KPA Innkeepers Usa Tr

Innkeepers USA Trust (NYSE: KPA), a hotel real estate investment trust (REIT) and a leading owner of upscale extended-stay hotel properties throughout the United States, today announced results for the three and nine months ended September 30, 2005. -0- *T Nine Nine 3Q 3Q % Mos. Mos. % 2005* 2004* Change* 2005* 2004* Change* ---------------------------------------------------------------------- Total revenue $67,095 $59,497 13% $186,264 $154,510 21% ---------------------------------------------------------------------- Net income applicable to common shareholders $6,837 $3,753 82% $11,185 $1,201 831% ---------------------------------------------------------------------- Diluted income per share $0.16 $0.10 60% $0.27 $0.03 800% ---------------------------------------------------------------------- Funds from operations (FFO) $16,970 $13,572 25% $39,310 $25,621 53% ---------------------------------------------------------------------- Adjusted FFO $16,967 $13,127 29% $42,487 $28,762 48% ---------------------------------------------------------------------- FFO per share $0.36 $0.32 13% $0.84 $0.66 27% ---------------------------------------------------------------------- Adjusted FFO per share $0.36 $0.31 16% $0.91 $0.74 23% ---------------------------------------------------------------------- Earnings before interest, taxes, depreciation and amortization (EBITDA) $25,404 $21,915 16% $65,826 $58,923 12% ---------------------------------------------------------------------- Adjusted EBITDA $25,390 $21,713 17% $67,502 $57,029 18% ---------------------------------------------------------------------- *In thousands, except per share and percentage change data FFO, Adjusted FFO, FFO per share, Adjusted FFO per share, EBITDA and Adjusted EBITDA are not generally accepted accounting principles (GAAP) financial measures and are discussed in further detail in this press release. FFO and FFO per share for the nine months ended September 30, 2004 include $4,249 in issuance costs pertaining to the Series A Cumulative Convertible preferred shares that were redeemed in January 2004. The Series A preferred share issuance costs have been excluded from Adjusted FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA. Adjusted FFO, Adjusted FFO per share and Adjusted EBITDA exclude other charges and discontinued operations. Adjusted EBITDA excludes a gain on sale of hotels of $1,501 and $786 for the nine months ended September 30, 2005 and 2004, respectively. *T Operating Results Revenue per available room (RevPAR) for 65 of the company's hotel properties (excluding four hotels closed for renovation and/or conversion during part or all of the periods presented) increased 5.7 percent for the third quarter 2005 to $82.90, compared to the same period in 2004. The increase was led by average daily rate (ADR), which improved 5.4 percent to $104.97. Occupancy rose 0.3 percent to 78.97 percent. The 5.7 percent RevPAR improvement for the third quarter 2005 reflects a 6.5 percent increase in RevPAR at the company's eight Silicon Valley, Calif. hotel properties. Gross operating margins for the company's 61 comparable hotels improved 270 basis points to 46.3 percent. The company's 61 comparable hotels exclude the seven hotels acquired in 2004 and 2005 and the Atlantic City hotel that is closed for renovation and conversion. "We are very pleased with the strong 270 basis point increase in our operating margins, which drove the 17 percent increase in Adjusted EBITDA for the third quarter," said Jeffrey H. Fisher, Innkeepers chief executive officer and president. "RevPAR increases were predominantly driven by increases in average daily rate, which accounted for 95 percent of the increase for the quarter. We were particularly encouraged by results at our eight Silicon Valley hotels, which outperformed the overall portfolio as RevPAR improved 6.5 percent." Dividend "Another major positive development in the third quarter was the increase in our common share dividend to $0.15 per share from $0.10," Fisher said. "It is the second time we raised the dividend this year and represents a 150 percent increase since the first quarter. We remain confident that the hotel industry recovery is on solid footing and believe that the industry will continue to do well for the next few years. We will continue to evaluate the common share dividend with our Board of Trustees on a quarterly basis." Repositionings/Development Update "Our Louisville, Ky. Hampton Inn opened in the third quarter after completing a $4.5 million renovation and conversion from another brand, and is attracting a strong corporate base of business, with its location just a couple of blocks from the Convention Center," Fisher said. "In addition to all the latest 'Make It Hampton' amenities, we've also added some unique features, including a martini bar and a 10-foot high 'water wall,' that lend a more upscale feel to the property and will further enhance the hotel's competitive edge in the upscale, focused service segment in this market." Fisher also noted that the company's properties in Montvale, N.J., and Atlantic City, N.J. that are both slated for conversion to the Courtyard by Marriott brand remain on track to open in mid-2006. The 190-room hotel in Montvale, N.J, that is closed pending completion of a $5 million renovation, is located on the New Jersey/New York border, 20 miles from New York City. The property is surrounded by more than 300 business and corporate offices, including Mercedes Benz of North America, BMW of North America and KPMG LLP. The 203-room Atlantic City hotel that is closed pending completion of a $7 million renovation is located one block from Atlantic City's Boardwalk and beaches and within walking distance of the Trump's Taj Mahal and Bally's casinos and the Atlantic City Convention Center. "The development of our Embassy Suites in Valencia, California, north of Los Angeles, also is on track to open in late 2006, with the groundbreaking scheduled for first quarter 2006. This will be our first Embassy Suites hotel, and we look forward to a long and mutually beneficial relationship with another of Hilton's top-rated brands," he said. Fisher pointed out that, while the company made no acquisitions in the third quarter, they remain an integral part of Innkeepers' growth strategy. "We continue to target premium brands in the upscale extended-stay sectors, as well as select-service and full-service hotels that have the potential to be rebranded and repositioned and are located in major markets with strong demand generators and high barriers to new competition." Capital Structure Bruce A. Riggins, chief financial officer, pointed out that the company continues to maintain one of the industry's strongest capital structures and lowest-levered balance sheets. "We paid down $16 million of debt during the third quarter. Our debt to investment in hotels at cost ratio was 25 percent at September 30, 2005, with no maturities prior to 2007. Our weighted average interest rate on our total debt is 7.1 percent, and 84 percent of our total debt is at fixed rates. We have great flexibility for future acquisition or development growth, with $83 million available on our $135 million line of credit." Hurricane Impact During the third quarter, the company had one hotel, the Four Points by Sheraton hotel in Ft. Walton Beach, Fla., that was impacted by displacement from four tropical storms or hurricanes and resulted in lost revenue of approximately $350,000. Subsequent to quarter's end, the company sustained some property damage at three of its Florida hotels from Hurricane Wilma in October. The Courtyard Ft. Lauderdale sustained damage to the roof and water damage to some of the rooms, but is expected to re-open in November 2005. The Hampton Inn Naples and Hampton Inn West Palm Beach hotels both sustained minor property damage and have both since reopened. The properties are insured for both property damage and business interruption. The company expects uninsured losses from Hurricane Wilma to be relatively insignificant. Earnings Guidance The company is maintaining its full-year adjusted FFO per share guidance of $1.11 to $1.14 and provides the following range of estimates for the fourth quarter and full-year 2005, based on assumed RevPAR growth of 6.0 percent to 7.0 percent for the fourth quarter and 6.8 percent to 7.2 percent for the full year (forecasted financial results do not include any assumptions for future acquisitions, dispositions or capital markets transactions): -- Net income (loss) applicable to common shareholders of $(0.2) million to $1.3 million for the fourth quarter and $11.0 million to $12.5 million for the full year; -- Diluted income per share of $0.00 to $0.03 for the fourth quarter and $0.26 to $0.30 for the full year; -- FFO per share of $0.20 to $0.23 for the fourth quarter and $1.04 to $1.07 for the full year; -- Adjusted FFO per share of $0.20 to $0.23 for the fourth quarter and $1.11 to $1.14 for the full year; -- Adjusted EBITDA of $18.0 million to $19.5 million for the fourth quarter and $85.5 million to $87.0 million for the full year; and -- Gross operating profit margin increase of approximately 200 basis points for the fourth quarter and for the full year for our comparable 61 hotels. -0- *T See reconciliations of net income applicable to common shareholders to FFO per share and Adjusted FFO per share and net income applicable to common shareholders to Adjusted EBITDA included in the tables of this press release. FFO per share, Adjusted FFO per share, and Adjusted EBITDA are not generally accepted accounting principles (GAAP) financial measures and are discussed in further detail in this press release. *T Innkeepers USA Trust owns 69 hotels with a total of 8,745 suites or rooms in 20 states and Washington, D.C., and focuses on acquiring and/or developing premium branded upscale extended-stay, select-service, and full-service hotels and the rebranding and repositioning of other hotel properties. For more information about Innkeepers USA Trust, visit the company's web site at www.innkeepersusa.com. To listen to a web cast of the company's third quarter 2005 conference call on November 9, 2005, at 10 a.m. Eastern time, go to the company's web site and click on Conference Calls. Interested parties may listen to an archived web cast of the conference call on the web site, or may dial (800) 405-2236, pass code 11041292, to hear a telephone replay. The archived web cast and telephone replay will be available through December 9, 2005. Included in this press release are certain "non-GAAP financial measures," within the meaning of Securities and Exchange Commission (SEC) rules and regulations, that are different from measures calculated and presented in accordance with GAAP (generally accepted accounting principles). These non-GAAP financial measures are (i) funds from operations (FFO), (ii) FFO per share, (iii) Adjusted FFO, (iv) Adjusted FFO per share, (v) net income (loss) (computed in accordance with GAAP) before interest, taxes, depreciation and amortization, common and preferred minority interests and preferred dividends (EBITDA), and (vi) Adjusted EBITDA. The following explains why we believe these measures help provide investors with a more complete understanding of our financial and operating performance. FFO As Defined by NAREIT and Adjusted FFO The National Association of Real Estate Investment Trusts (NAREIT) adopted the definition of FFO in order to promote an industry standard measure of REIT financial and operating performance. Management believes that the presentation of FFO, FFO per share, and Adjusted FFO (defined below) provides useful supplemental information to investors regarding the company's financial condition and results of operations, particularly in reference to the company's ability to service debt, fund capital expenditures and pay cash dividends. Many other real estate companies use FFO as a measure of their financial and operating performance, which provides another basis of comparison for management. FFO, as defined, adds back historical cost depreciation. Historical cost depreciation assumes the value of real estate assets diminishes predictably over a certain period of time. In fact, real estate asset values historically have increased or decreased with market conditions. Consequently, FFO and Adjusted FFO may be useful supplemental measures in evaluating financial and operating performance by disregarding, or adding back, historical cost depreciation in the calculation of FFO and Adjusted FFO. Additionally, FFO per share and Adjusted FFO per share targets have historically been used to determine a significant portion of the incentive compensation of the company's senior management. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The company calculates FFO in compliance with the NAREIT definition. The company defines Adjusted FFO as FFO (as defined by NAREIT), adjusted for non-recurring and/or non-cash items, including discontinued operations and impairment losses. FFO, Adjusted FFO, FFO per share, Adjusted FFO per share are reconciled to net income (loss) applicable to common shareholders determined in accordance with GAAP in the accompanying schedules. EBITDA and Adjusted EBITDA EBITDA is defined as net income (loss) (computed in accordance with GAAP) before interest, taxes, depreciation and amortization, common and preferred minority interests and preferred dividends. The company defines Adjusted EBITDA as EBITDA adjusted for non-recurring and/or non-cash items, including gains (losses) from sales of property, discontinued operations and impairment losses. Management believes that the presentation of EBITDA and Adjusted EBITDA provides useful supplemental information to investors regarding the company's financial condition and results of operations, particularly in reference to the company's ability to service debt, fund capital expenditures and pay cash dividends. EBITDA and Adjusted EBITDA are also factors in management's evaluation of the financial and operating performance of the company, hotel level performance, investment opportunities, dispositions and financing transactions. FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA, as presented, may not be comparable to FFO, FFO per share, Adjusted FFO, Adjusted FFO per share, EBITDA and Adjusted EBITDA as calculated by other real estate companies. These measures do not reflect certain expenses that the company incurred and will incur, such as depreciation and interest (although we show such expenses in the reconciliation of these measures to their most directly comparable GAAP measures). None of these measures should be considered as an alternative to net income, net cash provided by operating activities, or any other financial and operating performance measure prescribed by GAAP. These measures should only be used in conjunction with GAAP measures. EBITDA and Adjusted EBITDA are reconciled to net income (loss) applicable to common shareholders determined in accordance with GAAP in the accompanying schedules. Forward-Looking Statement Safe Harbor This press release, and other publicly available information on the Company, includes forward looking statements within the meaning of federal securities law. These statements include terms such as "should", "may", "believe" and "estimate", or assumptions, estimates or forecasts about future hotel and Company performance and results, and the Company's future need for capital. Such statements should not be relied on because they involve risks that could cause actual results to differ materially from the Company's expectations when such statements are made. Some of these risks are set forth in reports filed from time to time with the SEC and include, without limitation, (i) the operational risks of the hotel business (including decreasing hotel revenues and increasing hotel expenses) under the company's taxable REIT subsidiary structure, (ii) risks that war, terrorism or similar activities, widespread health alerts, disruption in oil imports or higher oil prices or changes in domestic or international political environments negatively affect the travel industry and the company, (iii) risk of declines in the performance and prospects of businesses and industries (e.g., technology, automotive, aerospace, pharmaceuticals) that are important hotel demand generators in the company's key markets (e.g. the Silicon Valley, CA, Washington, DC, etc.), (iv) risk that poor, declining and/or uncertain international, national, regional and/or local economic conditions will, among other things, negatively affect demand for the company's hotel rooms and the availability and terms of financing, (v) risk that the company's ability to maintain its properties in competitive condition becomes prohibitively expensive, (vi) risk that pricing in the hotel acquisition market becomes prohibitively expensive or non-financeable and that potential acquisitions or developments do not perform in accordance with expectations, (vii) risk that the Company may invest in hotels of a size or nature (e.g., upscale full service or resort) different than those it has focused on historically (e.g., upscale extended-stay, and mid-scale limited service); (viii) risks related to an increasing focus on development, including permitting risks, increasing the proportion of Company assets not producing revenue at a given time and risks that projects cost more, take longer to complete or do not perform as anticipated; (ix) changes in travel patterns or the prevailing means of commerce (i.e., e-commerce) may reduce demand for hotels in general or the Company's hotels in particular, (x) the complex tax rules that the company must satisfy to qualify as a REIT and the potentially severe consequences of failing to satisfy such requirements, and (xi) governmental regulation that may increase the company's cost of doing business or otherwise negatively effect its business or its attractiveness as an investment and create risk of liability for non-compliance (e.g., changes in laws affecting taxes or dividends, compliance with the Americans with Disabilities Act, workers compensation law changes, the Sarbanes-Oxley law, etc.). -0- *T INNKEEPERS USA TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2005 2004 2005 2004 ---------------------------------------------------------------------- Revenue: Hotel operating Rooms 62,819 57,151 176,192 143,747 Food and beverage 1,984 420 3,900 791 Telephone 507 468 1,366 1,356 Other 1,643 1,404 4,410 3,300 Corporate Percentage lease -- -- -- 5,073 Other 142 54 396 243 ---------------------------------------------------------------------- Total revenue 67,095 59,497 186,264 154,510 ---------------------------------------------------------------------- Expenses: Hotel operating Rooms 12,890 12,336 36,668 31,573 Food and beverage 1,611 441 2,950 802 Telephone 739 612 2,144 1,794 Other 732 642 1,980 1,434 General and administrative 5,740 5,069 17,432 13,338 Franchise and marketing fees 4,313 3,866 12,263 9,982 Amortization of deferred franchise conversion 292 274 948 774 Advertising and promotions 2,239 2,019 5,952 4,859 Utilities 3,001 2,912 8,572 6,885 Repairs and maintenance 3,368 3,050 9,232 7,760 Management fees 2,007 1,891 5,569 4,764 Amortization of deferred lease acquisition 130 131 392 382 Insurance 356 447 1,136 1,145 Corporate Depreciation 8,957 7,913 26,226 23,605 Amortization of franchise fees 16 16 51 38 Ground rent 132 129 391 376 Interest 4,687 4,718 13,836 13,809 Amortization of loan origination fees 216 235 651 718 Property taxes and insurance 2,561 3,090 8,566 8,659 General and administrative 2,016 1,280 5,907 4,110 Amortization of unearned compensation 182 312 437 753 Other charges -- 396 3,053 874 ---------------------------------------------------------------------- Total expenses 56,185 51,779 164,356 138,434 ---------------------------------------------------------------------- Income before minority interest 10,910 7,718 21,908 16,076 Minority interest, common (119) (113) (195) (37) Minority interest, preferred (1,068) (1,068) (3,205) (3,204) ---------------------------------------------------------------------- Income from continuing operations 9,723 6,537 18,508 12,835 Income from discontinued operations 14 116 1,377 1,204 ---------------------------------------------------------------------- Net income 9,737 6,653 19,885 14,039 Series A Preferred Share issuance costs -- -- -- (4,249) Preferred share dividends (2,900) (2,900) (8,700) (8,589) ---------------------------------------------------------------------- Net income applicable to common shareholders $6,837 $3,753 $11,185 $1,201 ---------------------------------------------------------------------- Earnings per share data: Basic - continuing operations $0.16 $0.10 $0.24 $0.00 ---------------------------------------------------------------------- Basic $0.16 $0.10 $0.27 $0.03 ---------------------------------------------------------------------- Basic - weighted average shares 42,730,549 37,603,379 41,726,975 37,501,727 ---------------------------------------------------------------------- Diluted - continuing operations $0.16 $0.10 $0.23 $0.00 ---------------------------------------------------------------------- Diluted $0.16 $0.10 $0.27 $0.03 ---------------------------------------------------------------------- Diluted - weighted average shares 43,051,919 37,784,575 41,964,476 37,501,727 ---------------------------------------------------------------------- INNKEEPERS USA TRUST CALCULATION OF FFO, EBITDA AND RECONCILIATION TO NET INCOME APPLICABLE TO COMMON SHAREHOLDERS (UNAUDITED) (in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 ----------------------- ----------------------- CALCULATION OF FFO Net income (loss) applicable to common shareholders $6,837 $3,753 $11,185 $1,201 Depreciation 8,957 7,913 26,226 23,605 Depreciation included in discontinued operations -- 482 -- 1,564 Gain on sale of hotels included in discontinued operations (11) 243 (1,501) (786) Minority interest, preferred 1,068 1,068 3,205 -- Minority interest, common 119 113 195 37 ----------------------- ----------------------- Diluted FFO $16,970 $13,572 $39,310 $25,621 ----------------------- ----------------------- Weighted average number of common shares and common share equivalents 47,629,045 42,786,100 46,640,482 38,747,277 ----------------------- ----------------------- FFO per share $0.36 $0.32 $0.84 $0.66 ----------------------- ----------------------- FFO 16,970 13,572 39,310 25,621 Series A preferred share issuance costs -- -- -- 4,249 Other charges -- 396 3,053 874 Discontinued operations (3) (841) 124 (1,982) ----------------------- ----------------------- Adjusted FFO $16,967 $13,127 $42,487 $28,762 ----------------------- ----------------------- Adjusted FFO per share $0.36 $0.31 $0.91 $0.74 ----------------------- ----------------------- Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 ----------------------- ----------------------- CALCULATION OF EBITDA Net income applicable to common shareholders $6,837 $3,753 $11,185 $1,201 Interest 4,687 4,718 13,836 13,809 Depreciation and amortization 9,793 8,881 28,705 26,270 Depreciation included in discontinued operations -- 482 -- 1,564 Minority interest, common 119 113 195 37 Minority interest, preferred 1,068 1,068 3,205 3,204 Series A preferred share issuance costs -- -- -- 4,249 Preferred share dividends 2,900 2,900 8,700 8,589 ----------------------- ----------------------- EBITDA $25,404 $21,915 $65,826 $58,923 ----------------------- ----------------------- Other charges -- 396 3,053 874 Discontinued operations (3) (841) 124 (1,982) Gain on sale of hotels included in discontinued operations (11) 243 (1,501) (786) ----------------------- ----------------------- Adjusted EBITDA $25,390 $21,713 $67,502 $57,029 ----------------------- ----------------------- INNKEEPERS USA TRUST 2005 Forecast Reconciliation (in thousands, except share and per share data) Three months ended Twelve months ended December 31, 2005 December 31, 2005 Low End High End Low End High End Range Range Range Range ----------------------- ----------------------- CALCULATION OF FFO Net income (loss) applicable to common shareholders (200) 1,300 10,985 12,485 Depreciation 8,735 8,735 34,960 34,960 Gain on sale of hotels included in discontinued operations -- -- (1,501) (1,501) Minority interest, preferred 1,068 1,068 4,273 4,273 Minority interest, common (75) (75) 120 120 ----------------------- ----------------------- Diluted FFO 9,528 11,028 48,837 50,337 ----------------------- ----------------------- Weighted average number of common shares and common share equivalents 47,644,671 47,644,671 46,864,748 46,864,748 ----------------------- ----------------------- FFO per share 0.20 0.23 1.04 1.07 ----------------------- ----------------------- FFO 9,528 11,028 48,837 50,337 Other charges -- -- 3,053 3,053 Discontinued operations -- -- 124 124 ----------------------- ----------------------- Adjusted FFO 9,528 11,028 52,014 53,514 ----------------------- ----------------------- Adjusted FFO per share 0.20 0.23 1.11 1.14 ----------------------- ----------------------- Three months ended Twelve months ended December 31, 2005 December 31, 2005 Low End High End Low End High End Range Range Range Range ----------------------- ----------------------- CALCULATION OF EBITDA Net income (loss) applicable to common shareholders (200) 1,300 10,985 12,485 Interest 4,666 4,666 18,503 18,503 Depreciation and amortization 9,641 9,641 38,343 38,343 Minority interest, preferred 1,068 1,068 4,273 4,273 Minority interest, common (75) (75) 120 120 Preferred share dividends 2,900 2,900 11,600 11,600 ----------------------- ----------------------- EBITDA 18,000 19,500 83,824 85,324 ----------------------- ----------------------- Other charges -- -- 3,053 3,053 Discontinued operations -- -- 124 124 Gain on sale of hotels included in discontinued operations -- -- (1,501) (1,501) ----------------------- ----------------------- Adjusted EBITDA $18,000 $19,500 $85,500 $87,000 ----------------------- ----------------------- INNKEEPERS USA TRUST CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) September 30, December 31, 2005 2004 ---------------------------------------------------------------------- ASSETS Investment in hotels: Land and improvements $146,610 $127,392 Buildings and improvements 728,149 687,754 Furniture and equipment 98,510 101,909 Renovations in process 16,148 2,794 Hotels under development 4,318 3,864 Hotels held for sale -- 19,299 ---------------------------------------------------------------------- 993,735 943,012 Accumulated depreciation (221,009) (207,853) ---------------------------------------------------------------------- Net investment in hotels 772,726 735,159 Cash and cash equivalents 14,658 22,837 Restricted cash and cash equivalents 9,447 10,781 Accounts receivable, net 6,655 4,577 Prepaid and other 2,188 2,539 Deferred and other 17,283 20,099 ---------------------------------------------------------------------- Total assets $822,957 $795,992 ---------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Debt $247,299 $286,865 Accounts payable and accrued expenses 17,485 12,663 Payable to manager 245 209 Franchise conversion fee obligations 10,825 10,825 Distributions payable 9,642 5,450 ---------------------------------------------------------------------- Total liabilities 285,496 316,012 Minority interest in Partnership 48,081 51,088 Shareholders' equity: Preferred shares, $0.01 par value, 20,000,000 shares authorized, 5,800,000 shares issued and outstanding 145,000 145,000 Common shares, $0.01 par value, 100,000,000 shares authorized, 42,874,412 and 37,966,756 issued and outstanding, respectively 429 380 Additional paid-in capital 460,494 396,631 Unearned compensation (1,766) (448) Distributions in excess of earnings (114,777) (112,671) ---------------------------------------------------------------------- Total shareholders' equity 489,380 428,892 ---------------------------------------------------------------------- Total liabilities and shareholders' equity $822,957 $795,992 ---------------------------------------------------------------------- INNKEEPERS USA TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Nine Months Ended September 30, --------------------- 2005 2004 ---------------------------------------------------------------------- Cash flows from operating activities: Net income 19,885 14,039 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,705 27,834 Write-off of deferred expenses included in extinguishment of debt 124 -- Minority interests 3,400 3,241 Gain on sale of hotel included in discontinued operations (1,501) (786) Changes in operating assets and liabilities: Accounts receivable, net (2,078) 1,050 Prepaid and other 351 1,054 Accounts payable and accrued expenses 4,821 7,992 Payable to manager 36 (466) ---------------------------------------------------------------------- Net cash provided by operating activities 53,743 53,958 ---------------------------------------------------------------------- Cash flows from investing activities: Investment in hotels, net of insurance proceeds (82,123) (82,055) Deposits for acquisition of hotels -- (154) Proceeds from sale of hotels 20,860 8,727 Net withdrawals (deposits) into restricted cash and cash equivalents 1,334 (3,066) Lease acquisitions -- (1,336) Payment of franchise fees (50) (192) Repayment of advances 557 175 ---------------------------------------------------------------------- Net cash used in investing activities (59,422) (77,901) ---------------------------------------------------------------------- Cash flows from financing activities: Proceeds from debt issuance 71,000 53,074 Payments on debt (110,566) (29,618) Payments on franchise conversion fee obligations (948) (106) Distributions paid to unit holders (3,385) (3,307) Distributions paid to shareholders (17,832) (11,684) Redemption of shares or units -- (115,730) Proceeds from issuance of common and preferred shares 59,585 143,081 Loan origination fees and costs paid (354) (1,091) ---------------------------------------------------------------------- Net cash provided by financing activities (2,500) 34,619 ---------------------------------------------------------------------- Net increase in cash and cash equivalents (8,179) 10,676 Cash and cash equivalents at beginning of period 22,837 9,586 ---------------------------------------------------------------------- Cash and cash equivalents at end of period 14,658 20,262 ---------------------------------------------------------------------- Supplemental cash flow information: Interest paid 13,836 13,643 INNKEEPERS USA TRUST DEBT COMPOSITION (UNAUDITED) As of September 30, 2005 (outstanding balance in thousands) Stated Outstanding Interest Maturity Encumbered DEBT Balance Rate Date Properties ---------------------------------------------------------------------- ------------------------------------------- Unsecured Line of Credit(1) $40,574 4.92% July 2007 -- ------------------------------------------- Industrial Revenue Bonds(1) $10,000 2.70% December 2014 -- ------------------------------------------- Term Loan #1 $23,450 8.17% October 2007 8 ------------------------------------------- Term Loan #2 $35,257 8.15% March 2009 8 ------------------------------------------- Term Loan #3 $28,228 7.02% April 2010 7 ------------------------------------------- Term Loan #4 $45,804 7.16% October 2009 6 ------------------------------------------- Term Loan #5 $49,584 7.75% January 2011 6 ------------------------------------------- Mortgage $12,803 10.35% June 2010 1 ------------------------------------------- Adjustments (4) $1,599 -- -- -- ------------------------------------------- TOTAL $247,299 7.3%(2) 5 years(3) 36 ------------------------------------------- (1) Variable rated debt. The stated interest rate of the industrial revenue bonds includes an annual letter of credit fee of 1.25% (2) Weighted average calculated using the stated interest rate (3) Weighted average maturity (4) Adjustment to record $13 million mortgage at a fair market interest rate of 7% (the stated interest rate is 10.35%) INNKEEPERS USA TRUST OTHER DATA (UNAUDITED) (in thousands, except shares data) September 30, September 30, 2005 2004 --------------------------- CAPITALIZATION --------------------------- Common share market capitalization $673,000 $486,000 --------------------------- Total Market capitalization $1,072,000 $949,000 --------------------------- Common share closing price $15.45 $12.44 --------------------------- Common share dividend(1) $0.37 $0.15 --------------------------- Common share dividend yield(1) 2.4% 1.2% --------------------------- Preferred share closing price $26.15 $25.30 --------------------------- Preferred share dividend(2) $2.00 $2.00 --------------------------- Preferred share dividend yield(2) 7.6% 7.9% --------------------------- DEBT COVERAGE --------------------------- Debt weighted average interest rate 7.1% 6.9% --------------------------- Debt to investment in hotel properties, at cost 25% 28% --------------------------- Debt and preferred shares to investment in hotel properties 39% 44% --------------------------- Debt to market capitalization 23% 27% --------------------------- Debt and preferred shares to market capitalization 37% 43% --------------------------- LIQUIDITY/FLEXIBILITY --------------------------- Debt due 2004 -- $1,000 --------------------------- Debt due 2005 $2,000 $6,000 --------------------------- Debt due 2006 $6,000 $7,000 --------------------------- Debt due 2007 and thereafter $239,000 $242,000 --------------------------- --------------------------- Unencumbered hotel assets(3) 48% 43% --------------------------- Unsecured Line of Credit outstanding balance $40,574 $27,000 --------------------------- Unsecured Line of Credit available balance(4) $82,839 $98,000 --------------------------- SHARES AND UNITS OUTSTANDING --------------------------- Common Shares 42,914,086 37,958,256 --------------------------- Common Partnership Units 666,891 1,117,056 --------------------------- Preferred Partnership Units 3,884,469 3,884,469 --------------------------- Preferred Shares 5,800,000 5,800,000 --------------------------- (1) Regular common share dividends declared for the trailing twelve months ended September 30, 2005 and September 30, 2004 (2) Regular annual preferred share dividends (3) Based upon the number of hotels (4) The actual amount that may be borrowed is contingent upon many factors, such as compliance with unsecured line of credit covenants and the use of proceeds from borrowings. The $135 million revolving unsecured line of credit available balance has been reduced by $11.5 million in letters of credit. INNKEEPERS USA TRUST HOTEL OPERATING RESULTS (UNAUDITED) Three Months Nine Months Ended Ended September 30, September 30, % % September Inc Inc 30, 2005 2005 2004 (dec) 2005 2004 (dec) -------------------------------------------------------- PORTFOLIO(1) ---------------- --------------------------------------------- Average Daily Rate $104.97 $99.58 5.41% $103.95 $97.72 6.38% --------------------------------------------- Occupancy 78.97% 78.77% 0.25% 76.70% 76.15% 0.72% --------------------------------------------- RevPAR $82.90 $78.45 5.67% $79.73 $74.41 7.15% --------------------------------------------- --------- Number of hotel properties 65 --------- Percent of total rooms 100.0% --------- Percent of room revenue(2) 100.0% --------- BY SEGMENT ---------------- Upscale Extended Stay --------------------------------------------- Average Daily Rate $105.87 $100.67 5.17% $103.82 $98.19 5.73% --------------------------------------------- Occupancy 82.43% 81.71% 0.88% 79.69% 78.87% 1.04% --------------------------------------------- RevPAR $87.27 $82.26 6.09% $82.73 $77.44 6.83% --------------------------------------------- --------- Number of hotel properties 49 --------- Percent of total rooms 74.7% --------- Percent of room revenue(2) 77.5% --------- Upscale(1) ----------------------------------------------- Average Daily Rate $120.56 $122.25 -1.38% $126.70 $117.79 7.56% ----------------------------------------------- Occupancy 71.65% 70.76% 1.26% 69.88% 77.44% -9.76% ----------------------------------------------- RevPAR $86.38 $86.50 -0.14% $88.54 $91.22 -2.94% ----------------------------------------------- --------- Number of hotel properties 3 --------- Percent of total rooms 5.8% --------- Percent of room revenue(2) 6.4% --------- Mid Priced(1) --------------------------------------------- Average Daily Rate $95.94 $87.98 9.05% $97.56 $88.57 10.15% --------------------------------------------- Occupancy 67.91% 69.91% -2.86% 67.28% 65.35% 2.95% --------------------------------------------- RevPAR $65.16 $61.51 5.93% $65.64 $57.88 13.41% --------------------------------------------- --------- Number of hotel properties 13 --------- Percent of total rooms 19.5% --------- Percent of room revenue(2) 16.1% --------- BY FRANCHISE AFFILIATION ---------------- Residence Inn --------------------------------------------- Average Daily Rate $106.13 $100.71 5.38% $103.96 $98.07 6.01% --------------------------------------------- Occupancy 82.06% 81.50% 0.69% 79.10% 78.05% 1.35% --------------------------------------------- RevPAR $87.09 $82.08 6.10% $82.24 $76.54 7.45% --------------------------------------------- --------- Number of hotel properties 42 --------- Percent of total rooms 63.5% --------- Percent of room revenue(2) 65.5% --------- Summerfield Suites --------------------------------------------- Average Daily Rate $101.12 $97.04 4.20% $98.26 $94.11 4.41% --------------------------------------------- Occupancy 85.77% 85.13% 0.75% 83.37% 84.25% -1.04% --------------------------------------------- RevPAR $86.73 $82.61 4.99% $81.91 $79.29 3.30% --------------------------------------------- --------- Number of hotel properties 6 --------- Percent of total rooms 9.4% --------- Percent of room revenue(2) 9.7% --------- Hampton Inn(1) --------------------------------------------- Average Daily Rate $96.95 $88.41 9.66% $98.32 $89.07 10.39% --------------------------------------------- Occupancy 67.69% 69.16% -2.13% 67.10% 64.80% 3.55% --------------------------------------------- RevPAR $65.63 $61.15 7.33% $65.97 $57.71 14.31% --------------------------------------------- --------- Number of hotel properties 12 --------- Percent of total rooms 18.3% --------- Percent of room revenue(2) 15.2% --------- BY MANAGEMENT COMPANY ------------------------- Innkeepers Hospitality Management(1)(3) --------------------------------------------- Average Daily Rate $104.59 $98.90 5.75% $103.61 $97.35 6.43% --------------------------------------------- Occupancy 79.32% 79.12% 0.25% 77.12% 76.09% 1.35% --------------------------------------------- RevPAR $82.96 $78.25 6.02% $79.91 $74.07 7.88% --------------------------------------------- --------- Number of hotel properties 64 --------- Percent of total rooms 97.3% --------- Percent of room revenue(2) 97.5% --------- Third Party Managed ----------------------------------------------- Average Daily Rate $121.03 $128.51 -5.82% $118.90 $110.75 7.36% ----------------------------------------------- Occupancy 66.66% 66.38% 0.42% 61.65% 78.23% -21.19% ----------------------------------------------- RevPAR $80.68 $85.31 -5.43% $73.30 $86.64 -15.40% ----------------------------------------------- --------- Number of hotel properties 1 --------- Percent of total rooms 2.7% --------- Percent of room revenue(2) 2.5% --------- BY GEOGRAPHIC REGION ---------------- New England (ME, NH, VT, MA, CT, RI) ---------------------------------------------- Average Daily Rate $112.92 $104.97 7.57% $106.47 $100.09 6.37% ---------------------------------------------- Occupancy 76.59% 77.62% -1.33% 72.16% 69.19% 4.29% ---------------------------------------------- RevPAR $86.48 $81.47 6.15% $76.83 $69.26 10.93% ---------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 4.6% --------- Percent of room revenue(2) 4.5% --------- Middle Atlantic(1) (NY, NJ, PA) ---------------------------------------------- Average Daily Rate $112.91 $108.58 3.99% $108.95 $103.71 5.05% ---------------------------------------------- Occupancy 78.93% 81.80% -3.51% 76.15% 75.21% 1.25% ---------------------------------------------- RevPAR $89.12 $88.82 0.34% $82.97 $78.00 6.37% ---------------------------------------------- --------- Number of hotel properties 10 --------- Percent of total rooms 14.2% --------- Percent of room revenue(2) 14.7% --------- South Atlantic(1) (DE, MD, WV, DC, VA, NC, SC, GA, FL) ----------------------------------------------- Average Daily Rate $107.05 $99.35 7.75% $109.74 $99.85 9.90% ----------------------------------------------- Occupancy 72.96% 74.15% -1.60% 74.66% 75.82% -1.53% ----------------------------------------------- RevPAR $78.11 $73.67 6.03% $81.94 $75.70 8.24% ----------------------------------------------- --------- Number of hotel properties 15 --------- Percent of total rooms 23.8% --------- Percent of room revenue(2) 24.5% --------- East North Central (OH, MI, IN, IL, WI) --------------------------------------------- Average Daily Rate $92.98 $90.09 3.21% $92.12 $86.98 5.91% --------------------------------------------- Occupancy 76.77% 74.91% 2.48% 72.77% 70.23% 3.62% --------------------------------------------- RevPAR $71.38 $67.48 5.78% $67.04 $61.09 9.74% --------------------------------------------- --------- Number of hotel properties 12 --------- Percent of total rooms 16.7% --------- Percent of room revenue(2) 14.0% --------- East South Central(1) (KY, TN, AL, MS) --------------------------------------------- Average Daily Rate $91.76 $85.46 7.37% $87.85 $81.31 8.04% --------------------------------------------- Occupancy 85.80% 88.95% -3.54% 83.01% 88.81% -6.53% --------------------------------------------- RevPAR $78.73 $76.01 3.58% $72.92 $72.21 0.98% --------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 2.2% --------- Percent of room revenue(2) 2.0% --------- West North Central (MN, IA, MO, KS, NE, SD, ND) --------------------------------------------- Average Daily Rate $82.58 $79.83 3.44% $81.85 $81.82 0.04% --------------------------------------------- Occupancy 88.47% 78.94% 12.07% 86.15% 79.32% 8.61% --------------------------------------------- RevPAR $73.06 $63.02 15.93% $70.52 $64.90 8.66% --------------------------------------------- --------- Number of hotel properties 1 --------- Percent of total rooms 0.8% --------- Percent of room revenue(2) 0.7% --------- West South Central (AR, LA, OK, TX) --------------------------------------------- Average Daily Rate $91.78 $88.86 3.29% $92.63 $89.80 3.15% --------------------------------------------- Occupancy 84.07% 78.66% 6.88% 83.23% 79.83% 4.26% --------------------------------------------- RevPAR $77.15 $69.89 10.39% $77.10 $71.69 7.55% --------------------------------------------- --------- Number of hotel properties 5 --------- Percent of total rooms 8.7% --------- Percent of room revenue(2) 8.4% --------- Mountain (MT, ID, WY, CO, UT, NM, AZ, NV) --------------------------------------------- Average Daily Rate $97.50 $90.42 7.83% $93.72 $87.84 6.69% --------------------------------------------- Occupancy 83.56% 77.91% 7.25% 76.82% 72.00% 6.69% --------------------------------------------- RevPAR $81.47 $70.44 15.66% $72.00 $63.24 13.85% --------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 3.6% --------- Percent of room revenue(2) 3.2% --------- Pacific (WA, OR, CA, AK, HI) ----------------------------------------------- Average Daily Rate $112.52 $106.10 6.05% $110.54 $104.53 5.75% ----------------------------------------------- Occupancy 83.25% 83.46% -0.25% 79.22% 80.26% -1.30% ----------------------------------------------- RevPAR $93.67 $88.55 5.78% $87.57 $83.89 4.39% ----------------------------------------------- --------- Number of hotel properties 14 --------- Percent of total rooms 25.4% --------- Percent of room revenue(2) 27.9% --------- BY SELECTED MSA ---------------- Atlanta --------------------------------------------- Average Daily Rate $96.82 $88.34 9.60% $97.30 $90.97 6.96% --------------------------------------------- Occupancy 76.86% 79.55% -3.38% 74.61% 74.06% 0.74% --------------------------------------------- RevPAR $74.41 $70.27 5.89% $72.60 $67.37 7.76% --------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 3.5% --------- Percent of room revenue(2) 3.2% --------- Boston --------------------------------------------- Average Daily Rate $94.22 $83.48 12.87% $94.48 $85.01 11.14% --------------------------------------------- Occupancy 68.40% 65.62% 4.24% 58.62% 54.46% 7.64% --------------------------------------------- RevPAR $64.45 $54.78 17.65% $55.38 $46.30 19.61% --------------------------------------------- --------- Number of hotel properties 1 --------- Percent of total rooms 1.2% --------- Percent of room revenue(2) 0.9% --------- Chicago --------------------------------------------- Average Daily Rate $93.41 $89.54 4.32% $93.43 $89.02 4.95% --------------------------------------------- Occupancy 74.71% 71.06% 5.14% 70.06% 64.47% 8.67% --------------------------------------------- RevPAR $69.78 $63.63 9.67% $65.46 $57.39 14.06% --------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 7.0% --------- Percent of room revenue(2) 5.8% --------- Dallas/Ft. Worth --------------------------------------------- Average Daily Rate $84.12 $81.22 3.57% $83.38 $80.57 3.49% --------------------------------------------- Occupancy 85.66% 80.56% 6.33% 83.82% 79.89% 4.92% --------------------------------------------- RevPAR $72.06 $65.43 10.13% $69.89 $64.37 8.58% --------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 6.8% --------- Percent of room revenue(2) 6.0% --------- Denver --------------------------------------------- Average Daily Rate $97.50 $90.42 7.83% $93.72 $87.84 6.69% --------------------------------------------- Occupancy 83.56% 77.91% 7.25% 76.82% 72.00% 6.69% --------------------------------------------- RevPAR $81.47 $70.44 15.66% $72.00 $63.24 13.85% --------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 3.6% --------- Percent of room revenue(2) 3.2% --------- Detroit --------------------------------------------- Average Daily Rate $95.59 $97.54 -2.00% $94.66 $89.58 5.67% --------------------------------------------- Occupancy 80.92% 80.46% 0.57% 75.22% 78.09% -3.68% --------------------------------------------- RevPAR $77.35 $78.48 -1.44% $71.20 $69.95 1.79% --------------------------------------------- --------- Number of hotel properties 3 --------- Percent of total rooms 4.5% --------- Percent of room revenue(2) 4.1% --------- Hartford ----------------------------------------------- Average Daily Rate $114.28 $106.75 7.05% $112.64 $105.45 6.82% ----------------------------------------------- Occupancy 78.14% 80.23% -2.61% 74.11% 72.33% 2.46% ----------------------------------------------- RevPAR $89.30 $85.64 4.27% $83.48 $76.27 9.45% ----------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 2.4% --------- Percent of room revenue(2) 2.5% --------- Philadelphia --------------------------------------------- Average Daily Rate $104.00 $97.23 6.96% $101.54 $94.81 7.10% --------------------------------------------- Occupancy 78.64% 80.45% -2.25% 79.44% 77.31% 2.76% --------------------------------------------- RevPAR $81.79 $78.22 4.56% $80.67 $73.30 10.05% --------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 5.8% --------- Percent of room revenue(2) 5.8% --------- Richmond --------------------------------------------- Average Daily Rate $97.72 $92.84 5.26% $95.57 $92.26 3.59% --------------------------------------------- Occupancy 80.67% 81.14% -0.58% 82.66% 77.09% 7.23% --------------------------------------------- RevPAR $78.83 $75.33 4.65% $79.00 $71.12 11.08% --------------------------------------------- --------- Number of hotel properties 2 --------- Percent of total rooms 2.3% --------- Percent of room revenue(2) 2.3% --------- San Francisco/San Jose/Oakland (Silicon valley) ---------------------------------------------- Average Daily Rate $110.17 $104.33 5.60% $110.19 $103.75 6.21% ---------------------------------------------- Occupancy 80.54% 79.82% 0.90% 74.88% 76.23% -1.77% ---------------------------------------------- RevPAR $88.73 $83.28 6.54% $82.51 $79.09 4.32% ---------------------------------------------- --------- Number of hotel properties 8 --------- Percent of total rooms 15.0% --------- Percent of room revenue(2) 15.5% --------- Seattle/Portland ---------------------------------------------- Average Daily Rate $115.92 $108.64 6.70% $109.09 $105.77 3.14% ---------------------------------------------- Occupancy 87.31% 87.70% -0.44% 85.12% 82.89% 2.69% ---------------------------------------------- RevPAR $101.21 $95.28 6.22% $92.85 $87.67 5.91% ---------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 6.3% --------- Percent of room revenue(2) 7.4% --------- Washington, D.C.(1) ----------------------------------------------- Average Daily Rate $134.42 $122.11 10.08% $133.48 $118.43 12.71% ----------------------------------------------- Occupancy 73.37% 76.06% -3.54% 73.45% 78.22% -6.10% ----------------------------------------------- RevPAR $98.63 $92.88 6.19% $98.04 $92.64 5.83% ----------------------------------------------- --------- Number of hotel properties 4 --------- Percent of total rooms 6.7% --------- Percent of room revenue(2) 8.3% --------- (1) Hotel operating results exclude one hotel property acquired in Company in May 2005. (2) Room revenue for YTD September 2005. (3) Operating Statistics for hotels acquired in 2004 and 2005 include room revenue for the applicable periods from the previous owner for those periods prior to our acquisition of the hotels. *T