MeriStar Hospitality Corporation (NYSE: MHX), the nation`s third largest hotel real estate investment trust (REIT), today announced results for the fourth quarter and year ended December 31, 2002.
For the 2002 fourth quarter, the company`s net loss, which includes several one-time charges described below, was $(124.9) million, or $(2.76) per diluted share, compared to $(61.8) million, or $(1.37) per share in the 2001 fourth quarter. Comparative funds from operations (FFO), assuming conversion of the company`s convertible notes, were $9.6 million, or $0.18 per share, compared to $14.2 million, or $0.27 per share, in the 2001 fourth quarter. FFO per share results were $0.01 higher than the consensus analysts` estimate of $0.17. Comparative FFO represents funds from operations, as defined by the National Association of Real Estate Investment Trusts, adjusted for significant non-recurring or unusual items, and the effect of non-hedging derivatives. The company has historically reported FFO per share results based on conversion of its convertible notes, as the assumed conversion has been dilutive to annual FFO per share results. For both the fourth quarter and full year 2002, conversion of the notes was anti-dilutive. Comparative FFO for the 2002 fourth quarter, assuming the convertible notes were not converted, was $7.8 million, or $0.16 per diluted share, compared to $12.4 million, or $0.26 per share in the 2001 fourth quarter.
Revenues increased 3.8 percent to $229.9 million for the fourth quarter of 2002. Comparative earnings before interest expense, income taxes, depreciation and amortization (EBITDA) decreased 1.6 percent to $43.1 million.
During the fourth quarter of 2002, the company recorded the following charges to earnings:
An asset impairment charge of $63.4 million related to the write-down of hotel assets currently being marketed based on anticipated sales values. The hotel assets currently being marketed are non-core assets, consistent with the assets that were sold in 2002.
A loss on discontinued operations of $30.5 million, which included an asset impairment charge of $15.4 million on a hotel asset classified as “held for sale.”
A $14.5 million charge to write down our note receivable from Interstate Hotels & Resorts. In January 2003, the company received $42.1 million, plus accrued interest, in settlement of the $56.1 million note.
$3.2 million of costs related to the separation of management functions between the company and Interstate Hotels & Resorts.
A write-off of $1.6 million of deferred costs related to the credit facility that was refinanced in the fourth quarter of 2002.
For the 2002 fourth quarter, comparable revenue per available room (RevPAR) rose 4.5 percent to $55.75 compared to the fourth quarter of 2001. A 5.9 percent increase in occupancy to 59.1 percent was partially offset by a 1.4 percent decline in average daily rate (ADR) to $94.27.
“We saw our first quarterly year-over-year RevPAR improvement since the first quarter of 2001, yet we continued to feel the impact of the ongoing sluggish economy,” said Paul W. Whetsell, chairman and chief executive officer. “Occupancy was up almost 6.0 percent for the quarter but a decline in average rate was the primary reason for the softer than expected RevPAR results. We were able to achieve FFO per share results in line with our guidance by controlling owner expenses and generating stronger than anticipated food and beverage revenue, despite weaker than expected RevPAR.”
During the fourth quarter, the company continued to execute its strategy of selling non-core assets with the sales of hotel assets in Las Vegas and San Diego, and in January 2003, sold a second Las Vegas hotel. Total net proceeds from the sales of these three assets were approximately $47 million. Whetsell noted that the company has seven additional non-core assets actively being marketed, which are expected to generate $50 million to $60 million in proceeds.
Also during the quarter, MeriStar made a number of executive changes in order to separate management responsibilities from Interstate Hotels & Resorts, operator of all 106 hotels. “With the challenging economic environment and Interstate`s increased size due to its recent merger, both companies required the full-time attention of a dedicated management team,” he explained. “Bruce Wiles was promoted to chief operating officer, Donald Olinger joined MeriStar from Host Marriott as chief financial officer, and Jerome Kraisinger will join MeriStar shortly as general counsel.” Whetsell remains chairman and chief executive officer of both MeriStar Hospitality and Interstate Hotels & Resorts.
For the full year 2002, the company`s net loss available to common stockholders was $(161.3) million, or $(3.59) per diluted share, compared to a loss of $(43.3) million, or $(0.97) per share in 2001. Revenues declined 7.0 percent to $983.5 million in 2002. EBITDA dropped 19.4 percent from 2001 to $215.8 million. Comparative FFO, assuming conversion of the convertible notes, was $79.8 million, or $1.49 per share, compared to $147.0 million, or $2.77 per share in 2001. Comparative FFO for the 2002 full year, assuming the convertible notes were not converted, was $72.5 million, or $1.48 per share. RevPAR for all hotels owned for the full year declined 8.6 percent to $63.69, with a 5.9 percent decrease in average daily rate to $99.44 and a 2.9 percent decline in occupancy to 64.0 percent.