ARLINGTON, Va., Aug. 8 /PRNewswire-FirstCall/ -- Interstate Hotels
& Resorts (NYSE:IHR), one of the nation's largest independent
hotel management companies, today reported operating results for
the second quarter ended June 30, 2007. The company's performance
for the second quarter includes the following (in millions, except
per share amounts): Second Quarter Year-to-Date ---------------
---------------- 2007 2006 2007 2006 ----- ----- ----- ----- Total
revenue (1) $35.4 $26.5 $63.8 $58.1 Net income $1.6 $3.0 $18.8 $3.8
Diluted earnings per share $0.05 $0.10 $0.59 $0.12 Adjusted EBITDA
(2) (3) $9.5 $7.6 $16.4 $22.2 Adjusted net income (2) $1.5 $1.6
$2.3 $8.1 Adjusted diluted EPS (2) $0.05 $0.05 $0.7 $0.26 (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 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 $1.0
million in the second quarters of 2007 and 2006, and $1.9 million
and $1.5 million for the first six months of 2007 and 2006,
respectively. The second quarter 2007 statement of operations
includes the following non-recurring items and special charges: --
$1.0 million of asset impairments and write-offs associated with
terminated management contracts; -- $0.4 million of severance costs
related to a reduction in corporate headcount associated with the
reduction in the number of third party managed properties
throughout the year; -- $0.6 million gain related to the sale of a
joint venture interest, recorded in equity in earnings of
affiliates. These items have been excluded from the calculation of
Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS.
Hotel Management Results Same-store(4) RevPAR for all managed
hotels in the second quarter of 2007 rose 8.0 percent to $104.61.
Average daily rate (ADR) improved 7.5 percent to $135.43, and
occupancy increased 0.4 percent to 77.2 percent. Same-store RevPAR
for all full-service managed hotels advanced 8.1 percent to
$113.21. ADR increased 7.0 percent to $145.38, while occupancy rose
1.0 percent to 77.9 percent. Same-store RevPAR for all
select-service managed hotels improved 7.7 percent to $77.23, on a
9.2 percent gain in ADR to $102.69 and a 1.3 percent decline in
occupancy to 75.2 percent. "We had an excellent second quarter,
with RevPAR increasing 8.0 percent, which compared favorably to the
industry average of 5.7 percent, according to Smith Travel Research
data," said Thomas F. Hewitt, chief executive officer. "Yielding
rate and controlling costs enabled us to deliver strong bottom line
growth to our owners." The company ended the quarter with 187
hotels in its portfolio, a decrease of 20 hotels from the beginning
of the quarter. This decrease was driven by the sale of properties
by two major owners, The Blackstone Group, which sold 11
Interstate-managed hotels during the quarter, and Sunstone Hotel
Investors, Inc. (NYSE:SHO), which sold a portfolio of six hotels.
These losses were somewhat offset by adding four new third-party
managed properties to the portfolio during the quarter: the
148-room Marriott Ashbourne in Ireland, the 484-room Marriott
Oakland City Center and the 162-room Courtyard Oakland Downtown,
both in California; and the 143-room Hampton Inn Pittsburgh, a
newly built hotel which opened at the end of the quarter. "The
expected reduction in our hotel count during the quarter is a
reflection of the favorable real estate market conditions the
industry has been experiencing over the past two years," Hewitt
noted. "As we work through this transitional year, we are
encouraged by the activity generated by our business development
team, which continues to focus on adding new properties to our
portfolio of third-party managed hotels, while also seeking
opportunities to grow our real estate ownership, both wholly-owned
and through joint venture investments." (4) Please see footnote 6
to the financial tables within this press release for a detailed
explanation of "same-store" hotel operating statistics.
Wholly-owned Hotel Results "RevPAR increased 3.8 percent at our six
wholly-owned properties. These results were impacted by tough
comparisons for our Baton Rouge hotel, which benefited from unusual
demand last year as a result of Hurricane Katrina. The hotel
continues to perform well, with occupancies in the mid-80s," Hewitt
said. "From a bottom-line perspective, the portfolio continues to
generate strong results," Hewitt noted. EBITDA from the company's
owned hotels was $5.9 million for the second quarter and $9.6
million for the first six months as illustrated below (in
millions): Owned Hotels Second Quarter Year-to-Date
--------------------------------------------- ---------------- 2007
2006 2007 2006 ------ ------ ------ ------ Net Income $1.2 $0.8
$1.5 $1.1 Interest Expense 2.9 0.5 4.9 1.0 Depreciation and
Amortization 1.8 0.5 3.2 0.9 ------ ------ ------ ------ EBITDA
$5.9 $1.8 $9.6 $3.0 ====== ====== ====== ====== "We completed the
purchase of the Westin Atlanta Airport in the second quarter, for
$74 million, our largest asset acquisition to date," Hewitt added.
"The Westin's favorable location provides for easy access to the
nearby convention center, downtown Atlanta and other area
attractions. We expect to benefit from the addition of 3.2 million
square feet of office construction across the Atlanta metro area.
Our planned $18 million renovation, just underway at this hotel,
will position us to take full advantage of the growth in the area."
With the addition of this hotel, the company's 2007 projected
annualized EBITDA from its wholly-owned assets is $25 million,
which is more than 50 percent of its total Adjusted EBITDA. "We
continue to look for hotels to which we can add value, both through
our management expertise and through targeted capital spending,"
Hewitt said. "We remain disciplined in our approach to the
properties we acquire in order to maintain a conservative balance
sheet, well positioned to handle any phase of the lodging cycle."
Joint Venture Investments The company ended the second quarter with
minority ownership in 17 properties through 11 joint venture
partnerships. The company's share of EBITDA from joint venture
investments was $1 million in both the second quarter of 2007 and
2006. The company's share of non-recourse mortgage debt from joint
ventures is $20.1 million. Leslie Ng, chief investment officer,
pointed out that joint ventures remain a major growth platform for
Interstate. "Joint venture investments provide us with solid
returns on our investment through the combination of our share of
the real estate returns, the management fee from the hotel, as well
as the participation in the potential asset value accretion upon
sale, while aligning our interests with our majority partner." Last
week, the company announced that it had entered the Mexican market
by making a $5.7 million investment in a three-property portfolio
of Tesoro Resorts in Mexico, which includes: Property Location # of
Rooms -------------------------------------------------------
Tesoro Los Cabos Cabo San Lucas, Mexico 286
------------------------------------------------------- Tesoro
Manzanillo Manzanillo, Mexico 331
------------------------------------------------------- Tesoro
Ixtapa Ixtapa, Mexico 203
------------------------------------------------------- Interstate
expects to convert this investment to a 15 percent joint venture
equity interest in the near term. In conjunction with this
investment, Interstate acquired a 50 percent interest in the
resorts' operating company through a separate joint venture,
operating as Interstate de Mexico. "This investment establishes a
solid platform for our entry into Mexico and Latin America, areas
where we see significant opportunities for growth over the next
decade," Ng said. "We continue to seek joint venture investment
opportunities both internationally and domestically that are
consistent with our targeted property profile," he added. Balance
Sheet On June 30, 2007, Interstate had: -- Total cash of $27.4
million -- Total debt of $172.2 million, consisting of $114.7
million of senior debt and $57.5 million of non-recourse mortgage
debt In May, the company amended its senior secured credit facility
to significantly expand the facility's capacity and provide greater
flexibility in certain of its financial covenants. The total
facility increased by $75 million to $200 million, consisting of a
$115 million term loan and a $85 million revolver. The interest
rate of the expanded facility remained at LIBOR plus 275 basis
points. The company used the additional $50 million term loan and
cash on hand to finance the acquisition of the Westin Atlanta
Airport hotel. "By increasing the capacity of our senior secured
facility, we have the flexibility to continue to execute our
strategic business plans, including the selective acquisition of
wholly-owned and joint venture real estate investments," said Bruce
Riggins, chief financial officer. "We currently have the entire $85
million available on our revolving credit facility to fund our
growth strategy and our operating needs." Outlook and Guidance The
company provides the following guidance for full-year 2007: --
RevPAR, on a same-store basis, is expected to increase 7.0 to 9.0
percent; -- Net income of $23.5 million to $24.7 million; --
Diluted earnings per share of $0.74 to $0.78; -- Adjusted net
income of $7.0 million to $8.2 million; -- Adjusted diluted
earnings per share of $0.22 to $0.26; -- Adjusted EBITDA of $41.5
million to $43.5 million, which includes the following: -- $4.0 to
$4.5 million from the company's share of EBITDA from unconsolidated
joint ventures; -- EBITDA from wholly-owned hotels of $20 million
to $22 million. -- Termination fees of approximately $6.0 million;
-- Incentive fees of $17.5 million to $19.5 million; -- Total capex
of approximately $14.0 million, including $4.0 million to be funded
out of mortgage-related escrows. Interstate will hold a conference
call to discuss its second-quarter results today, August 8, at 10
a.m. Eastern Time. To hear the webcast, interested parties may
visit the company's Web site at http://www.ihrco.com/ and click on
Investor Relations and then Second-Quarter Conference Call. A
replay of the conference call will be available until midnight on
Wednesday, August 15, 2007, by dialing (800) 405-2236, reference
number 11093055, and an archived webcast of the conference call
will be posted on the company's Web site through September 8, 2007.
As of July 31, 2007, Interstate Hotels & Resorts operated 189
hospitality properties with more than 43,000 rooms in 36 states,
the District of Columbia, Belgium, Canada, Ireland, Mexico and
Russia, including six wholly- owned properties and 20 properties
with a minority ownership interest through 13 separate joint
ventures. In addition, Interstate Hotels & Resorts has
contracts to manage 16 hospitality properties with more than 4,600
rooms currently under construction. For more information about
Interstate Hotels & Resorts, visit the company's Web site:
http://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 and Adjusted diluted 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, 2006. 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 Six Months Ended June 30, June 30,
------------------ ------------------ 2007 2006 2007 2006 --------
------- -------- -------- Revenue: Lodging $18,621 $6,418 $31,697
$11,455 Management fees 11,580 15,187 23,049 32,350 Termination
fees (1) 2,418 2,196 3,993 7,896 Other 2,763 2,718 5,032 6,429
-------- ------- -------- -------- 35,382 26,519 63,771 58,130
Other revenue from managed properties 164,793 217,824 341,163
442,773 -------- ------- -------- -------- Total revenue 200,175
244,343 404,934 500,903 Expenses: Lodging 12,667 4,572 22,039 8,460
Administrative and general 14,575 15,385 27,890 29,030 Depreciation
and amortization 3,684 1,546 6,977 3,089 Asset impairments and
write-offs (2) 1,047 92 1,155 8,642 -------- ------- --------
-------- 31,973 21,595 58,061 49,221 Other expenses from managed
properties 164,793 217,824 341,163 442,773 -------- -------
-------- -------- Total operating expenses 196,766 239,419 399,224
491,994 -------- ------- -------- -------- OPERATING INCOME 3,409
4,924 5,710 8,909 Interest income 721 545 1,157 931 Interest
expense (3) (3,276) (1,970) (6,009) (4,025) Equity in earnings
(losses) of affiliates 854 123 1,255 (434) -------- -------
-------- -------- INCOME BEFORE MINORITY INTEREST AND INCOME TAXES
1,708 3,622 2,113 5,381 Income tax expense (708) (1,611) (855)
(2,280) Minority interest expense (9) (31) (62) (49) --------
------- -------- -------- INCOME FROM CONTINUING OPERATIONS 991
1,980 1,196 3,052 Income from discontinued operations, net of tax
(4) 607 1,029 17,608 703 -------- ------- -------- -------- NET
INCOME $1,598 $3,009 $18,804 $3,755 ======== ======= ========
======== BASIC EARNINGS PER SHARE: Continuing operations $0.03
$0.07 $0.04 $0.10 Discontinued operations 0.02 0.03 0.56 0.02
-------- ------- -------- -------- Basic earnings per share $0.05
$0.10 $0.60 $0.12 ======== ======= ======== ======== DILUTED
EARNINGS PER SHARE (5): Continuing operations $0.03 $0.07 $0.04
$0.10 Discontinued operations 0.02 0.03 0.55 0.02 -------- -------
-------- -------- Diluted earnings per share $0.05 $0.10 $0.59
$0.12 ======== ======= ======== ======== Weighted average shares
outstanding (in thousands): Basic 31,642 30,890 31,602 30,788
Diluted 31,989 31,276 31,894 31,089 Interstate Hotels &
Resorts, Inc. Hotel Level Operating Statistics (Unaudited) Three
Months Ended Six Months Ended June 30, June 30,
------------------------ ------------------------ 2007 2006 %
change 2007 2006 % change ------- ------- ------- ------- --------
------- Managed Hotels - Hotel Level Operating Statistics: (6)
Full-service hotels: Occupancy 77.9% 77.1% 1.0% 75.2% 74.0% 1.6%
ADR $145.38 $135.93 7.0% $142.30 $132.99 7.0% RevPAR $113.21
$104.77 8.1% $107.04 $98.47 8.7% Select-service hotels: Occupancy
75.2% 76.2% -1.3% 71.6% 72.6% -1.4% ADR $102.69 $94.08 9.2% $101.11
$92.59 9.2% RevPAR $77.23 $71.69 7.7% $72.38 $67.22 7.7% Total:
Occupancy 77.2% 76.9% 0.4% 74.4% 73.7% 0.9% ADR $135.43 $126.00
7.5% $132.80 $123.46 7.6% RevPAR $104.61 $96.85 8.0% $98.75 $90.98
8.5% Owned Hotels - Hotel Level Operating Statistics: (7) Occupancy
75.9% 76.4% -0.7% 73.1% 73.6% -0.7% ADR $117.62 $112.56 4.5%
$118.26 $113.26 4.4% RevPAR $89.28 $86.03 3.8% $86.49 $83.40 3.7%
Interstate Hotels & Resorts, Inc. Reconciliations of Non-GAAP
Financial Measures (8) (Unaudited, in thousands except per share
amounts) Three Months Ended Six Months Ended June 30, June 30,
------------------- ----------------- 2007 2006 2007 2006 --------
-------- --------- -------- Net income $1,598 $3,009 $18,804 $3,755
Adjustments: Depreciation and amortization 3,684 1,546 6,977 3,089
Interest expense, net 2,555 1,425 4,852 3,094 Depreciation and
amortization from unconsolidated joint ventures 269 338 518 689
Interest expense, net from unconsolidated joint ventures 391 571
769 1,100 Discontinued operations, net (4) (607) (1,029) (17,608)
(703) Income tax expense 708 1,611 855 2,280 -------- --------
--------- -------- EBITDA 8,598 7,471 15,167 13,304 Asset
impairments and write-offs (2) 1,047 92 1,155 8,642 Severance (9)
378 - 732 - Equity interest in the sale of unconsolidated joint
ventures (10) (558) (24) (686) 176 Minority interest expense 9 31
62 49 -------- -------- --------- -------- Adjusted EBITDA $9,474
$7,570 $16,430 $22,171 ======== ======== ========= ======== Three
Months Ended Six Months Ended June 30, June 30, -----------------
------------------ 2007 2006 2007 2006 -------- -------- ---------
-------- Net income $1,598 $3,009 $18,804 $3,755 Adjustments: Asset
impairments and write-offs (2) 1,047 92 1,155 8,642 Severance (9)
378 - 732 - Discontinued operations, net (4) (607) (1,029) (17,608)
(703) Deferred financing costs write-off (3) 102 - 632 - Equity
interest in the sale of unconsolidated joint ventures (10) (558)
(24) (686) 176 Minority interest - 1 50 (65) Income tax rate
adjustment (11) (487) (415) (786) (3,749) -------- --------
--------- -------- Adjusted net income $1,473 $1,634 $2,293 $8,056
======== ======== ========= ======== Adjusted diluted earnings per
share (5) $0.05 $0.05 $0.07 $0.26 ======== ======== =========
======== Weighted average number of diluted shares outstanding (in
thousands) (5): 31,989 31,276 31,894 31,089 Interstate Hotels &
Resorts, Inc. Outlook Reconciliation (8), (12) (Unaudited, in
thousands) Forecast ----------------- Year Ending December 31, 2007
----------------- Net income $24,100 Adjustments: Depreciation and
amortization 15,600 Interest expense, net 11,500 Depreciation and
amortization from unconsolidated joint ventures 1,200 Interest
expense, net from unconsolidated joint ventures 1,700 Discontinued
operations, net (4) (17,600) Income tax expense 4,700
----------------- EBITDA 41,200 Asset impairments and write-offs
(2) 1,200 Severance (9) 700 Equity interest in the sale of
unconsolidated joint ventures (10) (700) Minority interest expense
100 ----------------- ----------------- Adjusted EBITDA $42,500
================= Forecast ----------------- Year Ending December
31, 2007 ----------------- Net income $24,100 Adjustments: Asset
impairments and write-offs (2) 1,200 Severance (9) 700 Discontinued
operations, net (4) (17,600) Deferred financing costs write-off (3)
600 Equity interest in the sale of unconsolidated joint ventures
(10) (700) Minority Interest 50 Income tax rate adjustment (11)
(750) ----------------- Adjusted net income $7,600
================= Adjusted diluted earnings per share (5) $0.24
================= 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. In the first quarter of 2006, we recognized $4.1
million of one-time termination fees due to the sale of 10 MeriStar
properties. (2) This amount represents losses recorded for
intangible costs associated with terminated management contracts.
(3) For 2007, interest expense includes $0.5 million of deferred
financing fees expensed in the first quarter in connection with the
entrance in 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 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 for
which we no longer managed as of June 30, 2007 are also not
included in same- store hotel results for the periods presented
herein. Of the 187 properties that we managed as of June 30, 2007,
165 hotels have been classified as same- store hotels. RevPar is
defined as revenue per available room. ADR is defined as average
daily rate. (7) Owned Hotels - Hotel Level Operating Statistics
include periods prior to our ownership. Hilton Concord was
purchased in February 2005, Hilton Durham was purchased in November
2005, Hilton Garden Inn in Baton Rouge was purchased in June 2006,
Hilton Arlington was purchased in October 2006, Houston Westchase
was purchased in February 2007, and Westin Atlanta Airport was
purchased in May 2007. Statistics for these properties are also
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) For 2007, severance expense of $0.7 million relates to
the separation costs of multiple personnel at our corporate offices
associated with the reduction in the number of third party managed
properties throughout the year. These severance costs are recorded
as part of administrative and general expenses on our statement of
operations. No severance expense was recorded in 2006. (10) For the
six months ended June 30, 2007, the adjustment relates to gains of
$0.7 million related to four of our joint ventures, three of which
were sold in prior years. In addition, we also incurred losses of
$0.2 million in the first quarter of 2006 related to the write-off
of a contribution to a joint venture. (11) This amount represents
the effect on income tax expense for the adjustments made to net
income at an effective tax rate of 41.7% for the six month period
ended June 30, 2007 and 42.8% for the six month period ended June
30, 2006. (12) Our outlook reconciliation uses the mid-point of our
estimates. DATASOURCE: Interstate Hotels & Resorts CONTACT:
Carrie McIntyre, SVP, Treasurer of Interstate Hotels & Resorts,
+1-703-387-3320 Web site: http://www.ihrco.com/
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