Fourth Quarter Adjusted FFO per Share Increase of Nearly 90 Percent
BETHESDA, Md., Feb. 7 /PRNewswire-FirstCall/ -- MeriStar
Hospitality Corporation (NYSE:MHX), one of the nation's largest
hotel real estate investment trusts (REIT), today announced
financial results for the full year and fourth quarter ended
December 31, 2005. Highlights of the company's strong performance
include(1): Q4 2005 Q4 2004 FY 2005 FY 2004 _______ _______ _______
_______ Net Loss (in millions) $(113.7) $(17.7) $(241.6) $(96.3)
Net Loss per Diluted Share $(1.30) $(0.20) $(2.76) $(1.18) Adjusted
FFO per Diluted Share $0.17 $0.09 $0.71 $0.40 Adjusted EBITDA (in
millions) $44.8 $40.6 $189.6 $164.0 RevPAR Increase 14.8% 10.5% ADR
Increase 9.4% 10.3% Occupancy Increase 4.9% 0.3% - Full year 2005
comparable hotel gross operating profit margins rose 144 basis
points, and comparable hotel EBITDA margins increased 176 basis
points; - Business interruption (BI) insurance gain of $2.8 million
and $7.1 million (based on insurer recognition to date from losses
resulting from the 2004 Florida hurricanes) included in fourth
quarter and full year 2005, respectively, in net income, adjusted
FFO and adjusted EBITDA. The BI insurance gain amount is $1.2
million below previous guidance; - Net loss includes non-cash
impairment charges of $153.6 million or $(1.71) per diluted share
for the full year 2005 and $106.6 million or $(1.19) per diluted
share for the fourth quarter 2005 related to the company's asset
disposition program. "Our 2005 results demonstrated the ability of
our portfolio to deliver consistently strong operating results,"
said Paul W. Whetsell, chairman and chief executive officer. "We
are realizing the benefits of our three-year renovation program and
the repositioning of our portfolio. Moreover, we have made
significant progress on our plan to take advantage of the
prevailing real estate market valuations and have sold assets at
prices that increase shareholder value and provide increased
financial strength, as well as greater visibility towards restoring
our common dividend. "Our management team remained focused and
active in early 2006. We have taken several actions since year end
that will greatly accelerate our capital structure improvement and
provide a stronger platform for future growth," Whetsell added. The
company completed the following: - Executed a previously announced
agreement with an affiliate of The Blackstone Group to sell nine
hotels and a golf and tennis club for approximately $367 million,
with the transaction expected to close by the end of the first
quarter; - Sold an additional six assets (1,269 rooms) in January
in several transactions for total gross proceeds of $115 million; -
Reached an agreement to settle the company's Hurricane Charley
insurance claims for a total value of $202.5 million after
deductibles. The settlement will result in an $82.5 million payment
in February; - Issued an irrevocable redemption notice to call $100
million of its 10.5 percent senior unsecured debt at the call price
of 105.25%. The notes will be redeemed in early March. "We have
substantially and successfully concluded our asset disposition plan
and intend to promptly apply these proceeds to repay our senior
unsecured notes," Whetsell stated. "These actions will
significantly improve our financial flexibility and interest
coverage, providing us a much broader ability to address business
issues and further enhance shareholder value." Donald D. Olinger,
chief financial officer stated, "We are very pleased to have worked
with our insurance companies to reach a settlement of our Hurricane
Charley claim at a coverage level that adequately addresses our
restoration obligations and supports our business interruption
income recognition. Completing the claim process will enable us to
better plan our business and focus on operations." Operations "Our
properties performed exceedingly well, as we experienced a 10.5
percent increase in RevPAR for the year on a comparable hotel
basis, led principally by a 10.3 percent increase in average daily
rate (ADR). RevPAR gains accelerated throughout the year, with a
2005 fourth quarter RevPAR increase of 14.8 percent over the 2004
fourth quarter," Whetsell noted. "Our ability to aggressively drive
rate was the major factor in the 176 basis-point improvement in our
comparable hotel EBITDA margins during 2005. Rate improvement
allowed us to absorb increases in energy and insurance costs and
still achieve 2005 adjusted EBITDA of nearly $190 million, which
was at the top end of our range of guidance. "With our focus on
upscale, full-service brands in major urban markets, we benefited
fully from the continuing growth in transient business demand and
the increased competitive strength of our portfolio. We are
encouraged that the development pipeline remains conservative,
especially in urban markets, where barriers to new competition are
the highest," Whetsell added. Regionally, the company experienced
the strongest gains in the Washington D.C./Mid-Atlantic and
southern California markets, where RevPAR grew 16.1 percent and
16.9 percent, respectively, during the 2005 fourth quarter. Also,
the company recorded RevPAR growth of 29.2 percent for the 2005
fourth quarter in the combined Houston/Dallas markets following the
response to the Gulf Coast hurricanes. Results from the company's
recently acquired properties, the Ritz-Carlton Pentagon City and
the Marriott Irvine, continued to show very positive growth, with a
combined 17.0 percent RevPAR increase in the 2005 fourth quarter
and 18.6 percent RevPAR growth for the year. The Radisson Lexington
Avenue in Midtown Manhattan, in which the company invested $10
million for a 49.99 percent equity interest, returned $1.6 million
in distributable cash recognized as EBITDA during the year,
$252,000 of which was recognized in the fourth quarter, in addition
to the $5.75 million annual return on the company's $40 million
mezzanine loan. "Results from all three of our recent investments
have exceeded our initial expectations and contributed
significantly to our excellent 2005 results," Whetsell remarked.
Asset Sales As previously reported, the company sold five hotels in
the 2005 fourth quarter for total gross proceeds of $58.5 million,
and retired $27 million in secured debt in the quarter. For the
full year 2005, the company sold nine properties with gross
proceeds totaling $104 million. The company also sold six
properties in January 2006 for total proceeds of $115 million and
repaid an additional $23 million in secured debt. The properties
include: - Courtyard Durham, North Carolina (146 rooms) - Hilton
Grand Rapids Airport, Michigan (224 rooms) - Radisson Annapolis,
Maryland (219 rooms) - Doubletree Hotel Dallas, Texas (289 rooms) -
Hilton Romulus Airport, Michigan (151 rooms) - Holiday Inn Fort
Lauderdale, Florida (240 rooms) In addition, the company recently
announced it had signed a definitive agreement to sell 10
properties to an affiliate of The Blackstone Group for $367
million. The transaction is expected to close by the end of the
first quarter. "Following the completion of the Blackstone
transaction, we will have sold 25 assets for $586 million since the
beginning of 2005. This group of 25 properties contributed over $30
million in adjusted EBITDA(2) for the full year 2005. These sales
essentially complete our asset disposition program, with only six
properties remaining for disposition that are expected to generate
approximately $70 million in proceeds. We plan to use the majority
of the proceeds from our asset disposition program to reduce our
overall debt levels," Whetsell stated. Renovation Update During the
year, the company invested $95 million in non-hurricane related
capital improvements at its properties, including $17 million
during the fourth quarter. "Our renovation program continues on
schedule, as we completed approximately $220 million in
non-hurricane refurbishments and upgrades at our hotels during 2004
and 2005. We plan to invest an additional $70 million in 2006 for
non-hurricane capital expenditures. This will essentially complete
our multi-year capital improvement program allowing our capital
expenditure levels to return to more typical industry levels. "The
benefits of our renovation program are accelerating," Whetsell
added. "By the end of 2005, nearly every property in our portfolio
had significant renovation work completed within the past two
years. We believe that our portfolio of hotels now is well
positioned for continued future growth." Capital Structure "We have
made measurable progress on our overall objective to restructure
our outstanding debt and significantly reduce our cost of
borrowing," Olinger said. "We expect to call the remaining balance
of our 10.5 percent senior unsecured notes following the completion
of our recently announced asset sale transactions and will look for
additional debt reduction opportunities. By the end of the second
quarter, we plan to repay a total of approximately $400 million of
our senior notes, plus $44 million in mortgage debt. "When combined
with the transactions we have entered into over the past year
including the refinancing of our $300 million CMBS loan, by
year-end 2006 we expect to have lowered our borrowing costs by 75
basis points to approximately 7.75 percent and reduced our annual
interest expense by approximately $50 million on a pro forma basis,
compared to year-end 2004 debt levels. "In combination with the
performance of our portfolio, our goal is to achieve greater
financial flexibility through improved interest coverage and lower
debt levels. In particular, we will seek to improve our interest
coverage ratio to more than two times by the end of 2006," he
added. Guidance The company provided the following range of
estimates for the full year and first quarter 2006: - RevPAR growth
of 7 to 9 percent for the full year and 10 to 12 percent in the
first quarter; - Net income (loss) of $7 to $11 million for the
full year and $(5) to $(8) million in the first quarter; - Adjusted
EBITDA of $177 to $181 million for the full year and $45 to $48
million in the first quarter; - Net income (loss) per diluted share
of $0.08 to $0.13 for full year and $(0.06) to $(0.09) for the
first quarter; - Adjusted FFO per diluted share of $0.88 to $0.92
for the full year and $0.13 to $0.16 in the first quarter. "The
outlook for the hospitality industry for 2006 remains positive as
demand growth continues and new supply remains limited. Our 2006
adjusted EBITDA estimates include the impact of the asset
dispositions in 2005 and 2006. Following our healthy margin
expansion in 2005, we expect 2006 margins to grow between 125 and
150 basis points as we see some impact of increased energy, labor
and insurance costs, as well as an increase in franchise fees
resulting from our recent brand conversions and franchise
renewals," Whetsell said. "Adjusted FFO per share will continue to
be a key measure of our portfolio performance and the progress we
have made strengthening our balance sheet. Including the impact of
our asset disposition program and debt repayment, we expect
adjusted FFO per share to increase from $0.71 per share in 2005 to
$0.88 to $0.92 per share in 2006 with first quarter adjusted FFO
per share of $0.13 to $0.16," Whetsell added. 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. Conference Call
MeriStar will hold a conference call to discuss its 2005 full year
and fourth-quarter results today, February 7, 2006, at 10 a.m.
Eastern time. Interested parties may visit the company's Web site
at http://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 company's Web site,
or may dial (800) 405-2236, reference number 11051757, to hear a
telephone replay. The telephone replay will be available through
midnight on Wednesday, February 22, 2006. Bethesda, Md.-based
MeriStar Hospitality Corporation owns 58 principally upscale,
full-service hotels in major markets and resort locations with
17,003 rooms in 19 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 website: http://www.meristar.com/. (1) FFO, Adjusted FFO,
Adjusted EBITDA, and comparable hotel EBITDA margins are non-GAAP
financial measures. See the notes to financial information for
further discussion of these non-GAAP financial measures. (2) Net
loss for the group of 25 properties was $(54.7) million, which
consisted of $30.5 million of EBITDA less $(19.7) million of
depreciation and amortization, $(1.3) million of interest expense,
and $(64.2) of loss on asset impairment. Information both included
and incorporated by reference in this press release may contain
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; the
level of proceeds from asset sales; our ability to realize
anticipated benefits of acquisitions; 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; availability of labor and union contract
requirements; the expanding scope of brand standards and the costs
associated with maintaining compliance with those standards;
weather conditions generally and natural disasters and our ability
to obtain cost-effective insurance coverage and to recover for
resulting property damage; rising interest rates; reliance on
third-party operators to provide timely and accurate financial
reporting; and changes in U.S. 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. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share amounts) Quarter Ended Year Ended December 31,
December 31, 2005 2004 2005 2004 ____ ____ ____ ____ Revenue: Hotel
operations: Rooms $114,702 $96,808 $471,700 $445,269 Food and
beverage 57,305 52,474 203,250 189,177 Other hotel operations
10,458 9,163 43,812 50,818 Office rental, parking and other revenue
962 946 5,860 4,922 ________ ________ ________ ________ Total
revenue 183,427 159,391 724,622 690,186 ________ ________ ________
________ Hotel operating expenses: Rooms 29,055 25,860 116,037
112,067 Food and beverage 38,776 35,028 142,175 135,424 Other hotel
operating expenses 6,689 6,230 27,652 32,344 Office rental, parking
and other expenses 521 457 2,903 2,395 Other operating expenses:
General and administrative, hotel 29,903 26,388 114,797 106,905
General and administrative, corporate 4,003 5,160 14,364 14,832
Property operating costs 28,294 23,631 109,715 101,803 Depreciation
and amortization 21,440 20,604 85,369 85,922 Property taxes,
insurance and other 8,500 8,135 39,807 49,177 Loss on asset
impairments 64,996 - 89,373 - Contract termination costs 134 -
1,215 - ________ ________ ________ ________ Operating expenses
232,311 151,493 743,407 640,869 ________ ________ ________ ________
Equity in income (loss) of and interest earned from unconsolidated
affiliates 2,937 8,347 10,193 13,147 Hurricane business
interruption insurance gain 2,772 - 7,062 - ________ ________
________ ________ Operating (loss) income (43,175) 16,245 (1,530)
62,464 Minority interest income 2,888 488 6,208 2,880 Interest
expense, net (28,017) (31,341) (119,580) (126,927) Loss on early
extinguishments of debt (301) (49) (58,004) (9,672) ________
________ ________ ________ Loss before income taxes and
discontinued operations (68,605) (14,657) (172,906) (71,255) Income
tax (expense) benefit (162) 240 (1,029) 1,040 ________ ________
________ ________ Loss from continuing operations (68,767) (14,417)
(173,935) (70,215) ________ ________ ________ ________ Discontinued
operations: Loss from discontinued operations before income tax
(44,970) (3,323) (67,683) (26,251) Income tax benefit - 12 - 167
________ ________ ________ ________ Loss from discontinued
operations (44,970) (3,311) (67,683) (26,084) ________ ________
________ ________ Net loss $(113,737) (17,728) $(241,618) (96,299)
======== ======== ======== ======== Basic loss per share: Loss from
continuing operations $(0.79) (0.16) $(1.99) (0.86) Loss from
discontinued operations (0.51) (0.04) (0.77) (0.32) ________
________ ________ ________ Loss per basic share $(1.30) (0.20)
$(2.76) (1.18) ======== ======== ======== ======== Diluted loss per
share: Loss from continuing operations $(0.80) (0.16) $(2.01)
(0.87) Loss from discontinued operations (0.50) (0.04) (0.75)
(0.31) ________ ________ ________ ________ Loss per diluted share
$(1.30) (0.20) $(2.76) (1.18) ======== ======== ======== ========
CONSOLIDATED BALANCE SHEETS (In thousands, except per share
amounts) December 31, December 31, 2005 2004 ____________
____________ ASSETS Property and equipment $2,342,832 $2,581,720
Accumulated depreciation (478,315) (506,632) ____________
____________ 1,864,517 2,075,088 Assets held for sale 80,885 -
Investment in and advances to unconsolidated affiliates 72,427
84,796 Prepaid expenses and other assets 35,570 34,533 Insurance
claim receivable 40,972 76,056 Accounts receivable, net of
allowance for doubtful accounts of $545 and $691 36,363 32,979
Restricted cash 19,856 58,413 Cash and cash equivalents 25,441
60,540 ____________ ____________ $2,176,031 $2,422,405 ============
============ LIABILITIES AND STOCKHOLDERS' EQUITY Long-term debt
$1,585,075 $1,573,276 Accounts payable and accrued expenses 81,188
75,527 Accrued interest 33,933 41,165 Due to Interstate Hotels and
Resorts 14,456 21,799 Other liabilities 8,509 11,553 ___________
____________ Total liabilities 1,723,161 1,723,320 ___________
____________ Minority interests 6,816 14,053 Stockholders' equity:
Preferred stock, par value $0.01 per share Authorized - 100,000
shares Issued - none - - Common stock, par value $0.01 per share
Authorized - 100,000 shares Issued -90,050 and 89,739 shares 900
897 Additional paid-in capital 1,469,151 1,465,658 Accumulated
deficit (980,011) (738,393) Common stock held in treasury - 2,492
and 2,372 shares (43,986) (43,130) ____________ ____________ Total
stockholders' equity 446,054 685,032 ____________ ____________
$2,176,031 $2,422,405 ============ ============ RECONCILIATION OF
NET LOSS TO FUNDS FROM OPERATIONS (a) (In thousands, except per
share amounts) Quarter Ended Year Ended December 31, December 31,
2005 2004 2005 2004 ____ ____ ____ ____ Funds From Operations: Net
loss $(113,737) $(17,728) $(241,618) $(96,299) Depreciation and
amortization of real estate assets 20,906 22,841 89,052 95,575 Loss
on disposal of assets 2,870 303 5,397 14,065 Unconsolidated
affiliate adjustments 1,325 1,065 4,732 1,065 Minority interest to
common OP unit holders (625) (473) (2,507) (2,943) ________
________ ________ ________ Funds from operations $(89,261) $6,008
$(144,944) $11,463 ======== ======== ======== ======== Weighted
average number of shares of common stock outstanding 87,533 89,735
87,472 83,978 ======== ======== ======== ======== Funds from
operations per diluted share $(1.02) $0.07 $(1.66) $0.14 ========
======== ======== ======== Funds From Operations, as adjusted:
Funds from operations $(89,261) $6,008 $(144,944) $11,463 Loss on
asset impairments 106,568 2,315 153,558 12,337 Loss on early
extinguishments of debt 301 49 58,004 9,672 Contract termination
costs 134 - 1,215 - Minority interest to common OP unit holders
(2,662) - (5,377) - ________ ________ ________ ________ Funds from
operations, as adjusted $15,080 $8,372 $62,456 $33,472 ========
======== ======== ======== Weighted average number of shares of
common stock and common stock equivalents outstanding 87,669 89,735
87,601 83,978 ======== ======== ======== ======== Funds from
operations per diluted share, as adjusted $0.17 $0.09 $0.71 $0.40
======== ======== ======== ======== (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 Year Ended December 31, December 31, 2005 2004 2005 2004 ____
____ ____ ____ EBITDA and Adjusted EBITDA: Net loss $(113,737)
$(17,728) $(241,618) $(96,299) Loss from discontinued operations
(44,970) (3,311) (67,683) (26,084) ________ ________ ________
________ Loss from continuing operations (68,767) (14,417)
(173,935) (70,215) Interest expense, net 28,017 31,341 119,580
126,927 Income tax expense (benefit) 162 (240) 1,029 (1,040)
Depreciation and amortization 21,440 20,604 85,369 85,922 ________
________ ________ ________ EBITDA from continuing operations
(19,148) 37,288 32,043 141,594 Loss on asset impairments 64,996 -
89,373 - Contract termination costs 134 - 1,215 - Minority interest
income (2,888) (488) (6,208) (2,880) Loss on early extinguishments
of debt 301 49 58,004 9,672 Equity investment adjustments: Equity
in (income) loss of affiliates (32) (237) 1,310 (237) Distributions
from equity investments 252 1,041 1,604 1,041 ________ ________
________ ________ Adjusted EBITDA from continuing operations
$43,615 $37,653 $177,341 $149,190 ======== ======== ========
======== Loss from discontinued operations $(44,970) $(3,311)
$(67,683) $(26,084) Interest expense, net - - - (478) Income tax
benefit - (12) - (167) Depreciation and amortization 1,679 3,603
10,351 15,132 ________ ________ ________ ________ EBITDA from
discontinued operations (43,291) 280 (57,332) (11,597) Loss on
asset impairments 41,572 2,315 64,185 12,337 Loss on disposal of
assets 2,870 303 5,397 14,065 ________ ________ ________ ________
Adjusted EBITDA from discontinued operations $1,151 $2,898 $12,250
$14,805 ======== ======== ======== ======== Adjusted EBITDA, total
operations $44,766 $40,551 $189,591 $163,995 ======== ========
======== ======== (a) See the notes to the financial information
for discussion of non-GAAP measures. HOTEL OPERATIONAL DATA
SCHEDULE OF COMPARABLE HOTEL RESULTS (a) (In thousands, except per
share amounts) Quarter Ended Year Ended December 31, December 31,
2005 2004 2005 2004 ____ ____ ____ ____ Number of hotels 49 49 49
49 Number of rooms 15,337 15,337 15,337 15,337 Comparable hotel
revenues: Rooms $110,364 94,880 $436,114 393,563 Food and beverage
56,198 51,746 187,869 173,915 Other hotel operations 8,531 7,899
33,036 31,679 ________ ________ ________ ________ Comparable hotel
revenues (b) 175,093 154,525 657,019 599,157 ________ ________
________ ________ Comparable hotel expenses: Room 28,323 25,336
108,429 100,844 Food and beverage 38,022 34,367 131,190 123,283
Other 4,439 5,615 22,302 21,974 General and administrative 28,533
25,435 105,545 98,084 Property operating costs, less management
fees 22,924 19,218 86,421 78,356 ________ ________ ________
________ Comparable hotel expenses (c) 122,241 109,971 453,887
422,541 ________ ________ ________ ________ ________ ________
________ ________ Comparable Hotel Gross Operating Profit 52,852
44,554 203,132 176,616 ________ ________ ________ ________ Margin
30.2% 28.8% 30.9% 29.5% Management Fees (c) 4,843 3,942 16,969
15,100 Property taxes, insurance and other (c) 9,552 8,594 35,164
33,495 ________ ________ ________ ________ Comparable Hotel EBITDA,
excluding BI (d) $38,457 $32,018 $150,999 $128,021 ________
________ ________ ________ Margin 22.0% 20.7% 23.0% 21.4% Hurricane
business interruption insurance gain - - 969 - ________ ________
________ ________ Comparable Hotel EBITDA, including BI (d) $38,457
$32,018 $151,968 $128,021 ======== ======== ======== ========
Margin 22.0% 20.7% 23.1% 21.4% (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 Year Ended December 31, December 31, 2005 2004 2005 2004 ____
____ ____ ____ Revenues per the consolidated statements of
operations $183,427 $159,391 $724,622 $690,186 Non-comparable hotel
revenues (7,372) (3,920) (61,743) (86,107) Office rental, parking
and other revenue (962) (946) (5,860) (4,922) ________ ________
________ ________ Comparable hotel revenues $175,093 $154,525
$657,019 $599,157 ======== ======== ======== ======== (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 Year Ended December 31, December 31, 2005 2004 2005
2004 ____ ____ ____ ____ Operating expenses per the consolidated
statements of operations $232,311 $151,493 $743,407 $640,869
Non-comparable hotel expenses (5,102) (3,222) (47,066) (68,979)
General and administrative, corporate (4,003) (5,160) (14,364)
(14,832) Depreciation and amortization (21,440) (20,604) (85,369)
(85,922) Loss on asset impairments (64,996) - (89,373) - Contract
termination costs (134) - (1,215) - ________ ________ ________
________ Comparable hotel expenses, management fees, property
taxes, insurance and other $136,636 $122,507 $506,020 $471,136
======== ======== ======== ======== (d) The reconciliation of
comparable hotel EBITDA to operating income per the consolidated
statements of operations is as follows (in thousands): Quarter
Ended Year Ended December 31, December 31, 2005 2004 2005 2004 ____
____ ____ ____ Comparable hotel EBITDA, including BI $38,457
$32,018 $151,968 $128,021 Non-comparable results, net (e) 2,270 698
14,677 17,128 Office rental, parking and other revenue 962 946
5,860 4,922 General and administrative, corporate (4,003) (5,160)
(14,364) (14,832) Depreciation and amortization (21,440) (20,604)
(85,369) (85,922) Loss on asset impairments (64,996) - (89,373) -
Contract termination costs (134) - (1,215) - Equity in income
(loss) of and interest earned from unconsolidated affiliates 2,937
8,347 10,193 13,147 Hurricane business interruption insurance gain
at non-comparable hotels 2,772 - 6,093 - ________ ________ ________
________ Operating (Loss) Income $(43,175) $16,245 $(1,530) $62,464
======== ======== ======== ======== (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; general and
administrative, corporate; depreciation and amortization; loss on
asset impairments; contract termination costs and equity in
income/loss of and interest earned from unconsolidated affiliates.
FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (In
millions, except per share amounts) Three Months Ending March 31,
2006 ____________________________________ Low-end of range High-end
of range ________________ _________________ Forecasted Funds from
Operations: Net loss (a) $ (8) (5) Adjustments to forecasted net
loss: Depreciation and amortization of real estate assets 19 19
Unconsolidated affiliate adjustments 1 1 ________________
________________ Funds from operations $12 15 Weighted average
diluted shares of common stock and common OP units outstanding 90
90 ________________ ________________ Funds from operations per
diluted share $ 0.13 0.16 ================ ================ Year
Ending December 31, 2006 ____________________________________
Low-end of range High-end of range ________________
_________________ Forecasted Funds from Operations: Net income (a)
$ 7 11 Adjustments to forecasted net income: Depreciation and
amortization of real estate assets 67 67 Unconsolidated affiliate
adjustments 5 5 ________________ ________________ Funds from
operations $ 79 83 Weighted average number of shares of common
stock and common OP units outstanding 90 90 ________________
________________ Funds from operations per diluted share $ 0.88
0.92 ================ ================ (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 adjusted funds from operations.
FORECASTED RECONCILIATION OF NET LOSS TO EBITDA (In millions) Three
Months Ending March 31, 2006 ____________________________________
Low-end of range High-end of range ________________
_________________ EBITDA and Adjusted EBITDA: Net loss (a) $ (8)
(5) Interest expense, net 30 30 Depreciation and amortization 21 21
________________ _________________ 43 46 EBITDA Equity investment
adjustments: Equity in income of affiliates 2 2 ________________
_________________ Adjusted EBITDA $ 45 48 ================
================ Year Ending December 31, 2006
____________________________________ Low-end of range High-end of
range ________________ _________________ EBITDA and Adjusted
EBITDA: Net income (a) $ 7 11 Interest expense, net 93 93
Depreciation and amortization 74 74 ________________
_________________ 174 178 EBITDA Equity investment adjustments:
Equity in income of affiliates 3 3 ________________
_________________ Adjusted EBITDA $ 177 181 ================
================ (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.
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 Securities and Exchange Commission,
however, recommends that FFO includes 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, contract termination 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,
contract termination 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.
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, contract termination costs, the earnings effect and
distributions related to equity method investments, 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, contract termination costs, the earnings
effect and distributions related to equity method investments, 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. Net Debt Net debt is defined as total debt less cash
and cash equivalents. Management uses net debt to evaluate the
Company's capital structure. Management believes that the
presentation of net debt provides useful information to investors
regarding our financial condition because accumulated cash can be
used for debt repayment, if appropriate. Net debt is not a
substitute for any U.S. GAAP financial measure. In addition, the
calculation of net debt contained in this document may not be
consistent with that of other companies. 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 that (i) are owned by us and the operations of which are
included in our consolidated results for the reporting periods
being compared, (ii) have not sustained substantial property damage
during the reporting periods being compared, and (iii) are not
classified as held-for-sale as of the end of the period. Of the 64
hotels that we owned as of December 31, 2005, 49 have been
classified as comparable hotels. The operating results of six
hotels classified as held-for-sale and reflected in discontinued
operations and nine hotels significantly affected by the hurricanes
in 2004 and 2005 that we owned as of December 31, 2005, are
excluded from comparable hotel results for these periods.
Additionally, changes in estimates to property tax expense, which
are recorded when known, have been allocated to the period to which
they relate, in order to maintain comparability between periods. 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 regarding 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
management and investors. Contact: Mike Bauer Sr. Director, Finance
and Investor Relations (301) 581-5927 Jerry Daly or Carol McCune
Daly Gray Public Relations (Media) (703) 435-6293 First Call
Analyst: FCMN Contact: julie@dalygray.com DATASOURCE: MeriStar
Hospitality Corporation CONTACT: Mike Bauer, Sr. Director, Finance
and Investor Relations of MeriStar Hospitality Corporation,
+1-301-581-5927; or Media: Jerry Daly, or Carol McCune, both of
Daly Gray Public Relations, +1-703-435-6293 Web site:
http://www.meristar.com/
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