Prime Hospitality Corp. , a leading hotel owner, operator and franchiser,
reported its results for the three months and year ended December 31, 2003. Prime reported a net loss before asset transactions and other non-cash
charges for the fourth quarter of 2003 of $1.3 million, or $.03 per share,
compared to a loss of $2.8 million, or $.06 per share, for the fourth
quarter of 2002. The fourth quarter of 2002 included a loss of $.04 per
share from the funding of deficits on the hotels formerly leased from
Hospitality Properties Trust (“HPT”).
The total net loss, which included a non-cash valuation charge of $1.0
million, was $2.0 million, or $.05 per share, for the fourth quarter of
2003 compared to a loss of $2.9 million, or $.06 per share, in the fourth
quarter of 2002.
“Our fourth quarter results reflected improved occupancy although rate
levels still remain a challenge,” said A.F. Petrocelli, chairman and CEO
of Prime. “We are cautiously optimistic that corporate travel will rebound
in 2004 enabling us to increase rates.”
“Our new management agreement with HPT went into effect on January 1. We
not only retained the 24 AmeriSuites but added 12 full-service hotels
which we expect to convert to the Prime Hotel brand by June. With the one
hotel currently open and two other hotels scheduled for conversion on
March 1, we expect to have 15 Prime Hotels opened in 10 states by
mid-year. We look forward to the new opportunities this presents for all
our brands with these full-service hotels available for cross-selling,
rewards redemptions and national sales contracts.”
For the year ended December 31, 2003, we reported a net loss before asset
transactions of $2.5 million, or $.06 per share, compared to net income
before asset transactions of $5.8 million, or $.13 per share, for the
comparable period in 2002. The total net loss, which includes lease
termination charges, gains and losses from asset sales and debt
retirements, and other non-cash charges for the year ended December 31,
2003 was $24.5 million, or $.55 per share, compared to a net loss of $3.9
million, or $.08 per share, for the comparable period in 2002.
For the quarter, total revenues decreased by $3.0 million to $86.8
million. Revenue per available room (“REVPAR”) at our comparable owned and
leased hotels decreased by 1.6% in the fourth quarter of 2003 as compared
to the fourth quarter of 2002. The results were affected by higher
occupancies and a lower average daily rate (“ADR”) due to softness in
corporate travel. For the fourth quarter of 2003, occupancy increased by
1.8 percentage points to 56.8% and ADR decreased by 4.7% to $66.36. Gross
operating profit margins at comparable owned and leased hotels declined by
3.9 percentage points due to the lower ADR.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
increased by $2.0 million to $11.9 million in the fourth quarter of 2003
due to the termination of the HPT lease. Interest expense declined by
9.0%, to $5.0 million, for the quarter ended December 31, 2003 primarily
due to debt reductions.
For the fourth quarter of 2003, we reported a 2.1% REVPAR decrease at our
comparable AmeriSuites hotels, as occupancy increased by 0.8 percentage
points to 57.2% and ADR decreased by 3.4% to $68.75. Increases were
reported in Oklahoma City and Richmond while decreases were posted in
Chicago, Charlotte, Denver and the Northeast.
For the fourth quarter of 2003, we reported a 1.1% REVPAR increase at our
comparable Wellesley Inns & Suites hotels, as occupancy increased by 3.5
percentage points to 57.0% and ADR decreased by 5.2% to $55.97. The South
Florida and Phoenix markets reported increases while revenues decreased in
Prime’s upscale full-service hotels which are located in the Northeast,
reported a 6.2% REVPAR decrease for the fourth quarter of 2003 as
occupancy decreased by 0.6 percentage points to 62.3% and ADR decreased by
5.2% to $111.37. The full-service hotels were impacted by decreases in the
suburban New York City market.
As of December 31, 2003, we had 148 AmeriSuites, 82 Wellesley Inns &
Suites and one Prime Hotel in operation. Although we intend to expand our
brands primarily through franchising, we will consider corporate
development or acquisition opportunities in strategic markets.
In December 2003, we entered into a management agreement with HPT for 24
AmeriSuites hotels and 12 full-service hotels to be re-branded under our
Prime Hotels & Resorts chain. The agreement became effective on January 1,
2004 for the AmeriSuites hotels and February 1, 2004 for the Prime Hotels
& Resorts hotels. The term is 15 years and we have two renewal options of
15 years each.
Under the agreement, HPT will receive an owner’s priority return of $26
million per year. This return is guaranteed by Prime under a limited
guarantee which caps the maximum cash outlay by Prime over the life of the
agreement at $30 million. Cash flow generated by the hotels in excess of
$26 million per year will be split 50/50 between HPT and Prime with
Prime’s share counting as its royalty and management fee. Also, as part of
the agreement, HPT will provide $25 million during the first two years to
pay for re-branding and other capital improvements on the 36 hotels.
The 12 full-service hotels are currently branded as Wyndham hotels and we
expect the conversion to the Prime Hotels & Resorts brand will be
completed by mid-year. We currently have one Prime Hotel open and on March
1, we will convert Radisson hotels in Fairfield, NJ and Secaucus, NJ to
the Prime brand. We expect that by June 2004 we will have 15 Prime Hotels
in 10 states encompassing almost 3,000 guestrooms.
Currently, we have three AmeriSuites under construction and a pipeline of
20 executed franchise agreements including five in the planning stage.
There is also one franchised Wellesley Inn under conversion.
During the quarter, we continued our installation of high speed internet
access in our AmeriSuites, Wellesley Inns & Suites and Prime Hotels and
Resorts brands. This new amenity will be available on both a wired and
wireless basis in all guest and meeting rooms and via wireless access in
all common areas, including hotel lobbies, fitness centers, pool areas and
restaurants. We have installed this feature in the majority of our hotels
and expect the installations to be complete by the end of the first
quarter of 2004.
As of December 31, 2003, we had $228.6 million in debt and $12.9 million
in cash and cash equivalents. During the quarter, we reduced our debt
balance by $15.0 million funded by operating cash flow and a federal
income tax refund. Our debt to book capitalization percentage is 25.2%.
Our debt to last twelve months EBITDA ratio is 3.8 times, and its EBITDA
to interest is 3.0 times. Under our revolving credit facility, we are
required to maintain a debt to EBITDA ratio of 4.25 times and an EBITDA to
interest ratio of 2.50 times.
Our current estimate is that REVPAR for comparable hotels will increase by
3% - 4% for the full year 2004 resulting in EBITDA in the range of $65 -
$70 million and earnings per share before asset transactions in the $.05 -
$.10 range. We estimate a loss for the first quarter of 2004 of $0.07 per
We currently expect capital expenditures to be approximately $20 million
in 2004 with the majority to be spent on maintenance capital. Based on the
EBITDA estimates and after deducting interest, taxes and maintenance
capital expenditures, we would expect to generate approximately $25
million in free cash flow in 2004 before asset sales.
Prime Hospitality Corp., one of the nation’s premiere lodging companies,
owns, manages and franchises 260 hotels throughout North America. The
Company owns and operates three proprietary brands that compete in
different segments: AmeriSuites(R) (all-suites), Wellesley Inns &
Suites(R) (limited-service) and Prime Hotels & Resorts (full-service).
Also within its portfolio are owned and/or managed hotels operated under
franchise agreements with national hotel chains including Hilton,
Radisson, Sheraton, Holiday Inn and Ramada. Prime can be accessed over the
internet at http://www.primehospitality.com/.
Prime Hospitality Corp. will hold a conference call on February 12, 2004
at 9:30 a.m. EST to discuss our fourth quarter and year end results.
Investors and members of the media may participate by calling
800-243-6403. A recording of the call will be available through February
26, 2004 by calling 800-839-6713 and using the conference ID# 6046668.