Press Release: Interstate Hotels Corporation
May 15, 2002
PITTSBURGH, PA -- Interstate Hotels Corporation (Nasdaq:IHCO), one of the largest independent hotel management
companies in the United States, today announced results for the first quarter ended March 31, 2002.
For the first quarter of 2002, the Company reported earnings before interest, income tax expense and depreciation
and amortization (EBITDA) of $3.6 million versus $2.5 million in the first quarter of 2001. The Company incurred
a net loss of $0.3 million compared to a net loss of $0.5 million for the same period last year reflecting earnings
per share of $(.05) compared to $(.07), respectively.
Revenue per available room (RevPAR) for comparable U.S. full-service hotels managed by the Company decreased 16.8%
for the quarter to $80.88 from $97.23 for the same period in 2001. Average daily room rate (ADR) decreased to $116.22
from $130.16, while occupancy rates declined from 74.7% to 69.6% in the first quarter from a year ago. The weakened
economic conditions in the U.S. and the lingering affects of the tragic events of September 11th continued to adversely
impact the Company's first quarter RevPAR.
Thomas F. Hewitt, Chairman and Chief Executive Officer, stated, "Although we experienced softness in RevPar
due to the sluggish economy, we have seen improved operating results as we continue our cost containment initiatives.
We are particularly pleased with our financial results this quarter, especially with the increase in EBITDA over
the comparable period last year."
Interstate Hotels Corporation operates approximately 135 hotels with more than 28,000 rooms in 36 states in the
United States, the District of Columbia, as well as Canada and Russia. For more information, visit www.interstatehotels.com.
FINANCIAL TABLES FOLLOW -
Comparable Hotel Statistics(a)
------------------------------
Three Months Ended
March 31,
2002 2001
------------------
U.S. Full-Service Managed Hotels:
Occupancy 69.6% 74.7%
ADR $116.22 $130.16
RevPAR $80.88 $97.23
(a) Comparable U.S. hotels represent those operated by the Company
since January 1, 2001 excluding hotels that underwent a major
renovation or a change in franchise affiliation.
NOTE:
This press release contains "forward-looking statements," within the meaning of the Private Securities
Litigation Reform Act of 1995, about the Company, including those statements regarding future operating results
and the timing and composition of revenues, among others, and statements containing words such as "expects,"
"believes" or "will," which indicate that those statements are forward-looking. Except for
historical information, the matters discussed in this press release are forward-looking statements that are subject
to certain risks and uncertainties that could cause the actual results to differ materially, including financial
performance, real estate conditions, execution of hotel development programs, changes in the availability of additional
management contracts, leases or acquisitions, the impact of the events of September 11, 2001, changes in local
or national economic conditions and other risks detailed from time to time in the Company's reports filed with
the SEC.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities
nor shall there be any sale of any securities in any state or province in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under applicable securities laws. MeriStar Hotels &
Resorts, Inc. ("MeriStar") plans to file a registration statement on Form S-4 with the SEC in connection
with the previously announced merger transaction. The Form S-4 will contain a prospectus, a proxy statement, and
other documents for the stockholders' meetings of Interstate and MeriStar at which time the proposed transaction
will be considered. Interstate and MeriStar plan to mail the proxy statement and prospectus contained in the Form
S-4 to their respective stockholders. The Form S-4, proxy statement and prospectus will contain important information
about Interstate, MeriStar, the merger and related matters. Investors and stockholders should read the Form S-4,
proxy statement and prospectus and the other documents filed with the SEC in connection with the merger carefully
before they make any decision with respect to the merger. A copy of the merger agreement has been filed with the
SEC by both Interstate and MeriStar. The Form S-4, proxy statement and prospectus, and all other documents filed
with the SEC in connection with the merger transaction will be available when filed free of charge at the SEC's
web site, at www.sec.gov. In addition, the proxy statement and prospectus, and all other documents filed with the
SEC in connection with the merger will be made available to investors free of charge by writing to Interstate or
MeriStar at their corporate headquarters.
In addition to the Form S-4, the proxy statement, and the other documents filed with the SEC in connection with
the merger, both Interstate and MeriStar are obligated to file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports, statements and other information filed with
the SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference room. Filings with the SEC also are available
to the public from commercial document-retrieval services and at the Web site maintained by the SEC at www.sec.gov.
Pursuant to Instruction 3 of Item 4 of Schedule 14A, the participants in the solicitation include Interstate, MeriStar,
their respective directors, and may include certain executive officers of each. Information concerning the Interstate
directors and executive officers and their direct and indirect interests in Interstate is contained in its annual
report on Form 10-K/A filed with the SEC on April 19, 2002. Information concerning the MeriStar directors and executive
officers and their direct and indirect interests in MeriStar is contained in its annual report on Form 10-K/A filed
with the SEC on April 30, 2002. The identity of the people who, under SEC rules, may be considered participants
in the solicitation of Interstate and MeriStar stockholders in connection with the proposed merger, and a description
of their interests, is available on Schedule 14A filed by Interstate on May 2, 2002 and a filing under Rule 425
under the Securities Act by MeriStar on May 2, 2002. As of the date of this communication, none of the foregoing
participants beneficially owned in excess of 1% of Interstate Common Stock, except Thomas F. Hewitt, J. William
Richardson, Kevin P. Kilkeary, Karim J. Alibhai and Sherwood M. Weiser, each a director and/or executive officer
of Interstate or beneficially owned in excess of 1% of the MeriStar Common Stock, except Paul W. Whetsell and Steven
D. Jorns, each a director and/or executive officer of MeriStar.
INTERSTATE HOTELS CORPORATION
Consolidated Statements of Operations
(Unaudited, in thousands except per share amounts)
Actual Three Months
Ended March 31,
2002 2001
-------- --------
Lodging revenues $ 676 $ 1,101
Net management fees 5,658 6,476
Other fees 4,013 3,508
-------- --------
10,347 11,085
Other revenue from managed hotels (1) 62,441 69,405
-------- --------
Total revenues 72,788 80,490
-------- --------
Lodging expenses 481 779
General and administrative 1,943 2,837
Payroll and related benefits 4,243 5,357
Tender Offer costs 119 -
Depreciation and amortization 2,528 2,706
-------- --------
9,314 11,679
Other expenses from managed hotels (1) 62,441 69,405
-------- --------
Total expenses 71,755 81,084
-------- --------
Operating income (loss) 1,033 (594)
Other income (expense):
Interest, net (975) (67)
Earnings (losses) from equity investments
in hotel real estate (180) 177
-------- --------
Loss before income tax benefit (122) (484)
Income tax benefit (71) (208)
-------- --------
Loss before minority interest (51) (276)
Minority interest 64 36
-------- --------
Net loss (115) (312)
Less mandatorily redeemable preferred stock:
Dividends 159 159
Accretion 15 15
-------- --------
Net loss available to common stockholders $ (289) $ (486)
======== ========
Earnings per share:
Basic $ (0.05) $ (0.07)
Diluted $ (0.05) $ (0.07)
Weighted average common shares outstanding:
Basic 5,730 6,481
Diluted 5,730 6,481
E.B.I.T.D.A. $ 3,554 $ 2,475
======== ========
(1) Includes the retroactive adoption of the provisions of EITF 01-14,
"Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred." In accordance with EITF 01-14, the
operating revenues and expenses include the reimbursement of costs
incurred on behalf of the third-party owners of the Company's managed
hotels. These costs relate primarily to payroll and benefit costs.
These reimbursements are received based upon the costs incurred by the
Company with no added margin. Therefore, the adoption of EITF 01-14
did not impact operating income or earnings per share.
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Contact:
Interstate Hotels Corporation
Investor Relations: Lisa O'Connor, 412/937-3319
Corporate Communications: Tom Loftus, 412/937-3382