-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfGQ4ZcM/MqIkVBagm72j1PL4Vt258EhgI5rE9VGWJvuwmOnCAapakwvMXTWHJYD AimC2ADN5mPlNcvJOSROgQ== 0000950142-02-000981.txt : 20021031 0000950142-02-000981.hdr.sgml : 20021031 20021031172746 ACCESSION NUMBER: 0000950142-02-000981 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20021030 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20021031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERISTAR HOSPITALITY CORP CENTRAL INDEX KEY: 0001012967 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752648842 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11903 FILM NUMBER: 02805576 BUSINESS ADDRESS: STREET 1: 1010 WISCONSIN AVENUE N W CITY: WASHINGTON STATE: DC ZIP: 20007 BUSINESS PHONE: 9725506800 MAIL ADDRESS: STREET 1: 1010 WISCONSIN AVENUE N W CITY: WASHINGTON STATE: DC ZIP: 20007 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL HOSPITALITY CORP DATE OF NAME CHANGE: 19960428 8-K 1 form8kmhc-103102.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Filed Pursuant to Section 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 30, 2002 MERISTAR HOSPITALITY CORPORATION (Exact name of registrant as specified in its charter) MARYLAND 1-11903 72-2648842 - ---------------------------- ---------------- ---------------------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification Number) 1010 Wisconsin Avenue, N.W. Washington, D.C. 20007 (Address of principal executive offices) Registrant's telephone number, including area code: (202) 295-1000 ITEM 5. OTHER EVENTS On October 30, 2002, the registrant issued the press release attached as Exhibit 99.1 to this report, which is incorporated by reference into this Item. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS The press release of the registrant is attached as Exhibit 99.1 to this report. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 31, 2002 MERISTAR HOSPITALITY CORPORATION By: /s/ Christopher L. Bennett -------------------------------- Christopher L. Bennett Senior Vice President and General Counsel EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Press Release, dated as of October 30, 2002. EX-99 3 ex991-103102.txt EXHIBIT 99.1 EXHIBIT 99.1 ------------ [GRAPHIC OMITTED] [LOGO - MERISTAR] OCTOBER 30, 2002 MERISTAR HOSPITALITY CORPORATION REPORTS THIRD-QUARTER RESULTS Refinances Senior Credit Facility - --------------------------------- WASHINGTON--Oct. 30, 2002--MeriStar Hospitality Corporation (NYSE: MHX), the nation's third largest hotel real estate investment trust (REIT), today announced financial results for the third quarter ended September 30, 2002. In addition, the company announced that it completed the refinancing of its senior credit facility. The lingering softness in the economy and general drop-off in travel during the weeks around the anniversary of the September 11 terrorist attacks contributed to lower than anticipated transient business travel during the third quarter. For the 2002 third quarter, net loss was $(29.4) million compared to $(17.3) million in the 2001 third quarter. Diluted net loss per share was $(0.65), compared to $(0.39) in the 2001 third quarter. Comparative funds from operations (FFO) were $6.7 million, compared to $15.4 million for the 2001 third quarter. Comparative FFO represents funds from operations, as defined by the National Association of Real Estate Investment Trusts, adjusted for significant non-recurring items, and the effect of non-hedging derivatives. Comparative FFO per diluted share was $0.13, compared to $0.29 for the 2001 third quarter. Revenues decreased 3.4 percent to $235.8 million. Comparative earnings before interest expense, income taxes, depreciation and amortization (EBITDA) declined 12.8 percent to $40.0 million. Hotel operating profit margins declined 220 basis points to 26.5 percent. Same-store revenue per available room (RevPAR) declined 5.3 percent to $60.95. Average daily rate (ADR) was off 3.5 percent to $94.36, while occupancy decreased 1.8 percent to 64.6 percent. The challenging economic environment continues to have a direct influence on business travel," said Paul Whetsell, chairman and chief executive officer. "To offset weakness in the transient business sector, we shifted our marketing efforts to lower rated group and leisure business to boost occupancy. This put more pressure on profit margins, but our operator, Interstate Hotels & Resorts, continues to focus on controlling costs to mitigate the shift in customer mix. We expect to achieve economies of scale and other cost benefits going forward as a result of the increased size and scale of our operator following the completion of its merger in July." New Credit Facility The company closed earlier this week on a new, three-year $100 million senior revolving credit facility. The initial rate of the facility will be LIBOR plus 388 basis points, slightly lower than the rate under the previous credit facility. "Our new revolver gives us the flexibility to operate within our business plan and to weather these difficult economic conditions," Whetsell said. "The $14 million balance on the previous revolver was paid off in conjunction with the closing of the facility. We have approximately $50 million of availability on the revolver based on our trailing 12-month EBITDA. We expect to generate $90 million to $100 million of cash flow before capital expenditures through 2003; therefore, we would anticipate using the revolver only sparingly going forward." SG Cowen Securities Corporation is the lead arranger and book runner for the new facility. Lehman Brothers, Inc. is the syndication agent and Salomon Smith Barney Inc. is the documentation agent. During the quarter, the company sold three hotels, using the proceeds to pay down existing debt. Whetsell noted that the company currently is marketing eight to 10 additional non-core assets for sale, which, if successful, are expected to generate net proceeds of $80 million to $100 million and will be used to further reduce outstanding debt. Operating Performance in Significant Markets RevPAR was down in July and August compared to the previous year but improved 9.3 percent in September. "While we are encouraged to see our first year-over-year RevPAR improvement since February 2001, the increase fell short of our expectations as travel was down significantly in the first two weeks of the month," Whetsell said. "We see continued improvements in RevPAR for the remainder of the year, with October RevPAR expected to increase approximately 8.0 percent over October of 2001." The Mid-Atlantic region showed a 4.9 percent improvement in RevPAR and was the largest contributor to EBITDA during the quarter. Atlanta experienced significant improvement, with an 11.0 percent increase. Hardest hit were New Jersey, Dallas, Houston, Connecticut and Northern California, where declines in business travel were particularly significant. "Our Mid-Atlantic properties performed well, and we believe they are well-positioned to benefit when the economy begins to turn around," he commented. RevPAR and EBITDA contributions in significant markets for the third quarter were: Three Months Ended September 30, 2002 EBITDA RevPAR Contribution % of Total Change (in 000s) EBITDA ------------- ----------------- --------------- Mid-Atlantic 4.9% 5,838 14.6% Southern California -5.0% 4,268 10.7% Northern California -10.7% 3,294 8.2% Chicago -7.2% 2,141 5.4% Colorado -1.3% 1,916 4.8% Atlanta 11.0% 1,722 4.3% Tampa/Clearwater -4.0% 1,649 4.1% Houston -11.6% 1,600 4.0% New Jersey -26.6% 1,522 3.8% Orlando -9.5% 972 2.4% Connecticut -11.2% 424 1.1% Dallas -14.0% (124) -0.3% Southwest Florida -2.2% (978) -2.5% Balance Sheet "With the completion of the refinancing of our line of credit, we are very comfortable with our current liquidity position, which consists of approximately $75 million of cash and availability," said John Emery, president and chief operating officer. "We plan to further enhance our liquidity through asset sales and generation of free cash flow and have ample cushion to withstand any future geo-political events." Key Financial Information o Total debt to annual EBITDA of 7.5x o Annual interest coverage ratio of 1.6x o Capital expenditures of $6.8 million and $28.0 million, respectively, for the three and nine months ended September 30, 2002 o Notes receivable from Interstate Hotels & Resorts of $56.1 million at September 30, 2002 o Cash balance of $41.2 million at September 30, 2002 Long-Term Debt Long-term debt as of September 30, 2002 consists of the following: (amounts in thousands) Interest Balance Rate Maturity Revolver (subsequently refinanced) $ 14,000 LIBOR + 400bps 2003 Convertible Notes 154,300 4.75% 2004 Subordinated Notes 203,108 8.75% 2007 Senior Unsecured Notes 299,292 9.00% 2008 Senior Unsecured Notes 248,584 10.50% 2009 CMBS 315,955 7.76% 2009 Senior Unsecured Notes 395,865 9.13% 2011 Mortgage Debt and Other 38,550 9.00% Various ---------- $ 1,669,654 Guidance Outlook For the 2002 fourth quarter, the company expects RevPAR to increase 7.0 percent to 8.0 percent over the fourth quarter of 2001. EBITDA is projected to be $43 million to $45 million, and FFO per share is estimated to be $0.18 to $0.22. For the full year 2002, the company expects a RevPAR decline of 8.0 percent to 8.5 percent, EBITDA of $216 million to $218 million and FFO per share of $1.49 to $1.53. 2003 RevPAR is projected to increase 2.0 percent to 3.0 percent. To listen to a webcast of the company's third-quarter conference call today, October 30, at 10 a.m. Eastern time, interested parties may visit the company's Web site and click on Investor Relations and then Third-Quarter Conference Call. Interested parties also may listen to an archived webcast of the conference call on the Web site, or may dial (800) 405-2236, reference code 503877, to hear a telephone replay. The telephone replay will be available through November 4, 2002. Washington, D.C.-based MeriStar Hospitality Corporation owns 109 principally upscale, full-service hotels in major markets and resort locations with 28,099 rooms in 27 states, the District of Columbia and Canada. The company owns hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Radisson and Doubletree. For more information about MeriStar Hospitality Corporation, visit the company's Web site: www.meristar.com. This press release contains forward-looking statements about MeriStar Hospitality Corporation, 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 current slowdown of the national economy; economic conditions generally and the real estate market specifically; the impact of the September 11, 2001 terrorist attacks or actual or threatened future terrorist incidents; governmental actions; legislative/regulatory changes, including changes to laws governing the taxation of REITs; availability of capital; interest rates; competition; supply and demand for hotel rooms in our current and proposed market areas; and changes in general accounting principles, policies and guidelines applicable to REITs. Additional risks are discussed in the Company's filings with Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2001. MeriStar Hospitality Corporation Statements of Operations (Unaudited, in thousands except per share amounts and operating statistics) Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 Revenue Hotel operations: Rooms $156,935 $163,568 $506,054 $562,497 Food and beverage 56,548 55,886 189,423 200,273 Other operating departments 18,306 18,721 57,715 64,511 Participating lease revenue - 1,841 - 8,146 Office rental and other revenue 4,017 4,016 14,282 12,183 -------- -------- -------- -------- Total revenue 235,806 244,032 767,474 847,610 Hotel operating expenses by department: Rooms 40,895 42,715 122,194 134,225 Food and beverage 44,187 44,122 138,234 147,320 Other operating departments 10,967 10,353 33,159 33,845 Office rental, parking and other operating expenses 767 819 2,372 2,444 Undistributed operating expenses: Administrative and general 42,136 39,610 129,098 126,774 Property operating costs 40,166 40,716 117,842 124,812 Property taxes, insurance and other 16,490 20,789 52,937 57,275 Depreciation and amortization 30,348 28,810 92,168 86,522 Interest expense, net 33,846 31,354 102,543 91,661 Change in fair value of non- hedging derivatives 1,132 - 4,211 - Write off of deferred costs - - 1,529 - Loss on fair value of non- hedging derivatives - - 4,735 - Swap termination costs - - - 9,297 Write down of investment in STS Hotel Net - - - 2,112 FelCor merger costs - 2,028 - 5,817 Costs to terminate leases with Prime Hospitality Corporation - - - 1,315 Restructuring charge - 1,080 - 1,080 -------- -------- -------- -------- Total expenses 260,934 262,396 801,022 824,499 -------- -------- -------- -------- Income (loss) from continuing operations before minority interests, income taxes, discontinued operations, loss on sale of assets and extraordinary loss (25,128) (18,364) (33,548) 23,111 Minority interests (1,584) (989) (1,965) 2,132 Income taxes (654) (588) (851) 814 -------- -------- -------- -------- Income (loss) from continuing operations before discontinued operations, loss on sale of assets and extraordinary loss (22,890) (16,787) (30,732) 20,165 Discontinued operations (1): Income (loss) from operations of assets sold (including loss on disposal of $6,403) (6,640) 558 (5,768) 2,264 Income tax benefit 128 - 128 - -------- -------- -------- -------- Loss on discontinued operations (6,512) 558 (5,640) 2,264 Loss on sale of asset, net of taxes - (1,073) - (2,132) Extraordinary loss, net of taxes - - - (1,224) -------- -------- -------- -------- Net income (loss) (29,402) (17,302) (36,372) 19,073 Dividends paid on unvested restricted stock (2) (198) (5) (593) -------- -------- -------- -------- Income (loss) available to common stockholders $(29,404) $(17,500) $(36,377) $18,480 ======== ======== ======== ======== Net income (loss) per diluted common share $(0.65) $(0.39) $(0.81) $0.42 ======== ======== ======== ======== Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 Comparative funds from operations (2), diluted: Comparative income (loss) before loss on sale of assets and extraordinary loss $(23,127) $(16,229) $(30,097) $22,429 Minority interest to common OP unit holders (1,725) (1,132) (2,389) 1,707 Interest on convertible debt 1,832 1,832 5,497 5,497 Hotel depreciation and amortization 28,594 27,965 86,844 84,197 Interest rate swaps 1,132 - 4,211 - Significant non- recurring items (net of income taxes): Write off of deferred costs - - 1,490 - Loss on fair value of non- hedging derivatives - - 4,615 - Swap termination costs - - - 8,998 Write down of investment in STS Hotel Net - - - 2,046 FelCor merger costs - 1,955 - 5,622 Costs to terminate leases with Prime Hospitality Corporation - - - 1,272 Restructuring - 1,053 - 1,053 -------- -------- -------- -------- $6,706 $15,444 $70,171 $132,821 ========= ========= ========= ======== Weighted average number of diluted shares of common stock and operating units outstanding 53,492 53,455 53,386 53,415 ========= ========= ========= ======== Comparative funds from operations per diluted share $0.13 $0.29 $1.31 $2.49 ========= ========= ========= ======== Operating Information: Comparative EBITDA (3) $39,961 $45,804 $172,768 $224,164 Occupancy 64.6% 65.8% 65.9% 69.6% ADR $94.36 $97.79 $100.56 $108.01 RevPAR $60.95 $64.36 $66.24 $75.19 RevPAR Decrease -5.30% -11.90% (1) We adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets," effective January 1, 2002. Gains and losses from all asset sales, as well as any income or loss from the asset prior to disposal, are required to be recorded as discontinued operations. We sold three hotels in August 2002. All operating results, including the loss on disposal, are recorded as discontinued operations. As required by SFAS No. 144, we have reclassified prior year periods to reflect operations of the three hotels as discontinued operations. (2) Comparative funds from operations represents funds from operations, as defined by the National Association of Real Estate Investment Trusts, adjusted for the impact of non-hedging derivatives and significant non-recurring items. Comparative income (loss) before loss on sale of assets and extraordinary loss is calculated as follows: Income (loss) from continuing operations before discontinued operations, loss on sale of assets and extraordinary loss $(22,890) $(16,787) $(30,732) $20,165 Income (loss) on discontinued operations, excluding loss on sale of assets (237) 558 635 2,264 -------- -------- -------- -------- Comparative income (loss) before loss on sale of assets and extraordinary loss $(23,127) $(16,229) $(30,097) $22,429 ======== ======== ======== ======== (3) Comparative EBITDA represents consolidated earnings before interest expense, income taxes, depreciation and amortization and includes the operations from the assets sold during the quarter, adjusted for non-recurring items. EBITDA from continuing operations $40,198 $44,908 $171,638 $220,915 EBITDA from assets sold (237) 896 1,130 3,249 -------- -------- -------- -------- Comparative EBITDA $39,961 $45,804 $172,768 $224,164 ========= ========= ========= ======== MeriStar Contact: Bruce Riggins, Director of Finance, (202) 295-2276 or Melissa Thompson, Director of Corporate Communications, (202) 295-2228 Media Contact: Jerry Daly or Carol McCune, media Daly Gray Public Relations, (703) 435-6293 -----END PRIVACY-ENHANCED MESSAGE-----