First Quarter Financial Highlights:
* Pro forma diluted EPS (including Caesars) increases 250% to $0.14
* EBITDA increased 12% for 172 owned hotels worldwide; 14% in North America and 23% in Europe
* EBITDA margin for 172 owned hotels worldwide increased from 28.3% to 30.3%
* Same store RevPar for 149 owned hotels increased 4.1% worldwide, including a 13.1% increase in Europe and a 4.3% increase in North America
* 22 managed or franchised hotels with approximately 5,800 rooms added during the quarter
Pro Forma Comparable Results:
For the first quarter of 1999, pro forma comparable income from operations (including Caesars) was approximately $27 million or $0.14 per diluted share on pro forma revenues of $1.2 billion compared to $14 million or $0.04 per diluted share on pro forma revenues of $1.1 billion in the corresponding period in 1998.
For the first quarter of 1999, pro forma comparable income from continuing operations (excluding gaming) was approximately $40 million or $0.20 per diluted share on revenues of approximately $851 million compared to comparable pro forma income from continuing operations of $24 million or $0.09 per diluted share on pro forma revenues of approximately $826 million for the corresponding period in 1998. The pro forma comparable results from continuing operations for the first quarter of 1999 assume the previously announced sale of Caesars for approximately $3 billion in cash and exclude pre-tax gains of $8 million on the sale of certain real estate and investments, a $15 million pre-tax charge relating to the reorganization of the Company to a C-Corporation in January 1999, and a previously announced $936 million deferred tax charge resulting from the reorganization. These 1999 results further assume the disposition of other non-core businesses, as of the beginning of the quarter, with total proceeds of approximately $670 million of which approximately $400 million has been realized as of April 30, 1999.
The pro forma comparable results from continuing operations for the first quarter of 1998 reflect the February 23, 1998 merger (the “ITT Merger”) of the Company with ITT Corporation (“ITT”), as if the ITT Merger had occurred on January 1, 1998, assume the sale of Caesars discussed above, exclude pretax gains of $12 million on the sale of certain real estate and investments and assume a 40% effective tax rate (the effective tax rate for continuing operations in the first quarter of 1999). These 1998 results further assume the disposition of other non-core businesses with total proceeds of approximately $3.4 billion of which approximately $3.1 billion has been realized as of April 30, 1999.
“The first quarter of 1999 included several milestones for our company,” Barry S. Sternlicht, chairman and chief executive officer of Starwood said. “We completed our corporate reorganization, retired our near term debt maturities, and with the sale of our stake in ESI and Madison Square Garden and the pending sale of Caesars, we will have realized over $6 billion of asset sales proceeds since acquiring ITT. By deleveraging our balance sheet, we have set the stage for future growth in our core global lodging business. We are now focused on our core business,” Mr. Sternlicht continued. “We continue to fill out our management ranks and this week we announced the hiring of two key executives and thought leaders, to head worldwide marketing and worldwide e-commerce strategies. The February launch of our Starwood Preferred Guest program has been very successful with more than 700,000 new participants enrolled in just over three months. We expect to start seeing financial benefits in terms of increased RevPar growth from this program later this year.
On an operating front, we are generally pleased with our first quarter performance. In the US our RevPar was adversely impacted by renovations at six large hotels in New England, the nation`s strongest RevPar market in the first quarter,” Mr. Sternlicht said. “In addition, strength continued in Europe, Asia appears to be entering a recovery period and despite a drop in RevPar in Latin America caused by the currency and economic crisis, EBITDA actually increased slightly. As importantly, the company is making improvements each day in integrating operations, implementing technology enhancements and identifying and implementing purchasing synergies. We believe that some of these initiatives are being reflected in our significantly improved operating margins.
The period of reorganization is behind us,” Mr. Sternlicht said. We are focused on our core global lodging business. 1999 will be the year to focus on our brands, training our people and renovating our superior owned real estate, providing additional value for our customer without increasing the cost of our operations,” Mr. Sternlicht concluded.
Hotel Group Results: On a same-store-sales basis, revenues for the first quarter of 1999 at the Company`s 172 owned and leased hotels, increased 5% to $746 million from $710 million in 1998, EBITDA margins increased to 30.3% from 28.3%, and EBITDA increased 12% to $226 million from $201 million in 1998. The increase in EBITDA reflects a 14% increase in North America and a 23% increase in Europe, offset by weakness in Latin America due to the economic conditions. Excluding 23 hotels under significant renovation, or for which comparable results are not available, EBITDA margins increased from 29.9% in 1998 to 32.3% in 1999 and EBITDA increased 13% to $220 million in 1999 when compared to the same period in 1998. For the quarter, same-store RevPar increased 4.1% to $99.30 from $95.40 in the corresponding period of 1998. The increase in RevPar primarily resulted from an increase in ADR of 3.4% to $145.57 from $140.74, and an increase in occupancy to 68.2% from 67.8% in the corresponding period in 1998.
During the quarter, the Company signed management and franchise agreements for 30 hotels with more than 5,000 rooms, including the 600 room Essex House in New York City. In addition, the Company signed 5 new management and franchise agreements for hotels previously in the Company`s portfolio, including retention of the 1,072 room Century Plaza in Los Angeles. Starwood also acquired a 25% interest in the 5-hotel Moriah chain of hotels in Israel and made an investment in the 12-hotel Block chain of hotels in Africa. Also, 22 managed or franchised hotels with approximately 5,800 rooms opened during the quarter. More than 30,000 new rooms are currently in the Company`s development pipeline around the world.