Interstate Hotels & Resorts Reports First-Quarter 2009 Results
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Interstate Hotels & Resorts Reports First-Quarter 2009 Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-05-07
Interstate Hotels & Resorts (OTC: IHRI), a leading hotel real estate investor and the nation’s largest independent hotel management company, today reported operating results for the first quarter ended March 31, 2009. The company’s performance for the first quarter includes the following (in millions, except per share amounts):
First Quarter
2009(4) 2008(5)
Total revenue(1) . . . . . . . . . . . . . . . . $30.5 $38.9
Net loss. . . . . . . . . . . . . . . . . . . . . . $(12.5) $(0.3)
Diluted loss per share . . . . . . . . . . $(0.39) $(0.01)
Adjusted EBITDA(2)(3) . . . . . . . . . . $5.9 $7.7
Adjusted net loss (2). . . . . . . . . . . . . $(2.0) $(1.1)
Adjusted diluted EPS (2). . . . . . . . . . $(0.06) $(0.03)
(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 adjusted EBITDA from investments in unconsolidated entities in the amounts of $1.2 million and $1.6 million in the first quarter of 2009 and 2008, respectively.
(4) The first quarter 2009 results include a $0.8 million charge for restructuring primarily related to severance costs as a part of the company’s 2009 cost reduction program, and $8.9 million of tax expense relating to the company’s global tax planning strategy. These charges are excluded from the calculation of Adjusted EBITDA, Adjusted net loss and Adjusted diluted EPS.
(5) The first quarter 2008 results include (i) a $2.4 million gain on the sale of the Doral Tesoro Hotel & Golf Club, and (ii) $1.1 million of write-offs of intangible assets related to the sale of certain hotels in 2008. Each of these items has been excluded from the calculation of Adjusted EBITDA, Adjusted net loss and Adjusted diluted EPS.
“The first quarter was an extremely difficult operating period, a trend that we anticipate will continue through most of 2009, and possibly into 2010,” said Thomas F. Hewitt, chief executive officer. “While our visibility remains limited, we expect to see the decline in RevPAR begin to moderate in the second half of the year.”
Hotel Management
Same-store RevPAR for all managed hotels in the first quarter declined 19.1 percent to $74.25. Average daily rate (ADR) was $123.01, down 9.8 percent, and occupancy fell 10.3 percent to 60.4 percent.
Same-store RevPAR for all full-service managed hotels declined 19.7 percent to $84.94. ADR was off 9.9 percent to $134.57, while occupancy decreased 10.9 percent to 63.1 percent.
Same-store RevPAR for all select-service managed hotels declined 17.2 percent to $54.01, led by a 9.2 percent decline in occupancy to 55.1 percent and an 8.9 percent drop in ADR to $97.98.
“The severe condition of the economy continues to present challenges to the hotel industry,” Hewitt said. “However, we remain focused on optimizing returns for our owners and shareholders. As lodging demand weakened in the first quarter, we adapted our cost reduction programs to make every effort to optimize our owners’ and shareholders’ returns.
“In addition to the cost reduction plans at the property level, we implemented an extensive corporate cost savings program in January, which resulted in a decrease of $4.6 million in corporate G&A expense in the first quarter, a reduction of 29 percent from last year.
“Our portfolio count remained steady in the 2009 first quarter,” Hewitt added. “We continue to focus on growing our managed portfolio and have several properties scheduled to come on line in the second quarter. We also have reached out to lenders and loan servicers to offer our expertise in taking over distressed assets. There has not been much movement in this area to date, but we expect activity to pick up later this year and next year, and we are well positioned to respond quickly when opportunities arise.”
Wholly Owned Hotel Results
EBITDA from the company’s seven owned hotels was $4.5 million in the 2009 first quarter as outlined below (in millions):
Owned Hotels First Quarter
2009 2008
Net income (loss) . . . . . . . . . . . . . . $(1.3) $0.1
Interest expense, net . . . . . . . . . . . . $2.9 $3.6
Depreciation and amortization. . . . $2.9 $3.2
EBITDA . . . . . . . . . . . . . . . . . . . . . $4.5 $6.9
“RevPAR for the owned portfolio decreased 16.0 percent, stemming from an 8.7 percent slide in occupancy and an 8.1 percent decrease in rate,” Hewitt said. “Our newly renovated Sheraton Columbia (Md.) hotel performed exceptionally well during the quarter with a 5.2 percent RevPAR increase over last year.
“Our newly renovated Westin Atlanta Airport hotel performed well compared to its competitive set and the overall industry with a RevPAR decline of 13.1 percent. Both of these properties have received an overwhelmingly positive response from customers that are now returning to the hotels following their comprehensive renovations.
“We saw significant weakness in Arlington, Texas, and Concord, Calif., as our hotels in those markets suffered RevPAR declines in excess of our portfolio average due to local market conditions. While total revenue for our owned hotels decreased $4.9 million, we were able to control expenses, leading to an overall expense reduction of $2.4 million.”
Balance Sheet
On March 31, 2009, Interstate had:
• Total unrestricted cash of $13.0 million.
• Total debt of $244.0 million, consisting of $161.5 million of senior debt and $82.5 million of non-recourse mortgage debt.
“We have engaged Bank of America to be the lead arranger for the extension of our credit facility, which has a March 2010 maturity,” said Bruce Riggins, chief financial officer. “We continue to have productive discussions with our bank group regarding this extension, and our goal is to have this extension in place by June 30.
“In late March, we received a waiver from our bank group related to our potential NYSE delisting, pending an appeal process with the Exchange,” said Riggins. “As part of the waiver agreement, the facility size was permanently reduced to $173.3 million from $198.0 million and the interest rate was increased to LIBOR plus 350 basis points from LIBOR plus 275 basis points. The new facility size provides for $10 million of borrowing capacity, of which $6 million is available through June 30. We do not expect that we will need to draw on our revolving facility during the waiver period.”
Outlook and Guidance
The company has updated its 2009 guidance to reflect a RevPAR decline scenario of 17 percent for all managed properties and 14 percent for owned hotels:
• Total Adjusted EBITDA of $37 million which includes the following:
- EBITDA from wholly owned hotels of $19 million;
- The company’s share of EBITDA from unconsolidated joint ventures of $6 million; and
- EBITDA from the hotel management business of $12 million.
• Adjusted net loss of $(1.9) million or $(0.06) per share.
Earnings Conference Call
Interstate will hold a conference call to discuss its first-quarter results today, May 6, at 10 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 First-Quarter Conference Call. A replay of the conference call will be available until midnight on Wednesday, May 13, 2009, by dialing (800) 405-2236, reference number 11130289, and an archived webcast of the conference call will be posted on the company’s Web site through June 6, 2009.
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