ARLINGTON, Va., Aug. 5 /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 second quarter ended June 30,
2009. The company's performance for the second quarter includes the
following (in millions, except per share amounts): Second Quarter
Year-to-Date (YTD) 2009(4) 2008 2009(4) 2008(5) Total revenue (1)
$34.0 $40.5 $64.5 $79.4 Net (loss) income $(6.7) $0.1 $(19.2)
$(0.2) Diluted (loss) earnings per share $(0.21) $0.00 $(0.60)
$0.00 Adjusted EBITDA (2)(3) $10.3 $10.2 $16.2 $17.9 Adjusted net
income (loss)(2) $0.6 $0.1 $(1.3) $(1.0) Adjusted diluted EPS (2)
$0.02 $0.00 $(0.04) $(0.03) (1) Total revenue excludes other
revenue from managed properties (reimbursable costs). (2) Adjusted
EBITDA, Adjusted net income (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 of and further discussion of non-GAAP financial
measures and reconciliation to net (loss) income later in this
press release. (3) Includes the company's share of EBITDA from
investments in unconsolidated entities in the amounts of $1.8
million and $2.5 million in the second quarters of 2009 and 2008,
respectively, and $3.0 million and $4.2 million in the first six
months of 2009 and 2008, respectively. (4) The second quarter 2009
and YTD 2009 results include (i) a $3 million non-cash impairment
charge related to the company's investment in a joint venture, (ii)
$0.1 million and $0.9 million charges, respectively, for
restructuring primarily related to severance costs as a part of the
company's 2009 cost reduction program, (iii) $0.7 million of
write-offs of intangible assets related to the termination of
certain management contracts and other asset impairments, and (iv)
income tax expense related to the full valuation allowance against
our deferred tax assets offset by a change in the company's
effective tax rate, both described in more detail in footnote 9 to
the financial tables later in this press release. These charges are
excluded from the calculation of Adjusted EBITDA, Adjusted net
income (loss), and Adjusted diluted EPS. (5) The YTD 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. These
charges are excluded from the calculation of Adjusted EBITDA,
Adjusted net income (loss), and Adjusted diluted EPS. Highlights
for the second quarter and through today include: -- Maintained
year over year Adjusted EBITDA in a difficult economy; generated
growth in Adjusted Net Income; -- Extended senior secured credit
facility to March 2012; -- Added seven properties to third-party
management portfolio, including three hotels from its signed
management contract pipeline of properties under development or
construction; -- Signed first management contract with the Duet
Hotel Fund in India; the second contract for JHM Interstate Hotels
India; -- Common stock resumed trading on the NYSE effective July
29, 2009. "I am very pleased with the significant progress we have
made on our capital structure," said Thomas F. Hewitt, chairman and
chief executive officer. "We extended our senior credit facility to
March 2012 well in advance of its original expiration date. This,
along with our successful appeal of the NYSE's ruling to suspend
the trading of our stock, has provided stability to our capital
structure in an extremely volatile market. "With these hurdles
behind us, we continue to focus our efforts on growing our third
party management business while preserving our capital and
liquidity and maximizing profits," Hewitt added. "Despite the
challenging operating climate and RevPAR declines in excess of 20
percent, we maintained our second quarter Adjusted EBITDA year over
year, which is a result of the cost reduction initiatives we
implemented in January." Hotel Management Same-store(6) RevPAR for
all managed hotels in the second quarter decreased 21.4 percent to
$81.81. Average daily rate (ADR) was $122.30, down 12.8 percent,
and occupancy fell 9.8 percent to 66.9 percent. Same-store RevPAR
for all full-service managed hotels declined 22.2 percent to
$93.35. ADR was off 13.9 percent to $133.78, while occupancy
decreased 9.7 percent to 69.8 percent. Same-store RevPAR for all
select-service managed hotels declined 19.0 percent to $59.68, led
by a 10.1 percent decline in occupancy to 61.4 percent and a 9.8
percent drop in ADR to $97.25. "During the second quarter, we saw a
continuation of the difficult economic conditions and deteriorating
lodging fundamentals that prevailed in the first quarter and much
of last year, " Hewitt said. "We continue to focus on top-line
revenues and reducing costs wherever possible. These are indeed
unprecedented times, but we have the experience and expertise to
operate effectively in these conditions." Hewitt added that
Interstate's new contract flow has remained steady in 2009, a fact
that he attributes to the company's proven operating performance in
all economic cycles, deep relationships in the industry, high owner
loyalty and a broad network of contacts. "We recently added two
Courtyard by Marriott hotels in Virginia owned by the same group
for whom we've been managing two hotels and two first-class
restaurants in Gettysburg, Pa. We also added the Holiday Inn Laredo
Civic Center and the Crowne Plaza Milwaukee Airport, and opened the
Lancaster Marriott at Penn Square and Lancaster County Convention
Center, a $177 million project with which we have been involved for
more than a decade. We opened the TownePlace Suites by Marriott in
Easton/Bethlehem (Pa.), and last week, our wholly-owned subsidiary,
Sunstone Hospitality Management, signed an agreement to manage the
Doubletree Austin-University Area in Texas, the second property we
now manage for that ownership group." After opening three
under-construction properties this summer, Interstate currently has
13 management contracts signed for hotels under development or
construction. The majority of these properties are expected to open
in 2010. (6) Please see footnote 11 to the financial tables within
this press release for a detailed explanation of "same-store" hotel
operating statistics. International "We continue to move forward
with our management and development plans in India," Hewitt added.
"Our management company joint venture, JHM Interstate Hotels India,
signed its first management contract with the Duet Fund, a
U.K.-based real estate fund dedicated to India hotel development
that we invested in last year." The 115-room hotel, scheduled to
open in the fall of 2009, is located in Jaipur, which is the
capital of the state of Rajasthan and part of India's Golden
Triangle (Delhi, Jaipur and Agra). Brand affiliations for this
property and the under-construction property in Vizag
(Visakhapatnam), are expected to be finalized during the third
quarter. Wholly Owned Hotel Results EBITDA from the company's seven
owned hotels was $6.0 million in the 2009 second quarter as
outlined below (in millions): Owned Hotels Second Quarter
Year-to-Date ------------ -------------- ------------ 2009 2008
2009 2008 ---- ---- ---- ---- Net income $0.0 $1.3 $(1.3) $1.5
Interest expense 3.1 3.2 6.0 6.8 Depreciation and amortization 2.9
3.8 5.8 7.0 --- --- --- --- EBITDA $6.0 $8.3 $10.5 $15.3 ==== ====
===== ===== "RevPAR for our owned portfolio declined 16.4 percent,
better than the industry average of 19.5 percent," Hewitt said.
"These results were driven by our two recently renovated
properties. The Westin Atlanta Airport property performed
exceptionally well with a RevPAR gain of 3.9 percent. Also, at the
Sheraton Columbia Town Center Hotel, after completing our $12
million renovation, the hotel outperformed its competitive set and
the industry with a 13.2 percent RevPAR decline. "We did experience
weakness at our hotels in Concord, Calif., and Houston and
Arlington, Texas," Hewitt noted. "However, I am very pleased with
the results of the cost-cutting initiatives carried out by all of
our hotels. Despite a RevPAR decrease of 16.4 percent, of which
12.6 percent was ADR, we were able to offset nearly 50 percent of
this revenue decline with expense savings." Balance Sheet On June
30, 2009, Interstate had: -- Total unrestricted cash of $22.8
million. -- Total debt of $243.7 million, consisting of $161.2
million of senior debt and $82.5 million of non-recourse mortgage
debt. Effective July 10, the company extended the maturity of its
senior credit facility to March 2012 by converting the facility's
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. "The recent extension of our credit facility to
2012 gives us a solid platform from which we can continue to focus
on our core business," said Bruce Riggins, chief financial officer.
"We are in the process of securing a mortgage on the Westin Atlanta
Airport Hotel and expect to choose a lender in the near term. The
expected mortgage proceeds of approximately $20 million will be
used to pay down the credit facility in accordance with its
amortization requirements. We are also in the process of exploring
the sale of a wholly-owned asset. Upon the completion of these two
transactions, we will be well on our way to meeting the second $20
million amortization hurdle by March 2011." Guidance The company
has updated its 2009 guidance based on a current projected RevPAR
decline of 19 percent for all hotels and 15 percent for owned
hotels: -- Total Adjusted EBITDA of $34.0 million which includes
the following: -- EBITDA from wholly owned hotels of $18.0 million;
-- The company's share of EBITDA from unconsolidated joint ventures
of $5.5 million; and -- EBITDA from the hotel management business
of $10.5 million. -- Adjusted net loss of $(7.2) million or $(0.22)
per share. Earnings Conference Call Interstate will hold a
conference call to discuss its second-quarter results today, August
5, at 9 a.m. Eastern Time. To hear the webcast, interested parties
may visit the company's Web site at http://www.ihrco.com/ and click
on Investor Relations and then Second-Quarter Conference Call. A
replay of the conference call will be available until midnight on
Wednesday, August 12, 2009, by dialing (800) 406-7325, reference
number 4117565, and an archived webcast of the conference call will
be posted on the company's Web site through September 5, 2009.
Interstate Hotels & Resorts has ownership interests in 56
hotels and resorts, including seven wholly owned assets. Together
with these properties, the company and its affiliates manage a
total of 224 hospitality properties with approximately 45,700 rooms
in 37 states, the District of Columbia, Russia, Mexico, Belgium,
Canada and Ireland. Interstate Hotels & Resorts also has
contracts to manage 13 to be built hospitality properties with
approximately 3,000 rooms. For more information about Interstate
Hotels & Resorts, visit the company's Web site:
http://www.ihrco.com/. Non-GAAP Financial Measures Included in this
press release are certain non-GAAP financial measures, which are
measures of our historical or estimated future performance that are
different from measures calculated and presented in accordance with
generally accepted accounting principles in the United States of
America (or GAAP), within the meaning of applicable Securities and
Exchange Commission rules, that we believe are useful to investors.
They are as follows: (i) Earnings before interest, taxes,
depreciation and amortization (or "EBITDA") and (ii) Adjusted
EBITDA, Adjusted net loss and Adjusted diluted loss per share. The
following discussion defines these terms and presents the reasons
we believe they are useful measures of our performance. EBITDA A
significant portion of our non-current assets consists of
intangible assets, related to some of our management contracts, and
long-lived assets, which include the cost of our owned hotels.
Intangible assets, excluding goodwill, are amortized over their
expected term. Property and equipment is depreciated over its
useful life. Because amortization and depreciation are non-cash
items, management and many industry investors believe the
presentation of EBITDA is useful. We also exclude depreciation and
amortization and interest expense from our unconsolidated joint
ventures. We believe EBITDA provides useful information to
investors regarding our performance and our capacity to incur and
service debt, fund capital expenditures and expand our business.
Management uses EBITDA to evaluate property-level results and as
one measure in determining the value of acquisitions and
dispositions. It is also widely used by management in the annual
budget process. We believe that the rating agencies and a number of
lenders use EBITDA for those purposes and a number of restrictive
covenants related to our indebtedness use measures similar to
EBITDA presented herein. Adjusted EBITDA, Adjusted Net Loss and
Adjusted Diluted EPS We define Adjusted EBITDA as, EBITDA excluding
the effects of certain recurring and non-recurring charges,
transactions and expenses incurred in connection with events
management believes do not provide the best indication of our
ongoing operating performance. These charges include restructuring
and severance expenses, asset impairments and write-offs, gains and
losses on asset dispositions for both consolidated and
unconsolidated investments, and other non-cash charges. We believe
that the presentation of Adjusted EBITDA will provide useful
supplemental information to investors regarding our ongoing
operating performance and when combined with the primary GAAP
presentation of net loss, is beneficial to an investor's complete
understanding of our operating performance. We also use Adjusted
EBITDA in determining our incentive compensation for management.
Similarly, we define Adjusted net loss and Adjusted diluted loss
per share ("EPS") as net loss and diluted EPS, without the effects
of those same charges, transactions and expenses described earlier.
We believe that Adjusted EBITDA, Adjusted net loss and Adjusted
diluted EPS are useful performance measures because including these
expenses, transactions, and special charges may either mask or
exaggerate trends in our ongoing operating performance.
Furthermore, performance measures that include these charges may
not be indicative of the continuing performance of our underlying
business. Therefore, we present Adjusted EBITDA, Adjusted net loss
and Adjusted diluted EPS because they may help investors to compare
our performance before the effect of various items that do not
directly affect our ongoing operating performance. Limitations on
Use of EBITDA, Adjusted EBITDA, Adjusted Net Loss and Adjusted
Diluted EPS We calculate EBITDA, Adjusted EBITDA, Adjusted net loss
and Adjusted diluted EPS as we believe they are important measures
for our management's and our investors' understanding of our
operations. These may not be comparable to measures with similar
titles as calculated by other companies. This information should
not be considered as an alternative to net income, operating
profit, cash from operations or any other operating performance
measure calculated in accordance with GAAP. Cash receipts and
expenditures from investments, interest expense and other non-cash
items have been and will be incurred and are not reflected in the
EBITDA and Adjusted EBITDA presentations. Adjusted net loss and
Adjusted diluted EPS do not include cash receipts and expenditures
related to those same items and charges discussed above. Management
compensates for these limitations by separately considering these
excluded items, all of which should be considered when evaluating
our performance, as well as the usefulness of our non-GAAP
financial measures. Additionally, EBITDA, Adjusted EBITDA, Adjusted
net loss and Adjusted diluted EPS should not be considered a
measure of our liquidity. Adjusted net income and Adjusted diluted
EPS should also not be used as a measure of amounts that accrue
directly to our stockholders' benefit. This press release contains
"forward-looking statements," within the meaning of the Private
Securities Litigation Reform Act of 1995, about Interstate Hotels
& Resorts, 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 volatility of
the national economy, economic conditions generally and the hotel
and real estate markets specifically, the war in Iraq,
international and geopolitical difficulties or health concerns,
governmental actions, legislative and regulatory changes,
availability of debt and equity capital, interest rates,
competition, weather conditions or natural disasters, supply and
demand for lodging facilities in our current and proposed market
areas, and the company's ability to manage integration and growth.
Additional risks are discussed in Interstate Hotels & Resorts'
filings with the Securities and Exchange Commission, including
Interstate Hotels & Resorts' annual report on Form 10-K for the
year ended December 31, 2008. Contact: Carrie McIntyre SVP,
Treasurer (703) 387-3320 Interstate Hotels & Resorts, Inc.
Consolidated Statements of Operations (Unaudited, in thousands
except per share amounts) Three Months Ended Six Months Ended June
30, June 30, ------------------ ---------------- 2009 2008 2009
2008 ---- ---- ---- ---- Revenue: Lodging $21,225 $25,796 $40,261
$49,714 Management fees 8,758 10,820 17,109 20,729 Termination fees
(1) 1,995 1,194 3,241 4,204 Other 2,039 2,693 3,923 4,792 -----
----- ----- ----- 34,017 40,503 64,534 79,439 Other revenue from
managed properties 133,657 157,333 265,746 308,347 ------- -------
------- ------- Total revenue 167,674 197,836 330,280 387,786
Expenses: Lodging 15,224 17,510 29,806 34,452 Administrative and
general 10,783 15,331 22,021 31,243 Depreciation and amortization
3,849 4,901 7,690 9,175 Restructuring costs (2) 90 - 921 - Asset
impairments and write- offs 236 29 236 1,141 --- -- --- -----
30,182 37,771 60,674 76,011 Other expenses from managed properties
133,657 157,333 265,746 308,347 ------- ------- ------- -------
Total operating expenses 163,839 195,104 326,420 384,358 -------
------- ------- ------- OPERATING INCOME 3,835 2,732 3,860 3,428
Interest income 25 280 125 599 Interest expense (4) (3,126) (3,333)
(6,033) (7,148) Equity in (losses) earnings of unconsolidated
entities (5)(6)(7)(8) (3,713) 535 (4,511) 2,896 Gain on sale of
investments - - 13 - --- --- -- --- (LOSS) INCOME BEFORE INCOME
TAXES (2,979) 214 (6,546) (225) Income tax (expense) benefit (9)
(3,733) (79) (12,649) 72 ------ --- ------- -- NET (LOSS) INCOME
(6,712) 135 (19,195) (153) Add: Net (income) loss attributable to
noncontrolling interest 5 (1) 11 1 --- -- -- --- NET (LOSS) INCOME
ATTRIBUTABLE TO INTERSTATE STOCKHOLDERS $(6,707) $134 $(19,184)
$(152) ======= ==== ======== ===== Basic (loss) earnings per share
attributable to Interstate stockholders $(0.21) $0.00 $(0.60) $0.00
====== ===== ====== ===== Diluted (loss) earnings per share
attributable to Interstate stockholders (10) $(0.21) $0.00 $(0.60)
$0.00 ====== ===== ====== ===== Weighted average shares outstanding
(in thousands): Basic 32,135 31,764 32,030 31,765 Diluted 32,135
32,864 32,030 31,765 Interstate Hotels & Resorts, Inc. Hotel
Level Operating Statistics (Unaudited) Three Months Ended Six
Months Ended June 30, June 30, ------------------ ----------------
2009 2008 % change 2009 2008 % change ---- ---- -------- ---- ----
-------- Managed Hotels - Hotel Level Operating Statistics: (11)
Full-service hotels: Occupancy 69.8% 77.3% -9.7% 66.7% 74.6% -10.6%
ADR $133.78 $155.30 -13.9% $134.70 $153.34 -12.2% RevPAR $93.35
$120.02 -22.2% $89.78 $114.40 -21.5% Select-service hotels:
Occupancy 61.4% 68.3% -10.1% 58.2% 64.3% -9.5% ADR $97.25 $107.79
-9.8% $98.32 $108.16 -9.1% RevPAR $59.68 $73.65 -19.0% $57.24
$69.51 -17.7% Total: Occupancy 66.9% 74.2% -9.8% 63.5% 70.7% -10.2%
ADR $122.30 $140.26 -12.8% $122.15 $137.89 -11.4% RevPAR $81.81
$104.08 -21.4% $77.54 $97.52 -20.5% Wholly-Owned Hotels - Hotel
Level Operating Statistics: (12) Occupancy 68.5% 71.6% -4.3% 63.8%
68.1% -6.3% ADR $107.18 $122.69 -12.6% $109.43 $122.34 -10.6%
RevPAR $73.38 $87.79 -16.4% $69.85 $83.34 -16.2% Interstate Hotels
& Resorts, Inc. Reconciliations of Non-GAAP Financial Measures
(13) (Unaudited, in thousands except per share amounts) Three
Months Ended Six Months Ended June 30, June 30, ------------------
----------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net
(loss) income $(6,712) $135 $(19,195) $(153) Adjustments:
Depreciation and amortization 3,849 4,901 7,690 9,175 Interest
expense, net 3,101 3,053 5,908 6,549 Depreciation and amortization
from unconsolidated entities 1,157 1,098 2,109 1,799 Interest
expense, net from unconsolidated entities 988 897 1,950 1,860
Income tax (benefit) expense 3,733 79 12,649 (72) ----- -- ------
--- EBITDA 6,116 10,163 11,111 19,158 Restructuring costs (2) 90 -
921 - Asset impairments and write-offs (3) 736 29 736 1,141 Gain on
sale of investments - - (13) - Equity interest in the sale of
unconsolidated entities (5) - - - (2,392) Foreign currency loss
from unconsolidated entities (6) (202) - (73) - Start-up costs from
unconsolidated entities (7) 511 - 511 - Investment in
unconsolidated entities impairments (8) 3,019 - 3,019 - -------
------- ------- ------- Adjusted EBITDA $10,270 $10,192 $16,212
$17,907 ======= ======= ======= ======= Three Months Ended Six
Months Ended June 30, June 30, ------------------ -----------------
2009 2008 2009 2008 ---- ---- ---- ---- Net (loss) income $(6,712)
$135 $(19,195) $(153) Adjustments: Restructuring costs (2) 90 - 921
- Asset impairments and write-offs (3) 736 29 736 1,141 Gain on
sale of investments - - (13) - Deferred financing costs write- off
(4) - - 119 - Equity interest in the sale of unconsolidated
entities (5) - - - (2,392) Foreign currency loss from
unconsolidated entities (6) (202) - (73) - Start-up costs from
unconsolidated entities (7) 511 - 511 - Investment in
unconsolidated entities impairments (8) 3,019 - 3,019 - Income tax
rate adjustment (14) 3,170 (43) 12,636 397 ----- --- ------ ---
Adjusted net income (loss) $612 $121 $(1,339) $(1,007) ==== ====
======= ======= Adjusted diluted earnings (loss) per share $0.02
$0.00 $(0.04) $(0.03) ===== ===== ====== ====== Weighted average
number of diluted shares outstanding (in thousands) (10): 32,135
32,864 32,030 31,765 Interstate Hotels & Resorts, Inc. Outlook
Reconciliation (13) (Unaudited, in thousands) Forecast ----------
Year Ending December 31, 2009 ------------------- Net loss
$(24,900) Adjustments: Depreciation and amortization 16,100
Interest expense, net 17,300 Depreciation and amortization from
unconsolidated entities 4,100 Interest expense, net from
unconsolidated entities 3,700 Income tax expense 12,700 ------
EBITDA 29,000 Restructuring costs (2) 900 Asset impairments and
write-offs (3) 700 Foreign currency loss from unconsolidated
entities (6) (100) Start-up costs from unconsolidated entities (7)
500 Investment in unconsolidated entities impairments (8) 3,000
----- Adjusted EBITDA $34,000 ======= Forecast ---------- Year
Ending December 31, 2009 ------------------- Net Loss $(24,900)
Adjustments: Restructuring costs (2) 900 Asset impairments and
write-offs (3) 700 Deferred financing costs write-off (4) 100
Foreign currency loss from unconsolidated entities (6) (100)
Start-up costs from unconsolidated entities (7) 500 Investment in
unconsolidated entities impairments (8) 3,000 Income tax rate
adjustment (14) 12,600 ------ Adjusted Net Loss $(7,200) =======
Adjusted diluted loss per share (10) $(0.22) ====== Interstate
Hotels & Resorts, Inc. Notes to Financial Tables (Unaudited)
(1) We record termination fees as revenue when all contingencies
related to the termination fees have been removed. (2)
Restructuring costs for the three and six months ended June 30,
2009 consists of severance payments and other benefits for
terminated employees associated with our cost-savings program
implemented in January 2009. (3) This amount represents losses
recorded for intangible assets associated with terminated
management contracts and other asset impairments. In the second
quarter of 2009, $0.5 million in allowance for bad debts related to
notes receivable, which are recorded within administrative and
general expense on our consolidated statement of operations, has
been included. (4) Interest expense for the six months ended June
30, 2009 includes a $0.1 million write-off of deferred financing
costs as a result of the permanent reduction in capacity of our
credit facility associated with the waiver and amendment obtained
in March 2009. (5) In the first quarter of 2008, one of our joint
ventures sold the Doral Tesoro Hotel & Golf Club and we
recorded a gain of $2.4 million. (6) One of our international joint
ventures has debt that is denominated in a currency other than its
functional currency. Each period, the debt obligation is translated
and the resulting gain or loss is recognized in our consolidated
statement of operations, although it is a non-cash event. (7) In
February 2008, we and JHM Hotels, LLC formed a joint venture hotel
management company in India. In May 2009, our previously
contributed notes receivable were converted into a 50.0 percent
equity interest in the JHM Interstate Hotels India Ltd. joint
venture. Upon applying the equity method of accounting in the
second quarter of 2009, we recorded $0.5 million in equity in
losses related to the accumulated start-up costs of the joint
venture. (8) In the second quarter of 2009, we recognized a
non-cash impairment charge of $3.0 million relating to one of our
joint venture investments and this charge is reflected within
equity in (losses) earnings of unconsolidated entities on our
statement of operations. (9) In the first quarter of 2009, our
effective annual tax rate was determined to be (250.4)% which took
into account our foreign intellectual property license transaction.
This transaction was expected to accelerate the utilization of
certain U.S. tax attributes based on then-current forecasts. The
application of this effective annual tax rate to our first quarter
pre-tax loss of $3.6 million resulted in income tax expense of $8.9
million for the first quarter of 2009. In the second quarter of
2009, we established a full valuation allowance against our
remaining net deferred tax assets as we determined it is more
likely than not that we will not be able to utilize these assets in
the foreseeable future. As a result, our effective annual tax rate
was calculated to be 1.2% in the second quarter of 2009 and is
expected to be nominal (or approximately 0%) for the third and
fourth quarters of 2009. (10) Our diluted earnings per share
assumes the issuance of common stock for all potentially dilutive
common stock equivalents outstanding. Potentially dilutive shares
include unvested restricted stock and stock options granted under
our comprehensive stock plan and operating partnership units held
by noncontrolling interest partners. No effect is shown for any
securities that are anti-dilutive. (11) We present certain
operating statistics (i.e. occupancy, RevPAR and ADR) for the
periods included in this report on a same-store hotel basis. We
define our same-store hotels as those which (i) are managed or
owned by us for the entirety of the reporting periods being
compared or have been managed by us for part of the reporting
periods compared and we have been able to obtain operating
statistics for the period of time in which we did not manage the
hotel, and (ii) have not sustained substantial property damage,
business interruption, or undergone large-scale capital projects
during the current reporting period being presented. In addition,
the operating results of hotels for which we no longer managed as
of June 30, 2009 are also not included in same-store hotel results
for the periods presented herein. Of the 221 properties that we
managed as of June 30, 2009, 193 hotels have been classified as
same-store hotels. RevPAR is defined as revenue per available room.
(12) Operating statistics for our wholly-owned hotels includes our
entire portfolio of 7 hotels, including the Sheraton Columbia and
the Westin Atlanta Airport, both of which underwent comprehensive
renovation programs throughout 2008. (13) See discussion of EBITDA,
adjusted EBITDA, adjusted net loss and adjusted diluted loss per
share, located in the "Non-GAAP Financial Measures" section,
described earlier in this press release. (14) These amounts
represent the effect on income tax expense for the adjustments made
to adjusted net income (loss). For the six months ended June 30,
2009 and 2008, we used an effective annual tax rate of 1.2% and
32%, respectively. For the three and six months ended June 30,
2009, we adjusted the income tax expense related to the valuation
allowance recorded against deferred tax assets during the quarter
as discussed in footnote 9 above. DATASOURCE: Interstate Hotels
& Resorts CONTACT: Carrie McIntyre, SVP, Treasurer,
+1-703-387-3320 Web Site: http://www.ihrco.com/
Copyright
