ARLINGTON, Va., Nov. 5 /PRNewswire-FirstCall/ -- Interstate Hotels &
Resorts (NYSE: IHR), a leading hotel real estate investor and the nation's
largest independent hotel management company, today reported operating results
for the third quarter ended September 30, 2008. The company's performance for
the third quarter includes the following (in millions, except per share
amounts):
Third Quarter Year-to-Date (YTD)
------------------- -------------------
2008(4) 2007(4) 2008(4) 2007(4)
-------- ------- -------- -------
Total revenue (1) $36.8 $33.7 $116.2 $97.5
Net income (loss) $(1.4) $0.8 $(1.6) $16.1
Diluted earnings (loss) per
share $(0.05) $0.03 $(0.05) $0.51
Adjusted EBITDA (2) (3) $8.3 $6.8 $26.2 $23.2
Adjusted net income (loss) (2) $(1.2) $1.4 $(2.2) $4.1
Adjusted diluted EPS (2) $(0.04) $0.04 $(0.07) $0.13
(1) Total revenue excludes other revenue from managed properties
(reimbursable costs).
(2) Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS are
non-GAAP financial measures and should not be considered as an
alternative to any measures of operating results under GAAP. See the
definition and further discussion of non-GAAP financial measures and
reconciliation to net income later in this press release.
(3) Includes the company's share of EBITDA from unconsolidated joint
venture investments in the amounts of $1.8 million and $1.2 million in
the third quarters of 2008 and 2007, respectively, and $6.0 million
and $3.1 million in the first nine months of 2008 and 2007,
respectively.
(4) The 2008 results include (i) a $2.4 million gain on the sale of the
Doral Tesoro Hotel & Golf Club in the first quarter 2008, and (ii)
$0.3 million and $1.4 million of write-offs of intangible assets
related to the sale of certain hotels in the third quarter 2008 and
YTD, respectively. The 2007 results include (i) $0.8 million and $8.7
million of write-offs of intangible assets related to the sale of
certain hotels during the third quarter 2007 and YTD, respectively,
and (ii) a $20.5 million gain related to the sale of BridgeStreet
Corporate Housing (completed in the first quarter 2007), which along
with the operations through the date of sale, are included in Income
from Discontinued Operations on the company's statement of operations
for the first quarter 2007. All of these items have been excluded
from the calculation of Adjusted EBITDA, Adjusted net income, and
Adjusted diluted EPS. In addition, the 2007 results have been
restated as presented in the company's 2007 Annual Report on form
10-K. For further details on this restatement see footnote 13 to the
financial tables of this press release, as well as footnote 19 in our
2007 Annual Report on form 10-K.
"Despite a rapidly declining global economy, we were able to achieve
positive RevPAR results for the quarter as well as increase management
contract unit count for the fourth consecutive quarter," said Thomas F.
Hewitt, chief executive officer. "We expect to face continued weakness in the
economy and lodging industry. However, we remain committed to enhancing value
for our owners and shareholders through focused revenue management and profit
maximization as well as preservation of capital and liquidity.
"Our strategy since early 2005 has been to diversify our earnings stream
between wholly owned hotels, joint venture investments and third party
management contracts," Hewitt said. "This balance along with our geographic
diversification and breadth of product types provides us with the ability to
temper these volatile market conditions. In this environment, we benefit from
the stability of our third party management contracts, where we are currently
focusing our strategic growth efforts."
Wholly Owned Hotel Results
EBITDA from the company's seven owned hotels was $5.7 million in the 2008
third quarter and $20.9 million for the first nine months as outlined below
(in millions):
Owned Hotels Third Quarter Year-to-Date
------------------------------------------------- ----------------
2008 2007 2008 2007
---- ---- ---- ----
Net income $(1.5) $0.5 $(0.1) $2.0
Interest expense, net $3.3 3.3 $10.1 $8.3
Depreciation and amortization $3.9 2.2 $10.9 $5.5
--- --- ---- ---
EBITDA $5.7 $6.0 $20.9 $15.8
--- --- ---- ----
The decrease in third quarter operating results as compared to last year
was primarily the result of ongoing renovations at the company's Westin
Atlanta property combined with softness in the Concord, Calif. and Arlington,
Texas markets. These factors were offset by the addition of the Sheraton
Columbia hotel to the company's owned portfolio in the fourth quarter of 2007
coupled with strength in the Houston, Texas and Baton Rouge, La. markets.
"RevPAR increased by 2.5 percent for our owned portfolio, excluding Westin
Atlanta and Sheraton Columbia, Md, which are undergoing renovations," Hewitt
said. "Our Hilton Houston Westchase and Hilton Garden Inn Baton Rouge
properties reported double-digit RevPAR growth, primarily the result of
hurricane-related business."
Hewitt pointed out that the company's capital projects in Columbia, Md.,
and Atlanta remain on target and on budget. "The Westin Atlanta renovation
will be completed by the end of the year. The Sheraton Columbia renovation
will also be finished by year-end, with the exception of the restaurant and
building exterior, which will trail into the first quarter of 2009. With the
completion of these extensive renovations, both properties will be in
excellent competitive shape heading into 2009."
Joint Venture Investments
EBITDA derived from the company's share of joint venture investments in
the third quarter 2008 increased by 50 percent to $1.8 million from the same
period last year. "Over the past year we have focused on growing the joint
venture segment of our business. We ended the quarter with 50 joint venture
properties as compared to 20 properties at the end of the third quarter of
last year," Hewitt stated.
The company opened its second aloft hotel, located in suburban Nashville,
Tenn., during the quarter under a JV development partnership with The John
Buck Company, which followed the opening of the JV's other aloft hotel in
Rancho Cucamonga, Calif., in June.
"In July, we formed our first JV partnership with Madison W Properties,
LLC, and acquired a minority equity interest in the Radisson Plaza Hotel
Lexington in Lexington, Kentucky. Following a planned $13 million renovation,
the hotel will be converted to a Hilton. We fully expect the refurbished
hotel, with its proximity to the Convention Center and the Rupp Arena and
conversion to the Hilton flag, to become Lexington's leading downtown hotel,"
he added.
Hotel Management Results
Same-store(5) RevPAR for all managed hotels in the third quarter of 2008
increased 1.6 percent to $103.93. Average daily rate (ADR) advanced 5.2
percent to $139.84, and occupancy declined 3.4 percent to 74.3 percent.
Same-store RevPAR for all full-service managed hotels rose 1.6 percent to
$113.64. ADR improved 6.0 percent to $152.48, while occupancy dropped 4.2
percent to 74.5 percent.
Same-store RevPAR for all select-service managed hotels increased 1.4
percent to $81.73, led by a 3.0 percent gain in ADR to $110.67, and a 1.6
percent decrease in occupancy to 73.9 percent.
(5) Please see footnote 6 to the financial tables within this press
release for a detailed explanation of "same-store" hotel operating statistics.
"Despite the increasingly difficult operating climate, our overall RevPAR
increased 1.6 percent for the quarter, which compares favorably with an
industry wide third-quarter RevPAR decrease of 1.1 percent, as reported by
Smith Travel Research," Hewitt pointed out.
"Consistent with our peers in the industry, we are forecasting negative
RevPAR growth in the fourth quarter and we have lowered our full year RevPAR
guidance. Although RevPAR growth has decelerated, we have been able to offset
this with increases in our management contract unit count. Historically, we
have capitalized on opportunities during difficult times as owners/investors
gravitate to the experienced managers with proven track records in all phases
of the economy," he noted.
"We added eight management contracts during the third quarter, ending the
period with a total of 226 hotels in our managed portfolio," Hewitt said.
"Since the end of the quarter, we have added two management contracts to our
portfolio, and we see a continuation of that trend in this challenging
economic environment."
Among the contracts added during the third quarter were four Hyatt Place
hotels in Texas owned by FFC Capital Corporation, for whom Interstate now
manages 29 properties. The company opened and is now managing the Hilton
Garden Inn in Melville/Plainview on Long Island in New York. The company also
took over management of the Best Western Bowery Hanbee Hotel in Lower
Manhattan/Chinatown in New York City, owned by Ben Wong, founder and principal
owner of New York-based Wok and Roll Restaurants.
After the quarter ended, the company opened and is managing the TownePlace
Suites by Marriott Albany Empire State Plaza, and is managing the 322-room
Hampton Inn Tropicana in Las Vegas. "We've opened a total of five newly built
properties this year and currently have contracts to manage another 17 hotels
in our pipeline."
International
"Although we have begun to see a softening in the Moscow market due to a
deceleration in this oil-based economy, our international portfolio performed
very well for the quarter," Hewitt said. During the quarter, the company
expanded its international presence with the opening of the 273-room Hilton
Moscow Leningradskaya in Russia, following completion of a two-year
restoration. It is the first Hilton branded hotel in Russia and Interstate's
eighth property in Europe. "We continue to expand our presence in Russia and
have a number of additional properties in the pipeline, including the 300-room
Renaissance Hotel in Moscow, which is on schedule to open in 2009, and the
300-room hotel component of the Freestyle Park mixed-use development project
scheduled to open in the spring of 2011. With our strong operations
infrastructure in place there and our proven track record over more than a
decade, our pipeline of management contract opportunities remains quite
active-in Russia and throughout Europe."
Interstate's joint venture management company, JHM Interstate Hotels
India, formed with JHM Hotels to operate and selectively invest in hotels in
India, continues to source management contracts there. The JV's first
management contract, a 124-room luxury hotel located in Visag (Visakhapatnam),
remains on schedule, with a projected opening slated for the first quarter of
2009.
Balance Sheet
On September 30, 2008, Interstate had:
-- Total unrestricted cash of $16.4 million.
-- Total debt of $241.0 million, consisting of $158.5 million of senior
debt and $82.5 million of non-recourse mortgage debt.
"Given the state of the credit markets, our main focus is on maximizing
liquidity," said Bruce Riggins, chief financial officer. "We are in
compliance with all of our debt covenants and expect to remain in compliance
based on our current forecast. Beyond the two owned hotel renovations, we
have no plans for any additional major investments in 2008 and 2009. Leading
into 2009, we are concentrating on preserving our cashflow generated by
operations in order to minimize our leverage while we focus our efforts on
refinancing our senior credit facility, which matures in early 2010. We have
no other debt maturities until 2011 and beyond."
Outlook and Guidance
"The economic outlook remains bleak; we are clearly in one of the most
difficult operating environments in many years," Hewitt said. "Our seasoned
management team began implementing contingency plans in the first quarter of
2008, and continue to evaluate strategies to maximize profits for our owners.
"We believe our international distribution and our strategy of
diversification of our earnings stream give us added stability during economic
slowdowns," he said. "While the operating environment will be challenging, we
remain confident in our strategy of preserving capital and focusing on
management contract growth."
The company provides the following updated guidance for full-year 2008:
-- RevPAR, on a same-store basis, as follows:
-- RevPAR for all managed properties (including owned hotels) is
expected to increase 0 percent to 1 percent;
-- Owned Hotel RevPAR, excluding Westin Atlanta Airport and Sheraton
Columbia hotels (which are undergoing significant renovations), is expected to
increase 0 percent to 1 percent;
-- Net income of $7.0 million to $8.8 million;
-- Diluted earnings per share of $0.21 to $0.26;
-- Adjusted net income of $6.3 million to $8.1 million;
-- Adjusted diluted earnings per share of $0.19 to $0.24;
-- Adjusted EBITDA of $48.0 million to $50.5 million, which includes the
following:
--EBITDA from wholly owned hotels of $25.0 million to $26.0 million;
--The company's share of EBITDA from unconsolidated joint ventures of
$7.5 million to $8.0 million;
-- EBITDA from the hotel management business of $15.5 million to $16.5
million;
-- The company's share of joint venture debt of $72 million related to
existing joint ventures.
Interstate will hold a conference call to discuss its third-quarter
results today, November 5, at 10 a.m. Eastern Time. To hear the webcast,
interested parties may visit the company's Web site at www.ihrco.com and click
on Investor Relations and then Third-Quarter Conference Call. A replay of the
conference call will be available until midnight on Wednesday, November 12,
2008, by dialing (800) 405-2236, reference number 11120753, and an archived
webcast of the conference call will be posted on the company's Web site
through December 5, 2008.
As of today, Interstate Hotels & Resorts has ownership interests in 57
hotels and resorts, including seven wholly owned assets. Together with these
properties, the company and its affiliates manage a total of 227 hospitality
properties with approximately 46,500 rooms in 37 states, the District of
Columbia, Russia, Mexico, Belgium, Canada and Ireland. Interstate Hotels &
Resorts also has contracts to manage 17 to be built hospitality properties
with approximately 4,300 rooms. For more information about Interstate Hotels
& Resorts, visit the company's Web site: www.ihrco.com.
Non-GAAP Financial Measures
Included in this press release are certain non-GAAP financial measures,
which are measures of our historical or estimated future performance that are
different from measures calculated and presented in accordance with generally
accepted accounting principles in the United States of America (or GAAP),
within the meaning of applicable Securities and Exchange Commission rules,
that we believe are useful to investors. They are as follows: (i) Earnings
before interest, taxes, depreciation and amortization (or "EBITDA") and (ii)
Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS. The following
discussion defines these terms and presents the reasons we believe they are
useful measures of our performance.
EBITDA
A significant portion of our non-current assets consists of intangible
assets, related to some of our management contracts, and long lived assets,
which includes the cost of our owned hotels. Intangible assets, excluding
goodwill, are amortized over their expected term. Property and equipment is
depreciated over its useful life. Because amortization and depreciation are
non-cash items, management and many industry investors believe the
presentation of EBITDA is useful. We also exclude depreciation and
amortization and interest expense from our unconsolidated joint ventures. We
believe EBITDA provides useful information to investors regarding our
performance and our capacity to incur and service debt, fund capital
expenditures and expand our business. Management uses EBITDA to evaluate
property-level results and as one measure in determining the value of
acquisitions and dispositions. It is also widely used by management in the
annual budget process. We believe that the rating agencies and a number of
lenders use EBITDA for those purposes and a number of restrictive covenants
related to our indebtedness use measures similar to EBITDA presented herein.
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted EBITDA as, EBITDA, excluding the effects of certain
recurring and non-recurring charges, transactions and expenses incurred in
connection with events management believes do not provide the best indication
of our ongoing operating performance. These charges include restructuring and
severance expenses, asset impairments and write-offs, gains and losses on
asset dispositions for both consolidated and unconsolidated investments, and
other non-cash charges. We believe that the presentation of Adjusted EBITDA
will provide useful supplemental information to investors regarding our
ongoing operating performance and that the presentation of Adjusted EBITDA,
when combined with the primary GAAP presentation of net income, is beneficial
to an investor's complete understanding of our operating performance. We also
use Adjusted EBITDA in determining our incentive compensation for management.
Similarly, we define Adjusted net income (loss) and Adjusted diluted
earnings (loss) per share ("EPS") as net income and diluted EPS, without the
effects of those same charges, transactions and expenses described earlier.
We believe that Adjusted EBITDA, Adjusted net income and Adjusted diluted EPS
are useful performance measures because including these expenses,
transactions, and special charges may either mask or exaggerate trends in our
ongoing operating performance. Furthermore, performance measures that include
these charges may not be indicative of the continuing performance of our
underlying business. Therefore, we present Adjusted EBITDA, Adjusted net
income and Adjusted diluted EPS because they may help investors to compare our
performance before the effect of various items that do not directly affect our
ongoing operating performance.
Limitations on the use of EBITDA, Adjusted EBITDA and Adjusted Net Income
We calculate EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted
diluted EPS as we believe they are important measures for our management's and
our investors' understanding of our operations. These may not be comparable
to measures with similar titles as calculated by other companies. This
information should not be considered as an alternative to net income,
operating profit, cash from operations or any other operating performance
measure calculated in accordance with GAAP. Cash receipts and expenditures
from investments, interest expense and other non-cash items have been and will
be incurred and are not reflected in the EBITDA and Adjusted EBITDA
presentations. Adjusted net income and Adjusted diluted EPS do not include
cash receipts and expenditures related to those same items and charges
discussed above. Management compensates for these limitations by separately
considering these excluded items, all of which should be considered when
evaluating our performance, as well as the usefulness of our non-GAAP
financial measures. Additionally, EBITDA, Adjusted EBITDA, Adjusted net
income, and Adjusted diluted EPS should not be considered a measure of our
liquidity. Adjusted net income and Adjusted diluted EPS should also not be
used as a measure of amounts that accrue directly to our stockholders'
benefit.
This press release contains "forward-looking statements," within the
meaning of the Private Securities Litigation Reform Act of 1995, about
Interstate Hotels & Resorts, including those statements regarding future
operating results and the timing and composition of revenues, among others,
and statements containing words such as "expects," "believes" or "will," which
indicate that those statements are forward-looking. Except for historical
information, the matters discussed in this press release are forward-looking
statements that are subject to certain risks and uncertainties that could
cause the actual results to differ materially, including the volatility of the
national economy, economic conditions generally and the hotel and real estate
markets specifically, the war in Iraq, international and geopolitical
difficulties or health concerns, governmental actions, legislative and
regulatory changes, availability of debt and equity capital, interest rates,
competition, weather conditions or natural disasters, supply and demand for
lodging facilities in our current and proposed market areas, and the company's
ability to manage integration and growth. Additional risks are discussed in
Interstate Hotels & Resorts' filings with the Securities and Exchange
Commission, including Interstate Hotels & Resorts' annual report on Form 10-K
for the year ended December 31, 2007 and quarterly report on Form 10-Q for the
quarter ended September 30, 2008.
Contact:
Carrie McIntyre
SVP, Treasurer
(703) 387-3320
Interstate Hotels & Resorts, Inc.
Statements of Operations
(Unaudited, in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------
2008 2007 (13) 2008 2007 (13)
---------- ---------- ---------- ----------
(as restated) (as restated)
Revenue:
Lodging $22,456 $20,628 $72,170 $52,325
Management fees 10,451 9,634 31,180 32,683
Termination fees (1) 1,446 935 5,650 4,928
Other 2,447 2,506 7,239 7,538
-------- -------- -------- --------
36,800 33,703 116,239 97,474
Other revenue from
managed properties 155,448 147,562 463,795 488,725
-------- -------- -------- --------
Total revenue 192,248 181,265 580,034 586,199
Expenses:
Lodging 16,803 14,604 51,255 36,535
Administrative and
general 13,550 13,669 44,793 41,667
Depreciation and
amortization 4,886 3,665 14,061 10,313
Asset impairments and
write-offs (2) 282 801 1,423 8,713
-------- -------- -------- --------
35,521 32,739 111,532 97,228
Other expenses from
managed properties 155,448 147,562 463,795 488,725
-------- -------- -------- --------
Total operating
expenses 190,969 180,301 575,327 585,953
-------- -------- -------- --------
OPERATING INCOME (LOSS) 1,279 964 4,707 246
Interest income 223 515 822 1,672
Interest expense (3) (3,433) (3,825) (10,581) (9,834)
Equity in earnings of
unconsolidated entities (29) 563 2,867 1,818
INCOME (LOSS) BEFORE
MINORITY INTEREST AND
INCOME TAXES (1,960) (1,783) (2,185) (6,098)
Income tax (expense)
benefit 554 (252) 626 1,804
Minority interest
(expense) benefit 3 (1) 4 (43)
-------- -------- -------- --------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (1,403) (2,036) (1,555) (4,337)
Income from discontinued
operations, net of
tax (4) - 2,836 - 20,444
-------- -------- -------- --------
NET INCOME (LOSS) $(1,403) $800 $(1,555) $16,107
======== ======== ======== ========
BASIC (LOSS) EARNINGS PER
SHARE:
Continuing operations $(0.05) $(0.06) $(0.05) $(0.14)
Discontinued operations - 0.09 - 0.65
-------- -------- -------- --------
Basic (loss) earnings
per share $(0.05) $0.03 $(0.05) $0.51
======== ======== ======== ========
DILUTED (LOSS) EARNINGS
PER SHARE (5):
Continuing operations $(0.05) $(0.06) $(0.05) $(0.14)
Discontinued operations - 0.09 - 0.65
-------- -------- -------- --------
Diluted (loss) earnings
per share $(0.05) $0.03 $(0.05) $0.51
======== ======== ======== ========
Weighted average shares
outstanding (in
thousands):
Basic 31,833 31,701 31,788 31,636
Diluted 31,833 31,996 31,788 31,927
Interstate Hotels & Resorts, Inc.
Hotel Level Operating Statistics
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ----------------------
2008 2007 % change 2008 2007 % change
------ ------ ---------- ------ ------ --------
Managed Hotels - Hotel Level Operating Statistics: (6)
Full-service hotels:
Occupancy 74.5% 77.8% -4.2% 74.0% 76.4% -3.1%
ADR $152.48 $143.79 6.0% $153.28 $143.70 6.7%
RevPAR $113.64 $111.81 1.6% $113.46 $109.86 3.3%
Select-service
hotels:
Occupancy 73.9% 75.1% -1.6% 72.0% 72.8% -1.1%
ADR $110.67 $107.42 3.0% $111.20 $107.39 3.5%
RevPAR $81.73 $80.63 1.4% $80.08 $78.14 2.5%
Total:
Occupancy 74.3% 76.9% -3.4% 73.4% 75.3% -2.5%
ADR $139.84 $132.99 5.2% $140.72 $133.03 5.8%
RevPAR $103.93 $102.32 1.6% $103.30 $100.21 3.1%
Owned Hotels - Hotel Level Operating Statistics: (7)
Occupancy 69.4% 70.7% -1.8% 70.5% 71.5% -1.4%
ADR $124.31 $119.03 4.4% $125.21 $120.81 3.6%
RevPAR $86.25 $84.17 2.5% $88.23 $86.42 2.1%
Interstate Hotels & Resorts, Inc.
Reconciliations of Non-GAAP Financial Measures (8)
(Unaudited, in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007
--------- ------- ------- --------
Net income (loss) $(1,403) $800 $(1,555) $16,107
Adjustments:
Depreciation and amortization 4,886 3,665 14,061 10,313
Interest expense, net 3,210 3,310 9,759 8,162
Depreciation and amortization from
unconsolidated joint entities 965 355 2,764 873
Interest expense, net from
unconsolidated joint entities 939 428 2,799 1,197
Discontinued operations, net (4) - (2,836) - (20,444)
Income tax expense (benefit) (554) 252 (626) (1,804)
--------- ------- ------- --------
EBITDA 8,043 5,974 27,202 14,404
Asset impairments and write-offs
(2) 282 801 1,423 8,713
Severance (9) - 80 - 812
Equity interest in the sale of
unconsolidated entities (10) - (98) (2,392) (784)
Minority interest expense
(benefit) (3) 1 (4) 43
--------- ------- ------- --------
Adjusted EBITDA $8,322 $6,758 $26,229 $23,188
========= ======= ======= ========
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007
--------- ------- ------- --------
Net income (loss) $(1,403) $800 $(1,555) $16,107
Adjustments:
Asset impairments and write-offs
(2) 282 801 1,423 8,713
Severance (9) - 80 - 812
Discontinued operations, net (4) - (2,836) - (20,444)
Deferred financing costs write-off
(3) - - - 632
Equity interest in the sale of
unconsolidated entities (10) - (98) (2,392) (784)
Minority interest (4) 8 2 33
Income tax rate adjustment (11) (119) 2,663 278 (931)
--------- ------- ------- --------
Adjusted net income (loss) $(1,244) $1,418 $(2,245) $4,138
========= ======= ======= ========
Adjusted diluted earnings per share $(0.04) $0.04 $(0.07) $0.13
========= ======= ======= ========
Weighted average number of diluted
shares outstanding (in thousands)
(5): 31,833 31,996 31,788 31,927
Interstate Hotels & Resorts, Inc.
Outlook Reconciliation (8), (12)
(Unaudited, in thousands)
Forecast
-----------------
Year Ending
December 31, 2008
-----------------
Net income $7,900
Adjustments:
Depreciation and amortization 18,200
Interest expense, net 13,400
Depreciation and amortization
from unconsolidated joint
ventures 3,700
Interest expense, net from
unconsolidated joint ventures 3,900
Income tax expense 3,150
-----------------
EBITDA 50,250
Asset impairments and write-
offs (2) 1,400
Equity interest in the sale of
unconsolidated joint ventures
(10) (2,400)
Minority interest expense -
-----------------
Adjusted EBITDA $49,250
=================
Forecast
-----------------
Year Ending
December 31, 2008
-----------------
Net income $7,900
Adjustments:
Asset impairments and write-
offs (2) 1,400
Equity interest in the sale of
unconsolidated joint ventures
(10) (2,400)
Minority Interest -
Income tax rate adjustment (11) 300
-----------------
Adjusted net income $7,200
=================
Adjusted diluted earnings per share
(5) $0.22
=================
Interstate Hotels & Resorts, Inc.
Notes to Financial Tables
(Unaudited)
(1) We record termination fees as revenue when all contingencies related
to the termination fees have been removed.
(2) This amount represents losses recorded for intangible costs
associated with terminated management contracts and other asset
impairments.
(3) For 2007, interest expense includes $0.5 million of deferred
financing fees expensed in the first quarter in connection with the
entrance into a new senior secured credit facility and the related
pay-off of all balances outstanding under our old senior secured
credit facility, as well as the write-off of $0.1 million of deferred
financing fees at the time of repayment of the underlying mortgage
note for the Hilton Concord.
(4) In January 2007, we completed the sale of our subsidiary,
BridgeStreet Corporate Housing. We have presented these operations
and the gain on sale as discontinued operations for all periods
presented. The calculation of EBITDA reflects the elimination of
discontinued operations.
(5) Our diluted earnings per share assumes the issuance of common stock
for all potentially dilutive common stock equivalents outstanding.
Potentially dilutive shares include unvested restricted stock and
stock options granted under our comprehensive stock plan and
operating partnership units held by minority partners. No effect is
shown for any securities that are anti-dilutive.
(6) We present certain operating statistics (i.e. occupancy, RevPAR and
ADR) for the periods included in this report on a same-store hotel
basis. We define our same-store hotels as those which (i) are
managed by us for the entirety of the reporting periods being
compared or have been managed by us for part of the reporting periods
compared and we have been able to obtain operating statistics for the
period of time in which we did not manage the hotel, and (ii) have
not sustained substantial property damage, business interruption, or
undergone large-scale capital projects during the reporting periods
being presented. In addition, the operating results of hotels which
we no longer managed as of September 30, 2008 are also not included
in same-store hotel results for the periods presented herein. Of the
226 properties that we managed as of September 30, 2008, 174 hotels
have been classified as same-store hotels. RevPar is defined as
revenue per available room.
(7) Owned Hotels - Hotel Level Operating Statistics include periods prior
to our ownership. Houston Westchase was purchased in February 2007,
Westin Atlanta Airport was purchased in May 2007, Sheraton Columbia
hotel was purchased in November 2007. The Westin Atlanta Airport and
Sheraton Columbia hotels are excluded from these statistics as they
are undergoing significant renovations. Statistics for all owned
properties are included in the Managed Hotels - Hotel Level Operating
Statistics.
(8) See discussion of EBITDA, adjusted EBITDA, adjusted net income and
adjusted diluted earnings per share, located in the "Non-GAAP
Financial Measures" section, described earlier in this press release.
(9) Severance expense for the three and nine months ended September 30,
2007 relates to the separation costs of personnel at our corporate
offices associated with the reduction in the number of third party
managed properties. These severance costs are recorded as part of
administrative and general expenses on our statement of operations.
(10) In the first quarter of 2008, one of our joint ventures sold the
Doral Tesoro Hotel & Golf Club, we recorded a gain of $2.4 million,
including the previously deferred gain of $0.6 million. In 2007,
the adjustment relates to an additional gain of $0.1 million on the
sale of the MIP joint venture in the first quarter, and additional
gain proceeds of $0.6 million from the sale of the Marriott Sawgrass
joint venture received during the second quarter.
(11) This amount represents the effect on income tax expense for the
adjustments made to net income at an effective tax rate of 28.7% for
2008 and 29.6% for 2007.
(12) Our outlook reconciliation uses the mid-point of our estimates.
(13) The effect of the restatement on the consolidated statement of
operations for the three months ended September 30, 2007 was a
decrease in amortization expense of $0.5 million, resulting from
incorrectly recognizing amortization expense for the terminated
management contracts, an increase of $0.8 million in asset impairment
and write-offs for the write-off of the intangible assets related to
the terminated hotel management contracts, and an increase in
income tax expense of $0.9 million. The effect on minority interest
on the statement of operations for the three month period was
immaterial.
The effect of the restatement on the consolidated statement of
operations for the nine months ended September 30, 2007 was a
decrease in amortization expense of $0.8 million, an increase of $7.6
million in asset impairment and write-offs, and a decrease in income
tax expense of $2.0 million. The effect on minority interest on the
statement of operations for the nine month period was immaterial.
