Interstate Hotels &
Resorts Reports Second-Quarter 2009 Results
ARLINGTON, Va., Aug. 5 /PRNewswire-FirstCall/ --
Interstate Hotels & Resorts (NYSE:IHR)
, a leading hotel real estate investor and the nation's largest
independent hotel management company, today reported operating results
for the second quarter ended June 30, 2009. The company's performance
for the second quarter includes the following (in millions, except per
share amounts):
Second Quarter Year-to-Date (YTD) 2009(4) 2008 2009(4) 2008(5) Total revenue (1) $34.0 $40.5 $64.5 $79.4 Net (loss) income $(6.7) $0.1 $(19.2) $(0.2) Diluted (loss) earnings per share $(0.21) $0.00 $(0.60) $0.00 Adjusted EBITDA (2)(3) $10.3 $10.2 $16.2 $17.9 Adjusted net income (loss)(2) $0.6 $0.1 $(1.3) $(1.0) Adjusted diluted EPS (2) $0.02 $0.00 $(0.04) $(0.03)
(1) Total revenue excludes other revenue from
managed properties (reimbursable costs).
(2) Adjusted EBITDA, Adjusted net income (loss),
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 of and further discussion of non-GAAP
financial measures and reconciliation to net (loss) income later in
this press release.
(3) Includes the company's share of EBITDA from
investments in
unconsolidated entities in the amounts of $1.8 million and $2.5 million
in the second quarters of 2009 and 2008, respectively, and $3.0 million
and $4.2 million in the first six months of 2009 and 2008, respectively.
(4) The second quarter 2009 and YTD 2009 results
include (i) a $3
million non-cash impairment charge related to the company's investment
in a joint venture, (ii) $0.1 million and $0.9 million charges,
respectively, for restructuring primarily related to severance costs as
a part of the company's 2009 cost reduction program, (iii) $0.7 million
of write-offs of intangible assets related to the termination of
certain management contracts and other asset impairments, and (iv)
income tax expense related to the full valuation allowance against our
deferred tax assets offset by a change in the company's effective tax
rate, both described in more detail in footnote 9 to the financial
tables later in this press release. These charges are excluded from the
calculation of Adjusted EBITDA, Adjusted net income (loss), and
Adjusted diluted EPS.
(5) The YTD 2008 results include (i) a $2.4
million gain on the sale
of the Doral Tesoro Hotel & Golf Club, and (ii) $1.1 million of
write-offs of intangible assets related to the sale of certain hotels.
These charges are excluded from the calculation of Adjusted EBITDA,
Adjusted net income (loss), and Adjusted diluted EPS.
Highlights for the second quarter and through today include: -- Maintained year over year Adjusted EBITDA in a difficult economy; generated growth in Adjusted Net Income; -- Extended senior secured credit facility to March 2012; -- Added seven properties to third-party management portfolio, including three hotels from its signed management contract pipeline of properties under development or construction; -- Signed first management contract with the Duet Hotel Fund in India; the second contract for JHM Interstate Hotels India;
-- Common stock resumed trading on the NYSE effective July 29, 2009.
"I am very pleased with the significant progress
we have made on our
capital structure," said Thomas F. Hewitt, chairman and chief executive
officer. "We extended our senior credit facility to March 2012 well in
advance of its original expiration date. This, along with our
successful appeal of the NYSE's ruling to suspend the trading of our
stock, has provided stability to our capital structure in an extremely
volatile market.
"With these hurdles behind us, we continue to
focus our efforts on
growing our third party management business while preserving our
capital and liquidity and maximizing profits," Hewitt added. "Despite
the challenging operating climate and RevPAR declines in excess of 20
percent, we maintained our second quarter Adjusted EBITDA year over
year, which is a result of the cost reduction initiatives we
implemented in January."
Hotel Management
Same-store(6) RevPAR for all managed hotels in the
second quarter
decreased 21.4 percent to $81.81. Average daily rate (ADR) was $122.30,
down 12.8 percent, and occupancy fell 9.8 percent to 66.9 percent.
Same-store RevPAR for all full-service managed
hotels declined 22.2
percent to $93.35. ADR was off 13.9 percent to $133.78, while occupancy
decreased 9.7 percent to 69.8 percent.
Same-store RevPAR for all select-service managed
hotels declined
19.0 percent to $59.68, led by a 10.1 percent decline in occupancy to
61.4 percent and a 9.8 percent drop in ADR to $97.25.
"During the second quarter, we saw a continuation
of the difficult
economic conditions and deteriorating lodging fundamentals that
prevailed in the first quarter and much of last year, " Hewitt said.
"We continue to focus on top-line revenues and reducing costs wherever
possible. These are indeed unprecedented times, but we have the
experience and expertise to operate effectively in these conditions."
Hewitt added that Interstate's new contract flow
has remained steady
in 2009, a fact that he attributes to the company's proven operating
performance in all economic cycles, deep relationships in the industry,
high owner loyalty and a broad network of contacts.
"We recently added two Courtyard by Marriott
hotels in Virginia
owned by the same group for whom we've been managing two hotels and two
first-class restaurants in Gettysburg, Pa. We also added the Holiday
Inn Laredo Civic Center and the Crowne Plaza Milwaukee Airport, and
opened the Lancaster Marriott at Penn Square and Lancaster County
Convention Center, a $177 million project with which we have been
involved for more than a decade. We opened the TownePlace Suites by
Marriott in Easton/Bethlehem (Pa.), and last week, our wholly-owned
subsidiary, Sunstone Hospitality Management, signed an agreement to
manage the Doubletree Austin-University Area in Texas, the second
property we now manage for that ownership group."
After opening three under-construction properties
this summer,
Interstate currently has 13 management contracts signed for hotels
under development or construction. The majority of these properties are
expected to open in 2010.
(6) Please see footnote 11 to the financial tables
within this press
release for a detailed explanation of "same-store" hotel operating
statistics.
International
"We continue to move forward with our management
and development
plans in India," Hewitt added. "Our management company joint venture,
JHM Interstate Hotels India, signed its first management contract with
the Duet Fund, a U.K.-based real estate fund dedicated to India hotel
development that we invested in last year."
The 115-room hotel, scheduled to open in the fall
of 2009, is
located in Jaipur, which is the capital of the state of Rajasthan and
part of India's Golden Triangle (Delhi, Jaipur and Agra). Brand
affiliations for this property and the under-construction property in
Vizag (Visakhapatnam), are expected to be finalized during the third
quarter.
Wholly Owned Hotel Results
EBITDA from the company's seven owned hotels was
$6.0 million in the 2009 second quarter as outlined below (in millions):
Owned Hotels Second Quarter Year-to-Date ------------ -------------- ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Net income $0.0 $1.3 $(1.3) $1.5 Interest expense 3.1 3.2 6.0 6.8 Depreciation and amortization 2.9 3.8 5.8 7.0 --- --- --- --- EBITDA $6.0 $8.3 $10.5 $15.3 ==== ==== ===== =====
"RevPAR for our owned portfolio declined 16.4
percent, better than
the industry average of 19.5 percent," Hewitt said. "These results were
driven by our two recently renovated properties. The Westin Atlanta
Airport property performed exceptionally well with a RevPAR gain of 3.9
percent. Also, at the Sheraton Columbia Town Center Hotel, after
completing our $12 million renovation, the hotel outperformed its
competitive set and the industry with a 13.2 percent RevPAR decline.
"We did experience weakness at our hotels in
Concord, Calif., and
Houston and Arlington, Texas," Hewitt noted. "However, I am very
pleased with the results of the cost-cutting initiatives carried out by
all of our hotels. Despite a RevPAR decrease of 16.4 percent, of which
12.6 percent was ADR, we were able to offset nearly 50 percent of this
revenue decline with expense savings."
Balance Sheet On June 30, 2009, Interstate had:
-- Total unrestricted cash of $22.8 million.
-- Total debt of $243.7 million, consisting of $161.2 million of senior debt and $82.5 million of non-recourse mortgage debt.
Effective July 10, the company extended the
maturity of its senior
credit facility to March 2012 by converting the facility's outstanding
balance of $161.2 million to a new term loan. The agreement also
provides the company with an $8 million revolving line of credit.
"The recent extension of our credit facility to
2012 gives us a
solid platform from which we can continue to focus on our core
business," said Bruce Riggins, chief financial officer. "We are in the
process of securing a mortgage on the Westin Atlanta Airport Hotel and
expect to choose a lender in the near term. The expected mortgage
proceeds of approximately $20 million will be used to pay down the
credit facility in accordance with its amortization requirements. We
are also in the process of exploring the sale of a wholly-owned asset.
Upon the completion of these two transactions, we will be well on our
way to meeting the second $20 million amortization hurdle by March
2011."
Guidance
The company has updated its 2009 guidance based on
a current
projected RevPAR decline of 19 percent for all hotels and 15 percent
for owned hotels:
-- Total Adjusted EBITDA of $34.0 million which includes the following: -- EBITDA from wholly owned hotels of $18.0 million; -- The company's share of EBITDA from unconsolidated joint ventures of $5.5 million; and -- EBITDA from the hotel management business of $10.5 million. -- Adjusted net loss of $(7.2) million or $(0.22) per share.
Earnings Conference Call
Interstate will hold a conference call to discuss
its second-quarter
results today, August 5, at 9 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 Second-Quarter Conference
Call. A replay of the conference call will be available until midnight
on Wednesday, August 12, 2009, by dialing (800) 406-7325, reference
number 4117565, and an archived webcast of the conference call will be
posted on the company's Web site through September 5, 2009.
Interstate Hotels & Resorts has ownership
interests in 56 hotels
and resorts, including seven wholly owned assets. Together with these
properties, the company and its affiliates manage a total of 224
hospitality properties with approximately 45,700 rooms in 37 states, the
District of Columbia, Russia, Mexico, Belgium,
Canada and Ireland.
Interstate Hotels & Resorts also has contracts to manage 13 to be
built hospitality properties with approximately 3,000 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 loss and Adjusted diluted loss per share. 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 include 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 Loss 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 when combined with the primary GAAP
presentation of net loss, 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 loss and
Adjusted diluted loss per
share ("EPS") as net loss and diluted EPS, without the effects of those
same charges, transactions and expenses described earlier. We believe
that Adjusted EBITDA, Adjusted net loss 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 loss 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 Use of EBITDA, Adjusted EBITDA,
Adjusted Net Loss and Adjusted Diluted EPS
We calculate EBITDA, Adjusted EBITDA, Adjusted net
loss 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
loss 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 loss 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.
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. Except for historical information, the matters
discussed in this press release are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual
results to differ materially, including the volatility of the national
economy, economic conditions generally and the hotel and real estate
markets specifically, the war in Iraq, international and geopolitical
difficulties or health concerns, governmental actions, legislative and
regulatory changes, availability of debt and equity capital, interest
rates, competition, weather conditions or natural disasters, supply and
demand for lodging facilities in our current and proposed market areas,
and the company's ability to manage integration and growth. Additional
risks are discussed in Interstate Hotels & Resorts' filings with
the Securities and Exchange Commission, including Interstate Hotels
& Resorts' annual report on Form 10-K for the year ended December
31, 2008.
Contact: Carrie McIntyre SVP, Treasurer (703) 387-3320
Interstate Hotels & Resorts, Inc. Consolidated Statements of Operations (Unaudited, in thousands except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenue: Lodging $21,225 $25,796 $40,261 $49,714 Management fees 8,758 10,820 17,109 20,729 Termination fees (1) 1,995 1,194 3,241 4,204 Other 2,039 2,693 3,923 4,792 ----- ----- ----- ----- 34,017 40,503 64,534 79,439 Other revenue from managed properties 133,657 157,333 265,746 308,347 ------- ------- ------- ------- Total revenue 167,674 197,836 330,280 387,786
Expenses: Lodging 15,224 17,510 29,806 34,452 Administrative and general 10,783 15,331 22,021 31,243 Depreciation and amortization 3,849 4,901 7,690 9,175 Restructuring costs (2) 90 - 921 - Asset impairments and write- offs 236 29 236 1,141 --- -- --- ----- 30,182 37,771 60,674 76,011 Other expenses from managed properties 133,657 157,333 265,746 308,347 ------- ------- ------- ------- Total operating expenses 163,839 195,104 326,420 384,358 ------- ------- ------- -------
OPERATING INCOME 3,835 2,732 3,860 3,428
Interest income 25 280 125 599 Interest expense (4) (3,126) (3,333) (6,033) (7,148) Equity in (losses) earnings of unconsolidated entities (5)(6)(7)(8) (3,713) 535 (4,511) 2,896 Gain on sale of investments - - 13 - --- --- -- ---
(LOSS) INCOME BEFORE INCOME TAXES (2,979) 214 (6,546) (225)
Income tax (expense) benefit (9) (3,733) (79) (12,649) 72 ------ --- ------- --
NET (LOSS) INCOME (6,712) 135 (19,195) (153) Add: Net (income) loss attributable to noncontrolling interest 5 (1) 11 1 --- -- -- --- NET (LOSS) INCOME ATTRIBUTABLE TO INTERSTATE STOCKHOLDERS $(6,707) $134 $(19,184) $(152) ======= ==== ======== =====
Basic (loss) earnings per share attributable to Interstate stockholders $(0.21) $0.00 $(0.60) $0.00 ====== ===== ====== =====
Diluted (loss) earnings per share attributable to Interstate stockholders (10) $(0.21) $0.00 $(0.60) $0.00 ====== ===== ====== =====
Weighted average shares outstanding (in thousands): Basic 32,135 31,764 32,030 31,765 Diluted 32,135 32,864 32,030 31,765
Interstate Hotels & Resorts, Inc. Hotel Level Operating Statistics (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2009 2008 % change 2009 2008 % change ---- ---- -------- ---- ---- --------
Managed Hotels - Hotel Level Operating Statistics: (11)
Full-service hotels: Occupancy 69.8% 77.3% -9.7% 66.7% 74.6% -10.6% ADR $133.78 $155.30 -13.9% $134.70 $153.34 -12.2% RevPAR $93.35 $120.02 -22.2% $89.78 $114.40 -21.5%
Select-service hotels: Occupancy 61.4% 68.3% -10.1% 58.2% 64.3% -9.5% ADR $97.25 $107.79 -9.8% $98.32 $108.16 -9.1% RevPAR $59.68 $73.65 -19.0% $57.24 $69.51 -17.7%
Total: Occupancy 66.9% 74.2% -9.8% 63.5% 70.7% -10.2% ADR $122.30 $140.26 -12.8% $122.15 $137.89 -11.4% RevPAR $81.81 $104.08 -21.4% $77.54 $97.52 -20.5%
Wholly-Owned Hotels - Hotel Level Operating Statistics: (12)
Occupancy 68.5% 71.6% -4.3% 63.8% 68.1% -6.3% ADR $107.18 $122.69 -12.6% $109.43 $122.34 -10.6% RevPAR $73.38 $87.79 -16.4% $69.85 $83.34 -16.2%
Interstate Hotels & Resorts, Inc. Reconciliations of Non-GAAP Financial Measures (13) (Unaudited, in thousands except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2009 2008 2009 2008 ---- ---- ---- ----
Net (loss) income $(6,712) $135 $(19,195) $(153) Adjustments: Depreciation and amortization 3,849 4,901 7,690 9,175 Interest expense, net 3,101 3,053 5,908 6,549 Depreciation and amortization from unconsolidated entities 1,157 1,098 2,109 1,799 Interest expense, net from unconsolidated entities 988 897 1,950 1,860 Income tax (benefit) expense 3,733 79 12,649 (72) ----- -- ------ ---
EBITDA 6,116 10,163 11,111 19,158 Restructuring costs (2) 90 - 921 - Asset impairments and write-offs (3) 736 29 736 1,141 Gain on sale of investments - - (13) - Equity interest in the sale of unconsolidated entities (5) - - - (2,392) Foreign currency loss from unconsolidated entities (6) (202) - (73) - Start-up costs from unconsolidated entities (7) 511 - 511 - Investment in unconsolidated entities impairments (8) 3,019 - 3,019 -
------- ------- ------- ------- Adjusted EBITDA $10,270 $10,192 $16,212 $17,907 ======= ======= ======= =======
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net (loss) income $(6,712) $135 $(19,195) $(153) Adjustments: Restructuring costs (2) 90 - 921 - Asset impairments and write-offs (3) 736 29 736 1,141 Gain on sale of investments - - (13) - Deferred financing costs write- off (4) - - 119 - Equity interest in the sale of unconsolidated entities (5) - - - (2,392) Foreign currency loss from unconsolidated entities (6) (202) - (73) - Start-up costs from unconsolidated entities (7) 511 - 511 - Investment in unconsolidated entities impairments (8) 3,019 - 3,019 - Income tax rate adjustment (14) 3,170 (43) 12,636 397 ----- --- ------ ---
Adjusted net income (loss) $612 $121 $(1,339) $(1,007) ==== ==== ======= =======
Adjusted diluted earnings (loss) per share $0.02 $0.00 $(0.04) $(0.03) ===== ===== ====== ======
Weighted average number of diluted shares outstanding (in thousands) (10): 32,135 32,864 32,030 31,765
Interstate Hotels & Resorts, Inc. Outlook Reconciliation (13) (Unaudited, in thousands)
Forecast ---------- Year Ending December 31, 2009 ------------------- Net loss $(24,900) Adjustments: Depreciation and amortization 16,100 Interest expense, net 17,300 Depreciation and amortization from unconsolidated entities 4,100 Interest expense, net from unconsolidated entities 3,700 Income tax expense 12,700 ------
EBITDA 29,000 Restructuring costs (2) 900 Asset impairments and write-offs (3) 700 Foreign currency loss from unconsolidated entities (6) (100) Start-up costs from unconsolidated entities (7) 500 Investment in unconsolidated entities impairments (8) 3,000 -----
Adjusted EBITDA $34,000 =======
Forecast ---------- Year Ending December 31, 2009 ------------------- Net Loss $(24,900) Adjustments: Restructuring costs (2) 900 Asset impairments and write-offs (3) 700 Deferred financing costs write-off (4) 100 Foreign currency loss from unconsolidated entities (6) (100) Start-up costs from unconsolidated entities (7) 500 Investment in unconsolidated entities impairments (8) 3,000 Income tax rate adjustment (14) 12,600 ------
Adjusted Net Loss $(7,200) =======
Adjusted diluted loss per share (10) $(0.22) ======
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) Restructuring costs for the three and six
months ended June 30,
2009 consists of severance payments and other benefits for terminated
employees associated with our cost-savings program implemented in
January 2009.
(3) This amount represents losses recorded for
intangible assets
associated with terminated management contracts and other asset
impairments. In the second quarter of 2009, $0.5 million in allowance
for bad debts related to notes receivable, which are recorded within
administrative and general expense on our consolidated statement of
operations, has been included.
(4) Interest expense for the six months ended June
30, 2009 includes
a $0.1 million write-off of deferred financing costs as a result of the
permanent reduction in capacity of our credit facility associated with
the waiver and amendment obtained in March 2009.
(5) In the first quarter of 2008, one of our joint
ventures sold the
Doral Tesoro Hotel & Golf Club and we recorded a gain of $2.4
million.
(6) One of our international joint ventures 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 consolidated statement of operations,
although it is a non-cash event.
(7) In February 2008, we and JHM Hotels, LLC
formed a joint venture
hotel management company in India. In May 2009, our previously
contributed notes receivable were converted into a 50.0 percent equity
interest in the JHM Interstate Hotels India Ltd. joint venture. Upon
applying the equity method of accounting in the second quarter of 2009,
we recorded $0.5 million in equity in losses related to the accumulated
start-up costs of the joint venture.
(8) In the second quarter of 2009, we recognized a
non-cash
impairment charge of $3.0 million relating to one of our joint venture
investments and this charge is reflected within equity in (losses)
earnings of unconsolidated entities on our statement of operations.
(9) In the first quarter of 2009, our effective
annual tax rate was
determined to be (250.4)% which took into account our foreign
intellectual property license transaction. This transaction was
expected to accelerate the utilization of certain U.S. tax attributes
based on then-current forecasts. The application of this effective
annual tax rate to our first quarter pre-tax loss of $3.6 million
resulted in income tax expense of $8.9 million for the first quarter of
2009.
In the second quarter of 2009, we established a
full valuation
allowance against our remaining net deferred tax assets as we
determined it is more likely than not that we will not be able to
utilize these assets in the foreseeable future. As a result, our
effective annual tax rate was calculated to be 1.2% in the second
quarter of 2009 and is expected to be nominal (or approximately 0%) for
the third and fourth quarters of 2009.
(10) 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 noncontrolling interest partners.
No effect is shown for any securities that are anti-dilutive.
(11) 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
or owned 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 current reporting period being
presented. In addition, the operating results of hotels for which we no
longer managed as of June 30, 2009 are also not included in same-store
hotel results for the periods presented herein. Of the 221 properties
that we managed as of June 30, 2009, 193 hotels have been classified as
same-store hotels. RevPAR is defined as revenue per available room.
(12) Operating statistics for our wholly-owned
hotels includes our
entire portfolio of 7 hotels, including the Sheraton Columbia and the
Westin Atlanta Airport, both of which underwent comprehensive
renovation programs throughout 2008.
(13) See discussion of EBITDA, adjusted EBITDA,
adjusted net loss
and adjusted diluted loss per share, located in the "Non-GAAP Financial
Measures" section, described earlier in this press release.
(14) These amounts represent the effect on income
tax expense for
the adjustments made to adjusted net income (loss). For the six months
ended June 30, 2009 and 2008, we used an effective annual tax rate of
1.2% and 32%, respectively. For the three and six months ended June 30,
2009, we adjusted the income tax expense related to the valuation
allowance recorded against deferred tax assets during the quarter as
discussed in footnote 9 above.
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