Press Release: Prime Hospitality Corp.
February 8, 2002
FAIRFIELD, NJ -- Prime Hospitality Corp. (NYSE: PDQ), a leading hotel owner, operator and franchisor, reported
its results for the fourth quarter and year ended December 31, 2001.
Net income before asset transactions and other charges for the fourth quarter was approximately $760,000, or $.02
per share, compared to $12.0 million, or $.26 per share, for the fourth quarter of 2000.
Total net income, which includes gains from the termination of leases, gains on asset sales and other non-recurring
items, was $4.8 million, or $.11 per share, for the fourth quarter of 2001 compared to $12.0 million, or $.26 per
share, for the same period in 2000.
``The combination of the recession and the impact of the September 11 terrorist attacks presented a very challenging
environment for Prime and the entire travel industry,'' said A.F. Petrocelli, Chairman and Chief Executive Officer
of Prime. ``While our results are down from the prior year, I am very pleased with how our Company has responded
to the challenge.''
``Our operating results fared better than we expected due to aggressive holiday promotions and several new cost
containment programs. We launched our new expanded rewards program on September 1 during a very difficult time
and we have already added over 50,000 new members increasing our revenue contribution from frequent guests by 33%.
We were also successful in selling real estate, generating approximately $38 million in proceeds since September
11. The combination of positive cash flow and proceeds from asset sales has strengthened our balance sheet and
lowered our leverage to 31% of capitalization.''
Mr. Petrocelli concluded, ``We believe our Company is well positioned to meet the challenges of a difficult economic
environment and to take advantage of opportunities for growth.''
For the year ended December 31, 2001, net income was $40.2 million, or $.88 per share, compared to $62.5 million,
or $1.34 per share, for the same period in 2000. Net income before asset transactions and other charges was $27.0
million, or $.59 per share, for 2001 as compared to $54.3 million, or $1.17 per share, for the same period in 2000.
Operating Results
4th Quarter 2001
For the quarter, total revenues decreased by $32.6 million to $101.6 million due to lower revenues at comparable
hotels and the impact of asset divestitures. Revenue per available room (``REVPAR'') at Prime's comparable owned
and leased hotels decreased by 13.7% as compared to the fourth quarter of 2000. The decrease was driven primarily
by lower average daily rate (``ADR''). For the quarter, occupancy decreased by 2.2 percentage points to 58.2% and
ADR decreased by 10.4% to $69.75.
Earnings before interest, taxes, depreciation and amortization (``EBITDA'') decreased by $18.7 million to $18.6
million in the fourth quarter of 2001. EBITDA margins at the comparable owned and leased hotels declined by 3.4
percentage points due to lower revenues partially offset by the impact of our cost containment program. Operating
costs at these hotels decreased by 9.1%.
Interest expense declined by 5.3%, or $450,000, to $8.0 million for the quarter ended December 30, 2001 as compared
to $8.5 million for the same period in the prior year primarily due to significant debt reductions in the past
year as a result of asset divestitures and operating cash flow.
Full Year 2001
For the year, total revenues were $485.4 million and EBITDA was $113.0 million. REVPAR at Prime's comparable owned
and leased hotels decreased by 7.8% as compared to 2000. The decrease was driven primarily by lower occupancy.
For the year, occupancy decreased by 4.1 percentage points to 63.3% and ADR decreased by 1.9% to $76.79.
Interest expense declined by 18.6%, or $7.7 million, to $33.6 million for 2001 as compared to $41.3 million for
2000 due to the debt reductions in the past year.
System-Wide Performance
For the quarter, Prime reported an 11.3% REVPAR decrease at its comparable AmeriSuites hotels, as occupancy decreased
by 0.3 percentage points to 59.2% and ADR decreased by 10.9% to $71.96. The major markets affected were Atlanta,
Chicago, Dallas, Northern New Jersey and Florida.
For the quarter, Prime reported a 15.5% REVPAR decrease at its comparable Wellesley Inns & Suites hotels, as
occupancy decreased by 5.0 percentage points to 56.2% and ADR decreased by 7.9% to $54.64. The decrease was attributable
to softening demand in Florida and Austin, TX.
Prime's comparable non-proprietary brand hotels, which consist primarily of upscale full-service hotels in the
Northeast, reported a 20.3% REVPAR decrease for the quarter as occupancy decreased by 10.0 percentage points to
60.7% and ADR decreased by 7.1% to $103.54. The non-proprietary brands were impacted by reductions in group business
and softness in the greater New York City market.
Brand Development
As of December 31, 2001, Prime had 139 AmeriSuites and 74 Wellesley Inns & Suites hotels in operation. Prime
intends to further expand its brands primarily through franchising.
During the quarter, three franchised AmeriSuites located in Chester, VA, Weston, FL and Mt. Laurel, NJ and one
owned AmeriSuites in Utica, MI opened. There are also currently eight additional AmeriSuites hotels under construction
including one by Prime. In addition, Prime has a pipeline of another 57 executed franchise agreements for new AmeriSuites
to be built.
Prime currently has a pipeline of ten executed Wellesley Inns & Suites franchise agreements for new hotels.
Building on the successful conversion of 38 hotels to the Wellesley Inns & Suites brand in 1999, Prime intends
to further grow the brand through conversions from other hotel brands. In November, a franchisee completed the
conversion of a Comfort Inn in Chattanooga, TN to a Wellesley Inn marking the fifth hotel to be converted to the
Wellesley brand in 2001.
On September 1, Prime implemented a new expanded rewards program which it believes will enhance its competitive
position. Prime has already increased its membership by 50,000, or over 50%, since September 1. This has resulted
in an increased contribution from the rewards program with frequent guests accounting for approximately 10% of
revenues at Prime's brands in the fourth quarter, up from approximately 7.5% for the prior three quarters.
Financial Condition/Asset Sales
During the fourth quarter, Prime sold one AmeriSuites and one Wellesley Inn for total proceeds of $17.6 million,
retaining the franchise rights on both hotels under 20-year franchise agreements. Thus far in 2002, Prime has generated
an additional $15.5 million from the sales of one full-service hotel and a Wellesley Inn hotel.
During the quarter, Prime reduced its outstanding debt by $4.3 million and had $320.0 million in debt and $30.1
million in cash and marketable securities at December 31, 2001. Prime's debt to EBITDA ratio is 2.8 times, and
its debt to book capitalization percentage is 31.0%.
2002 Outlook
1st Quarter 2002
Due to the continuing softness in the economy and the cutbacks in business travel, Prime believes that this will
continue to be a challenging environment for the hotel industry, particularly in the first half of the year.
Therefore, Prime anticipates that the trends which existed in the fourth quarter of 2001 will continue through
the first quarter of 2002. In addition to the lower revenues, EBITDA margins may also be impacted by higher health
care and other operating costs. Prime's preliminary estimate is that REVPAR will decrease by approximately 12%
- 13% in the first quarter of 2002 resulting in EBITDA in the $18 - $20 million range and earnings per share of
approximately breakeven to $.01 per share.
Full Year 2002
The Company believes that REVPAR trends will improve sequentially each quarter in 2002 due to the recovery predicted
in the second half of the year and comparisons to weak third and fourth quarter 2001 results. The Company expects
annual REVPAR to be approximately 1% - 2% below prior year levels.
The Company expects that its EBITDA margins will decline slightly due primarily to rising health care and other
operating costs offset partially by the Company's cost containment programs. Given these assumptions, the Company
believes that its annual EBITDA will be around $100 million and recurring earnings per share will be in the low
$.40 range.
The Company expects capital expenditures to be approximately $25 million with the majority to be spent on maintenance
capital and new technology. Based on the EBITDA estimates and after deducting interest, taxes and capital expenditures,
the Company would expect to generate approximately $30 - $35 million in free cash flow before asset sales. Prime
intends to utilize its free cash flow to continue to improve its balance sheet or to invest in its brands.
Prime Hospitality Corp., one of the nation's premiere lodging companies, owns, manages and franchises 234 hotels
throughout the United States. The Company owns and operates two proprietary brands that compete in different segments:
AmeriSuites® (all-suites) and Wellesley Inn & Suites® (limited-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.
Statements in this press release, other than statements of historical information, may constitute forward-looking
statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The
words ``believe,'' ``anticipate,'' ``project,'' ``expect,'' ``intends,'' ``may result,'' ``will continue,'' and
words of similar impact identify forward-looking statements. Forward-looking statements involve known and unknown
risks which may cause the Company's actual results in future periods to differ materially from expected results.
These risks include but are not limited to changes in economic conditions, supply and demand changes for hotel
rooms, competition within the lodging industry, relationships with owners, franchisees and suppliers, the impact
of government regulations, the availability of capital, the ability to attract and retain personnel and the impact
of emerging technologies. Prime undertakes no obligation to update the information set forth herein. For further
information regarding forward-looking statements and to some of the factors and uncertainties affecting us, please
refer to the Company's filings with the Securities and Exchange Commission (SEC) copies of which are available
from the SEC or may be obtained upon request from the Company.
Prime Hospitality Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three and Twelve months ended December 31, 2001 and 2000
($ in thousands, except per share amounts)
3 months ended 12 months ended
December 31, December 31,
2001 2000 2001 2000
Revenues:
Hotel revenues $98,324 $129,172 $469,711 $538,410
Management, franchise
and other fees 2,828 3,840 12,996 15,529
Rental and other 419 1,155 2,701 4,304
Total revenue 101,571 134,167 485,408 558,243
Costs and expenses:
Hotel operating expenses 56,102 69,149 255,392 275,641
Rent and other occupancy 20,408 21,868 88,215 84,100
General and administrative 6,480 5,838 28,774 28,430
Depreciation and amortization 9,813 9,831 38,411 41,611
Total costs and expenses 92,803 106,686 410,792 429,782
Operating income 8,068 27,481 74,616 128,461
Investment income 487 651 2,244 1,936
Interest expense (8,023) (8,470) (33,643) (41,325)
Other income, net 6,569 19 22,261 13,901
Income before income taxes and
extraordinary items 7,801 19,681 65,478 102,973
Provision for income taxes 3,004 7,676 25,209 40,159
Income before extraordinary items 4,797 12,005 40,269 62,814
Extraordinary item -- (10) (76) (314)
Net income $4,797 $11,995 $40,193 $62,500
Basic earnings per common share:
Income before extraordinary items $0.11 $0.27 $0.90 $1.37
Extraordinary items - loss on
discharge of indebtedness -- -- -- --
Net income per common share $0.11 $0.27 $0.90 $1.37
Diluted earnings per common share:
Income before extraordinary items $0.11 $0.26 $0.88 $1.34
Extraordinary items - loss on
discharge of indebtedness -- -- -- --
Net income per common share $0.11 $0.26 $0.88 $1.34
Prime Hospitality Corp.
Balance Sheet Information
(Unaudited)
(In Thousands, except per share amounts)
December 31, 2001
Cash and marketable securities $30,090
Fixed assets 1,021,115
Total assets 1,138,763
Revolving credit facility 0
Other debt 320,031
Total debt 320,031
Stockholders' equity $712,488
Quarterly weighted average basic shares outstanding 44,717
Quarterly weighted average diluted shares outstanding 45,582
Book value per quarterly weighted average diluted share $15.63
Prime Hospitality Corp.
Comparable Hotel Performance Summary
December 31, 2001
Three Twelve
Months Months
Ended Ended
Dec 31, Dec 31,
2001 2000 Variance 2001 2000 Variance
Owned and Leased Hotels:
Occupancy 58.2% 60.4% (2.2 pts.) 63.3% 67.4% (4.1 pts.)
ADR $69.75 $77.89 (10.4%) $76.79 $78.32 (1.9%)
REVPAR $40.62 $47.08 (13.7%) $48.64 $52.75 (7.8%)
System-Wide Hotels:
AmeriSuites
Occupancy 59.2% 59.5% (0.3 pts.) 65.1% 68.9% (3.8 pts.)
ADR $71.96 $80.73 (10.9%) $79.97 $81.83 (2.3%)
REVPAR $42.64 $48.07 (11.3%) $52.08 $56.34 (7.6%)
Wellesley Inns & Suites
Occupancy 56.2% 61.2% (5.0 pts.) 61.8% 64.8% (3.0 pts.)
ADR $54.64 $59.36 (7.9%) $60.38 $60.46 (0.1%)
REVPAR $30.68 $36.30 (15.5%) $37.29 $39.18 (4.8%)
Non-Proprietary Brands
Occupancy 60.7% 70.7% (10.0 pts.) 65.9% 72.9% (7.0 pts.)
ADR $103.54 $111.48 (7.1%) $109.99 $111.83 (1.6%)
REVPAR $62.84 $78.80 (20.3%) $72.45 $81.55 (11.2%)
Prime Hospitality Corp.
Hotel Statistics
December 31, 2001
Dec 2001
Number of
Hotels Rooms
AmeriSuites
Owned 65 8,384
Leased 46 5,696
Managed 6 819
Franchised 22 2,735
Total 139 17,634
Wellesley Inns & Suites
Owned 55 6,480
Leased -- --
Managed 5 558
Franchised 14 1,279
Total 74 8,317
Non-Proprietary Brands
Owned 11 2,195
Leased 1 160
Managed 9 1,439
Franchised -- --
Total 21 3,794
Total Portfolio
Owned 131 17,059
Leased 47 5,856
Managed 20 2,816
Franchised 36 4,014
Total 234 29,745
SOURCE: Prime Hospitality Corp.