EX-99.1 3 g74019ex99-1.txt PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACT: CHERYL STEWART 901.767.7005 RFS Reports Fourth Quarter Results Exceed Analysts' Expectations, Declares Dividend Memphis, Tennessee, January 31, 2002 - RFS Hotel Investors, Inc. (NYSE:RFS) today announced funds from operations (FFO) for the fourth quarter ended December 31, 2001, of $6.9 million, or $0.25 per share, compared to $13.5 million, or $0.50 per share, for the same quarter a year ago, a decline of 50% in FFO per share. Following the events of September 11, 2001, the Company announced on November 1, 2001, that it expected its fourth quarter FFO to range from $0.10 to $0.25 per share. FFO results were $0.06 higher than the consensus analysts' estimate of $0.19. FFO for the year ended December 31, 2001, was $51.2 million, or $1.85 per share, compared to 2000 FFO of $64.2 million, or $2.37 per share, a decline of 22% in FFO per share. FOURTH QUARTER HIGHLIGHTS - Comparable hotels revenue per available room (RevPAR) declined 15.9% for the quarter. The following represents changes in RevPAR as compared to the prior year comparable periods by market segment:
REVPAR CHANGE ------------- Quarter Year to Date ------- ------------ Comparable Hotels 58 56 Full Service (26.6%) (10.4%) Extended Stay ( 8.4%) ( 1.3%) Limited Service ( 6.0%) ( 0.3%) -------- -------- Total (15.9%) ( 4.6%)
- The Company's 10 California hotels experienced an average decline in quarterly RevPAR of 29.7%. The California hotels represented 33% of the Company's quarterly room revenue. The six hotels in northern California, consisting of two in San Francisco and four in Silicon Valley, experienced an average decline in quarterly RevPAR of 42.7%. Exclusive of these six northern California hotels, RevPAR declined 6.9% for the quarter. - Hotel operating margins (pro forma hotel EBITDA as a percentage of total revenue) declined 6.6 percentage points in the quarter. For the year, hotel operating margins declined 3.2 percentage points. - Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 28.7% to $14.3 million for the quarter and declined 9.4% for the year. - The Company realized an unleveraged FFO return on investment of 11.3% in its 56 comparable hotels for the year ended December 31, 2001. Based upon the Company's approximate 38% leverage and average borrowing costs of 7.9%, the Company realized a leveraged return on investment of 13.4%. - EBITDA for the year ended December 31, 2001, was 3.3 times the Company's interest costs. - Total debt was reduced by $1.6 million during the quarter. Randy Churchey, president and chief operating officer, said, "Operating results for the quarter were somewhat better than we anticipated for two reasons. First, the RevPAR decline of 15.9% was at the low end of the 15% to 25% range we expected. Second, Flagstone Hospitality, which operates 52 of our 58 properties, did an outstanding job of controlling costs. Although revenue declined by $9.9 million during the quarter, hotel EBITDA declined by only $7.3 million. Our RevPAR results were adversely impacted by the six northern California hotels which continue to experience a dramatic fall off in business. Although we have increased our market share at these hotels, the combination of the dot-com debacle, well-publicized energy problems, a light convention calendar, the Japanese recession, and the terrorist acts of September 11, have resulted in an inordinately difficult operating environment in that market." Based upon studies performed by Smith Travel Research, an independent firm which provides information on the hospitality industry, RFS's hotels, for the year outperformed their competitors in most markets. Mr. Churchey stated, "45 of our 58 hotels increased their market share in 2001 as measured by changes in RevPAR versus their competitive set of hotels. On average, our hotels increased market share by 4.6% during the year; and in northern California, one of the more difficult and competitive markets, our market share increased 12.2%." CAPITAL Despite the fact that FFO per share declined 50% during the quarter and 22% for the year ended December 31, 2001, the Company: - reduced debt by $1.6 million during the quarter; - earned a leveraged return on its investments of 13.4% for the year; - continued to maintain one of the least leveraged balance sheets in the industry with total debt equal to only 3.7 times EBITDA; and - generated operating cash flow (EBITDA less interest), for the year ended December 31, 2001 of $57.1 million. This represents funds available for payment of capital expenditures, debt reduction, and dividends. Kevin Luebbers, RFS executive vice president and chief financial officer, stated "Since inception of RFS as a public company in 1993, we have adhered to three simple principles in managing our business: (1) minimize debt and maintain a strong, liquid balance sheet; (2) invest in assets where we are likely to receive a cash return which is greater than our cost of capital; and (3) maintain reasonable diversification in terms of geography, brand, and market segment. The benefits of this strategy are very apparent in difficult times such as the present. Our balance sheet continues to be strong, our debt coverage ratios are among the best in the hotel industry, our return on investment compares favorably to any other hotel company, and the Company's diversification strategy minimizes risks. We believe our results since our 1993 IPO prove that this strategy is the best way to get the highest risk-adjusted return over time." OUTLOOK AND DIVIDENDS Robert Solmson, RFS chairman and chief executive officer, indicated, "We stated on November 1 that it is extremely difficult, given the uncertainty of political events, to make accurate projections in this environment. However, we did indicate that we felt it was reasonable for our shareholders to expect FFO per share ranging from $1.55 to $1.75 per share in 2002 and, based upon this range of FFO per share, an annual dividend of $1.00 to $1.20 per share. This range assumes a mild economic recovery in the second half of 2002, resulting in flat to a 4% decline in RevPAR for 2002. We are still comfortable with these estimates and, therefore, are declaring a first quarter dividend of $0.25 per share payable on February 15, 2002, to shareholders of record on February 5, 2002." "Fortunately, our balance sheet is strong and we have no significant debt maturities prior to June 30, 2004. Additionally, the Company has spent over $80 million in the last four years on capital improvements which will permit us to reduce capital expenditures to approximately $9 million in 2002. Obviously, this is very beneficial and will enhance our ability to continue paying meaningful dividends to our shareholders during this difficult operating period." RFS Hotel Investors, Inc. (RFS) is a real estate investment trust (REIT) that owns 58 hotels with approximately 8,400 rooms located in 24 states. RFS's hotel portfolio is diversified by geography, brand and segment. Leading brands under which RFS hotels are operated include Sheraton(R), Residence Inn by Marriott(R), Hilton(R), Doubletree(R), Holiday Inn(R), Hampton Inn(R), and Homewood Suites by Hilton(R). By segment, RFS receives approximately 42% of its EBITDA from full service hotels, 33% from extended stay hotels and 25% from limited service hotels. Additional information can be found on the Company's website at www.rfshotel.com. Certain matters within this press release are discussed using forward-looking language as specified in the 1995 Private Securities Litigation Reform Law, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. From time to time, these risks are discussed in the Company's filings with the Securities and Exchange Commission. RFS HOTEL INVESTORS, INC. KEY COMPANY STATISTICS QUARTER ENDED DECEMBER 31, 2001 OPERATING STATISTICS Total Revenues $48.6 million EBITDA $14.3 million % Decrease in Revenues(1) 16.9% % Decrease in EBITDA 28.7% FFO $ 6.9 million % of Hotel EBITDA(2) Full Service Hotels 42% % Decrease in FFO 48.7% Extended Stay Hotels 33% Limited Service Hotels 25% FFO per Share $ 0.25 % Decrease in FFO per Share 49.7%
CAPITAL STATISTICS EBITDA/Interest(2) 3.3x Debt/EBITDA(2) 3.7x EBITDA/Interest and 2.9x Percentage of fixed 96% Preferred Dividends(2) interest rate debt
--------------- (1) As compared to pro forma three months ended December 31, 2000, as if the Hilton lease termination occurred on January 1, 2000. (2) EBITDA information is for the year ended December 31, 2001. RFS HOTEL INVESTORS, INC. CONSOLIDATED INCOME STATEMENTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenue: Rooms $ 39,232 $ 188,725 Food and beverage 4,490 17,695 Other operating departments 1,872 9,103 Lease revenue (1) 1,197 $ 23,838 5,782 $ 106,574 Deferred revenue (1) 1,697 18,715 Other 156 132 573 785 -------- --------- --------- --------- Total hotel revenue 48,644 42,685 221,878 107,359 -------- --------- --------- --------- Hotel operating expenses by department: Rooms 8,249 37,000 Food and beverage 3,286 13,533 Other operating departments 607 2,201 Undistributed operating expenses: Property operating costs 4,877 22,550 Property taxes, insurance and other 3,330 2,379 12,848 10,747 Franchise costs 3,724 17,007 Maintenance and repair 2,193 9,741 Management fees 1,810 5,762 General and administrative 3,502 15,228 -------- --------- --------- --------- Total hotel operating expenses 31,578 2,379 135,870 10,747 -------- --------- --------- --------- Net hotel operating income (Hotel EBITDA) 17,066 40,306 86,008 96,612 Corporate expenses: Depreciation 7,352 6,898 29,605 27,198 Amortization of deferred expenses and unearned compensation 606 477 2,738 1,710 Interest expense 5,961 5,720 24,688 23,016 General and administrative 1,085 1,554 4,208 6,304 Hilton lease termination 65,496 (Gain) loss on sale of hotel properties 73 (651) (1,127) 4,376 Minority interest in income (loss) of Operating Partnership 8 2,351 (1,157) 3,218 -------- --------- --------- --------- Income (loss) before income taxes 1,981 23,957 (38,443) 30,790 Provision for (benefit from) income taxes 493 (24,714) -------- --------- --------- --------- Net income (loss) 1,488 23,957 (13,729) 30,790 Preferred stock dividends (782) (356) (3,125) (1,412) Gain on redemption of Series A Preferred Stock 5,141 -------- --------- --------- --------- NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 706 $ 23,601 $ (11,713) $ 29,378 ======== ========= ========= ========= Diluted earnings (loss) per share $ 0.03 $ 0.98 $ (0.47) $ 1.20 Weighted average common shares and equivalents outstanding 25,235 24,565 25,045 24,580
(1) Deferred revenue is recorded for the Company's hotels which are leased to third parties in accordance with Staff Accounting Bulletin 101 which requires deferral of certain revenue until the third and fourth quarters. For the three months ended December 31, 2001 and 2000, five and fifty-nine hotels were leased to third-party lessees, respectively. SAB 101 has no effect on rent payments under the Company's third-party leases or the Company's cash flow and no impact on full year revenue. RFS HOTEL INVESTORS, INC. CALCULATION OF FFO AND EBITDA FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2001 AND 2000 (in thousands, except per share data)
Quarter Ended Year Ended December 31, December 31, December 31, December 31, 2001 2000 2001 2000 ----------- ----------- ----------- ------------ Funds from operations: Net income (loss) $ 1,488 $ 23,957 $ (13,729) $ 30,790 Minority interest in income (loss) of Operating Partnership 8 2,351 (1,157) 3,218 Hilton lease termination 65,496 Deferred revenue (1,697) (18,715) Deferred income taxes related to Hilton lease termination 473 (24,734) (Gain) loss on sale of hotel properties 73 (651) (1,127) 4,376 Preferred stock dividends (782) (356) (3,125) (1,412) Depreciation 7,352 6,898 29,605 27,198 ---------- ---------- ---------- ---------- FUNDS FROM OPERATIONS $ 6,915 $ 13,484 $ 51,229 $ 64,170 ========== ========== ========== ========== Weighted average common shares, partnership units and potential dilutive shares outstanding 27,694 27,126 27,655 27,120 FFO PER SHARE $ 0.25 $ 0.50 $ 1.85 $ 2.37 Earnings before interest, taxes, depreciation and amortization (EBITDA): FFO $ 6,915 $ 13,484 $ 51,229 $ 64,170 Interest expense 5,961 5,720 24,688 23,016 Current income taxes 20 20 Amortization 606 477 2,738 1,710 Preferred stock dividends 782 356 3,125 1,412 ---------- ---------- ---------- ---------- CORPORATE EBITDA $ 14,284 $ 20,037 $ 81,800 $ 90,308 ========== ========== ========== ==========
RFS HOTEL INVESTORS, INC. CONSOLIDATED INCOME STATEMENTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2001 AND 2000 (in thousands, except per share data)
Quarter Ended Year Ended Actual Pro Forma (2) Actual Pro Forma (2) December 31, December 31, December 31, December 31, 2001 2000 2001 2000 ----------- ------------ ----------- ------------ Revenue: Rooms $ 39,232 $ 47,179 $ 188,725 $ 199,934 Food and beverage 4,490 5,366 17,695 19,693 Other operating departments 1,872 2,398 9,103 9,804 Lease revenue (1) 1,197 1,470 5,782 5,877 Deferred revenue (1) 1,697 1,946 Other 156 175 573 939 ---------- ---------- ---------- ---------- Total hotel revenue 48,644 58,534 221,878 236,247 ---------- ---------- ---------- ---------- Hotel operating expenses by department: Rooms 8,249 9,479 37,000 38,195 Food and beverage 3,286 3,796 13,533 14,489 Other operating departments 607 575 2,201 2,287 Undistributed operating expenses: Property operating costs 4,877 6,026 22,550 23,047 Property taxes, insurance and other 3,330 2,674 12,848 11,763 Franchise costs 3,724 3,872 17,007 16,161 Maintenance and repair 2,193 2,480 9,741 9,760 Management fees 1,810 1,374 5,762 5,735 General and administrative 3,502 3,845 15,228 15,651 ---------- ---------- ---------- ---------- Total hotel operating expenses 31,578 34,121 135,870 137,088 ---------- ---------- ---------- ---------- Net hotel operating income (Hotel EBITDA) 17,066 24,413 86,008 99,159 Corporate expenses: Depreciation 7,352 6,742 29,605 26,575 Amortization of deferred expenses and unearned compensation 606 480 2,738 1,710 Interest expense 5,961 6,073 24,688 24,427 General and administrative 1,085 1,556 4,208 6,304 Hilton lease termination 65,496 (Gain) Loss on sale of hotel properties 73 376 (1,127) 4,376 Minority interest in income (loss) of Operating Partnership 8 652 (1,157) 3,218 ---------- ---------- ---------- ---------- Income before income taxes 1,981 8,534 (38,443) 32,549 Provision for (benefit from) income taxes 493 542 (24,714) 2,679 ---------- ---------- ---------- ---------- Net income (loss) 1,488 7,992 (13,729) 29,870 Preferred stock dividends (782) (782) (3,125) (3,125) Gain on redemption of Series A Preferred Stock 5,141 ---------- ---------- ---------- ---------- Net income (loss) applicable to common shareholders $ 706 $ 7,210 $ (11,713) $ 26,745 ========== ========== ========== ========== Diluted earnings per share $ 0.03 $ 0.29 $ (0.47) $ 1.09 Weighted average common shares and equivalents outstanding 25,235 24,565 25,045 24,580
(1) Deferred revenue is recorded for the Company's hotels which are leased to third parties in accordance with Staff Accounting Bulletin 101 which requires deferral of certain revenue until the third and fourth quarters. For the three months ended December 31, 2001 and 2000, five and fifty-nine hotels were leased to third-party lessees, respectively. SAB 101 has no effect on rent payments under the Company's third-party leases or the Company's cash flow and no impact on full year revenue. (2) Assumes that the Hilton lease termination transaction, the sales of three hotels in 2000 and early 2001, the redemption of the Company's Series A Preferred Stock and the issuance of the Company's Series B Preferred Stock occurred on January 1, 2000. It includes the results of the Farmington Hills hotel which was sold on May 31, 2001. RFS HOTEL INVESTORS, INC. CALCULATION OF PRO FORMA FFO AND EBITDA(2) FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED YEAR ENDED -------------------------------- -------------------------------- PRO PRO ACTUAL FORMA(2) ACTUAL FORMA(2) DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Funds from operations: Net income (loss) $ 1,488 $ 7,992 $ (13,729) $ 29,870 Minority interest in income (loss) of Operating Partnership 8 652 (1,157) 3,218 Hilton lease termination 65,496 Deferred revenue (1,697) (1,946) Deferred income taxes related to Hilton lease termination 473 542 (24,734) 2,679 (Gain) loss on sale of hotel properties 73 376 (1,127) 4,376 Preferred stock dividends (782) (782) (3,125) (3,125) Depreciation 7,352 6,742 29,605 26,575 --------- --------- --------- --------- FUNDS FROM OPERATIONS $ 6,915 $ 13,576 $ 51,229 $ 63,593 ========= ========= ========= ========= Weighted average common shares, partnership units and potential dilutive shares outstanding 27,694 27,126 27,655 27,120 FFO PER SHARE $ 0.25 $ 0.50 $ 1.85 $ 2.34 Earnings before interest, taxes, depreciation and amortization (EBITDA): FFO $ 6,915 $ 13,576 $ 51,229 $ 63,593 Interest expense 5,961 6,073 24,688 24,427 Current income taxes 20 20 Amortization 606 480 2,738 1,710 Preferred stock dividends 782 782 3,125 3,125 --------- --------- --------- --------- CORPORATE EBITDA $ 14,284 $ 20,911 $ 81,800 $ 92,855 ========= ========= ========= =========
RFS HOTEL INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ------------ ASSETS Investment in hotel properties, net $ 615,562 $ 635,997 Cash and cash equivalents 5,735 3,681 Restricted cash 6,817 4,929 Accounts receivable 5,533 13,041 Notes receivable 626 Deferred expenses, net 6,964 6,814 Other assets 3,517 8,379 Deferred income taxes 24,734 ---------- ---------- Total assets $ 668,862 $ 673,467 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued expenses $ 20,857 $ 12,734 Borrowings on Line of Credit 81,188 50,273 Long-term obligations 219,947 227,158 Minority interest in Operating Partnership, 2,458 and 2,562 units issued and outstanding at December 31, 2001 and 2000, respectively 31,059 34,848 ---------- ---------- Total liabilities 353,051 325,013 ---------- ---------- Preferred Stock, $.01 par value, 5,000 shares authorized, 250 shares issued and outstanding at December 31, 2001 25,000 ---------- Commitments and contingencies Shareholders' equity: Preferred Stock, $.01 par value, 5,000 shares authorized, 974 shares issued and outstanding at December 31, 2000 10 Common Stock, $.01 par value, 100,000 shares authorized, 25,811 and 25,088 shares issued at December 31, 2001 and 2000, respectively 258 251 Additional paid-in capital 368,361 374,910 Other comprehensive income (3,220) Treasury stock, at cost, 576 shares (8,100) (8,100) Distributions in excess of earnings (66,488) (18,617) ---------- ---------- Total shareholders' equity 290,811 348,454 ---------- ---------- Total liabilities, preferred stock and shareholders' equity $ 668,862 $ 673,467 ========== ==========
RFS HOTEL INVESTORS, INC. COMPARABLE HOTEL OPERATING STATISTICS (1) FOR THE THREE MONTHS ENDED DECEMBER 31, 2001
ADR OCCUPANCY REVPAR ---------------------------- ------------------------------ ----------------------------- VARIANCE VS. VARIANCE VS VARIANCE VS Segment 2001 2000 2001 2000 2001 2000 ---------- ---------- ------------ ---------- ---------- ----------- Full Service $ 100.65 (13.2)% 57.6% (10.6 pts) $ 57.99 (26.6)% Extended Stay $ 94.47 0.4% 71.4% (6.9 pts) $ 67.43 (8.4)% Limited Service $ 68.62 (0.9)% 58.9% (3.2 pts) $ 40.45 (6.0)% ---------- ---------- ---------- ---------- ---------- ---------- TOTAL $ 87.19 (6.6)% 61.7% (6.8 pts) $ 53.83 (15.9)% ========== ========== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2001
ADR OCCUPANCY REVPAR ---------------------------- ------------------------------ ----------------------------- VARIANCE VS. VARIANCE VS VARIANCE VS Segment 2001 2000 2001 2000 2001 2000 ---------- ---------- ------------ ---------- ---------- ----------- Full Service $ 108.52 (2.0)% 67.9% (6.4 pts) $ 73.73 (10.4)% Extended Stay $ 96.55 2.0% 78.5% (2.7 pts) $ 75.83 (1.3)% Limited Service $ 70.91 1.8% 67.4% (1.4 pts) $ 47.79 (0.3)% ---------- ---------- ---------- ---------- ---------- ---------- TOTAL $ 90.50 (0.1)% 70.7% (3.3 pts) $ 63.95 (4.6)% ========== ========== ========== ========== ========== ==========
(1) For the three months ended December 31, 2001, includes all 58 hotels owned. For the year ended December 31, 2001, includes 56 of the 58 hotels owned. Excludes the Hilton San Francisco Fisherman's Wharf hotel, which underwent renovation and was converted from a Ramada Plaza in 2000, and the Sheraton Hotel in Birmingham, Alabama, which was undergoing renovation in 2000. RFS HOTEL INVESTORS, INC. RETURN ON INVESTMENT ANALYSIS (1) AS OF DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS)
Total Investment, EBITDA for the Before Year Ended Return on Depreciation (2) December 31, 2001 Investment ---------------- ----------------- ---------- Full Service $300,029 $ 32,853 10.9% Extended Stay $220,754 $ 28,240 12.8% Limited Service $209,654 $ 21,328 10.2% -------- -------- ----- Total $730,437 $ 82,421 11.3% -------- -------- -----
(1) Includes 56 of the 58 hotels owned at December 31, 2001. Excludes two hotels undergoing major renovations (Hilton San Francisco Fisherman's Wharf which was converted from a Ramada Plaza in 2000 and the Sheraton Hotel in Birmingham which was undergoing renovation in 2000). (2) Total investment includes original cost and all capital expenditures since acquisition. Also includes the costs associated with the Hilton lease termination of approximately $60 million. These costs were required to be written-off as a cancellation of executory contracts and therefore are not included on the balance sheet. However, for return on investment analysis, this amount is included in the total investment. RFS HOTEL INVESTORS, INC. OUTSTANDING DEBT DECEMBER 31, 2001
BALANCE INTEREST RATE MATURITY -------------- ------------- -------------- (in thousands) Line of Credit $ 81,188 LIBOR + 200bp Fixed/Variable (1) July 2004 Mortgage 33,181 6.83% Fixed August 2008 Mortgage 25,000 7.30% Fixed November 2011 Mortgage 92,087 7.83% Fixed December 2008 Mortgage 18,271 8.22% Fixed November 2007 Mortgage 51,408 8.00% Fixed August 2010 --------- $ 301,135 =========
(1) $40.0 million carries a fixed interest rate of 6.535% plus 200 basis points at December 31, 2001 through an interest rate swap maturing in July 2003. In addition, $30.0 million carries a fixed interest rate of 4.775% plus 200 basis points at December 31, 2001 through a second interest rate swap maturing in July 2003.
DEBT MATURITIES (in millions) 2002 $ 6.5 2003 7.0 2004 88.7 2005 8.2 2006 8.8 Thereafter 181.9 ------ $301.1 ======
Weighted average maturity of fixed rate debt is 7.3 years. (Excludes $70.0 million of the Line of Credit that carries fixed interest rates through interest rate swaps)