westin in Atlanta and Sheraton in Columbia, Maryland," Hewitt said.
"Guest response has been very positive, and we expect both properties to
outperform their competitive set going forward. Our owned portfolio is
now in strong competitive condition and requires very minimal capital for
the next several years."
Joint Venture Investments
The company focused on joint ventures early in 2008, adding a total
of 29 properties throughout the year, including its first two aloft Hotels
and a 22-hotel portfolio of select-service properties, and also formed
a partnership to operate and selectively invest in hotels throughout India.
As of today, the company has minority ownership interests in 50 of the
properties that it manages.
Hewitt noted that joint venture growth will play a less prominent role
in 2009. "In the current environment, the need to preserve capital and
maintain liquidity is critical. As the economy begins to rebound, we will
analyze potential opportunities for joint venture investments. Joint venture
investments typically provide more stable management contracts and the
benefit of participating in the operating returns and real estate appreciation
when the property is sold."
Hotel Management
Same-store(6) RevPAR for all managed hotels in the fourth quarter of
2008 decreased 8.9 percent to $84.93. Average daily rate (ADR) declined
2.3 percent to $136.52, and occupancy declined 6.7 percent to 62.2 percent.
Same-store RevPAR for all full-service managed hotels declined 9.8 percent
to $98.06. ADR declined 1.9 percent to $152.89, while occupancy dropped
8.0 percent to 64.1 percent.
Same-store RevPAR for all select-service managed hotels declined 5.8
percent to $59.29, led by a 3.9 percent decrease in occupancy to 58.4 percent
and a 2.0 percent decline in ADR to $101.44.
Interstate added four new contracts in the fourth quarter and 55 throughout
2008. New contracts in the fourth quarter include the 292-room Crowne Plaza
New Orleans Airport and the 322-room Hampton Inn Tropicana in Las Vegas,
the largest of the 1,600-plus Hampton Inn hotels worldwide.
Hewitt noted that the company has an active third-party management pipeline,
including contracts for 16 properties under construction that represent
a significant source of embedded growth. "Eight of these signed contracts
are for properties that are expected to open in 2009; eight are projected
to open in 2010."
(6) Please see footnote 7 to the financial tables
within this press
release for a detailed explanation
of "same-store" hotel operating
statistics.
International
The company continued to expand its international portfolio in 2008.
During the year, the company opened the 273-room Hilton Moscow Leningradskaya
in Russia, following completion of a two-year comprehensive restoration.
The landmark hotel is the first Hilton branded hotel in Moscow, and is
Interstate's sixth managed property in the city.
In January 2009, the company's Latin American affiliate, IHR de Mexico,
executed an agreement to manage a to-be-developed, world-class luxury condo
hotel resort and beach club in Manuel Antonio, Costa Rica. Jade Condo Hotel
Residences and Beach Club will consist of 190 condo hotel residences and
50 villas. Construction is expected to begin this spring with a projected
2010 opening.
"Despite the impact of a global recession, we believe the international
hotel industry remains an excellent source of long-term growth, and expanding
our international presence remains a high priority. Our pipeline of international
management contracts remains very active."
JHM Interstate Hotels India Ltd., Interstate's joint venture management
company formed with JHM Hotels to operate and selectively invest in hotels
in India, continues to source management contracts there. The JV's first
management contract, a 124-room Doubletree Hotel in Visag, is scheduled
to open in the second quarter of 2009.
Duet India Hotels Limited, a U.K.-based, real estate investment fund
in which Interstate and JHM own minority interests, is actively pursuing
hotel acquisitions and new construction opportunities.
New York Stock Exchange (NYSE) Listing
As previously disclosed in our press release on March 11, the company
has been notified by the NYSE that it has fallen below their continued
listing standard regarding average market capitalization over a 30 day
period of $15 million and will therefore be suspended from trading on the
NYSE prior to the market opening on March 12. The company has the right
to appeal this determination and intends to do so. The company will transition
to the OTC market under the ticker symbol IHRI.
The company's senior secured credit facility agreement requires that
the company be listed on the NYSE. KPMG LLP, the company's external auditor,
has notified the Audit Committee and management that since Interstate's
potential delisting from the NYSE creates a credit facility covenant issue,
which, if not resolved, could result in acceleration of the credit facility
debt, its auditor report on the consolidated financial statements for the
year ended December 31, 2008 will include an explanatory paragraph related
to the uncertainty of the company's ability to continue as a going concern.
The company's credit facility also includes a covenant requiring an audit
opinion without exception.
The company is in active discussions with its credit facility lenders
to receive a waiver through June 30, 2009, related to the covenant requiring
listing on the NYSE as well as the covenant dealing with audit opinions.
While there can be no assurances that the company can obtain the waiver,
a waiver of these covenants only requires a 51 percent vote by the credit
facility lenders.
Balance Sheet
On December 31, 2008, Interstate had:
-- Total unrestricted cash
of $22.9 million.
-- Total debt of $244.3
million, consisting of $161.8 million of
senior
debt and $82.5 million of non-recourse mortgage debt.
"We are in the process of addressing the New York Stock Exchange (NYSE)
listing requirement and ultimately the refinancing of our credit facility,"
said Bruce Riggins, chief financial officer. "The outstanding balance is
$162 million and the maturity date is March 2010. We are currently seeking
a waiver from our credit facility lenders through June 30 and expect to
begin negotiations in the second quarter related to extending our credit
facility maturity. Beyond the credit facility maturity, we have no other
debt maturities until late 2011 and beyond."
Outlook and Guidance
"The current environment is among the most challenging we have ever
experienced," Hewitt said. "However, our experienced senior management
team has been through numerous economic cycles, and we believe we have
taken the necessary steps to help us weather the storm, particularly in
the area of revenue management, cost containment, and capital preservation."
The company provides the following estimates based on a 2009 RevPAR
decline scenario of 15 percent for all managed properties and 13 percent
for owned hotels:
-- Total Adjusted EBITDA
of $38 million which includes the following:
-- EBITDA from wholly owned hotels of $19.5 million;
-- The company's share of EBITDA from unconsolidated joint
ventures of $6 million;
-- EBITDA from the hotel management business of $12.5 million;
-- Net loss of $(1.7) million
or $(0.05) per share; and
-- Capital expenditures
(including mortgage-related escrows) are
projected
to be $2.5 million, in addition to $7.0 million
carryover
capital being spent in the first quarter, substantially
all related
to the completion of the Westin Atlanta and Sheraton
Columbia
renovations.
Interstate will hold a conference call to discuss its fourth-quarter
results today, March 12, at 10 a.m. Eastern Time. To hear the webcast,
interested parties may visit the company's Web site at www.ihrco.com and
click on Investor Relations and then Fourth-Quarter Conference Call. A
replay of the conference call will be available until midnight on Thursday,
March 19, 2009, by dialing (800) 405-2236, reference number 11126433, and
an archived webcast of the conference call will be posted on the company's
Web site through April 12, 2009.
Interstate Hotels & Resorts has ownership interests in 57 hotels
and resorts, including seven wholly owned assets. Together with these properties,
the company and its affiliates manage a total of 225 hospitality properties
with more than 46,000 rooms in 37 states, the
District of Columbia, Russia, Mexico, Belgium, Canada and Ireland. Interstate
Hotels & Resorts also has contracts to manage 16 to be built hospitality
properties with approximately 4,000 rooms. For more information about Interstate
Hotels & Resorts, visit the company's Web site: www.ihrco.com.
Non-GAAP Financial Measures
Included in this press release are certain non-GAAP financial measures,
which are measures of our historical or estimated future performance that
are different from measures calculated and presented in accordance with
generally accepted accounting principles in the United States of America
(or GAAP), within the meaning of applicable Securities and Exchange Commission
rules, that we believe are useful to investors. They are as follows: (i)
Earnings before interest, taxes, depreciation and amortization (or "EBITDA")
and (ii) Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS.
The following discussion defines these terms and presents the reasons we
believe they are useful measures of our performance.
EBITDA
A significant portion of our non-current assets consists of intangible
assets, related to some of our management contracts, and long lived assets,
which includes the cost of our owned hotels. Intangible assets, excluding
goodwill, are amortized over their expected term. Property and equipment
is depreciated over its useful life. Because amortization and depreciation
are non-cash items, management and many industry investors believe the
presentation of EBITDA is useful. We also exclude depreciation and amortization
and interest expense from our unconsolidated joint ventures. We believe
EBITDA provides useful information to investors regarding our performance
and our capacity to incur and service debt, fund capital expenditures and
expand our business. Management uses EBITDA to evaluate property-level
results and as one measure in determining the value of acquisitions and
dispositions. It is also widely used by management in the annual budget
process. We believe that the rating agencies and a number of lenders use
EBITDA for those purposes and a number of restrictive covenants related
to our indebtedness use measures similar to EBITDA presented herein.
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted EBITDA as, EBITDA, excluding the effects of certain
recurring and non-recurring charges, transactions and expenses incurred
in connection with events management believes do not provide the best indication
of our ongoing operating performance. These charges include restructuring
and severance expenses, asset impairments and write-offs, gains and losses
on asset dispositions for both consolidated and unconsolidated investments,
and other non-cash charges. We believe that the presentation of Adjusted
EBITDA will provide useful supplemental information to investors regarding
our ongoing operating performance and that the presentation of Adjusted
EBITDA, when combined with the primary GAAP presentation of net income,
is beneficial to an investor's complete understanding of our operating
performance. We also use Adjusted EBITDA in determining our incentive compensation
for management.
Similarly, we define Adjusted net income (loss) and Adjusted diluted
earnings (loss) per share ("EPS") as net income and diluted EPS, without
the effects of those same charges, transactions and expenses described
earlier. We believe that Adjusted EBITDA, Adjusted net income and Adjusted
diluted EPS are useful performance measures because including these expenses,
transactions, and special charges may either mask or exaggerate trends
in our ongoing operating performance. Furthermore, performance measures
that include these charges may not be indicative of the continuing performance
of our underlying business. Therefore, we present Adjusted EBITDA, Adjusted
net income and Adjusted diluted EPS because they may help investors to
compare our performance before the effect of various items that do not
directly affect our ongoing operating performance.
Limitations on the use of EBITDA, Adjusted EBITDA, Adjusted Net Income,
and Adjusted Diluted EPS
We calculate EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted
diluted EPS as we believe they are important measures for our management's
and our investors' understanding of our operations. These may not be comparable
to measures with similar titles as calculated by other companies. This
information should not be considered as an alternative to net income, operating
profit, cash from operations or any other operating performance measure
calculated in accordance with GAAP. Cash receipts and expenditures from
investments, interest expense and other non-cash items have been and will
be incurred and are not reflected in the EBITDA and Adjusted EBITDA presentations.
Adjusted net income and Adjusted diluted EPS do not include cash receipts
and expenditures related to those same items and charges discussed above.
Management compensates for these limitations by separately considering
these excluded items, all of which should be considered when evaluating
our performance, as well as the usefulness of our non-GAAP financial measures.
Additionally, EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted
diluted EPS should not be considered a measure of our liquidity. Adjusted
net income and Adjusted diluted EPS should also not be used as a measure
of amounts that accrue directly to our stockholders' benefit.
Interstate Hotels & Resorts, Inc.
Statements of Operations
(Unaudited, in thousands except per share amounts)
Three Months
Ended Year
Ended
December 31, December 31,
------------ ------------
2008 2007 2008
2007
---- ---- ----
----
Revenue:
Lodging
$21,902 $21,873 $94,072 $74,198
Management fees
28,141 31,029 59,321 63,712
Termination fees (1)
1,246 3,669 6,896
8,597
Other
2,652 1,988 9,891
9,526
----- ----- -----
-----
53,941 58,559 170,180 156,033
Other revenue from managed
properties
145,478 155,373 609,273 644,098
------- ------- ------- -------
Total revenue
199,419 213,932 779,453 800,131
Expenses:
Lodging
16,031 15,747 67,286 52,281
Administrative and general
17,117 24,269 61,910 65,937
Depreciation and amortization
4,261 4,162 18,322 14,475
Asset impairments and
write-offs 11,114 2,414
12,537 11,127
------ ----- ------ ------
48,523 46,592 160,055 143,820
Other expenses from managed
properties
145,478 155,373 609,273 644,098
------- ------- ------- -------
Total operating expenses 194,001
201,965 769,328 787,918
------- ------- ------- -------
OPERATING INCOME
5,418 11,967 10,125 12,213
Interest income
136 481
958 2,153
Interest expense (3)
(3,862) (3,949) (14,443) (13,783)
Equity in (losses) earnings of
unconsolidated entities (4)(10)(11)
(5,278) 563 (2,411)
2,381
------ --- ------
-----
(LOSS) INCOME BEFORE MINORITY
INTEREST AND INCOME TAXES
(3,586) 9,062 (5,771) 2,964
Income tax expense
(12,907) (2,239) (12,281) (435)
Minority interest benefit (expense)
25 (22)
29 (65)
-- ---
-- ---
(LOSS) INCOME FROM CONTINUING
OPERATIONS
(16,468) 6,801 (18,023) 2,464
(Loss) income from discontinued
operations, net of tax (5)
- (80)
- 20,364
--- ---
--- ------
NET (LOSS)
INCOME
$(16,468) $6,721 $(18,023) $22,828
======== ====== ======== =======
BASIC (LOSS) EARNINGS PER SHARE:
Continuing operations
$(0.52) $0.21 $(0.57) $0.08
Discontinued operations
- (0.00) -
0.64
--- ----- ---
----
Basic (loss) earnings
per share $(0.52) $0.21
$(0.57) $0.72
====== ===== ======
=====
DILUTED (LOSS) EARNINGS PER SHARE (6):
Continuing operations
$(0.52) $0.21 $(0.57) $0.08
Discontinued operations
- (0.00) -
0.63
--- ----- ---
----
Diluted (loss) earnings
per share $(0.52) $0.21
$(0.57) $0.71
====== ===== ======
=====
Weighted average shares outstanding
(in thousands):
Basic
31,842 31,702 31,802 31,640
Diluted
31,842 32,042 31,802 31,963
Interstate Hotels & Resorts, Inc.
Hotel Level Operating Statistics
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
-------------------
------------
%
%
2008 2007 change
2008 2007 change
---- ---- ------
---- ---- ------
Managed Hotels -
Hotel Level Operating
Statistics: (7)
Full-service hotels:
Occupancy
64.1% 69.7% -8.0% 71.7%
74.8% -4.1%
ADR
$152.89 $155.86 -1.9% $153.37 $146.80
4.5%
RevPAR
$98.06 $108.69 -9.8% $109.91 $109.86
0.0%
Select-service hotels:
Occupancy
58.4% 60.8% -3.9% 64.7%
65.9% -1.8%
ADR
$101.44 $103.46 -2.0% $104.25 $101.74
2.5%
RevPAR
$59.29 $62.93 -5.8% $67.48
$67.02 0.7%
Total:
Occupancy
62.2% 66.7% -6.7% 69.3%
71.8% -3.5%
ADR
$136.52 $139.69 -2.3% $137.87 $132.80
3.8%
RevPAR
$84.93 $93.20 -8.9% $95.57
$95.35 0.2%
Wholly-Owned Hotels -
Hotel Level Operating
Statistics: (8)
Occupancy
61.5% 64.1% -4.1% 68.2%
69.7% -2.2%
ADR
$119.74 $122.68 -2.4% $123.97 $121.25
2.2%
RevPAR
$73.61 $78.61 -6.4% $84.55
$84.45 0.1%
Interstate Hotels & Resorts, Inc.
Reconciliations of Non-GAAP Financial Measures (9)
(Unaudited, in thousands except per share amounts)
Three Months
Ended Year
Ended
December 31, December 31,
------------ ------------
2008 2007 2008
2007
---- ---- ----
----
Net (loss) income
$(16,468) $6,721 $(18,023) $22,828
Adjustments:
Depreciation and amortization
4,261 4,162 18,322 14,475
Interest expense, net
3,726 3,468 13,485 11,630
Depreciation and amortization
from unconsolidated
entities 856
484 3,620 1,357
Interest expense, net
from
unconsolidated entities
1,044 661 3,843
1,858
Discontinued operations,
net (5) -
80 - (20,364)
Income tax expense
12,907 2,239 12,281
435
------ ----- ------
---
EBITDA
6,326 17,815 33,528 32,219
Asset impairments and
write-offs
(2)
11,419 5,320 12,842 14,033
Investment in unconsolidated
entities impairments
(4)
4,069 -
4,069 -
Foreign currency loss
from
unconsolidated entities
(10) 671
- 671
-
Equity interest in the
sale of
unconsolidated entities
(11)
- (438) (2,392) (1,222)
Severance (12)
- -
- 812
Minority interest (benefit)
expense
(25) 22
(29) 65
--- --
--- --
Adjusted EBITDA
$22,460 $22,719 $48,689 $45,907
======= ======= ======= =======
Three Months
Ended Year
Ended
December 31, December 31,
------------ ------------
2008 2007 2008
2007
---- ---- ----
----
Net (loss) income
$(16,468) $6,721 $(18,023) $22,828
Adjustments:
Asset impairments and
write-offs
(2)
11,419 5,320 12,842 14,033
Investment in unconsolidated
entities impairments
(4)
4,069 -
4,069 -
Foreign currency loss
from
unconsolidated entities
(10) 671
- 671
-
Equity interest in the
sale of
unconsolidated entities
(11)
- (438) (2,392) (1,222)
Severance (12)
- -
- 812
Discontinued operations,
net (5) -
80 - (20,364)
Deferred financing costs
write-
off (3)
- -
- 632
Minority interest adjustment
(78) (16) (76)
17
Income tax rate adjustment
(13) 9,001 (1,210)
9,279 (2,141)
----- ------ ----- ------
Adjusted net (loss) income
$8,614 $10,457 $6,370 $14,595
====== ======= ====== =======
Adjusted diluted (loss) earnings
per share
$0.27 $0.33 $0.20
$0.46
===== ===== =====
=====
Weighted average number of diluted
shares outstanding (in thousands)
(6):
31,842 32,042 31,802 31,963
Interstate Hotels & Resorts, Inc.
Outlook Reconciliation (9), (14)
(Unaudited, in thousands)
Forecast
--------
Year Ending
December 31, 2009
------------------
Net loss and Adjusted net loss
$(1,700)
Adjustments:
Depreciation and amortization
18,000
Interest expense, net
14,100
Depreciation and amortization
from unconsolidated
joint ventures
4,400
Interest expense, net
from unconsolidated joint
ventures
4,300
Income tax expense
(1,100)
------
EBITDA
38,000
Asset impairments and
write-offs
-
Equity interest in the
sale of unconsolidated
joint ventures
-
Minority interest expense
-
---
Adjusted EBITDA
$38,000
=======
Adjusted diluted loss per share (6)
$(0.05)
======
Interstate Hotels & Resorts, Inc.
Notes to Financial Tables
(Unaudited)
(1) We record termination fees as revenue when all contingencies
related to the termination fees have been removed.
(2) This amount represents losses recorded for impairment
of hotel assets, intangible costs associated with terminated management
contracts and other asset impairments. In the fourth quarter of 2008, we
recorded an $11.0 million non-cash impairment charge related to our Hilton
Arlington hotel asset. In addition, $0.3 million and $2.9 million in allowances
for bad debts related to notes receivable are included for the fourth quarters
2008 and 2007, respectively. Allowance for bad debts related to notes receivable
are recorded within administrative and general expense on our consolidated
statement of operations.
(3) For 2007, interest expense includes $0.5 million of
deferred financing fees expensed in the first quarter in connection with
the entrance into a senior secured credit facility and the related pay-off
of all balances outstanding under the previous credit facility, as well
as the write-off of $0.1 million of deferred financing fees at the time
of repayment of the underlying mortgage note for the Hilton Concord.
(4) In the fourth quarter of 2008, we recorded $3.5 million
and $0.4 million in non-cash impairment charges relating to two of our
joint venture investments and these charges are reflected within equity
in earnings of unconsolidated entities on our statement of operations.
We also recognized $0.1 million in equity in earnings of unconsolidated
entities associated with the write-off of costs for a cancelled development
project.
(5) In January 2007, we completed the sale of our subsidiary,
BridgeStreet Corporate Housing. We have presented these operations and
the gain on sale as discontinued operations for all periods presented.
The calculation of EBITDA reflects the elimination of discontinued operations.
(6) Our diluted earnings per share assumes the issuance
of common stock for all potentially dilutive common stock equivalents outstanding.
Potentially dilutive shares include unvested restricted stock and stock
options granted under our comprehensive stock plan and operating partnership
units held by minority partners. No effect is shown for any securities
that are anti-dilutive.
(7) We present certain operating statistics (i.e. occupancy,
RevPAR and ADR) for the periods included in this report on a same-store
hotel basis. We define our same-store hotels as those which (i) are managed
by us for the entirety of the reporting periods being compared or have
been managed by us for part of the reporting periods compared and we have
been able to obtain operating statistics for the period of time in which
we did not manage the hotel, and (ii) have not sustained substantial property
damage, business interruption, or undergone large-scale capital projects
during the reporting periods being presented. In addition, the operating
results of hotels which we no longer managed as of December 31, 2008 are
also not included in same-store hotel results for the periods presented
herein. Of the 226 properties that we managed as of December 31, 2008,
194 hotels have been classified as same-store hotels. RevPar is defined
as revenue per available room.
(8) Wholly-Owned Hotels - Hotel Level Operating Statistics
include periods prior to our ownership. The Hilton Houston Westchase was
purchased in February 2007, the Westin Atlanta Airport was purchased in
May 2007, and the Sheraton Columbia was purchased in November 2007. The
Westin Atlanta Airport and Sheraton Columbia hotels are excluded from these
statistics as they were undergoing significant renovations throughout 2008.
Statistics for all wholly-owned properties are included in the Managed
Hotels - Hotel Level Operating Statistics.
(9) See discussion of EBITDA, adjusted EBITDA, adjusted
net income and adjusted diluted earnings per share, located in the "Non-GAAP
Financial Measures" section, described earlier in this press release.
(10) One of our international joint venture has debt that
is denominated in a currency other than its functional currency. Each period,
the debt obligation is translated and the resulting gain or loss is recognized
in our statement of operations, although this is a non-cash event.
(11) In the first quarter of 2008, one of our joint ventures
sold the Doral Tesoro Hotel & Golf Club, we recorded a gain of $2.4
million, including the previously deferred gain of $0.6 million. For the
year ended December 31, 2007, the adjustment primarily relates to gains
of $1.2 million related to the settlement of working capital and other
purchase price adjustments for joint ventures sold in prior years.
(12) Severance expense for the year ended December 31,
2007 relates to the separation costs of personnel at our corporate offices
associated with the reduction in the number of third party managed properties.
These severance costs are recorded as part of administrative and general
expenses on our statement of operations.
(13) This amount represents the effect on income tax expense
for the adjustments made to net income (loss). For 2008, we used our historical
3-year average effective tax rate of 32.0% as we had a significant valuation
allowance of $16.1 million recorded against our deferred tax asset in the
current year which is excluded from adjusted net income and adjusted EPS.
This allowance was recorded as certain of our tax assets can not be utilized
in the foreseeable future which management believes to be the next five
years. Many of these tax assets have substantially longer remaining carryforward
periods of up to 20 years. For 2007, we used the effective tax rate of
15.0% for that year.
(14) Our outlook reconciliation uses the mid-point of
our estimates.
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