Increases Full-Year Earnings Guidance ARLINGTON, Va., Nov. 7
/PRNewswire-FirstCall/ -- Interstate Hotels & Resorts
(NYSE:IHR), a leading hotel real estate investor and one of the
nation's largest independent operators of full and select-service
hotels, today reported operating results for the third quarter
ended September 30, 2007. The company's performance for the third
quarter includes the following (in millions, except per share
amounts): Third Quarter Year-to-Date --------------------
------------------- 2007 (4) 2006 (5) 2007 (4) 2006 (5)
-------------------- ------------------- Total revenue (1) $33.7
$40.9 $97.5 $99.0 Net income 2.0 15.2 20.8 19.0 Diluted earnings
per share 0.06 0.48 0.65 0.60 Adjusted EBITDA (2)(3) 6.8 23.1 23.2
45.3 Adjusted net income (2) (0.7) 11.8 1.6 19.8 Adjusted diluted
EPS (2) (0.02) 0.37 0.05 0.63 (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 earnings release. (3) Includes the company's
share of EBITDA from unconsolidated joint venture investments in
the amounts of $1.2 million and $1.5 million in the third quarters
of 2007 and 2006, respectively, and $3.1 million and $3.0 million
for the first nine months of 2007 and 2006, respectively. (4) The
third quarter and full year 2007 results include a $2.8 million and
$20.4 million gain, respectively, related to the sale of
BridgeStreet Corporate Housing (completed in the first quarter
2007), and included in income from discontinued operations. This
has been excluded from the calculation of Adjusted EBITDA, Adjusted
Net Income, and Adjusted Diluted EPS. (5) Third quarter and
year-to-date 2006 results include $15.1 million and $19.2 million,
respectively, in lump-sum termination fees, from affiliates of the
Blackstone Group. "We had another strong quarter, both in terms of
our operating performance and the continued execution of our growth
strategy of diversifying our earnings base through real estate
ownership, both wholly owned and in joint ventures," said Thomas F.
Hewitt, chief executive officer. Wholly-owned Hotel Results "Our
portfolio of six wholly-owned hotels continued to perform very
well, with RevPAR up 7.4 percent. Average daily rate accounted for
most of the increase, rising 4.7 percent, while occupancy improved
2.5 percent. These results compared favorably with an average
industry RevPAR gain of 6.0 percent, as reported by Smith Travel
Research," Hewitt said. "We also were successful in driving these
results to the bottom line, as illustrated by the 220 basis point
increase in gross operating profit margins across the owned- hotel
portfolio." EBITDA from the company's owned hotels was $6.0 million
for the third quarter and $15.6 million for the first nine months
as illustrated below (in millions): Owned Hotels Third Quarter
Year-to-Date ----------------------------- -------------
------------- 2007 2006 2007 2006 ---- ---- ----- ---- Net income
$0.6 $0.3 $1.9 $1.0 Interest expense, net 3.2 1.0 8.2 2.4
Depreciation and amortization 2.2 0.6 5.5 1.5 ---- ---- ----- ----
EBITDA $6.0 $1.9 $15.6 $4.9 ==== ==== ===== ==== "EBITDA
contribution from the owned hotels grew dramatically from last year
largely due to hotel acquisitions," Hewitt said. "We also were very
pleased with the year-over-year performance of the hotels on a
proforma basis, with EBITDA increasing 22 percent for the quarter."
"We continue to selectively seek opportunities to expand our
ownership portfolio," he added. "During the quarter we signed an
agreement to acquire our seventh wholly-owned property, the
288-room Sheraton Columbia in Maryland for $46.5 million. The
transaction is expected to close by the end of the year."
Interstate will invest approximately $12 million in capital
improvements at the Sheraton Columbia, which would upgrade all
guest rooms and public spaces. "This comprehensive renovation will
allow us to take advantage of the hotel's excellent location in a
major office and retail development in the high-density
Baltimore/Washington D.C. corridor, featuring more than 2,500
businesses and 21 million square feet of commercial and residential
space. "Investing capital to upgrade a hotel is an important tactic
of our ownership strategy; it allows us to reposition the hotel and
create value," he said. "Including the Sheraton Columbia, we have
earmarked approximately $35 million for strategic capital
improvements at our wholly-owned properties through 2008. As we
will be completing major renovations of the Westin Atlanta Airport
Hotel and Sheraton Columbia in 2008, we expect to see significant
operating growth in 2009 for these hotels. However, due to the
magnitude of the renovations, there will be some renovation
displacement in 2008." In discussing the company's transformation,
Hewitt noted, "We have successfully redefined ourselves over the
last two years. With the addition of Sheraton Columbia, we estimate
that 65 percent of our 2007 annualized Adjusted EBITDA, on a
proforma basis, is now derived from longer-term real estate
ownership, with our management fee stream contributing the balance
of our income." Joint Venture Investments At the end of the third
quarter, the company had minority interests in 20 properties
through 15 joint venture partnerships. Of the company's reported
Adjusted EBITDA of $6.8 million for the third quarter, joint
ventures contributed $1.2 million. The company continued to execute
on expanding its joint venture portfolio during the quarter. In
conjunction with the purchase of the Sheraton Columbia, the company
formed a joint venture partnership with affiliates of Investcorp
International, Inc. The JV will acquire the Hilton Seelbach in
Louisville, Ky., and the Crowne Plaza in Madison, Wis., for $71.5
million. Interstate will invest $4.7 million for a 15 percent
minority stake. "The hotels are well established in their markets,
have steadily improving RevPAR and income levels, and will be
purchased at attractive prices below replacement costs," Hewitt
said. Earlier in the quarter, the company formed a joint venture
with Premier Properties to build three hotels-a Hyatt Place and two
aloft hotels. Interstate will invest a 15 percent equity interest
in the joint venture and will manage all three properties. "The
Premier Properties JV adds significant bulk to our already active
development pipeline," said Leslie Ng, chief investment officer.
"With the addition of the Premier hotels, we now have five joint
venture properties scheduled to open in 2008 and 2009. Including
these hotels under construction and the Investcorp JV, we will have
joint venture interests in 27 properties and are aggressively
seeking additional opportunities." Hotel Management Results
Same-store(6) RevPAR for all managed hotels in the third quarter of
2007 rose 9.1 percent to $102.93. Average daily rate (ADR) improved
7.5 percent to $133.30, and occupancy increased 1.4 percent to 77.2
percent. Same-store RevPAR for all full-service managed hotels
advanced 9.9 percent to $110.67. ADR increased 7.2 percent to
$142.65, while occupancy rose 2.5 percent to 77.6 percent.
Same-store RevPAR for all select-service managed hotels improved
5.7 percent to $78.48, on a 7.6 percent gain in ADR to $103.18 and
a 1.7 percent decline in occupancy to 76.1 percent. "Our managed
portfolio continued to perform well in excess of industry norms at
the top line," Hewitt said. "In addition, we have been able to
closely monitor expenses and drive margin improvement for our
owners. This has put us in a position to increase the midpoint of
our incentive fee guidance by $1 million for the full year." During
the quarter, the company added its third condo-hotel management
contract to its managed portfolio. Interstate announced in August
that it had been selected to manage the EuroSuites luxury
condo-hotel in the Doral area of Miami, Florida. The nearly
completed, sold-out, 368-suite property is being developed and
asset managed by two groups headed by hotel industry veteran, Adel
Wulff. Hewitt noted that the number of managed properties has begun
to stabilize. "While we lost eight hotels during the quarter, we
gained five during that same period. Our pipeline for managed
hotels has never been stronger, and we expect to see additions to
our portfolio in the coming quarters. Also, the merger of Equity
Inns was completed in October and we continue to manage this
portfolio of 38 hotels." Balance Sheet On September 30, 2007,
Interstate had: * Total unrestricted cash of $21.6 million * Total
debt of $171.9 million, consisting of $114.4 million of senior debt
and $57.5 million of non-recourse mortgage debt "At the end of the
quarter and through today, our entire $85 million revolving credit
facility remains available," said Bruce Riggins, chief financial
officer. "We will use a portion of the revolver and cash on hand to
initially fund the Sheraton Columbia acquisition, but expect to
mortgage the property in early 2008. This will free up the majority
of our revolver and provide sufficient flexibility to fund our
strategic growth plans, including the opportunistic acquisition of
wholly-owned and joint-venture interests in hotel real estate."
Full-year Guidance The company provides the following guidance for
full year 2007: * RevPAR, on a same-store basis, is expected to
increase 8.0 percent to 9.0 percent; * Net income of $28.0 million
to $29.3 million; * Diluted earnings per share of $0.88 to $0.92; *
Adjusted net income of $8.7 million to $10.0 million; * Adjusted
diluted earnings per share of $0.27 to $0.31; * Adjusted EBITDA of
$42.5 million to $44.5 million, an increase of $1.0 million from
our previously issued guidance, which includes the following: --
Approximately $4.0 million from the company's share of EBITDA from
unconsolidated joint ventures; -- EBITDA from wholly-owned hotels
of $20.5 million to $21.5 million; -- Termination fees of
approximately $6.0 million; -- Incentive fees of $19.0 million to
$20.0 million. * Total capex of approximately $13.0 million,
including $3.0 million to be funded out of mortgage-related
escrows. Interstate will hold a conference call to discuss its
third-quarter results today, November 7, 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 Third-Quarter Conference Call. A replay of the conference call
will be available until midnight on Wednesday, November 14, 2007,
by dialing (800) 405-2236, reference number 11099285, and an
archived webcast of the conference call will be posted on the
company's Web site through December 14, 2007. As of October 31,
2007, Interstate Hotels & Resorts owned or had a minority
ownership interest through separate joint ventures in 26 hotels and
resorts. Together with these properties, the company and its
affiliates manages a total of 183 hospitality properties with more
than 42,000 rooms in 36 states, the District of Columbia, Belgium,
Canada, Ireland, Mexico and Russia. Interstate Hotels & Resorts
also has contracts to manage 15 hospitality properties with
approximately 4,400 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 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. Interstate Hotels & Resorts, Inc. Statements
of Operations (Unaudited, in thousands except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30,
--------------------- --------------------- 2007 2006 2007 2006
--------- --------- --------- --------- Revenue: Lodging $20,628
$7,154 $52,325 $18,609 Management fees 9,634 14,066 32,683 46,416
Termination fees (1) 935 16,995 4,928 24,891 Other 2,506 2,688
7,538 9,117 --------- --------- --------- --------- 33,703 40,903
97,474 99,033 Other revenue from managed properties 147,562 202,780
488,725 645,553 --------- --------- --------- --------- Total
revenue 181,265 243,683 586,199 744,586 Expenses: Lodging 14,675
5,210 36,714 13,670 Administrative and general 13,598 14,199 41,488
43,229 Depreciation and amortization 4,137 1,626 11,114 4,715 Asset
impairments and write-offs (2) 6 2,024 1,161 10,666 ---------
--------- --------- --------- 32,416 23,059 90,477 72,280 Other
expenses from managed properties 147,562 202,780 488,725 645,553
--------- --------- --------- --------- Total operating expenses
179,978 225,839 579,202 717,833 --------- --------- ---------
--------- OPERATING INCOME 1,287 17,844 6,997 26,753 Interest
income 515 514 1,672 1,445 Interest expense (3) (3,825) (2,197)
(9,834) (6,222) Equity in earnings of affiliates 563 4,745 1,818
4,311 --------- --------- --------- --------- INCOME (LOSS) BEFORE
MINORITY INTEREST AND INCOME TAXES (1,460) 20,906 653 26,287 Income
tax benefit (expense) 654 (7,933) (201) (10,213) Minority interest
expense (1) (122) (63) (171) --------- --------- ---------
--------- INCOME (LOSS) FROM CONTINUING OPERATIONS (807) 12,851 389
15,903 Income from discontinued operations, net of tax (4) 2,836
2,347 20,444 3,050 --------- --------- --------- --------- NET
INCOME $2,029 $15,198 $20,833 $18,953 ========= ========= =========
========= BASIC EARNINGS PER SHARE: Continuing operations $(0.03)
$0.41 $0.01 $0.51 Discontinued operations 0.09 0.07 0.65 0.10
--------- --------- --------- --------- Basic earnings per share
$0.06 $0.48 $0.66 $0.61 ========= ========= ========= =========
DILUTED EARNINGS PER SHARE (5): Continuing operations $(0.03) $0.41
$0.01 $0.50 Discontinued operations 0.09 0.07 0.64 0.10 ---------
--------- --------- --------- Diluted earnings per share $0.06
$0.48 $0.65 $0.60 ========= ========= ========= ========= Weighted
average shares outstanding (in thousands): Basic 31,701 31,368
31,636 30,983 Diluted 31,996 31,753 31,927 31,424 Interstate Hotels
& Resorts, Inc. Hotel Level Operating Statistics (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30,
----------------------- ----------------------- % % 2007 2006
change 2007 2006 change ------- ------- ------ ------- -------
------ Managed Hotels - Hotel Level Operating Statistics: (6)
Full-service hotels: Occupancy 77.6% 75.7% 2.5% 76.2% 74.6% 2.1%
ADR $142.65 $133.09 7.2% $142.67 $133.36 7.0% RevPAR $110.67
$100.69 9.9% $108.69 $99.48 9.3% Select-service hotels: Occupancy
76.1% 77.4% -1.7% 73.5% 74.5% -1.3% ADR $103.18 $95.87 7.6% $102.23
$94.21 8.5% RevPAR $78.48 $74.23 5.7% $75.16 $70.16 7.1% Total:
Occupancy 77.2% 76.1% 1.4% 75.5% 74.6% 1.2% ADR $133.30 $123.97
7.5% $133.20 $123.95 7.5% RevPAR $102.93 $94.32 9.1% $100.62 $92.42
8.9% Owned Hotels - Hotel Level Operating Statistics: (7) Occupancy
72.4% 70.6% 2.5% 72.9% 72.6% 0.4% ADR $113.69 $108.59 4.7% $116.73
$111.73 4.5% RevPAR $82.30 $76.64 7.4% $85.07 $81.12 4.9%
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, 2007 2006 2007 2006 -------- -------- --------
--------- Net income $2,029 $15,198 $20,833 $18,953 Adjustments:
Depreciation and amortization 4,137 1,626 11,114 4,715 Interest
expense, net 3,310 1,683 8,162 4,777 Depreciation and amortization
from unconsolidated joint ventures 355 453 873 1,142 Interest
expense, net from unconsolidated joint ventures 428 816 1,197 1,916
Discontinued operations, net (4) (2,836) (2,347) (20,444) (3,050)
Income tax (benefit) expense (654) 7,933 201 10,213 --------
-------- -------- --------- EBITDA 6,769 25,362 21,936 38,666 Asset
impairments and write-offs (2) 6 2,024 1,161 10,666 Severance (9)
80 138 812 138 Equity interest in the sale of unconsolidated joint
ventures (10) (98) (4,499) (784) (4,323) Minority interest expense
1 122 63 171 -------- -------- -------- --------- Adjusted EBITDA
$6,758 $23,147 $23,188 $45,318 ======== ======== ======== =========
Three Months Ended Nine Months Ended September 30, September 30,
2007 2006 2007 2006 -------- -------- -------- --------- Net income
$2,029 $15,198 $20,833 $18,953 Adjustments: Asset impairments and
write-offs (2) 6 2,024 1,161 10,666 Severance (9) 80 138 812 138
Discontinued operations, net (4) (2,836) (2,347) (20,444) (3,050)
Deferred financing costs write-off (3) - - 632 - Equity interest in
the sale of unconsolidated joint ventures (10) (98) (4,499) (784)
(4,323) Minority interest 6 7 56 (58) Income tax rate adjustment
(11) 148 1,239 (638) (2,510) -------- -------- -------- ---------
Adjusted net income $(665) $11,760 $1,628 $19,816 ======== ========
======== ========= Adjusted diluted earnings per share (5) $(0.02)
$0.37 $0.05 $0.63 ======== ======== ======== ========= Weighted
average number of diluted shares outstanding (in thousands) (5):
31,996 31,753 31,927 31,424 Interstate Hotels & Resorts, Inc.
Outlook Reconciliation (8), (12) (Unaudited, in thousands) Forecast
----------------- Year Ending December 31, 2007 -----------------
Net income $28,600 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 1,500 Discontinued operations, net
(4) (20,400) Income tax expense 4,200 ----------------- EBITDA
42,200 Asset impairments and write-offs (2) 1,200 Severance (9) 800
Equity interest in the sale of unconsolidated joint ventures (10)
(800) Minority interest expense 100 ----------------- Adjusted
EBITDA $43,500 ================= Forecast ----------------- Year
Ending December 31, 2007 ----------------- Net income $28,600
Adjustments: Asset impairments and write-offs (2) 1,200 Severance
(9) 800 Discontinued operations, net (4) (20,400) Deferred
financing costs write-off (3) 600 Equity interest in the sale of
unconsolidated joint ventures (10) (800) Minority Interest 50
Income tax rate adjustment (11) (650) ----------------- Adjusted
net income $9,400 ================= Adjusted diluted earnings per
share (5) $0.29 ================= (1) We record termination fees as
revenue when all contingencies related to the termination fees have
been removed. In September 2006, we recognized $15.1 million of
one-time termination fees from Blackstone relating to unpaid
termination fees for hotels terminated on or before October 1,
2006. 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. In the third
quarter of 2007 we recognized additional gain of $2.8 million with
the settlement of working capital for the sale of BridgeStreet
Corporate Housing. 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 and our affiliates 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 September 30, 2007 are also not
included in same-store hotel results for the periods presented
herein. Of the 184 properties that we and our affiliates managed as
of September 30, 2007, 178 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) Severance expense for
the nine month periods ended September 30, 2007 and 2006, relates
to the separation costs of multiple 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) For the nine months ended September 30, 2007, the adjustment
primarily relates to gains of $0.8 million related to joint
ventures sold in prior years. For the nine months ended September
30, 2006, the adjustment is due to the sale of the joint venture
which owned the Marriott Sawgrass Resort & Spa, for which we
recognized a gain of $4.5 million, offset by the write-off of a
$0.2 million 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 34.0% for the nine
month period ended September 30, 2007 and 39.1% for the nine month
period ended September 30, 2006. (12) Our outlook reconciliation
uses the mid-point of our estimates. Contact: Carrie McIntyre SVP,
Treasurer (703) 387-3320 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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