Press Release: MeriStar Hotels & Resorts
November 8, 2001
WASHINGTON, DC -- MeriStar Hotels & Resorts (NYSE: MMH), the nation's largest independent hotel management
company, yesterday announced results for the third quarter ended September 30, 2001.
For comparative purposes, the results for the three and nine months ended September 30, 2000 are presented on a
pro forma basis as if the company's 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.
Third-quarter revenues for 2001 decreased 9.2 percent to $77.6 million. Excluding non-recurring items, net loss
for the quarter was $(1.6) million, or $(0.04) per share on a diluted basis, compared to net income of $2.8 million
or $0.08 per share in the 2000 third quarter. Recurring earnings before interest, taxes, depreciation and amortization
(EBITDA) were $3.0 million, compared to $9.7 million in the 2000 third quarter.
During the third quarter, the company recorded the following non-recurring charges:
Same-store revenue per available room (RevPAR) for all full-service managed hotels in the 2001 third quarter
declined 15.5 percent to $66.29. Occupancy declined 11.2 percent to 65.9 percent and average daily rate (ADR) fell
4.9 percent to $100.54. Same-store RevPAR for all limited-service, leased hotels in the 2001 third quarter declined
9.2 percent to $50.95. ADR rose 1.0 percent to $79.64, and occupancy decreased 10.1 percent to 64.0 percent.
``The terrible and unprecedented events of September 11 have had an immediate and far-reaching impact on the hospitality
industry,'' said Paul W. Whetsell, chairman and chief executive officer of MeriStar. ``We were already in a difficult
operating environment with the economy weakening steadily since the first quarter. We have been working closely
with our owners to optimize revenues and profitability and protect margins while continuing to provide superior
guest service.''
MeriStar's BridgeStreet corporate housing operations accounted for approximately half of the earnings decline as
the slowing U.S. economy and the terrorist attacks combined to sharply curtail corporate travel. ``The nature of
the corporate housing business allows us to expand and contract our inventory as conditions warrant. We ceased
operations in four smaller secondary markets in the third quarter and have reduced inventory in other U.S. markets,''
he said. ``On a positive note, we continue to see growth opportunities in Europe and opened our first office in
Paris during the third quarter.''
The sluggish economy prior to and after the September 11 events also had a negative impact on earnings at managed
hotels. MeriStar's managed hotels' results were most negatively influenced by a sharp reduction in business travel,
especially meetings and convention business.
``RevPAR declined dramatically immediately after the attacks as all travel came to a near halt,'' he said. ``Occupancy
has improved from 47 percent at our full-service hotels the week after the terrorist attacks to 67 percent in the
last week of October, but a return to more normal conditions continues to be hampered by fears of additional attacks
and the condition of the economy.''
The rapid decline in demand in September impacted certain of the company's technical debt covenants. The company
has obtained a waiver of these covenants through February 2002. ``We are in the process of amending our debt facility
through February 2003 to provide the flexibility to achieve maximum operating results,'' said John Emery, president
and chief operating officer. ``Even under current conditions, we are generating cash flow substantially in excess
of debt service, and as the recovery continues we anticipate a return to historical financial covenant ratios.''
Outlook
``It is very difficult to provide meaningful guidance beyond 2001 until the aftereffects of the terrorist attacks
become more clear,'' Emery said. ``We have cut our operating overhead at both the corporate and property levels
and believe we are properly staffed with experienced managers to weather these unprecedented economic conditions.
``Our core strength lies in our ability to operate successfully under difficult economic conditions and to improve
the operating performance of our hotels,'' he said. ``During tough periods, hotels tend to change ownership more
often, creating growth opportunities for proven, experienced managers like MeriStar. We are in a sound financial
position and have the people and systems in place to respond quickly and efficiently.''
Emery said that the company anticipates a loss per share in the 2001 fourth quarter of $(0.06) to $(0.05) and full-year
2001 EBITDA of $17 million to $18 million.
Key Financial Information
As of September 30, 2001:
MeriStar Hotels & Resorts operates 276 hospitality properties with more than 57,000 rooms in 41 states,
the District of Columbia, and Canada, 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, the United Kingdom, Paris,
France and 35 additional countries through its network partners.
For more information about MeriStar Hotels & Resorts, visit the company's Web site: www.meristar.com. To listen
to a webcast of the company's third-quarter conference call today, November 7, at 2 p.m. Eastern time, go to the
Web site and click on Investor Relations and then Third-Quarter Conference Calls. Interested parties also may listen
to an archived webcast of the conference call on the Web site, or may dial (800) 405-2236, pass code 403613, to
hear a telephone replay. The archived webcast will be available through Tuesday, November 13, and the telephone
replay will be available through Monday, November 12, 2001.
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 the effects of the events of September 11,
2001 and the downturn in the economy. Additional risks are discussed in the Company's filings with the Securities
and Exchange Commission, including the Company's annual report on Form 10-K 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 Ended Nine months ended
September 30, September 30,
2001 2000(2) 2001 2000(2)
Revenue
Rooms $ 35,363 $ 38,218 $ 112,024 $ 114,870
Food and beverage 2,606 3,344 8,847 9,870
Other operating
departments 1,586 1,877 5,371 6,466
Corporate housing 28,255 29,369 79,192 38,761
Management and other fees 9,807 12,713 35,450 36,192
-------- -------- --------- ---------
Total revenue 77,617 85,521 240,884 206,159
Operating expenses by
department:
Rooms 8,290 9,149 25,566 26,556
Food and beverage 2,088 2,506 6,732 7,574
Other operating
departments expenses 1,033 1,123 3,246 3,552
Corporate housing 20,611 18,744 57,416 24,781
Undistributed operating
expenses: -
Administrative and general 18,662 18,719 58,207 48,434
Property operating costs 8,895 8,856 27,044 25,802
Participating lease
expense 15,402 17,261 48,436 49,870
Depreciation and
amortization 3,179 2,778 9,725 6,540
Merger costs (146) - 4,239 -
Charges to investments in
and advances to
affiliates, accounts and
notes receivable, and
other 800 - 16,098 -
Restructuring expenses 918 - 1,830 -
-------- -------- --------- ---------
Total operating expenses 79,732 79,136 258,539 193,109
-------- -------- --------- ---------
Net operating income (loss) (2,115) 6,385 (17,655) 13,050
Interest expense, net 2,807 1,986 8,469 4,530
Equity in (income) loss of
affiliates (374) (506) (814) (382)
-------- -------- --------- ---------
Income (loss) before
minority interests and
income taxes (4,548) 4,905 (25,310) 8,902
Minority interests (356) 322 (950) $ 585
Income taxes (1,677) 1,819 (9,744) $ 3,302
-------- -------- --------- ---------
Net income (loss) $ (2,515) $ 2,764 $ (14,616) $ 5,015
======== ======= ======== ========
Weighted average number of
diluted shares of common
stock outstanding 37,184 39,237 36,919 36,117
======== ======= ======== ========
Net income (loss) per
diluted common share $ (0.07) $ 0.08 $ (0.40) $ 0.15
======== ======= ======== ========
Net operating income (loss) $ (2,115) $ 6,385 $ (17,655) $ 13,050
Equity in income of
affiliates 374 506 814 382
Depreciation and
amortization 3,179 2,778 9,725 6,540
Merger costs (146) - 4,239 -
Charges to investments in
and advances to affiliates,
accounts and notes
receivable, and other 800 - 16,098 -
Restructuring expenses 918 - 1,830 -
-------- -------- --------- ---------
Recurring EBITDA $ 3,010 $ 9,669 $ 15,051 $ 19,972
======== ======= ======== ========
(1) Excludes the effect of EITF 98-9.
(2) For comparative purposes, the results of the three and nine months
ended September 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 65.9% 74.2% 69.2% 73.4%
ADR $ 100.54 $ 105.74 $ 109.06 $ 108.82
RevPAR $ 66.29 $ 78.43 $ 75.46 $ 79.87
Limited-service leased hotels:
Occupancy 64.0% 71.2% 66.0% 71.4%
ADR $ 79.64 $ 78.81 $ 81.12 $ 77.70
RevPAR $ 50.95 $ 56.13 $ 53.55 $ 55.45
-------------------------------------------------
Contact:
MeriStar Hotels & Resorts
Bruce Riggins, 202/295-2276
Melissa Thompson, 202/295-2228
or
Daly Gray Public Relations (Media)
Jerry Daly or Carol McCune, 703/435-6293