Nov. 4, 2009 (PR Newswire) -- ARLINGTON, Va., Nov. 4 /PRNewswire-FirstCall/ -- Interstate Hotels & Resorts (NYSE: IHR), a leading hotel real estate investor and the nation's largest independent hotel management company, today reported operating results for the third quarter ended September 30, 2009. The company's performance for the third quarter includes the following (in millions, except per share amounts):
Third Quarter Year-to-Date (YTD)
2009 2008 2009 2008
---- ---- ---- ----
Total revenue (1) $30.8 $36.8 $95.3 $116.2
Net loss $(10.3) $(1.4) $(29.5) $(1.6)
Diluted loss per share $(0.32) $(0.05) $(0.92) $(0.05)
Adjusted EBITDA (2) (3) $6.4 $8.3 $22.6 $26.2
Adjusted net loss (2) $(5.4) $(1.2) $(6.8) $(2.3)
Adjusted diluted EPS (2) $(0.17) $(0.04) $(0.21) $(0.07)
(1) Total revenue excludes other revenue from managed properties
(reimbursable costs).
(2) Adjusted EBITDA, Adjusted net loss, and Adjusted diluted EPS are
non-GAAP financial measures and should not be considered as an
alternative to any measures of operating results under GAAP. See
the definition and further discussion of non-GAAP financial measures
and reconciliation to net loss later in this press release.
(3) Includes the company's share of EBITDA from unconsolidated entities
in the amounts of $1.0 million and $1.9 million in the third quarters
of 2009 and 2008, respectively, and $4.0 million and $6.0 million in
the first nine months of 2009 and 2008, respectively.
Highlights for the third quarter and through today include:
-- Extended senior secured credit facility to March 2012;
-- Common stock resumed trading on the NYSE effective July 29, 2009;
-- Added 10 properties to third-party management portfolio, including first
hotel in India, the new-build Four Points by Sheraton in Jaipur;
-- Secured mortgage financing for Westin Atlanta Airport;
-- Signed purchase and sale agreement to sell wholly owned Hilton Garden
Inn Baton Rouge; IHR to retain management of hotel with new ownership.
"The hotel business climate continued to be among the most challenging the industry has ever experienced," said Thomas F. Hewitt, chairman and chief executive officer. "Shrinking corporate travel budgets continue to impact hotel performance, despite some offset from price-motivated leisure travel this summer."
"Throughout this downturn, we have continued to focus on growth in third party management contracts, cost containment, preservation of capital and maintaining liquidity. We have made significant progress with our capital structure by extending the maturity of our debt and taking the necessary steps to meet our first amortization payment hurdle ahead of schedule."
Hotel Management Results
Same-store(4) RevPAR for all managed hotels in the third quarter of 2009 decreased 20.8 percent to $78.97. Average daily rate (ADR) declined 15.1 percent to $115.29, and occupancy was off 6.7 percent to 68.5 percent.
Same-store RevPAR for all full-service managed hotels dropped 22.2 percent to $87.75, based on a 17.1 percent fall in ADR to $125.35, and a 6.3 percent decline in occupancy to 70.0 percent.
Same-store RevPAR for all select-service managed hotels fell 16.6 percent to $62.09, reflecting a 9.7 percent decrease in ADR to $94.63, and a 7.6 percent decline in occupancy to 65.6 percent.
"Lodging fundamentals continued in a similar pattern during the quarter, as our overall RevPAR declined nearly 21 percent led by an ADR decrease of over 15 percent," Hewitt said. "However, occupancy declines seem to be lessening across the portfolio, with only a 6.7 percent decrease this quarter.
"Despite the difficult economy, we added six contracts to our managed portfolio in the quarter and four in October as owners and investors continue to seek operators with the resources and expertise to effectively manage hotels through this economic downturn. With these additions, today we have a total of 228 hotels in our managed portfolio.
"Our management contract pipeline remains quite active. We are beginning to see distressed hotel opportunities and believe this will be an important source of new contracts in the coming year," Hewitt added. "We have also opened four newly built properties this year and currently have signed contracts to manage another 13 to be built hotels."
(4) Please see footnote 9 to the financial tables within this press
release for a detailed explanation of "same-store" hotel operating
statistics.
International
During the quarter, the company continued to advance its management/development initiative in India. "In October, our joint venture management company, JHM Interstate Hotels India, opened its first property in India, a Four Points by Sheraton in Jaipur. It is the first project developed by Duet India Hotels Limited, a real estate development group devoted exclusively to hotel development in India, in which our management partnership has an equity interest. We are on schedule to open our second Four Points by Sheraton, in Visag, in the next few months and have been selected to manage three hotels that are expected to open from late summer 2010 through spring 2011.
"The expansion of our international portfolio continues to be an important priority for us," Hewitt said. "India is a dynamic, high-growth market and our India-based management platform and local partners provide the infrastructure we need to successfully expand our presence there."
Wholly Owned Hotel Results
EBITDA from the company's seven owned hotels was $4.2 million in the 2009 third quarter and $14.7 million for the first nine months, as outlined below (in millions):
Owned Hotels Third Quarter Year-to-Date
2009 2008 2009 2008
---- ---- ---- ----
Net loss $(4.5) $(1.5) $(5.8) $(0.1)
Interest expense, net $5.8 $3.3 $11.8 $10.1
Depreciation and amortization $2.9 $3.9 $8.7 $10.9
---- ---- ---- -----
EBITDA $4.2 $5.7 $14.7 $20.9
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The decrease in third quarter operating results as compared to last year was primarily the result of persistent weakness in the Houston, Texas and Concord, Calif. markets. These results were partially offset by the strong relative performance of the company's newly renovated Westin Atlanta Airport and Sheraton Columbia hotels.
"RevPAR at our owned hotels decreased 14.7 percent, which compares favorably with the average industry RevPAR decline of 16.9 percent for the third quarter," Hewitt said. "The majority of our RevPAR decline was attributable to a 13 percent decrease in ADR, but we were able to offset over 60 percent of this revenue decline with expense savings resulting from our cost containment efforts.
Balance Sheet
On September 30, 2009, Interstate had:
-- Total unrestricted cash of $20.9 million.
-- Total debt of $244.4 million, consisting of $161.9 million of senior
debt and $82.5 million of non-recourse mortgage debt.
Early in the quarter, the company extended the maturity of its senior credit facility to March 2012 by converting the facility's then outstanding balance of $161.2 million to a new term loan. The agreement also provides the company with an $8 million revolving line of credit. With that extension, the company is required to make a $20 million amortization payment by March 2010 and another $20 million amortization payment by March 2011.
"As of today, we have made $25 million of our required $40 million amortization payments on our senior secured credit facility," said Bruce Riggins, chief financial officer. "On October 28, we successfully completed mortgage financing for our Westin Atlanta Airport hotel with a five-year, $22 million mortgage from PB Capital Corporation, carrying an interest rate of LIBOR plus 500 basis points and a LIBOR floor of 200 basis points, with interest only payable for the first two years. We used the net proceeds to pay down our senior credit facility, which satisfies the initial amortization requirement well ahead of schedule.
"We also executed a purchase and sale agreement for the sale of our wholly owned Hilton Garden Inn Baton Rouge to a fund managed by Fairwood Capital LLC and expect the transaction to close in November. We will continue to manage the hotel and proceeds from the sale will be used to pay down the senior credit facility. By the close of the fourth quarter, we expect to have paid down approximately $35 million of the $40 million required by March 2011."
Guidance
The company has updated its 2009 guidance based on a current projected RevPAR decline of 20 percent for all hotels and 16 percent for owned hotels:
-- Total Adjusted EBITDA of $31 million, which includes the following:
-- EBITDA from wholly owned hotels of $17 million;
-- The company's share of EBITDA from unconsolidated joint ventures of $5
million; and
-- EBITDA from the hotel management business of $9 million.
-- Adjusted net loss of $(9.0) million, or $(0.28) per share.
Interstate will hold a conference call to discuss its third-quarter results today, November 4, at 9 a.m. Eastern Time. To hear the webcast, interested parties may visit the company's Web site at www.ihrco.com and click on Investor Relations and then Third-Quarter Conference Call. A replay of the conference call will be available until midnight on Wednesday, November 11, 2009, by dialing 1-800-406-7325, reference number 4170333, and an archived webcast of the conference call will be posted on the company's Web site through December 4, 2009.
As of today, Interstate Hotels & Resorts, Inc. has ownership interests in 56 hotels and resorts, including seven wholly owned assets. Including those properties, the company and its affiliates manage a total of 228 hospitality properties with more than 46,000 rooms in 37 states, the District of Columbia, Russia, India, Mexico, Belgium, Canada and Ireland. Interstate Hotels & Resorts also has contracts to manage 13 to be built hospitality properties with approximately 3,000 rooms.
