MeriStar Hospitality Corporation (NYSE: MHX), one of the nation's
largest hotel real estate investment trusts (REIT), today announced
financial results for the third quarter ended September 30, 2005.
Highlights of the company's strong quarterly performance
include(1): -- Net loss of $(117) million or $(1.34) per diluted
share compared to a net loss of $(27) million or $(0.31) per
diluted share for the 2004 third quarter. The 2005 third quarter
net loss includes the previously announced $(92) million or $(1.02)
per diluted share impact of the defeasance cost, impairment and
interest rate swap termination fee related to debt refinancing; --
Adjusted funds from operations (FFO) per diluted share of $0.09
increased 350 percent compared to $0.02 per diluted share for the
2004 third quarter; -- Adjusted EBITDA of $39.6 million increased
nearly 17 percent compared to $33.9 million in the 2004 third
quarter; -- Revenue per available room (RevPAR) increased 11.5
percent for the comparable hotels, as average daily rate (ADR) rose
11.1 percent and occupancy improved 0.3 percent; and -- Comparable
hotel gross operating profit margins improved 137 basis points, and
comparable hotel EBITDA margins improved 166 basis points. (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. "We are pleased with the excellent results generated by
our properties during the quarter," said Paul W. Whetsell, chairman
and chief executive officer. "Our strategy of reshaping our
portfolio to one able to drive rate and improve margins is
continuing to produce superior results and increase shareholder
value. RevPAR exceeded the upper end of our guidance for the period
and was driven almost entirely by rate." The Marriott Irvine in
southern California and The Ritz-Carlton, Pentagon City in
Arlington, Va., which were acquired mid-2004 and excluded from the
comparable hotel RevPAR and margin results, achieved RevPAR gains
of 26.4 percent and 15.7 percent, respectively, in the third
quarter. The company experienced operating strength in several key
markets, including southern California and Washington, D.C., where
RevPAR grew 18.6 percent and 11.7 percent, respectively.
Additionally, the company's New Jersey properties experienced a
17.1 percent growth in RevPAR as several renovated properties were
able to take advantage of a strong market and drive both occupancy
and ADR. The Radisson Lexington Avenue in Midtown Manhattan
continued to perform well resulting in $561,000 in distributable
cash in the quarter on the company's equity interest, in addition
to the $1.4 million return on the $40 million mezzanine loan.
Renovation Update In the third quarter, the company invested $19.3
million in non-hurricane related capital improvements at its
properties. "As part of our overall capital improvement program, we
have invested $78.4 million in renovations and upgrades to our
properties over the past nine months, and we are on track to reach
our target of $115 million in 2005," Whetsell said. "Property
results are reflecting the positive impacts of this program. For
example, the Radisson Chicago, which recently completed
improvements to both the guest rooms and public space, including a
reconcepting of the street-front restaurant, experienced a 22.1
percent increase in RevPAR for the quarter driven primarily by a
17.1 percent increase in ADR," Whetsell continued. "We expect our
2006 capital investment program to be well below 2005 levels as we
near completion of our multi-year investment initiative and begin
to approach more traditional levels of capital spending," he added.
Asset Sales The company sold three hotels, the Marina Hotel San
Pedro, the Wyndham Garden Marietta and the DoubleTree Albuquerque,
during the third quarter for total gross proceeds of $25.3 million.
On a combined basis, these properties sold for nearly 16 times
their trailing twelve-month EBITDA. "Including the sale of the
Hilton Monterey in May, we have generated total gross proceeds of
$45.8 million year to date," Whetsell said. "As we indicated last
quarter, we have expanded our asset disposition activity to take
advantage of the favorable market conditions. Based on our current
outlook, we now expect to sell an additional $150 million to $200
million in assets by year-end, with the balance of the dispositions
completed in the first quarter of 2006." Capital Structure The
company completed several key capital market transactions during
the quarter. "We made significant progress toward our objective of
strengthening our balance sheet and improving our credit
statistics," said Donald D. Olinger, chief financial officer. "Most
significantly, we refinanced our $300 million CMBS loan and
repurchased an additional $28.7 million of senior unsecured notes,
bringing our total senior unsecured note repurchase for the year to
more than $50 million. We also redeemed the remaining $33 million
of our 8.75 percent senior subordinated notes at par and expanded
our bank facility by $100 million. These transactions resulted in a
substantial lowering of our weighted average cost of debt and
annual interest expense, greater cash flow, and significant
improvement in our overall credit statistics. In addition, the new
CMBS structure provides the company greater flexibility with
respect to substituting or selling assets in the collateral pool.
As demonstrated by the recent sale of the DoubleTree Albuquerque,
we now have the ability to sell those collateral assets that do not
fit with our long-term strategy, thus reducing future capital
requirements and generating proceeds to further reduce our debt."
The company expects to use asset sale proceeds to continue to
reduce its outstanding debt, with particular focus on the company's
$206 million of 10.5 percent senior unsecured notes, which become
callable in December 2005. Pending the timing of asset sales, the
company currently expects to call between $100 million and $150
million in 2005 with the balance being redeemed in the first
quarter of 2006. Hurricane Update Damage associated with Hurricane
Katrina resulted in the temporary closure of the company's two New
Orleans properties, the 303-room Holiday Inn Select New Orleans
Airport and the 23-room boutique Hotel Maison de Ville. The
potential financial impact of the closure of these properties on
company operations is not expected to be significant. Three of
MeriStar's Florida properties that suffered damage from the
hurricanes last fall remain closed. The Best Western Sanibel Island
is expected to open in November, the South Seas Island Resort on
Captiva is expected to open in December and the Holiday Inn Walt
Disney World re-opening is scheduled for 2006. Guidance The company
is maintaining its full year adjusted EBITDA guidance of $185
million to $190 million and projects a net loss of $(138) million
to $(143) million. The guidance includes $4 million of additional
business interruption (BI) insurance gain in the fourth quarter.
This BI gain amount reflects the minimum cumulative amount of lost
profit expected in the year from the properties impacted by the
hurricanes last fall. Recognition of BI gain is subject to numerous
requirements, and timing of the recognition of BI gain cannot be
certain. RevPAR for the fourth quarter is estimated to increase 9
to 11 percent and 8.5 to 9.5 percent for the full year.
Additionally, the company provided the following range of estimates
for the fourth quarter and full year: -- Net loss of $(9) million
to $(14) million in the fourth quarter; -- Adjusted EBITDA of $40
million to $45 million in the fourth quarter; -- Net loss per
diluted share of $(0.10) to $(0.16) in the fourth quarter and
$(1.57) to $(1.63) for the full year; -- FFO per diluted share of
$0.10 to $0.16 in the fourth quarter and $(0.50) to $(0.56) for the
full year; and -- Adjusted FFO per diluted share of $0.10 to $0.16
in the fourth quarter and $0.64 to $0.70 for the full year. 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 third-quarter results today, November 1, 2005, at 11
a.m. Eastern time. Interested parties may visit the company's Web
site at www.meristar.com and click on Investor Relations and then
the webcast link. Interested parties also may listen to an archived
webcast of the conference call on the Web site, or may dial (800)
405-2236, reference number 11041610, to hear a telephone replay.
The telephone replay will be available through midnight on Tuesday,
November 8, 2005. Arlington, Va.-based MeriStar Hospitality
Corporation owns 69 principally upscale, full-service hotels in
major markets and resort locations with 19,376 rooms in 22 states
and the District of Columbia. The company owns hotels under such
internationally known brands as Hilton, Sheraton, Marriott,
Ritz-Carlton, Westin, Doubletree and Radisson. For more information
about MeriStar Hospitality, visit the company's Web site:
www.meristar.com. This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements, which are based on various assumptions
and describe our future plans, strategies and expectations, are
generally identified by our use of words such as "intend," "plan,"
"may," "should," "will," "project," "estimate," "anticipate,"
"believe," "expect," "continue," "potential," "opportunity," and
similar expressions, whether in the negative or affirmative. We
cannot guarantee that we actually will achieve these plans,
intentions or expectations. All statements regarding our expected
financial position, business and financing plans are
forward-looking statements. Except for historical information,
matters discussed in this press release are subject to known and
unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially
different from future results, performance or achievements
expressed or implied by such forward-looking statements. Factors
which could have a material adverse effect on our operations and
future prospects include, but are not limited to: economic
conditions generally and the real estate market specifically;
supply and demand for hotel rooms in our current and proposed
market areas; other factors that may influence the travel industry,
including health, safety and economic factors; competition; the
level of proceeds from asset sales; cash flow generally, including
the availability of capital generally, cash available for capital
expenditures, and our ability to refinance debt; the effects of
threats of terrorism and increased security precautions on travel
patterns and demand for hotels; the threatened or actual outbreak
of hostilities and international political instability;
governmental actions, including new laws and regulations and
particularly changes to laws governing the taxation of real estate
investment trusts; weather conditions generally and natural
disasters; rising insurance premiums; rising interest rates; 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. -0-
*T CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share amounts) Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 ---- ---- ---- ---- Revenue:
Hotel operations: Rooms $130,674 $121,053 $389,870 $378,807 Food
and beverage 48,035 44,483 158,322 147,936 Other hotel operations
12,036 12,518 34,787 43,100 Office rental, parking and other
revenue 1,908 1,426 4,941 4,021 --------- --------- ---------
--------- Total revenue 192,653 179,480 587,920 573,864 ---------
--------- --------- --------- Hotel operating expenses: Rooms
33,041 32,000 95,766 94,565 Food and beverage 36,323 34,762 112,613
109,284 Other hotel operating expenses 7,708 8,182 22,124 27,290
Office rental, parking and other expenses 945 682 2,381 1,938 Other
operating expenses: General and administrative, hotel 32,328 28,770
93,643 88,950 General and administrative, corporate 4,000 2,547
10,361 9,653 Property operating costs 30,947 28,292 89,622 85,796
Depreciation and amortization 25,728 24,599 73,021 73,058 Property
taxes, insurance and other 11,092 12,567 33,439 43,337 Loss on
asset impairments 40,343 - 40,343 - Contract termination costs
1,081 - 1,081 - --------- --------- --------- --------- Operating
expenses 223,536 172,401 574,394 533,871 --------- ---------
--------- --------- Equity in income/loss of and interest earned
from unconsolidated affiliates 2,682 1,600 7,257 4,800 Hurricane
business interruption gain - - 4,290 - --------- ---------
--------- --------- Operating (loss) income (28,201) 8,679 25,073
44,793 Minority interest income 3,062 775 3,370 2,392 Interest
expense, net (30,152) (30,994) (91,563) (95,586) Loss on early
extinguishments of debt (56,151) - (57,158) (7,903) ---------
--------- --------- --------- Loss before income taxes and
discontinued operations (111,442) (21,540) (120,278) (56,304)
Income tax (expense) benefit (33) 289 (867) 796 --------- ---------
--------- --------- Loss from continuing operations (111,475)
(21,251) (121,145) (55,508) --------- --------- --------- ---------
Discontinued operations: Loss from discontinued operations before
income tax (5,832) (5,557) (8,672) (23,223) Income tax benefit - 36
- 159 --------- --------- --------- --------- Loss from
discontinued operations (5,832) (5,521) (8,672) (23,064) ---------
--------- --------- --------- Net loss $(117,307) $(26,772)
$(129,817) $(78,572) ========= ========= ========= ========= Basic
loss per share: Loss from continuing operations $(1.27) $(0.24)
$(1.39) $(0.70) Loss from discontinued operations (0.07) (0.07)
(0.09) (0.29) --------- --------- --------- --------- Loss per
basic share $(1.34) $(0.31) $(1.48) $(0.99) ========= =========
========= ========= Diluted loss per share: Loss from continuing
operations $(1.28) $(0.25) $(1.39) $(0.71) Loss from discontinued
operations (0.06) (0.06) (0.09) (0.28) --------- ---------
--------- --------- Loss per diluted share $(1.34) $(0.31) $(1.48)
$(0.99) ========= ========= ========= ========= CONSOLIDATED
BALANCE SHEETS (In thousands, except per share amounts) September
30, December 31, 2005 2004 ---- ---- ASSETS Property and equipment
$ 2,569,041 $ 2,581,720 Accumulated depreciation (513,559)
(506,632) ------------- ------------- 2,055,482 2,075,088 Assets
held for sale 23,058 - Investment in and advances to unconsolidated
affiliates 71,465 84,796 Prepaid expenses and other assets 35,969
34,533 Insurance claim receivable 37,070 76,056 Accounts
receivable, net of allowance for doubtful accounts of $528 and $691
41,922 32,979 Restricted cash 18,839 58,413 Cash and cash
equivalents 35,296 60,540 ------------- ------------- $ 2,319,101 $
2,422,405 ============= ============= LIABILITIES AND STOCKHOLDERS'
EQUITY Long-term debt $ 1,613,982 $ 1,573,276 Accounts payable and
accrued expenses 81,638 75,527 Accrued interest 31,719 41,165 Due
to Interstate Hotels and Resorts 16,881 21,799 Other liabilities
7,618 11,553 ------------- ------------- Total liabilities
1,751,838 1,723,320 ------------- ------------- Minority interests
10,050 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 - 89,982 and 89,739 shares 900 897 Additional paid-in
capital 1,468,504 1,465,658 Accumulated deficit (868,210) (738,393)
Common stock held in treasury - 2,491 and 2,372 shares (43,981)
(43,130) ------------- ------------- Total stockholders' equity
557,213 685,032 ------------- ------------- $ 2,319,101 $ 2,422,405
============= ============= RECONCILIATION OF NET LOSS TO FUNDS
FROM OPERATIONS (a) (In thousands, except per share amounts) Three
Months Ended Nine Months Ended September 30, September 30, 2005
2004 2005 2004 ---- ---- ---- ---- Funds From Operations: Net loss
$(117,307) $(26,772) $(129,817) $(78,572) Depreciation and
amortization of real estate assets 22,149 24,614 68,146 72,734 Loss
on disposal of assets 1,490 2,232 2,527 13,762 Unconsolidated
affiliate adjustments 990 - 3,407 - Minority interest to common OP
unit holders (3,028) (735) (1,882) (2,469) ---------- ---------
---------- --------- Funds from operations $(95,706) $(661)
$(57,619) $5,455 ========== ========= ========== ========= Weighted
average number of shares of common stock outstanding 89,750 89,662
87,452 82,060 ========== ========= ========== ========= Funds from
operations per diluted share $(1.07) $(0.01) $(0.66) $0.07
========== ========= ========== ========= Funds From Operations, as
adjusted: Funds from operations $(95,706) $(661) $(57,619) $5,455
Loss on asset impairments 44,153 2,581 46,989 10,022 Loss on early
extinguishments of debt 56,151 - 57,158 7,903 Write off of deferred
financing fees 2,321 - 2,531 1,719 Contract termination costs 1,081
- 1,081 - Minority interest to common OP unit holders (201) -
(2,737) - ---------- --------- ---------- --------- Funds from
operations, as adjusted $7,799 $1,920 $47,403 $25,099 ==========
========= ========== ========= Weighted average number of shares of
common stock and common stock equivalents outstanding 87,668 89,713
87,579 82,060 ========== ========= ========== ========= Funds from
operations per diluted share, as adjusted $0.09 $0.02 $0.54 $0.31
========== ========= ========== ========= (a) See the notes to the
financial information for discussion of non-GAAP measures.
RECONCILIATION OF NET LOSS TO EBITDA (a) (In thousands) Three
Months Ended Nine Months Ended September 30, September 30, 2005
2004 2005 2004 ---- ---- ---- ---- EBITDA and Adjusted EBITDA: Net
loss $(117,307) $(26,772) $(129,817) $(78,572) Loss from
discontinued operations (5,832) (5,521) (8,672) (23,064) ----------
--------- ---------- --------- Loss from continuing operations
(111,475) (21,251) (121,145) (55,508) Interest expense, net 30,152
30,994 91,563 95,586 Income tax expense (benefit) 33 (289) 867
(796) Depreciation and amortization (b) 25,728 24,599 73,021 73,058
---------- --------- ---------- --------- EBITDA from continuing
operations (55,562) 34,053 44,306 112,340 Loss on asset impairments
40,343 - 40,343 - Contract termination costs 1,081 - 1,081 -
Minority interest income (3,062) (775) (3,370) (2,392) Loss on
early extinguishments of debt 56,151 - 57,158 7,903 Equity
investment adjustments: Equity in loss of affiliates 178 - 1,342 -
Distributions from equity investments 561 - 1,352 - ----------
--------- ---------- --------- Adjusted EBITDA from continuing
operations $39,690 $33,278 $142,212 $117,851 ========== =========
========== ========= Loss from discontinued operations $(5,832)
$(5,521) $(8,672) $(23,064) Interest expense, net - - - (478)
Income tax benefit - (36) - (159) Depreciation and amortization 443
1,375 2,111 5,510 ---------- --------- ---------- --------- EBITDA
from discontinued operations (5,389) (4,182) (6,561) (18,191) Loss
on asset impairments 3,810 2,581 6,646 10,022 Loss on disposal of
assets 1,490 2,231 2,527 13,762 ---------- --------- ----------
--------- Adjusted EBITDA from discontinued operations $(89) $630
$2,612 $5,593 ========== ========= ========== ========= Adjusted
EBITDA, total operations $39,601 $33,908 $144,824 $123,444
========== ========= ========== ========= (a) See the notes to the
financial information for discussion of non-GAAP measures. (b)
Depreciation and amortization includes the write-off of deferred
financing costs totaling $2.3 million for the three months ended
September 30, 2005 and $2.5 million and $1.7 million for the nine
months ended September 30, 2005 and 2004, respectively, related to
our early extinguishments of debt during these periods. HOTEL
OPERATIONAL DATA SCHEDULE OF COMPARABLE HOTEL RESULTS (a) (In
thousands, except per share amounts) Three Months Ended Nine Months
Ended September 30, September 30, 2005 2004 2005 2004 ---- ----
---- ---- Number of hotels 57 57 57 57 Number of rooms 16,619
16,619 16,619 16,619 Comparable hotel revenues: Rooms $116,864
$104,312 $348,342 $320,493 Food and beverage 42,632 38,017 139,134
129,126 Other hotel operations 8,638 8,278 25,076 24,485 --------
-------- -------- -------- Comparable hotel revenues (b) 168,134
150,607 512,552 474,104 -------- -------- -------- --------
Comparable hotel expenses: Room 29,914 27,504 86,697 81,685 Food
and beverage 32,202 29,459 98,875 94,489 Other 5,747 5,691 17,094
16,989 General and administrative 28,547 25,964 83,264 78,677
Property operating costs, less management fees 24,458 21,712 69,494
64,697 -------- -------- -------- -------- Comparable hotel
expenses (c) 120,868 110,330 355,424 336,537 -------- --------
-------- -------- -------- -------- -------- -------- Comparable
Hotel Gross Operating Profit 47,266 40,277 157,128 137,567 --------
-------- -------- -------- Margin 28.1% 26.7% 30.7% 29.0%
Management Fees (c) 4,196 3,754 12,800 11,828 Property taxes,
insurance and other (c) 8,891 8,402 26,664 25,854 -------- --------
-------- -------- Comparable Hotel EBITDA, excluding BI (d) $
34,179 $ 28,121 $117,664 $ 99,885 -------- -------- --------
-------- Margin 20.3% 18.7% 23.0% 21.1% Hurricane business
interruption gain - - 969 - -------- -------- -------- --------
Comparable Hotel EBITDA, including BI (d) $ 34,179 $ 28,121
$118,633 $ 99,885 ======== ======== ======== ======== Margin 20.3%
18.7% 23.1% 21.1% (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): Three Months Ended Nine
Months Ended September 30, September 30, 2005 2004 2005 2004 ----
---- ---- ---- Revenues per the consolidated statements of
operations $192,653 $179,480 $587,920 $573,864 Non-comparable hotel
revenues (22,611) (27,447) (70,427) (95,739) Office rental, parking
and other revenue (1,908) (1,426) (4,941) (4,021) ---------
--------- --------- --------- Comparable hotel revenues $168,134
$150,607 $512,552 $474,104 ========= ========= ========= =========
(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): Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 ---- ---- ---- ---- Operating
expenses per the consolidated statements of operations $223,536
$172,401 $574,394 $533,871 Non-comparable hotel expenses (18,429)
(22,769) (54,700) (76,941) General and administrative, corporate
(4,000) (2,547) (10,361) (9,653) Depreciation and amortization
(25,728) (24,599) (73,021) (73,058) Loss on asset impairments
(40,343) - (40,343) - Contract termination costs (1,081) - (1,081)
- --------- --------- --------- --------- Comparable hotel
expenses, management fees, property taxes, insurance and other
$133,955 $122,486 $394,888 $374,219 ========= ========= =========
========= (d) The reconciliation of comparable hotel EBITDA to
operating income per the consolidated statements of operations is
as follows (in thousands): Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 ---- ---- ---- ----
Comparable hotel EBITDA, including BI $34,179 $28,121 $118,633
$99,885 Non-comparable results, net (e) 4,182 4,678 15,727 18,798
Office rental, parking and other revenue 1,908 1,426 4,941 4,021
General and administrative, corporate (4,000) (2,547) (10,361)
(9,653) Depreciation and amortization (25,728) (24,599) (73,021)
(73,058) Loss on asset impairments (40,343) - (40,343) - Contract
termination costs (1,081) - (1,081) - Equity in income/loss of and
interest earned from unconsolidated affiliates 2,682 1,600 7,257
4,800 Hurricane business interruption gain at non- comparable
hotels - - 3,321 - --------- --------- -------- ----------
Operating Income $(28,201) $8,679 $25,073 $44,793 =========
========= ========= ========= (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 December
31, 2005 ------------------------------------- Low-end of range
High-end of range ---------------- ----------------- Forecasted
Funds from Operations: Net loss (a) $ (14) $ (9) Adjustments to
forecasted net loss: Depreciation and amortization of real estate
assets 22 22 Unconsolidated affiliate adjustments 1 1 Minority
interest to common OP unit holders - - ------------------
------------------ Funds from operations $ 9 $ 14 Weighted average
diluted shares of common stock and common OP units outstanding 90
90 ------------------ ------------------ Funds from operations per
diluted share $ 0.10 $ 0.16 ================== ==================
Funds From Operations, as adjusted: Funds from operations $ 9 $ 14
Loss on asset impairments - - Loss on early extinguishments of debt
- - ------------------ ------------------ Funds from operations, as
adjusted $ 9 $ 14 Weighted average number of shares of common stock
and common stock equivalents outstanding 90 90 ------------------
------------------ Funds from operations per diluted share, as
adjusted $ 0.10 $ 0.16 ================== ================== Year
Ending December 31, 2005 ----------------------------- Low-end of
range High-end of range ---------------- -----------------
Forecasted Funds from Operations: Net loss (a) $ (143) $ (138)
Adjustments to forecasted net loss: Depreciation and amortization
of real estate assets 90 90 Unconsolidated affiliate adjustments 4
4 Minority interest to common OP unit holders (4) (4) Loss on
disposal of assets 3 3 ---------------- ----------------- Funds
from operations $ (50) $ (45) Weighted average number of shares of
common stock and common OP units outstanding 90 90 ----------------
----------------- Funds from operations per diluted share $ (0.56)
$ (0.50) ================ ================= Funds From Operations,
as adjusted: Funds from operations $ (50) $ (45) Loss on asset
impairments 47 47 Contract termination fees 1 1 Loss on early
extinguishments of debt 57 57 Write-off of deferred financing costs
3 3 ---------------- ----------------- Funds from operations, as
adjusted $ 58 $ 63 Weighted average number of shares of common
stock and common stock equivalents outstanding 90 90
---------------- ----------------- Funds from operations per
diluted share, as adjusted $ 0.64 $ 0.70 ================
================= (a) Forecasted net 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. FORECASTED
RECONCILIATION OF NET LOSS TO EBITDA (In millions) Three Months
Ending December 31, 2005 -------------------------------------
Low-end of range High-end of range ----------------
----------------- EBITDA and Adjusted EBITDA: Net loss (a) $ (14) $
(9) Interest expense, net 30 30 Depreciation and amortization 24 24
------------------- ----------------- EBITDA 40 45 Equity
investment adjustments: Equity in income of affiliates (1) (1)
Distributions from equity investments 1 1 Minority interest to
common OP unit holders - - ------------------- -----------------
Adjusted EBITDA $ 40 45 =================== ================= Year
Ending December 31, 2005 ----------------------------- Low-end of
range High-end of range ---------------- ----------------- EBITDA
and Adjusted EBITDA: Net loss (a) $ (143) $ (138) Interest expense,
net 122 122 Depreciation and amortization 96 96 Write-off of
deferred financing costs 3 3 ---------------- -----------------
EBITDA 78 83 Loss on asset impairments 47 47 Contract termination
fees 1 1 Loss on early extinguishments of debt 57 57 Equity
investment adjustments: Equity in income of affiliates - -
Distributions from equity investments 3 3 Minority interest to
common OP unit holders (4) (4) Loss on disposal of assets 3 3
---------------- ----------------- Adjusted EBITDA $ 185 190
================ ================= (a) Forecasted net loss does not
include any possible future losses on asset impairments, gains or
losses on the sale of assets, gains or losses on early
extinguishment of debt, or gains or losses on property damage
insurance recoveries. *T NOTES TO FINANCIAL INFORMATION Funds From
Operations Substantially all of our non-current assets consist of
real estate, and, in accordance with accounting principles
generally accepted in the United States, or GAAP, those assets are
subject to straight-line depreciation, which reflects the
assumption that the value of real estate assets, other than land,
will decline ratably over time. That assumption is often not true
with respect to the actual market values of real estate assets
(and, in particular, hotels), which fluctuate based on economic,
market and other conditions. As a result, management and many
industry investors believe the presentation of GAAP operating
measures for real estate companies to be more informative and
useful when other measures, adjusted for depreciation and
amortization, are also presented. In an effort to address these
concerns, the National Association of Real Estate Investment
Trusts, or NAREIT, adopted a definition of Funds From Operations,
or FFO. NAREIT defines FFO as net income (computed in accordance
with GAAP) excluding gains or losses from sales of real estate,
real estate-related depreciation and amortization, and after
comparable adjustments for our portion of these items related to
unconsolidated partnerships and joint ventures. Extraordinary items
and cumulative effect of changes in accounting principles as
defined by GAAP are also excluded from the calculation of FFO. As
defined by NAREIT, FFO also does not include reductions from asset
impairment charges. The SEC, however, recommends that FFO 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, write-offs of deferred financing costs, 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, write-offs of deferred
financing costs, 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. Comparable
Hotel Operating Results and Statistics We present certain operating
statistics (i.e., RevPAR, ADR and average occupancy) and operating
results (revenues, expenses and operating profit) for the periods
included in this report on a comparable hotel basis as supplemental
information for investors. We define our comparable hotels as
properties (i) that are owned by us and the operations of which are
included in our consolidated results for the entirety of the
reporting periods being compared, (ii) that have not sustained
substantial property damage during the reporting periods being
compared, and (iii) that are not planned for disposition as of the
end of the period. Of the 69 hotels that we owned as of September
30, 2005, 57 have been classified as comparable hotels. The
operating results of one hotel classified as held-for-sale and
reflected in discontinued operations, nine hotels significantly
affected by the hurricanes, and the two hotels acquired in 2004
that we owned as of September 30, 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 into the ongoing operating performance of our hotels
and the effectiveness of management in running our business on a
property-level basis. We eliminate depreciation and amortization
because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based
on historical cost accounting for real estate assets, implicitly
assume that the value of real estate assets diminishes over time.
Because real estate values have historically risen or fallen with
market conditions, many industry investors have considered
presentation of operating results for real estate companies that
use historical cost accounting to be insufficient by themselves. We
eliminate loss on asset impairments because these non-cash expenses
are primarily related to our non-comparable properties, and do not
reflect the operating performance of our comparable assets. As a
result of the elimination of corporate-level costs and expenses and
depreciation and amortization, the comparable hotel operating
results we present do not represent our total revenues, expenses or
operating profit and should not be used to evaluate our performance
as a whole. Management compensates for these limitations by
separately considering the impact of these excluded items to the
extent that they are material to operating decisions or assessments
of our operating performance. Our consolidated statements of
operations include such amounts, all of which should be considered
by investors when evaluating our performance. We present these
hotel operating results on a comparable hotel basis because we
believe that doing so provides investors and management with useful
information for evaluating the period-to-period performance of our
hotels and facilitates comparisons with other hotel REITs and hotel
owners. In particular, these measures assist management and
investors in distinguishing whether increases or decreases in
revenues and/or expenses are due to growth or decline of operations
at comparable hotels (which represent the vast majority of our
portfolio) or from other factors, such as the effect of
acquisitions or dispositions. While management believes that
presentation of comparable hotel results is a "same store"
supplemental measure that provides useful information in evaluating
the ongoing performance of the Company, this measure is not used to
allocate resources or to assess the operating performance of each
of these hotels, as these decisions are based on data for
individual hotels and are not based on comparable hotel results.
For these reasons, we believe that comparable hotel operating
results, when combined with the presentation of GAAP operating
profit, revenues and expenses, provide useful information to
management and investors.
Meristar (NYSE:MHX)
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Meristar (NYSE:MHX)
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