ARLINGTON, Va., May 7 /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 operating results for the
first quarter ended March 31, 2008. The company's performance for
the first quarter includes the following (in millions, except per
share amounts): First Quarter ---------------------- 2008(4)
2007(4) -------- -------- Total revenue (1) $38.9 $28.4 Net income
$(0.3) $15.9 Diluted earnings per share $(0.1) $0.50 Adjusted
EBITDA (2) (3) $7.7 $7.0 Adjusted net income (2) $(1.1) $0.8
Adjusted diluted EPS (2) $(0.03) $0.02 (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 $1.6 million and $0.9 million
in the first quarter of 2008 and 2007, respectively. (4) The first
quarter 2008 and 2007 results include (i) a $2.4 million gain on
the sale of the Doral Tesoro Hotel & Golf Club in the first
quarter 2008, (ii) $1.1 million and $2.4 million of write-offs of
intangible assets related to the sale of certain hotels during 2008
and 2007, respectively, and (iii) a $17.6 million gain related to
the sale of BridgeStreet Corporate Housing (completed in the first
quarter 2007), which along with the operations through the date of
sale are included in Income from Discontinued Operations on the
company's statement of operations for the first quarter 2007. Each
of these items has been excluded from the calculation of Adjusted
EBITDA, Adjusted net income, and Adjusted diluted EPS. In addition,
the first quarter 2007 results have been restated as presented in
the company's 2007 Annual Report on form 10-K. For further details
on this restatement see footnote 13 to the financial tables of this
press release, as well as footnote 19 in our 2007 Annual Report on
form 10-K. Highlights for the first quarter include: -- Completed
acquisition of four-hotel portfolio from The Blackstone Group for
$209 million through our joint venture with Harte Holdings of
Ireland; -- Formed joint venture with FFC Capital which then
acquired 22 select- service hotels; -- Formed joint venture with
JHM Hotels to operate and invest in hotel properties in India,
signed first management contract in April 2008; -- Committed to
invest $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; -- Recorded a gain of $2.4 million from the sale
of a joint venture hotel. This gain is classified as a
non-recurring item and has been excluded from Adjusted EBITDA,
Adjusted net income, and Adjusted diluted EPS; -- Added a total of
34 management contracts, including those listed above. Wholly Owned
Hotel Results EBITDA from the company's owned hotels was $6.9
million for the 2008 first quarter, as outlined below (in
millions): Owned Hotels First Quarter ------------------- 2008 2007
---- ---- Net income $0.2 $0.9 Interest expense $3.5 $1.4
Depreciation and amortization $3.2 $1.4 EBITDA $6.9 $3.7 "Results
at our seven owned properties were in line with our expectations,"
said Thomas F. Hewitt, chief executive officer. "As a result of the
execution of our growth strategy, first quarter EBITDA from our
owned hotels is nearly double the amount from last year. "We remain
on track with the planned capital improvements at our owned hotels,
spending $7 million of the $35 million we budgeted for 2008, of
which $27 million is earmarked for the comprehensive renovations of
the Sheraton Columbia, Md. and the Westin Atlanta Airport hotels,"
Hewitt said. In April, the company completed the first phase of the
rooms renovation at the Sheraton Columbia in Maryland, which
encompassed one half of the guest rooms. The second phase of the
rooms renovation is scheduled to begin in July, and is expected to
be completed by the end of the third quarter. The majority of the
remaining projects in the capital plan, including all remaining
public spaces, will be completed by the end of the year. "We are on
target to complete the rooms renovation of the Westin Atlanta
Airport hotel by July 2008. To date, we have refurbished 280 of the
495 rooms, and anticipate that the remainder of the comprehensive
$18 million renovation, including all meeting rooms and public
spaces, will be completed by year end. "Both of these capital
projects represent significant embedded growth for us, and when
completed, will enable the hotels to realize their full operating
potential. We expect to see considerable growth in the bottom line
results at both the Westin Atlanta Airport and the Sheraton
Columbia post renovation," Hewitt said. Joint Venture Investments
The company completed several significant joint venture
transactions in the first quarter, acquiring minority equity
interests in 26 properties through two separate transactions and
divesting one property. Interstate and joint venture partner Harte
Holdings of Ireland completed the acquisition of four hotels from
The Blackstone Group for $209 million. Interstate invested $11.6
million for a 20 percent ownership interest in the four hotels --
the Sheraton Mahwah, N.J.; Sheraton Frazer Great Valley, near
Philadelphia; Hilton Lafayette, La.; and Latham Hotel Georgetown,
Washington, D.C. Interstate, along with its joint venture partner,
FFC Corporation, acquired a portfolio of 22 select-service hotels
which were immediately converted to Wyndham Worldwide brands. "The
new brand affiliations are already having a positive impact at the
hotels," Hewitt said. In February, the joint venture with True
North Hotel Partners sold the Doral Tesoro Hotel & Golf Club.
Interstate originally invested $1.5 million for a 15.9 percent
interest in the joint venture in June 2006. The company has
received $3.6 million in distributions to date, and recognized a
gain of $2.4 million upon sale of the hotel. "This is an excellent
example of the joint venture lifecycle. We sourced the deal for our
partner, maximized returns for the partnership through operations,
and then participated in the increased value of the hotel upon
sale," noted Hewitt. "We now have minority equity interests in 47
hotels with 12 different joint venture partners. In addition, we
have interests in two aloft hotels that are expected to open in
2008 in Rancho Cucamonga, Calif. and Cool Springs, Tenn. The
California aloft is scheduled to open in June, while the Tennessee
property is expected to open in the fourth quarter. Joint venture
investments will remain a focus for us and is the primary component
of our real estate growth strategy in 2008." Hotel Management
Results Same-store(5) RevPAR for all managed hotels in the first
quarter of 2008 increased 3.1 percent to $96.33. Average daily rate
(ADR) advanced 6.8 percent to $138.49, and occupancy declined 3.5
percent to 69.6 percent. Same-store RevPAR for all full-service
managed hotels rose 3.3 percent to $106.84. ADR improved 7.5
percent to $151.54, while occupancy dropped 3.8 percent to 70.5
percent. Same-store RevPAR for all select-service managed hotels
increased 2.3 percent to $74.71, led by a 5.1 percent gain in ADR
to $110.50, partially offset by a 2.7 percent decline in occupancy
to 67.6 percent. "Despite a slowing economy, we continued to drive
rate as evidenced by our increase of nearly 7 percent from last
year," Hewitt said. "RevPAR rose 3.1 percent, which compares
favorably with the industry average of 1.9 percent. RevPAR growth
was impacted by the Easter shift from April last year to March this
year. Regionally, our hotels in the San Francisco and New York
markets led the way. "Our portfolio totaled 217 hotels at the end
of the quarter, a net gain of 26 contracts during the period. The
combination of joint ventures and a continued focus on our third
party management business has produced an increase in management
contracts over the last two quarters." (5) Please see footnote 6 to
the financial tables within this press release for a detailed
explanation of "same-store" hotel operating statistics.
International Expansion Interstate announced a major development in
its international growth strategy in February, with the formation
of JHM Interstate Hotels India, a joint venture with JHM Hotels, to
operate and selectively invest in hotels in India. "India is one of
the world's fastest-growing lodging markets," Hewitt said. "The
surging demand for hotel rooms there has created a significant need
for experienced hotel management. The current lodging environment
in India offers a limited selection of management and brand
options. Our focus there will be to manage and opportunistically
invest in hotels, as well as to provide hotel owners with franchise
opportunities with well-established hotel brands." Interstate and
JHM Hotels each committed to invest $6.25 million in Duet India
Hotels Limited, a real estate investment fund that has raised
approximately $170 million to develop 25 hotels throughout the
country, ensuring access to a robust pipeline of management
opportunities in India. The fund has committed to providing JHM
Interstate Hotels India the first opportunity to manage the hotels
in which the fund invests. In April, the venture executed a
contract to manage its first property in India -- a 124-room,
five-star, business-class hotel in Vizag (Visakhapatnam), a major
coastal city in the state of Andhra Pradeshon India's eastern shore
with a population base of approximately three million people.
Interstate is facilitating discussions between several
international hotel brands and the ownership group, Vishnupriya
Hotels Resorts Private Limited. The hotel, which broke ground in
July 2007, is expected to open in the fourth quarter of 2008. "This
contract marks our official entry into India's dynamic lodging
market and establishes JHM Interstate Hotels India as one of the
first independent, international hotel management companies to be
located there," said Leslie Ng, Interstate's chief investment
officer. "The joint venture is already actively sourcing additional
management opportunities throughout the country." Balance Sheet On
March 31, 2008, Interstate had: -- Total unrestricted cash of $10.2
million. -- Total debt of $233.4 million, consisting of $175.9
million of senior debt and $57.5 million of non-recourse mortgage
debt. On May 1, the company closed on a $25 million non-recourse
mortgage secured by its Sheraton Columbia hotel. The loan can be
increased up to $35 million in total upon achieving certain capital
expenditure and net operating income thresholds. The loan has a
five-year term and bears interest at a floating rate of LIBOR plus
200 basis points. Proceeds were used to pay off a portion of the
company's senior revolving credit facility, thereby increasing the
available capacity of the facility. "Our ability to consummate this
loan at a very attractive interest rate in a challenging lending
environment underscores the financial community's continued
confidence in Interstate," said Bruce Riggins, Interstate's chief
financial officer. "We expect the loan size to increase to $35
million in 2009, which gives us additional balance sheet
flexibility. With our current balance sheet, we have the ability to
continue to execute on our growth strategies and to respond to
future business opportunities." Outlook and Guidance The company
provides the following updated guidance for full-year 2008: --
RevPAR, on a same-store basis, as follows: -- RevPAR for all
managed properties (including owned hotels) is expected to increase
3.0 percent to 5.0 percent; -- Owned Hotel RevPAR, excluding Westin
Atlanta Airport and Sheraton Columbia hotels (which are undergoing
significant renovations), is expected to increase 4.0 percent to
6.0 percent; -- Net income of $11.3 million to $13.3 million; --
Diluted earnings per share of $0.35 to $0.41; -- Adjusted net
income of $10.5 million to $12.4 million; -- Adjusted diluted
earnings per share of $0.32 to $0.38; -- Adjusted EBITDA of $56
million to $59 million, which includes the following: -- EBITDA
from wholly-owned hotels of $29 million to $30 million; -- The
company's share of EBITDA from unconsolidated joint ventures of $9
million to $10 million, including $0.5 million to $1.0 million from
new joint ventures; -- EBITDA from the hotel management business of
$18 million to $19 million. -- The company's share of joint venture
debt of $70 million related to existing joint ventures. Interstate
will hold a conference call to discuss its first-quarter results
today, May 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
First-Quarter Conference Call. A replay of the conference call will
be available until midnight on Wednesday, May 14, 2008, by dialing
(800) 405-2236, reference number 11112759, and an archived webcast
of the conference call will be posted on the company's Web site
through June 7, 2008. As of March 31, 2008, Interstate Hotels &
Resorts had ownership interests in 54 hotels and resorts, including
seven wholly owned assets. Together with these properties, the
company and its affiliates managed a total of 217 hospitality
properties with approximately 45,000 rooms in 36 states, the
District of Columbia, Russia, Mexico, Canada, Belgium and Ireland.
Interstate Hotels & Resorts also has contracts to manage 17 to
be built hospitality properties with approximately 4,000 rooms. 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, 2007. Interstate Hotels & Resorts, Inc.
Statements of Operations (Unaudited, in thousands except per share
amounts) Quarter Ended March 31, ---------------------------------
2008 2007 ---------------- ---------------- (as restated) (13)
Revenue: Lodging $23,918 $13,076 Management fees 9,909 11,469
Termination fees (1) 3,010 1,575 Other 2,099 2,269 ----------------
---------------- 38,936 28,389 Other revenue from managed
properties 151,014 176,370 ---------------- ---------------- Total
revenue 189,950 204,759 Expenses: Lodging 17,025 9,372
Administrative and general 15,829 13,315 Depreciation and
amortization 4,274 3,225 Asset impairments and write-offs (2) 1,112
2,399 ---------------- ---------------- 38,240 28,311 Other
expenses from managed properties 151,014 176,370 ----------------
---------------- Total operating expenses 189,254 204,681
---------------- ---------------- OPERATING INCOME 696 78 Interest
income 319 436 Interest expense (3) (3,815) (2,733) Equity in
earnings of unconsolidated entities 2,361 401 ----------------
---------------- LOSS BEFORE MINORITY INTEREST AND INCOME TAXES
(439) (1,818) Income tax benefit 151 781 Minority interest
(benefit) expense 2 (46) ---------------- ---------------- LOSS
FROM CONTINUING OPERATIONS (286) (1,083) Income from discontinued
operations, net of tax (4) - 17,001 ----------------
---------------- NET (LOSS) INCOME $(286) $15,918 ================
================ BASIC (LOSS) EARNINGS PER SHARE: Continuing
operations $(0.01) $(0.04) Discontinued operations - 0.54
---------------- ---------------- Basic (loss) earnings per share
$(0.01) $0.50 ================ ================ DILUTED (LOSS)
EARNINGS PER SHARE (5): Continuing operations $(0.01) $(0.04)
Discontinued operations - 0.54 ---------------- ----------------
Diluted (loss) earnings per share $(0.01) $0.50 ================
================ Weighted average shares outstanding (in
thousands): Basic 31,714 31,546 Diluted 32,240 31,806 Interstate
Hotels & Resorts, Inc. Hotel Level Operating Statistics
(Unaudited) Quarter Ended March 31,
-------------------------------- 2008 2007 % change ----------
---------- ---------- Managed Hotels - Hotel Level Operating
Statistics: (6) Full-service hotels: Occupancy 70.5% 73.3% -3.8%
ADR $151.54 $140.95 7.5% RevPAR $106.84 $103.38 3.3% Select-service
hotels: Occupancy 67.6% 69.5% -2.7% ADR $110.50 $105.09 5.1% RevPAR
$ 74.71 $ 73.01 2.3% Total: Occupancy 69.6% 72.1% -3.5% ADR $138.49
$129.66 6.8% RevPAR $ 96.33 $ 93.47 3.1% Owned Hotels - Hotel Level
Operating Statistics: (7) Occupancy 67.0% 69.3% -3.3% ADR $125.04
$119.82 4.4% RevPAR $ 83.72 $ 83.01 0.9% Interstate Hotels &
Resorts, Inc. Reconciliations of Non-GAAP Financial Measures (8)
(Unaudited, in thousands except per share amounts) Quarter Ended
March 31, ----------------------------- 2008 2007 -------- --------
Net (loss) income $(286) $15,918 Adjustments: Depreciation and
amortization 4,274 3,225 Interest expense, net 3,496 2,297
Depreciation and amortization from unconsolidated joint ventures
701 249 Interest expense, net from unconsolidated joint ventures
963 378 Discontinued operations, net (4) - (17,001) Income tax
benefit (151) (781) -------- -------- EBITDA 8,997 4,285 Asset
impairments and write-offs (2) 1,112 2,399 Severance (9) - 354
Equity interest in the sale of unconsolidated entities (10) (2,392)
(128) Minority interest (benefit) expense (2) 46 -------- --------
Adjusted EBITDA $7,715 $6,956 ======== ======== Quarter Ended March
31, ----------------------------- 2008 2007 -------- -------- Net
(loss) income $(286) $15,918 Adjustments: Asset impairments and
write-offs (2) 1,112 2,399 Severance (9) - 354 Discontinued
operations, net (4) - (17,001) Deferred financing costs write-off
(3) - 530 Equity interest in the sale of unconsolidated entities
(10) (2,392) (128) Minority interest 6 42 Income tax rate
adjustment (11) 440 (1,339) -------- -------- Adjusted net (loss)
income $(1,120) $775 ======== ======== Adjusted diluted earnings
per share $(0.03) $0.02 ======== ======== Weighted average number
of diluted shares outstanding (in thousands) (5): 32,240 31,806
Interstate Hotels & Resorts, Inc. Outlook Reconciliation (8),
(12) (Unaudited, in thousands) Forecast ----------------- Year
Ending December 31, 2008 ----------------- Net income $12,300
Adjustments: Depreciation and amortization 18,300 Interest expense,
net 13,600 Depreciation and amortization from unconsolidated joint
ventures 3,200 Interest expense, net from unconsolidated joint
ventures 4,900 Income tax expense 6,500 ----------------- EBITDA
58,800 Asset impairments and write-offs (2) 1,100 Equity interest
in the sale of unconsolidated joint ventures (10) (2,400)
----------------- Minority interest expense - Adjusted EBITDA
$57,500 ================= Forecast ----------------- Year Ending
December 31, 2008 ----------------- Net income $12,300 Adjustments:
Asset impairments and write-offs (2) 1,100 Equity interest in the
sale of unconsolidated joint ventures (10) (2,400) Minority
Interest - Income tax rate adjustment (11) 450 -----------------
Adjusted net income $11,450 ================= Adjusted diluted
earnings per share $0.35 ================= (1) We record
termination fees as revenue when all contingencies related to the
termination fees have been removed. (2) This amount represents
losses recorded for intangible costs associated with terminated
management contracts and other asset impairments. (3) For 2007,
interest expense includes $0.5 million of deferred financing fees
expensed in the first quarter in connection with the entrance into
a new senior secured credit facility and the related pay-off of all
balances outstanding under our old senior secured credit facility.
(4) In January 2007, we completed the sale of our subsidiary,
BridgeStreet Corporate Housing. We have presented these operations
and the gain on sale as discontinued operations for all periods
presented. The calculation of EBITDA reflects the elimination of
discontinued operations. (5) Our diluted earnings per share assumes
the issuance of common stock for all potentially dilutive common
stock equivalents outstanding. Potentially dilutive shares include
unvested restricted stock and stock options granted under our
comprehensive stock plan and operating partnership units held by
minority partners. No effect is shown for any securities that are
anti-dilutive. (6) We present certain operating statistics (i.e.
occupancy, RevPAR and ADR) for the periods included in this report
on a same-store hotel basis. We define our same-store hotels as
those which (i) are managed by us for the entirety of the reporting
periods being compared or have been managed by us for part of the
reporting periods compared and we have been able to obtain
operating statistics for the period of time in which we did not
manage the hotel, and (ii) have not sustained substantial property
damage, business interruption, or undergone large-scale capital
projects during the reporting periods being presented. In addition,
the operating results of hotels which we no longer managed as of
March 31, 2008 are also not included in same-store hotel results
for the periods presented herein. Of the 217 properties that we
managed as of March 31, 2007, 172 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.
Houston Westchase was purchased in February 2007, Westin Atlanta
Airport was purchased in May 2007 and Sheraton Columbia hotel was
purchased in November 2007. The Westin Atlanta Airport and Sheraton
Columbia hotels are excluded from these statistics as they are
undergoing significant renovations. Statistics for all owned
properties are included in the Managed Hotels - Hotel Level
Operating Statistics. (8) See discussion of EBITDA, adjusted
EBITDA, adjusted net income and adjusted diluted earnings per
share, located in the "Non-GAAP Financial Measures" section,
described earlier in this press release. (9) Severance expense for
the three months ended March 31, 2007 relates to the separation
costs of personnel at our corporate offices associated with the
reduction in the number of third party managed properties. These
severance costs are recorded as part of administrative and general
expenses on our statement of operations. (10) In the first quarter
of 2008, one of our joint ventures sold the Doral Tesoro Hotel
& Golf Club. We recorded a gain of $2.4 million, including the
previously deferred gain of $0.6 million. In the first quarter of
2007, the adjustment relates to an additional gain of $0.1 million
on the sale of the MIP 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 34.5% for the quarter ended
March 31, 2008 and 42% for the quarter ended March 31, 2007. (12)
Our outlook reconciliation uses the mid-point of our estimates.
(13) On February 26, 2008, our Audit Committee 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 an error in the calculation of intangible asset
impairment charges that resulted from the termination of certain
hotel management contracts. The effect of the restatement on the
consolidated statement of operations was a decrease in amortization
expense of $0.1 million, resulting from incorrectly recognizing
amortization expense for the terminated management contracts, an
increase of $2.3 million in asset impairment and write-offs for the
write-off of the intangible assets related to the terminated hotel
management contracts, and a decrease in income tax expense of $0.9
million. The effect on minority interest on the statement of
operations was immaterial. Contact: Carrie McIntyre SVP, Treasurer
(703) 387-3320 DATASOURCE: Interstate Hotels & Resorts CONTACT:
Carrie McIntyre, SVP, Treasurer, Interstate Hotels & Resorts,
+1-703-387-3320 Web site: http://www.ihrco.com/
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