ARLINGTON, Va., Feb. 27 /PRNewswire-FirstCall/ -- Interstate Hotels
& Resorts (NYSE:IHR), a leading hotel real estate investor and
the nation's largest independent operator of full- and
select-service hotels, today reported strong operating results for
the fourth quarter and year ended December 31, 2007. The company's
performance for the fourth quarter and full year include the
following (in millions, except per share amounts): Fourth Quarter
Full Year -------------- --------------- 2007(4) 2006(5) 2007(4)
2006(5) ---- ---- ---- ---- Total revenue (1) $58.6 $41.6 $156.0
$140.7 Net income $6.8 $10.8 $22.8 $29.8 Diluted earnings per share
$0.21 $0.34 $0.71 $0.94 Adjusted EBITDA (2) (3) $22.7 $19.7 $45.9
$65.0 Adjusted net income (2) $10.5 $9.0 $14.6 $28.8 Adjusted
diluted EPS (2) $0.33 $0.28 $0.46 $0.91 (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
reconciliations 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 $1.3 million and $1.2 million
in the fourth quarters of 2007 and 2006, respectively, and $4.4
million and $4.3 million for the full years of 2007 and 2006,
respectively. (4) The fourth quarter and full year 2007 results
include (i) $2.4 million and $11.1 million of write-offs of
intangible assets related to the sale of certain hotels during the
fourth quarter and full year, respectively, (ii) a $2.9 million
allowance for bad debts related to a note receivable the company
holds with an owner of one its hotels, included in administrative
and general expenses on the company's statement of operations for
both the fourth quarter and full year; and (iii) a $20.4 million
gain related to the sale of BridgeStreet Corporate Housing
(completed in the first quarter 2007), which is included in Income
from Discontinued Operations on the company's statement of
operations for the full year 2007. Each of these items has been
excluded from the calculation of Adjusted EBITDA, Adjusted Net
Income, and Adjusted Diluted EPS. (5) Fourth quarter and
year-to-date 2006 results include $0.8 million and $19.2 million,
respectively, in lump-sum termination fees, from affiliates of the
Blackstone Group. Fourth quarter 2007 highlights include: --
Incentive management fees of $21.1 million, a 26 percent increase
compared to 2006. -- Same-store RevPAR improvement of 9.1 percent,
compared to 5.7 percent for the industry. -- Adjusted EBITDA of
$22.7 million, $3.0 million more than the same quarter of 2006. --
Acquired the 288-room Sheraton Columbia, Md. for $46.5 million, or
$161,500 per key. -- Completed joint venture acquisition with
Investcorp International of two hotels for $71.5 million from The
Blackstone Group. -- Added 10 new management contracts, bringing
the year-end 2007 total to 191 managed properties. Wholly-owned
Hotel Results EBITDA from the company's owned hotels was $6.1
million for the 2007 fourth quarter and $21.7 million for the full
year 2007, as outlined below (in millions): Owned Hotels Fourth
Quarter Full Year 2007 2006 2007 2006 ---- ---- ---- ---- Net
Income $0.0 $0.1 $1.9 $1.9 Interest Expense $3.4 $1.1 $11.6 $2.9
Depreciation and Amortization $2.7 $1.0 $8.2 $2.4 ---- ---- ----
---- EBITDA $6.1 $2.2 $21.7 $7.2 ---- ---- ---- ---- Interstate
acquired the 288-room Sheraton Columbia, Md. for $46.5 million in
the 2007 fourth quarter, its third wholly-owned acquisition for the
year, bringing the number of wholly-owned hotels in its portfolio
to seven. "During the fourth quarter, we not only achieved
impressive operating results, as evidenced by the 7.9 percent
RevPAR increase on our six wholly- owned assets, we continued to
execute on our growth strategy to selectively acquire wholly-owned
hotels by purchasing the Sheraton Columbia Hotel in Maryland," said
Thomas F. Hewitt, chief executive officer. "In early 2005, we set
out to diversify and stabilize our income streams," he said. "With
the acquisition of the Sheraton Columbia, we have now reached our
near-term target of generating 50 percent of our Adjusted EBITDA
from whole ownership. Although we will remain opportunistic in
seeking additional wholly-owned assets, we expect the majority of
our dollars invested in owned assets in 2008 to come through
value-added capital improvements at our existing hotels." Hewitt
said that the company will invest approximately $35 million to
upgrade its owned hotels in 2008, including $27 million related to
completion of the comprehensive $30 million renovation of the
Westin Atlanta Airport and Sheraton Columbia hotels. Room
renovations are underway at both hotels. The Westin Atlanta Airport
renovation represents approximately $15 million of the company's
total capital budget for 2008. In total, the company will have
invested $18 million for this comprehensive renovation project. The
room renovations at the property are expected to be completed by
July 2008. The remainder of the renovation project, including all
meeting rooms and public spaces, will be completed by the end of
the year. The Sheraton Columbia property, representing $12 million
of the total capital budget for 2008, will undergo two phases of
room renovations. The first phase, covering half of the guest
rooms, is expected to be completed in mid spring, with phase two,
including the other half of the guest rooms and meeting rooms, by
the end of the third quarter. The entire renovation, including all
remaining public spaces, will be substantially completed by the end
of 2008. "Not only do these capital expenditures give our hotels a
competitive edge in their respective markets, they translate into
significant embedded growth," Hewitt said. "We expect a $3 million
to $4 million increase in EBITDA from these hotels in 2009,
post-renovation." Joint Venture Investments During the quarter, the
company's joint venture with Investcorp International completed the
acquisition of two hotels for $71.5 million from The Blackstone
Group. The company closed the year with minority interests in 22
properties, and its share of EBITDA from joint venture investments
for the 2007 fourth quarter and full year was $1.3 million and $4.4
million, respectively. In addition, during the fourth quarter, the
company entered into two new joint venture partnerships, which
acquired interests in a total of 26 properties in early 2008. As of
today, the company has minority ownership interests in 47
properties. "We have been extremely successful in sourcing capital
through joint venture partnerships during the year," Hewitt said.
"We not only added six new joint venture properties during 2007, we
have added 26 more since the beginning of 2008 and have five joint
venture properties under development or construction. We expect
EBITDA from our joint ventures to more than double in 2008." Hotel
Management Results Same-store RevPAR for all managed hotels in the
2007 fourth quarter increased 9.1 percent to $97.70. Average daily
rate (ADR) rose 9.5 percent to $141.99, and occupancy declined 0.3
percent to 68.8 percent. This compares to RevPAR growth of 5.7
percent for the hotel industry as a whole. "We continue to
significantly outpace the industry as our RevPAR increased 9.1
percent for the full year compared to the industry average 5.7
percent, according to Smith Travel Research," Hewitt added.
Same-store RevPAR for all full-service managed hotels rose 9.7
percent in the fourth quarter to $107.76, ADR improved 9.9 percent
to $154.79, while occupancy showed a slight decrease, by 0.1
percent, to 69.6 percent. Same-store RevPAR for all select-service
managed hotels increased 6.7 percent to $69.54, led by a 7.6
percent gain in ADR to $104.52, offset by a 2.7 percent decrease in
occupancy to 66.5 percent. "While we saw a slight decline in
occupancy in the fourth quarter, ADR continued to show strength,
driving very healthy RevPAR gains across the portfolio," Hewitt
pointed out. "Major urban, gateway and coastal cities continue to
remain strong. "We added 10 new management contracts in the
quarter, bringing the number of management contracts at year end to
191," he said. "We not only have stabilized our portfolio in 2007,
we have a very robust pipeline leading into 2008 as illustrated by
our current hotel count of 220. We believe that our proven ability
to deliver strong results throughout the industry cycle will be
appealing to owners and investors who are in need of a proven
management company to manage through potentially difficult
financial circumstances in the future." International Expansion
During 2007 the company increased its number of managed
international properties from four to 11. This growth spanned four
countries: Russia, Mexico, Belgium and Ireland. Interstate also has
contracts to manage two additional properties under construction in
Russia, which are expected to open in 2008. "Interstate has
performed very well at the three Marriott hotels we have managed in
Russia for more than 10 years," Hewitt said. "Our consistent, high
level operating performance is a key reason we have been afforded
these opportunities to expand within Russia and to enter additional
countries this year. We are focused on capitalizing on additional
international opportunities as they arise, as we demonstrated most
recently with our venture in India." Last week the company
announced the formation of a 50-50 joint venture partnership with
JHM Hotels to operate and invest in hotels in India. The joint
venture, named JHM Interstate Hotels India, will serve as the
company's platform for all hospitality-related activities in India.
In addition to this platform, Interstate has committed to invest
approximately $6.3 million in Duet India Hotels Limited, a
U.K.-based, real estate investment fund dedicated solely to the
investment of hotels in India. The fund has raised approximately
$175 million to date and is expected to raise in excess of $200
million in total equity contributions. "India is one of the
fastest-growing lodging markets in the world," Hewitt said. "We are
entering this market at a time when there are currently only
100,000 hotel rooms available, a number that will need to at least
double by 2010 to meet projected demand. With this management
platform and our investment in the fund, we are well positioned
with a significant pipeline in this emerging market." Balance Sheet
On December 31, 2007, Interstate had: -- Total unrestricted cash of
$9.8 million. -- Total debt of $211.6 million, consisting of $154.1
million of senior debt and $57.5 million of non-recourse mortgage
debt. "During the quarter we borrowed a net of $40 million on our
senior revolving credit facility to fund our $46.5 million
acquisition of the Sheraton Columbia hotel, as well as
approximately $8 million in joint venture investments," said Bruce
Riggins, chief financial officer. "We expect to place a $30 million
non-recourse mortgage on the Sheraton Columbia early in the second
quarter of 2008. We continue to maintain a prudently leveraged
balance sheet and have more than adequate capital available to fund
our 2008 renovation programs and to respond to future business
opportunities." Outlook and Guidance The company provides the
following guidance for full year 2008: -- RevPAR, on a same-store
basis, as follows: - Total RevPAR is expected to increase 3.0
percent to 6.0 percent; - Owned Hotel RevPAR, excluding Westin
Atlanta Airport and Sheraton Columbia hotels (which will be
undergoing significant renovations in 2008), is expected to
increase 4.0 percent to 6.0 percent; - Total Owned Hotel RevPAR is
expected to increase 2.0 percent to 4.0 percent; -- Net income and
adjusted net income of $9.8 million to $12.2 million; -- Diluted
earnings per share and adjusted diluted earnings per share of $0.30
to $0.38; -- Adjusted EBITDA of $57 million to $61 million, which
includes the following: - EBITDA from wholly-owned hotels of $29
million to $30.5 million, based on revenue from wholly-owned hotels
of $102 to $104 million; - Approximately $10 million to $11.5
million from the company's share of EBITDA from unconsolidated
joint ventures, including: -- $8 million to $9.5 million from
existing joint ventures; -- $2 million from new joint ventures; -
Incentive fees of $20 million to $22 million; - Termination fees of
$6.5 million to $7.5 million; -- Total Capex of approximately $35
million, including $27 million related to completion of the $30
million renovation of the Westin Atlanta Airport and Sheraton
Columbia hotels; -- The company's share of joint venture debt of
$70 million related to existing joint ventures. 2009 and beyond: --
Adjusted EBITDA increase of approximately $3 million to $4 million
from Westin Atlanta Airport and Sheraton Columbia hotels (after
completion of the comprehensive renovations); -- $4 million to $5
million of incremental annualized management fees associated with
16 contracts signed and under development. Interstate will hold a
conference call to discuss its fourth-quarter results today,
February 27, 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
Fourth-Quarter Conference Call. A replay of the conference call
will be available until midnight on Wednesday, March 5, 2008, by
dialing (800) 405-2236, reference number 11107547, and an archived
webcast of the conference call will be posted on the company's Web
site through March 27, 2008. As of today, Interstate Hotels &
Resorts has ownership interests in 54 hotels and resorts, including
seven wholly owned assets. Together with these properties, the
company and its affiliates manage a total of 220 hospitality
properties with approximately 46,000 rooms in 36 states, the
District of Columbia, Belgium, Canada, Ireland, Mexico and Russia.
Interstate Hotels & Resorts has contracts to manage 16 to be
built hospitality properties with approximately 3,700 rooms. For
more information about Interstate Hotels & Resorts, visit the
company's Web site, http://www.ihrco.com/. Other Events On February
26, 2008, the Audit Committee of the company determined, after
discussions with management, that the previously-issued financial
statements as of and for the quarters ended March 31, 2007, June
30, 2007 and September 30, 2007 should no longer be relied upon
because of errors in the company's calculation of intangible asset
impairment charges that resulted from the termination of certain
hotel management contracts. The statement of operations included in
this earnings release for the quarter and year ended December 31,
2007 reflects all necessary corrections. Because the company's
Adjusted EBITDA excludes all impairment charges, amortization
expense and taxes, previously disclosed Adjusted EBITDA has not
been affected by the error. The company's previously disclosed
Adjusted net income and Adjusted diluted EPS, because they exclude
impairment charges, have not been affected by the additional
impairment charges but have been understated due to the
amortization expense that should not have been recorded after the
effective date each management contract should have been written
off. The company should have recognized additional impairment
losses of $2.3 million, $4.5 million and $0.8 million for the
write-off of intangible assets related to hotel management
contracts that were terminated during the quarters ended March 31,
2007, June 30, 2007 and September 30, 2007, respectively. The
recognition of the additional impairments, partially offset by the
lower amortization expense recorded during each period, will reduce
previously reported net income (loss) by approximately $1.3
million, $2.5 million and $0.2 million for the quarters ended March
31, 2007, June 30, 2007 and September 30, 2007, respectively.
Recognition of these additional impairment charges would also
reduce previously reported amounts for intangible assets, total
assets and stockholders' equity by an aggregate of $4.8 million as
of September 30, 2007; will increase the amount of asset
impairments and write-offs by an aggregate of $7.6 million for the
nine months ended September 30, 2007; and will reduce net income by
approximately $4.8 million for the nine months ended September 30,
2007. At this time, management believes that they have quantified
the full effects of these errors and will report the final as
restated amounts in the Form 10-K. The company expects to file its
2007 Annual Report on Form 10-K on or before March 17, 2008, which
will present restated 2007 quarterly financial information on an as
reported and an as restated basis. 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, discontinued
operations 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 December 31, ---------------------------------
2007 2006 --------------- ---------------- Revenue: Lodging $21,873
$9,318 Management fees 31,029 28,889 Termination fees (1) 3,669 990
Other 1,988 2,451 --------------- ---------------- 58,559 41,648
Other revenue from managed properties 155,373 188,931
--------------- ---------------- Total revenue 213,932 230,579
Expenses: Lodging 15,824 7,098 Administrative and general 24,192
16,098 Depreciation and amortization 4,085 2,006 Asset impairments
and write-offs 2,414 2,548 --------------- ---------------- 46,515
27,750 Other expenses from managed properties 155,373 188,931
--------------- ---------------- Total operating expenses 201,888
216,681 --------------- ---------------- OPERATING INCOME 12,044
13,898 Interest income 481 575 Interest expense (2) (3,949) (2,259)
Equity in earnings of affiliates 563 5,547 Gain on sale of
investments and extinguishment of debt (3) - 162 ---------------
---------------- INCOME BEFORE MINORITY INTEREST AND INCOME TAXES
9,139 17,923 Income tax expense (2,269) (7,058) Minority interest
expense (22) (52) --------------- ---------------- INCOME FROM
CONTINUING OPERATIONS 6,848 10,813 Income (loss) from discontinued
operations, net of tax (4) (80) 13 --------------- ----------------
NET INCOME $6,768 $10,826 =============== ================ BASIC
EARNINGS PER SHARE: Continuing operations $0.21 $0.34 Discontinued
operations (0.00) 0.00 --------------- ---------------- Basic
earnings per share $0.21 $0.34 =============== ================
DILUTED EARNINGS PER SHARE (5): Continuing operations $0.21 $0.34
Discontinued operations (0.00) 0.00 ---------------
---------------- Diluted earnings per share $0.21 $0.34
=============== ================ Weighted average shares
outstanding (in thousands): Basic 31,702 31,516 Diluted 32,042
31,829 Year Ended December 31, ---------------------------------
2007 2006 --------------- ---------------- Revenue: Lodging $74,198
$27,927 Management fees 63,712 75,305 Termination fees (1) 8,597
25,881 Other 9,526 11,568 --------------- ---------------- 156,033
140,681 Other revenue from managed properties 644,098 834,484
--------------- ---------------- Total revenue 800,131 975,165
Expenses: Lodging 52,538 20,768 Administrative and general 65,680
59,327 Depreciation and amortization 14,475 6,721 Asset impairments
and write-offs 11,127 13,214 --------------- ----------------
143,820 100,030 Other expenses from managed properties 644,098
834,484 --------------- ---------------- Total operating expenses
787,918 934,514 --------------- ---------------- OPERATING INCOME
12,213 40,651 Interest income 2,153 2,020 Interest expense (2)
(13,783) (8,481) Equity in earnings of affiliates 2,381 9,858 Gain
on sale of investments and extinguishment of debt (3) - 162
--------------- ---------------- INCOME BEFORE MINORITY INTEREST
AND INCOME TAXES 2,964 44,210 Income tax expense (435) (17,271)
Minority interest expense (65) (223) ---------------
---------------- INCOME FROM CONTINUING OPERATIONS 2,464 26,716
Income (loss) from discontinued operations, net of tax (4) 20,364
3,063 --------------- ---------------- NET INCOME $22,828 $29,779
=============== ================ BASIC EARNINGS PER SHARE:
Continuing operations $0.08 $0.86 Discontinued operations 0.64 0.10
--------------- ---------------- Basic earnings per share $0.72
$0.96 =============== ================ DILUTED EARNINGS PER SHARE
(5): Continuing operations $0.08 $0.85 Discontinued operations 0.63
0.09 --------------- ---------------- Diluted earnings per share
$0.71 $0.94 =============== ================ Weighted average
shares outstanding (in thousands): Basic 31,640 31,105 Diluted
31,963 31,542 Note: The company filed a Form 8-K reporting that our
previously-issued financial statements as of and for the quarters
ended March 31, 2007, June 30, 2007 and September 30, 2007 should
no longer be relied upon because of errors in those financial
statements. The errors related to the timing of the recognition of
impairment losses on intangible assets and related tax effects.
Because the Company's Adjusted EBITDA excludes all impairment
charges, amortization expense and taxes previously disclosed
Adjusted EBITDA has not been affected by the matters described
above. The Company's previously disclosed Adjusted Net Income and
Adjusted Diluted EPS, because they exclude impairment charges, have
not been affected by the impairment charges but have been
understated due to the amortization expense that should not have
been recorded after the effective date each management contract
should have been written off. We believe that the statement of
operations included herein for the year ended December 31, 2007
reflects all necessary corrections for the periods presented. Our
Form 8-K filed today, February 27th, should be read in conjunction
with to this earnings release. Interstate Hotels & Resorts,
Inc. Hotel Level Operating Statistics (Unaudited) Three Months
Ended Year Ended December 31, December 31, ----------------------
---------------------- % % 2007 2006 change 2007 2006 change ----
---- ------ ---- ---- ------ Managed Hotels - Hotel Level Operating
Statistics: (6) Full-service hotels: Occupancy 69.6% 69.7% -0.1%
74.7% 73.5% 1.6% ADR $154.79 $140.82 9.9% $144.68 $134.31 7.7%
RevPAR $107.76 $98.20 9.7% $108.13 $98.71 9.5% Select-service
hotels: Occupancy 66.5% 67.1% -2.7% 72.1% 72.7% -0.8% ADR $104.52
$97.15 7.6% $104.23 $96.33 8.2% RevPAR $69.54 $65.15 6.7% $75.10
$70.06 7.2% Total: Occupancy 68.8% 69.0% -0.3% 74.0% 73.3% 1.0% ADR
$141.99 $129.67 9.5% $134.33 $124.40 8.0% RevPAR $97.70 $89.51 9.1%
$99.45 $91.17 9.1% Owned Hotels - Hotel Level Operating Statistics:
(7) Occupancy 64.2% 63.2% 1.6% 70.7% 70.2% 0.7% ADR $118.84 $111.83
6.3% $117.21 $111.75 4.9% RevPAR $76.27 $70.70 7.9% $82.85 $78.50
5.5% Interstate Hotels & Resorts, Inc. Reconciliations of
Non-GAAP Financial Measures (8) (Unaudited, in thousands except per
share amounts) Three Months Ended December 31,
------------------------------- 2007 2006 --------------
--------------- Net income $6,768 $10,826 Adjustments: Depreciation
and amortization 4,085 2,006 Interest expense, net 3,468 1,684
Depreciation and amortization from unconsolidated joint ventures
484 389 Interest expense, net from unconsolidated joint ventures
610 677 Discontinued operations, net (4) 80 (13) Income tax expense
2,269 7,058 -------------- --------------- EBITDA 17,764 22,627
Asset impairments and write-offs (9) 5,320 2,548 Severance (10) - 7
Gain on sale of investments and extinguishment of debt (3) - (162)
Equity interest in the sale of unconsolidated joint ventures (11)
(439) (5,383) Minority interest expense 22 52 --------------
--------------- Adjusted EBITDA $22,667 $19,689 ==============
=============== Three Months Ended December 31,
------------------------------- 2007 2006 --------------
--------------- Net income $6,768 $10,826 Adjustments: Asset
impairments and write-offs (9) 5,320 2,548 Severance (10) - 7 Gain
on sale of investments and extinguishment of debt (3) - (162)
Discontinued operations, net (4) 80 (13) Deferred financing costs
write-off (2) - - Equity interest in the sale of unconsolidated
joint ventures (11) (439) (5,383) Minority interest (19) 56 Income
tax rate adjustment (12) (1,210) 1,142 --------------
--------------- Adjusted net income $10,500 $9,021 ==============
=============== Adjusted diluted earnings per share (5) $0.33 $0.28
============== =============== Weighted average number of diluted
shares outstanding (in thousands) (5): 32,042 31,829 Year Ended
December 31, ------------------------------- 2007 2006
-------------- --------------- Net income $22,828 $29,779
Adjustments: Depreciation and amortization 14,475 6,721 Interest
expense, net 11,630 6,461 Depreciation and amortization from
unconsolidated joint ventures 1,357 1,531 Interest expense, net
from unconsolidated joint ventures 1,858 2,593 Discontinued
operations, net (4) (20,364) (3,063) Income tax expense 435 17,271
-------------- --------------- EBITDA 32,219 61,293 Asset
impairments and write-offs (9) 14,033 13,214 Severance (10) 812 145
Gain on sale of investments and extinguishment of debt (3) - (162)
Equity interest in the sale of unconsolidated joint ventures (11)
(1,222) (9,706) Minority interest expense 65 223 Adjusted EBITDA
$45,907 $65,007 -------------- --------------- Year Ended December
31, ------------------------------- 2007 2006 --------------
--------------- Net income $22,828 $29,779 Adjustments: Asset
impairments and write-offs (9) 14,033 13,214 Severance (10) 812 145
Gain on sale of investments and extinguishment of debt (3) - (162)
Discontinued operations, net (4) (20,364) (3,063) Deferred
financing costs write-off (2) 632 - Equity interest in the sale of
unconsolidated joint ventures (11) (1,222) (9,706) Minority
interest 17 (2) Income tax rate adjustment (12) (2,141) (1,368)
-------------- --------------- Adjusted net income $14,595 $28,837
============== =============== Adjusted diluted earnings per share
(5) $0.46 $0.91 ============== =============== Weighted average
number of diluted shares outstanding (in thousands) (5): 31,963
31,559 Interstate Hotels & Resorts, Inc. Outlook Reconciliation
(8), (13) (Unaudited, in thousands) Forecast
------------------------------- Year Ending December 31, 2008
------------------------------- Net income $11,000 Adjustments:
Depreciation and amortization 17,800 Interest expense, net 13,800
Depreciation and amortization from unconsolidated joint ventures
3,500 Interest expense, net from unconsolidated joint ventures
5,400 Income tax expense 7,400 -------------------------------
EBITDA 58,900 Minority interest expense 100
------------------------------- -------------------------------
Adjusted EBITDA $59,000 =============================== (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) 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. (3) In the fourth quarter of 2006, we recognized a
gain of $0.2 million related to the sale of stock warrants for
stock in an unaffiliated company. (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 December 31, 2007 are also not
included in same-store hotel results for the periods presented
herein. Of the 191 properties that we managed as of December 31,
2007, 169 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, Westin Atlanta Airport was
purchased in May 2007. The Sheraton Columbia hotel purchased in
November 2007 was not included in the 2007 owned hotels operating
statistics. Statistics for these properties are also included in
the Managed Hotels - Hotel Level Operating Statistics. (8) See
discussion of EBITDA, Adjusted EBTIDA, Adjusted net income and
Adjusted diluted earnings per share, located in the "Non-GAAP
Financial Measures" section, described earlier in this press
release. (9) This amount represents losses recorded for intangibles
costs associated with terminated management contracts. In December
2007, we wrote off a $2.9 million note receivable and related
interest receivable due from the owner of a property in which we
hold a 50% joint venture ownership interest, as we do not believe
these amounts are collectible due to the declining value of the
underlying property. The write-off is recorded as part of
administrative and general expenses on our statement of operations.
(10)Severance expense for the year ended December 31, 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. (11)For the year ended December 31, 2007, the
adjustment primarily relates to gains of $1.2 million related to
the settlement of working capital and other purchase price true
-ups for joint ventures sold in prior years. For the year ended
December 31, 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 and the sale of the MIP
joint venture, which we recognized a gain of $5.4 million. These
gains were offset by the write-off of a $0.2 million contribution
to a joint venture. (12)This amount represents the effect on income
tax expense for the adjustments made to net income at an effective
tax rate of 15% for the year ended December 31, 2007 and 39% for
the year ended December 31, 2006. (13)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, +1-703-387-3320,
for Interstate Hotels & Resorts Web site: http://www.ihrco.com/
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Interstate Hotels (NYSE:IHR)
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