MeriStar Hospitality Corporation (NYSE:MHX), one of the nation's
largest hotel real estate investment trusts (REIT), today announced
financial results for the first quarter ended March 31, 2005.
Highlights of the company's strong quarterly performance
include(1): -- Net loss narrowed to $(13.4) million or $(0.15) per
diluted share compared to a net loss of $(40.2) million or $(0.58)
per diluted share for the 2004 first quarter; -- Adjusted EBITDA of
$43.3 million increased 15.0 percent compared to $37.6 million in
the 2004 first quarter; -- Adjusted funds from operations (FFO) per
share of $0.12 increased 300 percent compared to $0.03 per share
for the 2004 first quarter; -- A 140 basis point improvement in
comparable hotel gross operating profit margins and a 220 basis
point improvement in comparable hotel EBITDA margins; -- Revenue
per available room (RevPAR) increased 5.1 percent for the
comparable hotels, adjusted for rooms out-of-service; -- Estimated
RevPAR growth of 7.5 percent assuming all Florida properties were
fully open and realized market RevPAR growth rates and were
included in the comparable hotels; and -- Business interruption
("BI") insurance income of $2.3 million included in net loss,
adjusted EBITDA and adjusted FFO. (1) See the notes to financial
information for further discussion on certain of these non-GAAP
financial measures. "We had a great first quarter, as evidenced by
the improvements in net income, adjusted EBITDA, and adjusted FFO
per share. All of these measures exceeded our prior year amounts by
a wide margin," said Paul W. Whetsell, chairman and chief executive
officer. "Our ability to increase room rates has lead to strong
flow through, generating an increase in comparable hotel gross
operating profit margins of 140 basis points along with comparable
EBITDA margins of 220 basis points, well ahead of the 50 to 100
basis point EBITDA margin increase we targeted in our first quarter
guidance. Our efforts to strengthen the portfolio through well
executed capital expenditures, planned asset sales and new property
investments are positioning us well for revenue growth and margin
expansion. "A number of our markets reported strong increases in
RevPAR. Washington, D.C., where we own 11 properties (2,478 rooms),
continues as one of the nation's leading markets. Our comparable
hotels in and around the nation's capital enjoyed adjusted RevPAR
gains of 11.8 percent," Whetsell stated. Strong rate increases
drove the average daily rate (ADR) for the company's comparable
hotels up 8.1 percent to $108.69 in the first quarter. Following
the company's strategy to increase room rates and displace
lower-rated contract business, occupancy decreased slightly by 1.9
percentage points to 67.8 percent after adjusting for rooms
out-of-service for the company's extensive renovation program. The
comparable properties' adjusted RevPAR increase of 5.1 percent
exceeded the company's guidance of 4 to 5 percent for the first
quarter and was realized despite the continued closure during the
quarter of seven properties in the strong Florida market where
RevPAR gains have been exceptionally strong. The company estimates
that the adjusted RevPAR would have increased 7.5 percent had all
of its Florida properties been fully open with market type RevPAR
performance. The company acquired two properties during 2004, The
Ritz-Carlton, Pentagon City and the Marriott Irvine, which had a
combined adjusted RevPAR increase of 12 percent for the quarter.
"The Marriott Irvine property completed its major room renovation
program during the quarter," Whetsell stated. These two properties
are not currently included in the company's comparable results as
they were not owned in both years. During 2004 the company also
acquired a 49.99 percent interest in the landmark Radisson
Lexington in Midtown Manhattan, which recorded a RevPAR increase of
14 percent in the first quarter. "All three of our 2004 investment
properties are performing exceptionally well and are out-performing
our original expectations," Whetsell added. Renovation Program In
the first quarter, the company invested approximately $35.8 million
in capital improvements at its properties as part of its $100
million renovation program for 2005. "We are clearly experiencing
the benefits of our property investment program that began in 2004.
The upgrading we are doing allows us to position properties for
higher-rated and more profitable business." Examples of the
program's impact include the Hilton hotel in Durham, N.C. During
2004, the company renovated the guest rooms, meeting space, sports
bar and restaurant. In the first quarter 2005, the property
reported a 16 percent improvement in adjusted RevPAR and
significantly outperformed its competitive set. Another property,
the company's Courtyard in Marina del Ray, Calif., also completed a
renovation in 2004 and reported RevPAR growth of 17 percent for the
2005 first quarter. "This hotel's RevPAR index in the quarter of
over 115 demonstrates the property's strength and its ability to
grow share in its market," Whetsell added. "We expect to see
similar examples across our portfolio as we continue to complete
projects throughout the year." Florida Hotels Update Florida
continued to see outstanding growth as evidenced by reports of
double-digit RevPAR gains across the state. The company's two open
Orlando hotels both produced nearly 30 percent RevPAR gains in the
first quarter. Also, the company's two hotels in the
Tampa/Clearwater market achieved nearly 25 percent RevPAR growth,
adjusted for rooms out-of-service. Whetsell noted that, of the
seven properties substantially closed in the first quarter due to
hurricane damage last fall, five will be reopening in the second
quarter. "We expect to have all but our South Seas Resort on
Captiva open by summer. South Seas, which suffered the most damage,
is expected to re-open this fall in time for the high season."
Total company adjusted EBITDA of $43.3 million in the first quarter
included $2.3 million of BI insurance income recognition related to
the ongoing claim for the Florida properties affected by last
year's hurricanes. Including BI insurance income, the company's
seven Florida hotels substantially closed during the first quarter
and the Dunes Golf and Tennis Club on Sanibel Island contributed
$2.5 million of EBITDA ($0.9 million of net income) in the first
quarter 2005, compared to $6.4 million of EBITDA ($3.8 million of
net income) in the first quarter 2004. In addition, total revenue
reported by these properties was $4.0 million in the 2005 first
quarter compared to $28.9 million in the quarter a year ago. "The
operating results from our comparable hotels provided for a strong
first quarter, despite recognizing a very conservative BI insurance
gain in the quarter," said Donald D. Olinger, chief financial
officer. "The $2.3 million of BI recognized in the quarter
represents minimum profit recognition independent from the claim
payment process and is below both what we ultimately expect to
recognize and the $6 to $8 million originally contemplated in our
guidance for the quarter. The claim negotiation process was not
sufficiently advanced on several of our more complex properties to
enable us to recognize profit in the first quarter, and we did not
believe that forcing the issue was in the best interest of the
overall claim resolution. We are very confident that we ultimately
will be compensated for lost profits at a level well in excess of
what we recognized in this quarter, however the timing of the
recognition between this year's quarters will continue to be
challenging to predict." To date, the company has received
approximately $70 million of hurricane recovery insurance payments.
"We have been receiving regular cash payments from our insurance
carriers and expect these payments to continue as we work through
our claim," Olinger added. "However, in order to recognize gains
resulting from BI insurance for lost income, all contingencies
related to the recoveries must be resolved, which is difficult to
achieve with the insurance companies until the claim is more
advanced." Capital Structure "We continued to improve our capital
structure in the first quarter, taking advantage of lower interest
rate debt opportunities, and lengthening our maturities," Olinger
said. In January 2005, the company placed a 5.8 percent fixed-rate,
10-year, $38 million mortgage on the Hilton Crystal City hotel in
Arlington, Virginia. In the short-term, proceeds will be used to
temporarily fund capital projects at properties damaged by last
year's hurricanes. "We ultimately plan to reduce debt carrying
higher rates or use the proceeds to fund selected investments. We
will continue to look for opportunities to reduce our borrowing
costs and to improve our credit statistics in 2005," he added.
Guidance Following the strength of the first quarter results, the
company has increased full year 2005 guidance for adjusted EBITDA,
FFO per share, RevPAR growth and comparable hotel EBITDA margin
growth. RevPAR increase has been raised to 8 to 9 percent for the
full year 2005 with RevPAR growth of 9 to 10 percent anticipated in
the second quarter 2005. Comparable hotel EBITDA margins are
expected to increase 125 to 175 basis points in the second quarter
and for the full year. Additionally, the company provides the
following range of estimates for the second quarter and full year:
-- Net income (loss) of break-even to $3 million for the second
quarter and $(38) million to $(43) million for the full year; --
Net income (loss) per diluted share of $0.00 to $0.03 for the
second quarter and $(0.43) to $(0.49) for the full year; -- FFO per
diluted share of $0.28 to $0.31 for the second quarter and $0.59 to
$0.64 for the full year; -- Adjusted FFO per diluted share of $0.28
to $0.31 for the second quarter and $0.59 to $0.64 for the full
year; -- Adjusted EBITDA of $60 million to $63 million for the
second quarter and $190 million to $195 million for the full year;
and -- BI insurance profit of $2.5 million to $5 million is
included in the second quarter adjusted EBITDA guidance of $60 to
$63 million. 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. FFO, Adjusted
FFO, and Adjusted EBITDA (earnings before interest, income taxes,
depreciation, amortization and other items) are non-GAAP financial
measures and should not be considered as alternatives to any
measures of operating results under GAAP. See the notes to
financial information for further discussion of these non-GAAP
financial measures. MeriStar will hold a conference call to discuss
its first-quarter results today, May 4, at 10 a.m. Eastern time.
Interested parties may visit the company's Web site at
www.meristar.com and click on Investor Relations and then the
webcast link. Interested parties also may listen to an archived
webcast of the conference call on the Web site, or may dial (800)
240-7305, reference number 11028922, to hear a telephone replay.
The telephone replay will be available through midnight on
Wednesday, May 11, 2005. Arlington, Va.-based MeriStar Hospitality
Corporation owns 73 principally upscale, full-service hotels in
major markets and resort locations with 20,319 rooms in 22 states
and the District of Columbia. The company owns hotels under such
internationally known brands as Hilton, Sheraton, Marriott,
Ritz-Carlton, Westin, Doubletree and Radisson. For more information
about MeriStar Hospitality, visit the company's Web site:
www.meristar.com. This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements, which are based on various assumptions
and describe our future plans, strategies and expectations, are
generally identified by our use of words such as "intend," "plan,"
"may," "should," "will," "project," "estimate," "anticipate,"
"believe," "expect," "continue," "potential," "opportunity," and
similar expressions, whether in the negative or affirmative. We
cannot guarantee that we actually will achieve these plans,
intentions or expectations. All statements regarding our expected
financial position, business and financing plans are
forward-looking statements. Except for historical information,
matters discussed in this press release are subject to known and
unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially
different from future results, performance or achievements
expressed or implied by such forward-looking statements. Factors
which could have a material adverse effect on our operations and
future prospects include, but are not limited to: economic
conditions generally and the real estate market specifically;
supply and demand for hotel rooms in our current and proposed
market areas; other factors that may influence the travel industry,
including health, safety and economic factors; competition; cash
flow generally, including the availability of capital generally,
cash available for capital expenditures, and our ability to
refinance debt; the effects of threats of terrorism and increased
security precautions on travel patterns and demand for hotels; the
threatened or actual outbreak of hostilities and international
political instability; governmental actions, including new laws and
regulations and particularly changes to laws governing the taxation
of real estate investment trusts; weather conditions generally and
natural disasters; rising interest rates; and changes in generally
accepted accounting principles, policies and guidelines applicable
to real estate investment trusts. These risks and uncertainties
should be considered in evaluating any forward-looking statements
contained in this press release or incorporated by reference
herein. All forward-looking statements speak only as of the date of
this press release or, in the case of any document incorporated by
reference, the date of that document. All subsequent written and
oral forward-looking statements attributable to us or any person
acting on our behalf are qualified by the cautionary statements in
this section. We undertake no obligation to update or publicly
release any revisions to forward-looking statements to reflect
events, circumstances or changes in expectations after the date of
this press release. -0- *T CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) Quarter Ended March 31,
------------------------------- 2005 2004 ---------------
------------- Revenue: Hotel operations: Rooms $ 125,995 $ 129,992
Food and beverage 51,858 49,110 Other hotel operations 11,384
15,340 Office rental, parking and other revenue 1,858 1,368
--------------- ------------- Total revenue 191,095 195,810
--------------- ------------- Hotel operating expenses: Rooms
31,359 31,686 Food and beverage 37,509 36,907 Other hotel operating
expenses 7,116 9,475 Office rental, parking and other expenses 824
585 Other operating expenses: General and administrative, hotel
32,105 32,264 General and administrative, corporate 3,533 3,882
Property operating costs 29,682 29,735 Depreciation and
amortization 24,888 25,517 Property taxes, insurance and other
10,989 16,334 Loss on asset impairments - 184 ---------------
------------- Operating expenses 178,005 186,569 ---------------
------------- Equity in income/loss of and interest earned from
unconsolidated affiliates 1,634 1,600 Hurricane business
interruption income 2,281 - --------------- ------------- Operating
income 17,005 10,841 Minority interest 347 946 Interest expense,
net (30,714) (34,502) Loss on early extinguishments of debt (60)
(5,923) --------------- ------------- Loss before income taxes and
discontinued operations (13,422) (28,638) Income tax (expense)
benefit (22) 524 --------------- ------------- Loss from continuing
operations (13,444) (28,114) --------------- -------------
Discontinued operations: Loss from discontinued operations before
income tax benefit - (12,220) Income tax benefit - 89
--------------- ------------- Loss from discontinued operations -
(12,131) --------------- ------------- Net loss $ (13,444) $
(40,245) =============== ============= Basic loss per share: Loss
from continuing operations $ (0.15) $ (0.41) Loss from discontinued
operations - (0.18) --------------- ------------- Net loss per
basic share $ (0.15) $ (0.59) =============== ============= Diluted
loss per share: Loss from continuing operations $ (0.15) $ (0.41)
Loss from discontinued operations - (0.17) ---------------
------------- Net loss per diluted share $ (0.15) $ (0.58)
=============== ============= RECONCILIATION OF NET LOSS TO FUNDS
FROM OPERATIONS (a) (In thousands, except per share amounts)
Quarter Ended March 31, ------------------------------- 2005 2004
Funds From Operations: Net Loss $ (13,444) $ (40,245) Depreciation
and amortization of real estate assets 23,494 24,503 Loss on
disposal of assets - 6,946 Unconsolidated affiliate adjustments
1,254 - Minority interest to common OP unit holders (634) (997)
--------------- ------------- Funds from operations $ 10,670 $
(9,793) =============== ============= Weighted average number of
shares of common stock outstanding 87,495 68,640 ===============
============= Funds from operations per diluted share $ 0.12 $
(0.14) =============== ============= Funds From Operations, as
adjusted: Funds from operations $ 10,670 $ (9,793) Loss on asset
impairments - 5,011 Loss on early extinguishments of debt 60 5,923
Write off of deferred financing fees 11 1,266 Minority interest to
common OP unit holders (1) (387) --------------- -------------
Funds from operations, as adjusted $ 10,740 $ 2,020 ===============
============= Weighted average number of shares of common stock and
common stock equivalents outstanding 87,495 68,711 ===============
============= Funds from operations per diluted share, as adjusted
$ 0.12 $ 0.03 =============== ============= (a) See the notes to
the financial information for discussion of non-GAAP measures.
RECONCILIATION OF NET LOSS TO EBITDA (a) (In thousands) Quarter
Ended March 31, ------------------------------- 2005 2004 EBITDA
and Adjusted EBITDA: Loss from continuing operations $ (13,444) $
(28,114) Loss from discontinued operations - (12,131)
--------------- ------------- Net Loss $ (13,444) $ (40,245)
=============== ============= Loss from continuing operations $
(13,444) $ (28,114) Interest expense, net 30,714 34,502 Income tax
expense (benefit) 22 (524) Depreciation and amortization (b) 24,888
25,517 --------------- ------------- EBITDA from continuing
operations 42,180 31,381 Loss on asset impairments - 184 Minority
interest (347) (946) Loss on early extinguishments of debt 60 5,923
Equity investment adjustments: Equity in loss of affiliates 1,370 -
--------------- ------------- Adjusted EBITDA from continuing
operations $ 43,263 $ 36,542 =============== ============= Loss
from discontinued operations $ - $ (12,131) Interest expense, net -
(111) Income tax benefit - (89) Depreciation and amortization -
1,643 --------------- ------------- EBITDA from discontinued
operations - (10,688) Loss on asset impairments - 4,827 Loss on
disposal of assets - 6,946 --------------- ------------- Adjusted
EBITDA from discontinued operations $ - $ 1,085 ===============
============= Adjusted EBITDA, total operations $ 43,263 $ 37,627
=============== ============= (a) See the notes to the financial
information for discussion of non-GAAP measures. (b) Depreciation
and amortization includes the write-off of deferred financing costs
totaling $1.3 million for the Quarter Ended March 31, 2004 related
to our early extinguishments of debt during this period. HOTEL
OPERATIONAL DATA SCHEDULE OF COMPARABLE HOTEL RESULTS (a) (In
thousands, except per share amounts) Quarter Ended March 31,
------------------------------- 2005 2004 ---------------
------------- Number of hotels 62 62 Number of rooms 17,684 17,684
Comparable hotel gross operating profit margin 28.8% 27.4%
Comparable hotel EBITDA margin 20.9% 18.7% Comparable hotel
revenues: Rooms $ 114,037 $ 110,041 Food and beverage 45,406 43,983
Other hotel operations 8,185 8,330 --------------- -------------
Comparable hotel revenues (b) 167,628 162,354 ---------------
------------- Comparable hotel expenses: Room 28,833 28,152 Food
and beverage 32,903 33,002 Other 5,726 5,831 General and
administrative 28,771 28,140 Property operating costs, less
management fees 23,177 22,686 --------------- -------------
Comparable hotel expenses (c) 119,410 117,811 ---------------
------------- --------------- ------------- Comparable Hotel Gross
Operating Profit 48,218 44,543 --------------- -------------
Management fees (c) (4,188) (4,055) Property taxes, insurance and
other (c) (9,226) (10,084) Hurricane business interruption income
278 - --------------- ------------- Comparable Hotel EBITDA (d) $
35,082 $ 30,404 =============== ============= (a) See the notes to
the financial information for discussion of non-GAAP measures, and
comparable hotel results and statistics. (b) The reconciliation of
total revenues per the consolidated statements of operations to the
comparable hotel revenues is as follows (in thousands): Quarter
Ended March 31, ------------------------------- 2005 2004 Revenues
per the consolidated statements of operations $ 191,095 $ 195,810
Non-comparable hotel revenues (21,609) (32,088) Office rental,
parking and other revenue (1,858) (1,368) ---------------
------------- Comparable hotel revenues $ 167,628 $ 162,354
=============== ============= (c) The reconciliation of operating
costs per the consolidated statements of operations to the
comparable hotel expenses, management fees, property taxes,
insurance, and other is as follows (in thousands): Quarter Ended
March 31, ------------------------------- 2005 2004 Operating
expenses per the consolidated statements of operations $ 178,005 $
186,569 Non-comparable hotel expenses (16,760) (25,036) General and
administrative, corporate (3,533) (3,882) Depreciation and
amortization (24,888) (25,517) Loss on asset impairments - (184)
--------------- ------------- Comparable hotel expenses, management
fees, property taxes, insurance, and other $ 132,824 $ 131,950
=============== ============= (d) The reconciliation of comparable
hotel EBITDA to operating income per the consolidated statements of
operations is as follows (in thousands): Quarter Ended March 31,
------------------------------- 2005 2004 ---------------
------------- Comparable hotel EBITDA $ 35,082 $ 30,404
Non-comparable results, net (e) 4,849 7,052 Office rental, parking
and other revenue 1,858 1,368 General and administrative, corporate
(3,533) (3,882) Depreciation and amortization (24,888) (25,517)
Loss on asset impairments - (184) Equity in income/loss of and
interest earned from unconsolidated affiliates 1,634 1,600
Hurricane business interruption income at non-comparable hotels
2,003 - --------------- ------------- Operating Income $ 17,005 $
10,841 =============== ============= (e) Non-comparable results,
net represent all revenues and expenses, other than those of our
comparable hotels, and specific revenues and expenses identified
above: office rental, parking and other revenue and expense;
general and administrative, corporate; depreciation and
amortization; loss on asset impairments; and equity in income/loss
of and interest earned from unconsolidated affiliates.
RECONCILIATION OF NET INCOME TO EBITDA (HURRICANE PROPERTIES) (In
thousands) *T In August and September of 2004, Florida was hit by
hurricanes. Twelve hotels in Florida and the golf course on Sanibel
Island were impacted by varying degrees by the hurricanes. The
operations at nine of these hotels were very significantly
affected. Of the nine, the Hilton Clearwater continued to operate
with a number of rooms out of service and the Hilton Cocoa Beach
was initially shutdown then partially reopened in December. These
two properties were open in the first quarter 2005 and included in
the 62 comparable hotels. The following seven hotels were still
substantially closed during the first quarter of 2005: Best Western
Sanibel Island, Holiday Inn Walt Disney World, Sanibel Inn, Seaside
Inn, Song of the Sea, South Seas Resort, and Sundial Beach Resort.
The following is a reconciliation of Net Income to EBITDA for those
seven hotels and Dunes Golf and Tennis Club on Sanibel Island: -0-
*T Quarter Ended March 31, ------------------------------- 2005
2004 --------------- ------------- EBITDA: Net Income (a) $ 884 $
3,801 Depreciation and amortization 1,644 2,646 ---------------
------------- EBITDA (a) $ 2,528 $ 6,447 ===============
============= (a) Includes $2.0 million of business interruption
insurance income at these seven hotels and Dunes Golf and Tennis
Club in 2005; we received an additional $0.3 million of business
interruption income included in the 62 comparable hotels. DETAILED
OPERATING STATISTICS BY MARKET, REGION AND LOCATION Comparable
hotels, same store basis (a) 1st Quarter 2005
------------------------------- Market/Region/Location Hotels Rooms
ADR Occ% RevPAR
---------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 $ 138.62 66.9% $ 92.68 New Jersey
4 1,120 $ 127.75 57.7% $ 73.77 Southern California (b) 3 1,034 $
121.03 76.4% $ 92.51 Northern California 3 968 $ 112.61 67.8% $
76.33 Orlando (c) 2 1,231 $ 100.74 81.0% $ 81.61 Tampa /Clearwater
2 922 $ 124.69 81.9% $ 102.08 Chicago 2 857 $ 99.54 52.3% $ 52.05
Colorado 2 736 $ 83.25 48.1% $ 40.07 Atlanta 2 650 $ 93.74 78.3% $
73.37 Dallas 2 598 $ 90.01 62.2% $ 55.99 Houston 2 597 $ 108.14
70.1% $ 75.82 Other Hotels 28 6,859 $ 99.98 67.2% $ 67.22
---------------------------------------------------------------------
All Markets 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 $ 133.83 64.4% $ 86.24 South Central
11 3,281 $ 96.40 64.5% $ 62.22 South Atlantic (c) 12 4,101 $ 109.89
78.3% $ 86.01 Pacific (b) 9 2,797 $ 116.37 70.1% $ 81.61 North
Central 7 1,789 $ 90.10 56.8% $ 51.15 Mountain 6 1,798 $ 84.02
64.0% $ 53.75 New England 1 200 $ 85.41 67.4% $ 57.54
---------------------------------------------------------------------
All Regions 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Urban (b) 19 4,933 $ 118.71 67.9% $ 80.54 Resort (c) 7 2,678 $
121.65 80.0% $ 97.35 Airport (b) 12 3,751 $ 94.82 70.0% $ 66.35
Suburban 24 6,322 $ 102.59 61.3% $ 62.90
---------------------------------------------------------------------
All Locations 62 17,684 $ 108.69 67.8% $ 73.64
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane hotels at market rates
(d)
---------------------------------------------------------------------
Comparable Hotels 62 17,684 $ 108.69 67.8% $ 73.64 Closed Hurricane
Hotels (d) 7 1,340 n/a n/a $ 211.92
---------------------------------------------------------------------
Total 69 19,024 n/a n/a $ 82.48
---------------------------------------------------------------------
1st Quarter 2004 --------------------------------
Market/Region/Location Hotels Rooms ADR Occ% RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 $ 118.19 70.1% $ 82.89 New Jersey
4 1,120 $ 126.09 62.0% $ 78.22 Southern California (b) 3 1,034 $
114.28 76.9% $ 87.84 Northern California 3 968 $ 105.35 72.3% $
76.18 Orlando (c) 2 1,231 $ 84.87 74.9% $ 63.55 Tampa /Clearwater 2
922 $ 105.93 77.5% $ 82.08 Chicago 2 857 $ 87.09 56.2% $ 48.96
Colorado 2 736 $ 79.25 57.9% $ 45.87 Atlanta 2 650 $ 82.49 84.8% $
69.97 Dallas 2 598 $ 87.25 59.1% $ 51.56 Houston 2 597 $ 119.95
76.7% $ 92.04 Other Hotels 28 6,859 $ 95.71 68.8% $ 65.89
---------------------------------------------------------------------
All Markets 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 $ 120.39 67.7% $ 81.49 South Central
11 3,281 $ 97.41 65.9% $ 64.22 South Atlantic (c) 12 4,101 $ 96.82
76.3% $ 73.89 Pacific (b) 9 2,797 $ 110.67 72.6% $ 80.36 North
Central 7 1,789 $ 82.85 61.5% $ 50.91 Mountain 6 1,798 $ 79.67
67.2% $ 53.52 New England 1 200 $ 72.10 79.9% $ 57.64
---------------------------------------------------------------------
All Regions 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Urban (b) 19 4,933 $ 109.07 69.8% $ 76.07 Resort (c) 7 2,678 $
108.31 75.4% $ 81.72 Airport (b) 12 3,751 $ 84.00 74.5% $ 62.55
Suburban 24 6,322 $ 100.61 64.1% $ 64.48
---------------------------------------------------------------------
All Locations 62 17,684 $ 100.57 69.7% $ 70.05
---------------------------------------------------------------------
Estimated RevPAR, including closed hurricane hotels at market rates
(d)
---------------------------------------------------------------------
Comparable Hotels 62 17,684 $ 100.57 69.7% $ 70.05 Closed Hurricane
Hotels (d) 7 1,340 $ 250.76 69.7% $ 174.86
---------------------------------------------------------------------
Total 69 19,024 $ 110.08 69.7% $ 76.69
---------------------------------------------------------------------
Market/Region/Location Hotels Rooms Percent Change in RevPAR
----------------------------------------------------------------------
Washington DC Metro (b) 10 2,112 11.8% New Jersey 4 1,120 -5.7%
Southern California (b) 3 1,034 5.3% Northern California 3 968 0.2%
Orlando (c) 2 1,231 28.4% Tampa /Clearwater 2 922 24.4% Chicago 2
857 6.3% Colorado 2 736 -12.6% Atlanta 2 650 4.9% Dallas 2 598 8.6%
Houston 2 597 -17.6% Other Hotels 28 6,859 2.0%
----------------------------------------------------------------------
All Markets 62 17,684 5.1%
----------------------------------------------------------------------
Middle Atlantic (b) 16 3,718 5.8% South Central 11 3,281 -3.1%
South Atlantic (c) 12 4,101 16.4% Pacific (b) 9 2,797 1.6% North
Central 7 1,789 0.5% Mountain 6 1,798 0.4% New England 1 200 -0.2%
----------------------------------------------------------------------
All Regions 62 17,684 5.1%
----------------------------------------------------------------------
Urban (b) 19 4,933 5.9% Resort (c) 7 2,678 19.1% Airport (b) 12
3,751 6.1% Suburban 24 6,322 -2.5%
----------------------------------------------------------------------
All Locations 62 17,684 5.1%
----------------------------------------------------------------------
Estimated RevPAR, including closed hurricane hotels at market rates
(d)
----------------------------------------------------------------------
Comparable Hotels 62 17,684 5.1% Closed Hurricane Hotels (d) 7
1,340 21.2%
----------------------------------------------------------------------
Total 69 19,024 7.5%
----------------------------------------------------------------------
(a) See notes to financial information for discussion of comparable
hotel operating results and statistics. (b) Excludes hotels
acquired in 2004. (c) Excludes hotels substantially closed during
the first quarter 2005 due to the Florida hurricanes. (d) Estimated
RevPAR increase reflects an assumed weighted average growth rate of
21.2% based on market type RevPAR performance at the seven hotels
substantially closed during the first quarter 2005. FORECASTED
RECONCILIATION OF NET INCOME (LOSS) TO FUNDS FROM OPERATIONS (In
millions, except per share amounts) Three Months Ending June 30,
2005 -------------------------------- Low-end of High-end of range
range ---------------- -------------- Forecasted Funds from
Operations: Net income (a) $ - $ 3 Adjustments to forecasted net
income: Depreciation and amortization of real estate assets 25 25
Minority interest to common OP unit holders - - ---------------
------------- Funds from operations $ 25 $ 28 Weighted average
diluted shares of common stock and common OP units outstanding 90
90 --------------- ------------- Funds from operations per diluted
share (a) $ 0.28 $ 0.31 =============== ============= Year Ending
December 31, 2005 --------------------------------- Low-end of
High-end of range range ---------------- --------------- Forecasted
Funds from Operations: Net loss (a) $ (43) $ (38) Adjustments to
forecasted net loss: Depreciation and amortization of real estate
assets 97 97 Minority interest to common OP unit holders (1) (1)
--------------- ------------- Funds from operations $ 53 $ 58
Weighted average number of shares of common stock and common OP
units outstanding 90 90 --------------- ------------- Funds from
operations per diluted share (a) $ 0.59 $ 0.64 ===============
============= (a) Forecasted net income (loss) does not include any
possible future losses on asset impairments, gains or losses on the
sale of assets, gains or losses on early extinguishment of debt, or
gains or losses on property damage insurance recoveries; therefore,
forecasted funds from operations is equivalent to forecasted
adjusted funds from operations. FORECASTED RECONCILIATION OF NET
INCOME (LOSS) TO EBITDA (In millions) Three Months Ending June 30,
2005 --------------------------------- Low-end of High-end of range
range ---------------- --------------- EBITDA and Adjusted EBITDA:
Net income (a) $ - $ 3 Interest expense, net 34 34 Depreciation and
amortization 26 26 --------------- -------------- EBITDA 60 63
Minority interest to common OP unit holders - - ---------------
-------------- Adjusted EBITDA $ 60 $ 63 ===============
============== Year Ending December 31, 2005
--------------------------------- Low-end of High-end of range
range ---------------- --------------- EBITDA and Adjusted EBITDA:
Net loss (a) $ (43) $ (38) Interest expense, net 132 132
Depreciation and amortization 102 102 --------------- -------------
EBITDA 191 196 Minority interest to common OP unit holders (1) (1)
--------------- ------------- Adjusted EBITDA $ 190 $ 195
=============== ============= (a) Forecasted net income (loss) does
not include any possible future losses on asset impairments, gains
or losses on the sale of assets, gains or losses on early
extinguishment of debt, or gains or losses on property damage
insurance recoveries. *T NOTES TO FINANCIAL INFORMATION Funds From
Operations Substantially all of our non-current assets consist of
real estate, and, in accordance with accounting principles
generally accepted in the United States, or 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, the National Association of Real Estate Investment
Trusts, or 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 is the 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 provides
beneficial information to investors. Adjusted FFO represents FFO
excluding the effects of gains or 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 gains or 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.
Consolidated Earnings Before Interest, Income Taxes, Depreciation
and Amortization 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.
Furthermore, we use Adjusted EBITDA to provide a measure of
performance that can be isolated on an asset by asset basis to
determine overall property performance. 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. Comparable
Hotel Operating Results and Statistics We present certain operating
statistics (i.e., RevPAR, ADR and average occupancy) and operating
results (revenues, expenses and operating profit) for the periods
included in this report on a comparable hotel basis as supplemental
information for investors. We define our comparable hotels as
properties (i) that are owned by us and the operations of which are
included in our consolidated results for the entirety of the
reporting periods being compared, (ii) that have not sustained
substantial property damage during the reporting periods being
compared, and (iii) that are not planned for disposition as of the
end of the period. Of the 73 hotels that we owned as of March 31,
2005, 62 have been classified as comparable hotels. The operating
results of seven hotels significantly affected by the hurricanes in
Florida in August and September 2004 that were substantially closed
in the first quarter 2005, two hotels planned for disposition, and
the two hotels acquired in 2004, that we owned as of March 31, 2005
are excluded from comparable hotel results for these periods. In
addition, the operating statistics for the quarter ended March 31,
2005 exclude room nights that were out of service during the
periods due to renovations and the impact of the Florida hurricanes
at our 62 comparable hotels. We present these comparable hotel
operating results by eliminating corporate-level revenues and
expenses, as well as depreciation and amortization and loss on
asset impairments. We eliminate corporate-level revenues and
expenses to arrive at property-level results because we believe
property-level results provide investors with supplemental
information into the ongoing operating performance of our hotels
and the effectiveness of management in running our business on a
property-level basis. We eliminate depreciation and amortization
because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based
on historical cost accounting for real estate assets, implicitly
assume that the value of real estate assets diminishes over time.
Because real estate values have historically risen or fallen with
market conditions, many industry investors have considered
presentation of operating results for real estate companies that
use historical cost accounting to be insufficient by themselves. We
eliminate loss on asset impairments because these non-cash expenses
are primarily related to our non-comparable properties, and do not
reflect the operating performance of our comparable assets. As a
result of the elimination of corporate-level costs and expenses and
depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses or
operating profit and should not be used to evaluate our performance
as a whole. Management compensates for these limitations by
separately considering the impact of these excluded items to the
extent that they are material to operating decisions or assessments
of our operating performance. Our consolidated statements of
operations include such amounts, all of which should be considered
by investors when evaluating our performance. We present these
hotel operating results on a comparable hotel basis because we
believe that doing so provides investors and management with useful
information for evaluating the period-to-period performance of our
hotels and facilitates comparisons with other hotel REITs and hotel
owners. In particular, these measures assist management and
investors in distinguishing whether increases or decreases in
revenues and/or expenses are due to growth or decline of operations
at comparable hotels (which represent the vast majority of our
portfolio) or from other factors, such as the effect of
acquisitions or dispositions. While management believes that
presentation of comparable hotel results is a "same store"
supplemental measure that provides useful information in evaluating
the ongoing performance of the Company, this measure is not used to
allocate resources or to assess the operating performance of each
of these hotels, as these decisions are based on data for
individual hotels and are not based on comparable hotel results.
For these reasons, we believe that comparable hotel operating
results, when combined with the presentation of GAAP operating
profit, revenues and expenses, provide useful information to
investors and management.
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