Press Release: MeriStar Hotels & Resorts, Inc.
August 9, 2001
WASHINGTON, DC -- MeriStar Hotels & Resorts (NYSE: MMH), the nation's largest independent hotel management
company, today announced results for the second quarter ended June 30, 2001. For comparative purposes, the results
for the three months ended and six months ended June 30, 2000 are presented on a pro forma basis as if the 106
leases with MeriStar Hospitality Corporation (NYSE: MHX) that were converted to management contracts on January
1, 2001 had been converted on January 1, 2000.
Revenues for the 2001 second quarter increased 24.4 percent to $83.5 million. Excluding non-recurring items, net
loss for the quarter was ($0.5) million, or $(0.01) per share on a diluted basis, compared to net income of $1.9
million, or $0.06 per share in the 2000 second quarter. Recurring earnings before interest, taxes, depreciation
and amortization (EBITDA) declined 19.9 percent to $5.5 million.
During the second quarter, the company recorded the following non-recurring charges:
- $0.6 million of costs related to the company's terminated merger with American Skiing Company (NYSE: SKI - news). - $0.9 million of costs related to the corporate restructuring that resulted in a 10 percent reduction in corporate overhead on a run-rate basis.
Same-store revenue per available room (RevPAR) for all full-service managed hotels in the 2001 second quarter
declined 5.0 percent to $79.65. Occupancy declined 5.6 percent to 71.9 percent and average daily rate (ADR) advanced
0.6 percent to $110.71. Same-store RevPAR for all limited-service, leased hotels in the 2001 second quarter declined
2.4 percent to $56.88. ADR rose 5.2 percent to $82.07, and occupancy decreased 7.2 percent to 69.3 percent.
``The sluggish U.S. economy had a major impact on our BridgeStreet subsidiary in the 2001 second quarter, which
was the primary cause for our lower results,'' said Paul Whetsell, chairman and chief executive officer of MeriStar.
``However, our BridgeStreet operations in London, where we have added more units, were ahead of our internal plan,
although not enough to offset the U.S. declines.
``The flexible nature of our corporate housing inventory allows us to respond quickly to economic changes by reducing
the number of leased units,'' said Whetsell. ``We plan to shut down operations in three smaller, secondary markets,
which will result in a total charge of $0.5 million to $1.0 million in the third and fourth quarters. At the same
time, we are expanding our corporate housing business in select U.S. and European markets.''
Whetsell said that the slowing economy also had a negative impact on earnings from its managed hotels, but to a
much lesser extent. ``Converting from leases to management contracts on January 1, 2001, as a result of the REIT
Modernization Act has significantly reduced our earnings volatility,'' he said.
MeriStar's managed hotels' results were most negatively influenced by a sharp reduction in business travel, as
well as leisure travel in some markets. ``We continue to monitor and seek additional ways to enhance returns for
our owners,'' Whetsell said. ``We are aggressively pursuing more group business in the second half and are prepared
to take advantage of any improvement in the economy.''
Outlook
``Since the beginning of the year, we have seen steady and persistent erosion of economic growth,'' Whetsell noted.
``We expect RevPAR trends in the second half of 2001 to be similar to the second quarter. We also expect the slowdown
in corporate housing demand to continue in the U.S. for the balance of the year and are therefore reducing our
guidance for the remainder of the year.''
Whetsell said that the company expects earnings per share to be $(0.01) to $0.01 in the 2001 third quarter, and
$(0.02) to $0.00 in the 2001 fourth quarter and full-year 2001 EBITDA to be $22 million to $24 million.
``MeriStar continues to have strong free cash flow and is well positioned to operate throughout the economic cycle.
We will continue to focus on our primary strengths and growth strategies to maximize our owners' returns, to seek
additional management contracts, to expand our BridgeStreet Corporate Housing Worldwide distribution, and to build
our Doral brand.''
Key Financial Information As of June 30, 2001: - Total debt of $110.0 million - Cash balance of $1.4 million - Total debt to annual EBITDA of 3.9x - Senior debt to annual EBITDA of 2.6x - Annual interest coverage ratio of 2.7x - $26 million available on the revolving line of credit - Average cost of debt of 9.4 percent
MeriStar Hotels & Resorts operates 269 hospitality properties with more than 55,000 rooms in 39 states, the
District of Columbia, Canada, and Puerto Rico, including 54 properties managed by Flagstone Hospitality Management,
a subsidiary of MeriStar Hotels & Resorts. Through its Doral Golf division, MeriStar manages 11 golf courses.
BridgeStreet Corporate Housing Worldwide, a MeriStar subsidiary, is one of the world's largest corporate housing
providers, offering upscale, fully furnished corporate housing throughout the United States, Canada and Europe.
For more information about MeriStar Hotels & Resorts, visit the company's Web site: www.meristar.com
This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934, about MeriStar Hotels & Resorts, Inc., including
those statements regarding future operating results and the timing and composition of revenues, among others. 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
the following: the ability of MeriStar Hotels & Resorts to successfully implement its acquisition and operating
strategies; the company's ability to manage rapid expansion; significant leverage; changes in economic cycles;
competition from other hospitality companies; and changes in the laws and government regulations applicable to
the company. For a more detailed description of some of those risks and uncertainties, please read the section
titled ``Risk Factors'' and ``Forward-Looking Information'' in the annual report on Form 10-K of MeriStar Hotels
& Resorts for the year ended December 31, 2000.
MeriStar Hotels & Resorts, Inc.
Statements of Operations (1)
(Unaudited, in thousands except per share amounts
and operating statistics)
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000(2) 2001 2000(2)
Revenue
Rooms $39,121 $39,803 $76,661 $76,652
Food and beverage 3,107 3,442 6,241 6,526
Other operating departments 1,841 2,411 3,785 4,589
Corporate housing 26,488 9,392 50,937 9,392
Management and other fees 12,960 12,108 25,643 23,479
-------- -------- --------- --------
Total revenue 83,517 67,156 163,267 120,638
Operating expenses by department:
Rooms 8,771 8,683 17,276 17,407
Food and beverage 2,304 2,596 4,644 5,068
Other operating
departments expenses 1,171 1,296 2,213 2,429
Corporate housing 19,464 6,037 36,805 6,037
Undistributed operating expenses:
Administrative and general 20,383 15,212 39,545 29,715
Property operating costs 9,185 8,434 18,149 16,946
Participating lease expense 17,089 18,067 33,034 32,609
Depreciation and amortization 3,411 2,119 6,546 3,762
Merger costs 614 - 4,385 -
Charges to investments in
and advances to
affiliates, accounts and
notes receivable, and other - - 15,298 -
Restructuring expenses 912 - 912 -
-
-------- -------- --------- --------
Total operating expenses 83,304 62,444 178,807 113,973
-------- -------- --------- --------
Net operating income (loss) 213 4,712 (15,540) 6,665
Interest expense, net 2,777 1,353 5,662 2,544
Equity in (income)
loss of affiliates (327) (4) (440) 124
-------- -------- --------- --------
Income (loss) before minority
interests and income taxes (2,237) 3,363 (20,762) 3,997
Minority interests 69 221 (594) 263
Income taxes (922) 1,248 (8,067) 1,483
-------- -------- --------- --------
Net income (loss) $(1,384) $ 1,894 $(12,101) $ 2,251
======== ======== ========= ========
Weighted average number of
diluted shares of common
stock outstanding 37,172 33,605 36,787 34,555
======== ======== ========= ========
GAAP net income (loss)
per diluted common share $ (0.03) $ 0.37 $ (0.32) $ 0.45
Effect of EITF 98-9 (0.01) 0.02 (0.01) (0.01)
Effect of non-recurring items 0.03 - 0.32 -
Effect of converting
MeriStar Hospitality leases to
management contracts on
January 1, 2001 - (0.33) - (0.37)
-------- -------- --------- --------
Pro forma net income (loss)
per diluted common share $ (0.01) $ 0.06 $ (0.01) $ 0.07
======== ======== ========= ========
(1) Excludes the effect of EITF 98-9.
(2) For comparative purposes, the results of the three and six months
ended June 30, 2000 are presented on a proforma basis assuming the
leases with MeriStar Hospitality Corporation were converted to
management contracts on January 1, 2000. These pro forma amounts
are detailed in our Form 8-K filing dated May 2, 2001.
Pro forma hotel operating statistics:
Full-service managed hotels:
Occupancy 71.9% 76.2% 70.4% 72.6%
ADR $110.71 $110.03 $113.80 $111.07
RevPAR $ 79.65 $ 83.81 $ 80.14 $ 80.59
Limited-service leased hotels:
Occupancy 69.3% 74.7% 67.0% 71.3%
ADR $ 82.07 $ 78.01 $ 81.82 $ 77.35
RevPAR $ 56.88 $ 58.25 $ 54.84 $ 55.15
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Contact:
MeriStar Hotels & Resorts, Inc.
Bruce Riggins, 202/295-2276
Melissa Thompson, 202/295-2228
or
Daly Gray Public Relations (Media)
Jerry Daly or Carol McCune, 703/435-6293