ARLINGTON, Va.—July 30, 2003—Interstate Hotels & Resorts (NYSE: IHR), the nation`s largest independent hotel management company, today reported historical results for the second quarter ended June 30, 2003. Interstate Hotels & Resorts was formed July 31, 2002, following the merger of MeriStar Hotels & Resorts and Interstate Hotels Corporation. For 2002, both historical financial data and combined pro forma financial data (assuming the merger was completed on January 1, 2002) are included in the tables of this press release. Historical financial data represents results for Interstate Hotels Corporation through July 31, 2002, and results for Interstate Hotels & Resorts subsequent to July 31, 2002.
For the second quarter of 2003, net loss was $(0.5) million, or $(0.02) per share. On a historical basis, net loss available to common shareholders was $(13.7) million, or $(2.44) per share, in the 2002 second quarter.
The statement of operations for the 2003 second quarter includes the following non-recurring items and special charges:
$0.6 million of merger and integration expenses, including professional fees, travel and other transition costs.
$0.8 million of write-offs of intangible assets related to the termination of the management contracts with Winston Hotels (NYSE: WXH - News) on June 30, 2003, and other management contracts terminated during the quarter.
In the 2003 second quarter, earnings before interest, taxes, depreciation and amortization (EBITDA), excluding non-recurring items and special charges, was $7.0 million. Net income, excluding non-recurring items and special charges, for the 2003 second-quarter reporting period was $0.4 million, or $0.02 per share. These results are $0.03 ahead of consensus analysts` estimates. Second-quarter 2002 pro forma net income available to common shareholders was $5.7 million. Second-quarter 2002 pro forma EBITDA, excluding non-recurring items and special charges, was $7.7 million and pro forma net income, excluding non-recurring items and special charges, was $0.1 million, or $0.01 per share.
EBITDA and net income, excluding non-recurring items and special charges, are non-GAAP financial measures within the meaning of the Securities and Exchange Commission (SEC) regulations. See the discussion below in the “Non-GAAP Financial Measures” section of this press release. Reconciliations of EBITDA and EBITDA and net income, excluding non-recurring items and special charges, are provided in the tables of this press release.
Same-store revenue per available room (RevPAR) for all full-service managed hotels in the 2003 second quarter declined 5.8 percent from the 2002 second quarter to $71.26. Occupancy declined 1.8 percent to 68.2 percent, and average daily rate (ADR) decreased 3.9 percent to $104.53. Same-store RevPAR for all limited-service managed hotels in the 2003 second quarter decreased 3.5 percent to $55.20. Occupancy decreased 3.0 percent to 68.6 percent, and ADR declined 0.6 percent to $80.41.
“Second-quarter revenues suffered due to the impact of the war with Iraq and a difficult economic environment,” said Paul W. Whetsell, chairman and chief executive officer. “However, the last two weeks of the quarter saw an upswing in travel, primarily from the leisure segment. While two weeks do not necessarily make a trend, we are encouraged by the continued strength in leisure travel through the first half of July. The future, however, remains uncertain, with the key being the strength of business travel this fall.”
“We continued to improve market share for our owners in the second quarter, despite a persistently sluggish economy,” said John Emery, president and chief operating officer. “Interstate-managed hotels showed a 1.2 percent increase in RevPAR market share during the period, which builds on the 1.3 percent improvement in the 2003 first quarter. Through our revenue management program, we are able to monitor and adjust room rates in response to occupancy levels and changing trends. We continue to seek ways to capture additional revenues, through targeted marketing and on-property promotions, such as for food and beverage.”
The war in Iraq and concerns about the SARS virus continued to negatively impact BridgeStreet Corporate Housing Worldwide`s European and Canadian operations. “Results in BridgeStreet`s U.S. markets also were negatively impacted in the second quarter due to the sluggish economy. Although the SARS crisis is apparently under control, our Canadian operations are recovering slowly. We expect economic conditions to continue to affect BridgeStreet`s operations in Europe and the United States for the foreseeable future,” Emery noted.
BridgeStreet doubled the size of its Licensed Global Partner program in the second quarter with the signing of three new agreements with companies that have properties in San Francisco/Silicon Valley, San Diego and South Carolina. BridgeStreet also expanded its global reach with the acquisition of Global Home Network (GHN) during the quarter. This strategic acquisition provides BridgeStreet customers with access to an international network of partners with properties in 40 countries.
“We continue to focus on selected real estate acquisition opportunities, forming a joint venture with Northridge Capital to acquire up to $400 million in hotel assets,” Emery said. “We have signed a contract for our first hotel acquisition, which we expect to complete in August, and expect to acquire additional hotels in the second half of 2003. We are targeting upscale, full-service and selected premium-branded, limited-service properties in key urban and suburban markets that have strong investment potential and that can benefit from Interstate`s proven repositioning and turnaround programs.”
During the quarter, Interstate signed five new long-term management agreements, including three hotels which are part of the Calypso Cay Resort in Florida, a Four Points by Sheraton in New York and a Hilton Garden Inn in Connecticut. “Despite the current economic conditions, we have been successful at adding new management contracts,” said John Emery. “Our pipeline of new management contracts remains strong through the end of the year.”
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