Press Release: Winston Hotels, Inc.
November 1, 2000
RALEIGH, NC -- Winston Hotels, Inc., (NYSE: WXH), a real estate investment trust and owner of premium limited-service,
high-end extended-stay and full-service hotels, yesterday announced results for the third quarter and nine months
ended September 30, 2000. FFO totaled $8.9 million for the third quarter of 2000 and $9.3 million for the third
quarter of 1999. On a per share basis, FFO for the third quarter of 2000 totaled $0.49 on 18.2 million weighted
average shares outstanding compared to $0.51 on 18.1 million weighted average shares for the same quarter a year
ago. Lease revenue prior to adoption of SAB 101 totaled $16.5 million for both the third quarter of 2000 and the
third quarter of 1999.
Summary of Third Quarter and YTD Unaudited Financial Highlights
($ in thousands, except per share amounts)
For the Three Months For the Nine Months
Ended Sept. 30, Ended Sept. 30,
2000 1999 Change 2000 1999 Change
(proforma) (proforma)
Percentage lease
revenue Pre-
SAB 101 $16,487 $16,490 0.0% $48,757 $48,515 0.5%
Deferred lease
revenue $2,257 $1,678 34.5% $(9,789) $(11,705) 16.4%
Percentage lease
revenue $18,744 $18,168 3.2% $38,968 $36,810 5.9%
FFO $8,914 $9,314 (4.3)% $24,803 $25,309 (2.0)%
FFO per diluted
common share $0.49 $0.51 (3.9)% $1.36 $ 1.40 (2.9)%
Note: The 1999 financial highlights above have been presented on a
proforma basis as if the Company had adopted SAB 101 prior to 1999 in
order to provide for a meaningful comparison.
Bob Winston, Chief Executive Officer, commented: ``Our third quarter FFO per share of $0.49 and RevPAR results
were in line with expectations. This solid performance despite our sector's slower growth is testimony to the effectiveness
of our strategy. Our commitment to investing in high-quality real estate has given us one of the youngest median
property ages of any public-hotel REIT. This highly selective approach continues to serve us well.
``Additionally, we are making excellent progress in executing our multi-dimensional growth strategy, which permits
us to apply our expertise in hotel development and participate in carefully structured joint ventures. Earlier
this month we announced the opening of a Hilton Garden Inn in Windsor Connecticut, which is owned and operated
under a joint venture agreement with Regent Partners. In addition we have two other joint venture projects under
development which will provide us with additional sources of fee income and enable us to expand our affiliations
with leading upscale brands. Finally, we are in the process of financing and developing two Hilton Garden Inn hotels
with Noble Investment Group. This strategic alliance further documents Winston's ability to execute despite the
market constraints currently confronting our sector,'' stated Mr. Winston.
Winston Hotels' President and Chief Operating Officer, James D. Rosenberg, added, ``Operating trends remained solid
in the third quarter of 2000. As we stated earlier in the year, we expected RevPAR growth for our segment to be
in the flat to one percent range. Accordingly, we are encouraged by our positive trend in RevPar growth, which
was up one percent for the third quarter.''
Mr. Rosenberg went on to say, ``In addition to ramping up occupancy at our newest hotels and engaging in joint
ventures, Winston continues to focus on driving internal growth by offering financing services as well. In fact,
we continue to seek additional opportunities to provide mezzanine financing to other borrowers. It is important
to note that Winston Hotels is not merely a financial investor. We are fully versed in all aspects of hotel development,
finance and operations including selecting sites and markets, assessing investment potential, selecting architects
and contractors and if necessary building and also managing hotels.''
Opening of Windsor, Conn. Hilton Garden Inn
On September 19, 2000, the Company opened a $16.5 million, full-service 158-room Hilton Garden Inn, which is owned
and operated under a joint venture agreement with Regent Partners, a leading real estate development, investment
and services firm. The hotel is leased to and operated by Bass Hotels & Resorts.
Under the terms of the joint venture agreement, Winston provided development management services and capital design
and purchasing capabilities, and will continue to provide ongoing asset management assistance to the joint venture.
Winston has an ownership stake of 49 percent in the hotel, and the ability to acquire Regent's and other parties'
ownership interest in the project, subject to the provisions of the joint venture agreement.
Sale of Duncanville, Texas Hampton Inn
The Company sold its 119-room Hampton Inn hotel in Duncanville, Texas effective September 29, 2000. The sale price
was $3.0 million. The Company used the proceeds from this transaction for debt reduction. The sale of the Duncanville
property was in keeping with the Company's strategy to market for sale certain non-core hotels that lie outside
Winston's upscale segment focus and use the proceeds for debt reduction.
Pro Forma Lease Revenue
For the 50 hotels that were open during both quarters ended September 30, 2000 and September 30, 1999, including
the Duncanville, Texas Hampton Inn which was sold effective September 29, 2000, lease revenues and related statistics
were as follows (note that the Company does not exclude 'for sale' or 'under renovation' hotels when making these
comparisons):
Quarter Ended September 30,
2000 1999 %Change
Lease Revenues* $16,487 16,374 0.7
Average Daily Rate $78.41 $75.22 4.2
Occupancy 71.36% 73.72 % (3.2)
RevPAR $55.96 $55.45 1.0
(*Pre SAB 101, $ in thousands)
The Company portfolio at September 30, 2000 included an aggregate total of 49 operating hotel properties with 6,723
rooms in 12 states, as well as a 49% ownership interest in one operating hotel and two hotels under development
through joint venture agreements.
Stock Repurchase Program
Regarding stock repurchases, on August 17, 2000, the Board authorized the repurchase of up to 1,000,000 shares
of Winston's common stock. The Company is prepared to begin to execute this program when the right pricing opportunity
arises.
Dividend Performance
During the third quarter, Winston Hotels announced its regular quarterly cash dividend of $0.28 per common share.
The dividend was paid on October 16, 2000 to common shareholders of record as of September 30, 2000. The regular
quarterly dividend is equivalent to $1.12 per share on an annualized basis. Also in the third quarter, the Company
announced its regular quarterly cash dividend to preferred shareholders of $0.578125 per share. This dividend also
was paid on October 16, 2000 to shareholders of record as of September 30, 2000.
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (``SAB 101'')
which provides guidance on revenue recognition. SAB 101 is effective for fiscal years beginning after December
15, 1999. SAB 101 requires that a lessor not recognize contingent rental income until annual specified hurdles
have been achieved by the lessee. During 1999 and prior years, consistent with industry practice, the Company recognized
contingent rentals throughout the year since it was considered probable that the lessee would exceed the annual
specified hurdles. The Company has reviewed the terms of its leases and has determined that the provisions of SAB
101 materially impact the Company's revenue recognition on an interim basis, effectively deferring the recognition
of revenue from its leases from the first and second quarters of the calendar year to the third and fourth quarters.
SAB 101 will impact the Company's revenue recognition on an annual basis, although to a much lesser degree, as
seven of the Company's leases have fiscal year ends which differ from the Company's calendar year end. The Company
has accounted for SAB 101 as a change in accounting principle effective January 1, 2000, and therefore has not
restated prior year financial statements.
SAB 101 will have no impact on the Company's FFO, or its interim or annual cash flow from its third party lessees,
and therefore, on its ability to pay dividends.
As of September 30, 2000, the Company's deferred lease revenue resulting from the adoption of SAB 101 totaled $10.5
million, at least 90% of which will be recognized in the fourth quarter of 2000. As noted above, the Company has
seven leases with non-calendar year fiscal years. These seven leases generated $0.7 million deferred revenue as
of December 31, 1999, which is shown as a ``cumulative effect of change in accounting principle'' on the accompanying
Statement of Income for the Nine Months Ended September 30, 2000.
Winston Hotels' third quarter investor conference call is scheduled for 10 a.m. EST on October 31, 2000. This call
also will be simulcast over the internet via the website www.winstonhotels.com
, www.vcall.com and www.streetevents.com
. The replay will be available on the Winston Hotels website for 30 days, and the Streetevents website for 90 days,
or via the telephone by dialing 888-266-2086, passcode 4681597.
Forward-Looking Statements
The press release contains ``forward looking'' statements within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited
to, statements referring to the anticipated benefits and development plans of the joint ventures and alliances.
You can identify these statements by use of words like ``may,'' ``will,'' ``expect,'' ``anticipate,'' ``estimate,''
or ``continue'' or similar expressions. These statements represent the Company's judgment and are subject to risks
and uncertainties that could cause actual operating results to differ materially from those expressed or implied
in the forward looking statements including, but not limited to, development risks including risk of construction
delay, cost overruns, occupancy and other governmental permits, zoning, the increase of development costs in connection
with projects that are not pursued to completion, and the risk of non-payment of mezzanine loans. Other risks are
discussed in the Company's filings with the Securities and Exchange Commission, including but not limited to its
Form S-3 Registration Statement filed on September 2, 1999 as amended on September 29, 1999 and its Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q and its other periodic reports.
About the Company
Raleigh, North Carolina-based Winston Hotels, Inc., is a real estate investment trust specializing in the development,
acquisition, and rehabilitation of premium limited-service, high-end extended-stay and full-service hotel properties,
with a portfolio increasingly weighted toward the leading brands in the lodging industry's upscale segment.
For more information, call Patti Bell, Investor Relations Manager of Winston Hotels, Inc., at 919-510-8003.
For more information on Winston Hotels toll-free via fax, simply dial 800-PRO-INFO and enter company code 994 or
the ticker symbol WXH on any touch tone phone, or visit the Winston Hotels page FRB's web site at www.frbinc.com
.
Visit Winston Hotels at www.winstonhotels.com .
WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
ASSETS
September 30, 2000 December 31, 1999
(unaudited)
Land $41,776 $42,704
Buildings and improvements 360,398 364,481
Furniture and equipment 39,855 38,348
Operating properties 442,029 445,533
Less accumulated depreciation 72,427 58,366
369,602 387,167
Properties under development 227 1,703
Net investment in hotel properties 369,829 388,870
Corporate FF&E, net 1,327 871
Cash 117 28
Lease revenue receivable 10,256 7,611
Notes receivable 3,892 --
Investment in joint ventures 4,283 184
Deferred expenses, net 3,366 4,072
Prepaid expenses and other assets 5,775 4,435
Total assets $398,845 $406,071
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt $69,155 $69,975
Due to banks 103,400 104,500
Deferred percentage lease revenue 10,508 --
Accounts payable and accrued expenses 6,980 5,490
Distributions payable 6,829 6,806
Minority interest in Partnership 8,937 10,222
Total liabilities $205,809 $196,993
Shareholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, 3,000,000
shares issued and outstanding
(liquidation preference of $76,734) 30 30
Common stock, $.01 par value, 50,000,000
shares authorized, 16,897,253 and
16,813,823 shares issued and outstanding 169 168
Additional paid-in capital 229,804 229,106
Unearned compensation (856) (524)
Distributions in excess of earnings (36,111) (19,702)
Total shareholders' equity 193,036 209,078
Total liabilities and
shareholders' equity $398,845 $406,071
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Post SAB 101) (Pre SAB 101)
Three Months Three Months
Ended Ended
Revenue: Sept. 30, 2000 Sept. 30, 1999
Percentage lease revenue (see Note below) $18,744
$16,490
Interest, joint venture and other income 469 97
Total revenue 19,213 16,587
Expenses:
Real estate taxes and property and casualty
insurance 1,473 1,197
General and administrative 1,139 872
Interest 3,460 3,249
Depreciation 5,293 5,185
Amortization 236 221
Total expenses 11,601 10,724
Income before loss on sale of property and
allocation to minority interest 7,612 5,863
Loss on sale of property 588 239
Income before allocation to minority interest 7,024 5,624
Income allocation to minority interest 379 373
Net income 6,645 5,251
Preferred stock distribution (1,734) (1,734)
Net income applicable to common
shareholders $4,911 $3,517
Earnings per share:
Net income per common share $0.29 $0.21
Net income per common share assuming dilution $0.29 $0.21
Weighted average number of common shares 16,897 16,373
Weighted average number of common shares
assuming dilution 18,195 18,127
Selected Pro Forma Financial Data:
(see Note below)
Percentage lease revenue - Pre SAB 101 $16,487 $16,490
Deferred percentage lease revenue $2,257 $1,678
Percentage lease revenue $18,744 $18,168
Net income $6,645 $6,767
Net income applicable to common shareholders $4,911 $5,033
Net income per common share $0.29 $0.31
Net income per common share assuming dilution $0.29 $0.31
Note: The operating results for the three months ended September 30, 1999
are presented on the basis of accounting used for revenue recognition
prior to the adoption of SAB 101. Accordingly, the Company has presented
the information provided in the Selected Pro Forma Financial Data to
reflect operating results as if the Company had adopted SAB 101 prior to
January 1, 1999 in order to present a more meaningful comparison.
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Post SAB 101) (Pre SAB 101)
Nine Months Nine Months
Ended Ended
Revenue: Sept. 30, 2000 Sept. 30, 1999
Percentage lease revenue (see Note below) $38,968 $48,515
Interest, joint venture and other income 818 301
Total revenue 39,786 48,816
Expenses:
Real estate taxes and property and casualty
insurance 5,260 4,878
General and administrative 3,558 3,470
Interest 10,057 9,344
Depreciation 15,829 15,300
Amortization 694 612
Total expenses 35,398 33,604
Income before loss on sale of property,
allocation to minority interest, and cumulative
effect of change in accounting principle 4,388 15,212
Loss on sale of property 850 239
Income before allocation to minority interest
and cumulative effect of change in accounting
principle 3,538 14,973
Income allocation to minority interest (117) 938
Income (loss) before cumulative effect of
change in accounting principle 3,655 14,035
Cumulative effect of change in accounting
principle - gross (720) --
Cumulative effect of change in accounting
principle - allocation to minority interest 52 --
Cumulative effect of change in accounting
principle - net (668) --
Net income 2,987 14,035
Preferred stock distribution (5,203) (5,203)
Net income (loss) applicable to common
shareholders $(2,216) $8,832
Earnings per share:
Income (loss) before cumulative effect of
change in accounting principle per common
share $(0.09) $0.54
Income (loss) before cumulative effect of
change in accounting principle per common
share assuming dilution $(0.09) $0.54
Net income (loss) per common share $(0.13) $0.54
Net income (loss) per common share assuming
dilution $(0.13) $0.54
Weighted average number of common shares 16,886 16,353
Weighted average number of common shares
assuming dilution 18,185 18,107
Selected Pro Forma Financial Data:
(see Note below)
Percentage lease revenue - Pre SAB 101 $48,757 $48,515
Deferred percentage lease revenue $ (9,789) $(11,705)
Percentage lease revenue $38,968 $36,810
Net income $3,655 $3,454
Net loss applicable to common
shareholders $ (1,548) $ (1,749)
Net loss per common share $(0.09) $(0.11)
Net loss per common share assuming
dilution $(0.09) $(0.11)
Note: The results for the nine months ended September 30, 1999 are
presented on the basis of accounting used for revenue recognition prior to
the adoption of SAB 101. Accordingly, the Company has presented the
information provided in the Selected Pro Forma Financial Data to reflect
operating results as if the Company had adopted SAB 101 prior to January
1, 1999 in order to present a more meaningful comparison. Further, the
cumulative effect of change in accounting principle has been removed for
the nine months ended September 30, 2000 to aid in this comparison.
WINSTON HOTELS, INC.
THIRD QUARTER and YTD 2000
PRO FORMA REVPAR STATISTICAL HIGHLIGHTS
(50 Hotels)
Third Quarter
# of %
Properties 2000 1999 Change
Brand
Comfort/Quality Inn/Suites 11 $39.90 $44.02 -9.36
Hampton Inn/Suites 18 56.26 55.35 1.64
Hilton Garden 3 70.47 65.32 7.88
Holiday Inn/Express 5 69.13 67.62 2.23
Homewood 7 65.02 62.20 4.53
Marriott Products 6 58.02 55.21 5.09
Geographic
East N/S Central 2 77.76 70.40 10.45
Northeast/Middle Atlantic 5 90.50 84.61 6.96
Mountain 3 39.07 37.89 3.11
South Atlantic 36 51.56 52.68 -2.13
West South Central 4 49.09 46.47 5.64
Segment
Midscale w/f&b 3 83.94 83.97 -0.04
Midscale w/out f&b 30 49.00 49.78 -1.57
Upscale 17 61.44 58.74 4.60
Service
Extended Stay 9 60.30 58.09 3.80
Full Service 11 68.27 66.04 3.38
Limited Service 30 49.00 49.78 -1.57
Year To Date
%
2000 1999 Change
Brand
Comfort/Quality Inn/Suites $42.29 $44.82 -5.64
Hampton Inn/Suites 54.14 53.80 0.63
Hilton Garden 69.42 62.92 10.33
Holiday Inn/Express 66.06 63.42 4.16
Homewood 67.06 65.40 2.54
Marriott Products 58.59 58.05 0.93
Geographic
East N/S Central 68.46 65.39 4.69
Northeast/Middle Atlantic 82.22 74.74 10.01
Mountain 51.75 51.75 0.00
South Atlantic 51.95 52.77 -1.55
West South Central 49.41 48.16 2.60
Segment
Midscale w/f&b 80.53 77.15 4.38
Midscale w/out f&b 48.39 49.05 -1.35
Upscale 62.51 60.71 2.96
Service
Extended Stay 64.14 63.77 0.58
Full Service 66.47 63.37 4.89
Limited Service 48.39 49.05 -1.35
SOURCE: Winston Hotels, Inc.