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Interstate Hotels & Resorts Reports Second-Quarter 2007 Results
ARLINGTON, Va., Aug. 8 /PRNewswire-FirstCall/ -- Interstate Hotels &
Resorts (NYSE: IHR), one of the nation's largest independent hotel
management companies, today reported operating results for the second
quarter ended June 30, 2007. The company's performance for the second
quarter includes the following (in millions, except per share amounts):
Second Quarter Year-to-Date
--------------- ----------------
2007 2006 2007 2006
----- ----- ----- -----
Total revenue (1) $35.4 $26.5 $63.8 $58.1
Net income $1.6 $3.0 $18.8 $3.8
Diluted earnings per share $0.05 $0.10 $0.59 $0.12
Adjusted EBITDA (2) (3) $9.5 $7.6 $16.4 $22.2
Adjusted net income (2) $1.5 $1.6 $2.3 $8.1
Adjusted diluted EPS (2) $0.05 $0.05 $0.07 $0.26
(1) Total revenue excludes other revenue from managed properties
(reimbursable costs).
(2) Adjusted EBITDA, Adjusted net income, 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
further discussion of non-GAAP financial measures and reconciliation
to net income later in this press release.
(3) Includes the company's share of EBITDA from unconsolidated Joint
Venture investments in the amounts of $1.0 million in the second
quarters of 2007 and 2006, and $1.9 million and $1.5 million for the
first six months of 2007 and 2006, respectively.
The second quarter 2007 statement of operations includes the following
non-recurring items and special charges:
-- $1.0 million of asset impairments and write-offs associated with
terminated management contracts;
-- $0.4 million of severance costs related to a reduction in corporate
headcount associated with the reduction in the number of third party
managed properties throughout the year;
-- $0.6 million gain related to the sale of a joint venture interest,
recorded in equity in earnings of affiliates.
These items have been excluded from the calculation of Adjusted EBITDA,
Adjusted Net Income, and Adjusted Diluted EPS.
Hotel Management Results
Same-store(4) RevPAR for all managed hotels in the second quarter of
2007 rose 8.0 percent to $104.61. Average daily rate (ADR) improved 7.5
percent to $135.43, and occupancy increased 0.4 percent to 77.2 percent.
Same-store RevPAR for all full-service managed hotels advanced 8.1
percent to $113.21. ADR increased 7.0 percent to $145.38, while occupancy
rose 1.0 percent to 77.9 percent.
Same-store RevPAR for all select-service managed hotels improved 7.7
percent to $77.23, on a 9.2 percent gain in ADR to $102.69 and a 1.3
percent decline in occupancy to 75.2 percent.
"We had an excellent second quarter, with RevPAR increasing 8.0
percent, which compared favorably to the industry average of 5.7 percent,
according to Smith Travel Research data," said Thomas F. Hewitt, chief
executive officer. "Yielding rate and controlling costs enabled us to
deliver strong bottom line growth to our owners."
The company ended the quarter with 187 hotels in its portfolio, a
decrease of 20 hotels from the beginning of the quarter. This decrease was
driven by the sale of properties by two major owners, The Blackstone Group,
which sold 11 Interstate-managed hotels during the quarter, and Sunstone
Hotel Investors, Inc. (NYSE: SHO), which sold a portfolio of six hotels.
These losses were somewhat offset by adding four new third-party managed
properties to the portfolio during the quarter: the 148-room Marriott
Ashbourne in Ireland, the 484-room Marriott Oakland City Center and the
162-room Courtyard Oakland Downtown, both in California; and the 143-room
Hampton Inn Pittsburgh, a newly built hotel which opened at the end of the
quarter.
"The expected reduction in our hotel count during the quarter is a
reflection of the favorable real estate market conditions the industry has
been experiencing over the past two years," Hewitt noted. "As we work
through this transitional year, we are encouraged by the activity generated
by our business development team, which continues to focus on adding new
properties to our portfolio of third-party managed hotels, while also
seeking opportunities to grow our real estate ownership, both wholly-owned
and through joint venture investments."
(4) Please see footnote 6 to the financial tables within this press
release for a detailed explanation of "same-store" hotel operating
statistics.
Wholly-owned Hotel Results
"RevPAR increased 3.8 percent at our six wholly-owned properties. These
results were impacted by tough comparisons for our Baton Rouge hotel, which
benefited from unusual demand last year as a result of Hurricane Katrina.
The hotel continues to perform well, with occupancies in the mid-80s,"
Hewitt said.
"From a bottom-line perspective, the portfolio continues to generate
strong results," Hewitt noted. EBITDA from the company's owned hotels was
$5.9 million for the second quarter and $9.6 million for the first six
months as illustrated below (in millions):
Owned Hotels Second Quarter Year-to-Date
--------------------------------------------- ----------------
2007 2006 2007 2006
------ ------ ------ ------
Net Income $1.2 $0.8 $1.5 $1.1
Interest Expense 2.9 0.5 4.9 1.0
Depreciation and Amortization 1.8 0.5 3.2 0.9
------ ------ ------ ------
EBITDA $5.9 $1.8 $9.6 $3.0
====== ====== ====== ======
"We completed the purchase of the Westin Atlanta Airport in the second
quarter, for $74 million, our largest asset acquisition to date," Hewitt
added. "The Westin's favorable location provides for easy access to the
nearby convention center, downtown Atlanta and other area attractions. We
expect to benefit from the addition of 3.2 million square feet of office
construction across the Atlanta metro area. Our planned $18 million
renovation, just underway at this hotel, will position us to take full
advantage of the growth in the area."
With the addition of this hotel, the company's 2007 projected
annualized EBITDA from its wholly-owned assets is $25 million, which is
more than 50 percent of its total Adjusted EBITDA.
"We continue to look for hotels to which we can add value, both through
our management expertise and through targeted capital spending," Hewitt
said. "We remain disciplined in our approach to the properties we acquire
in order to maintain a conservative balance sheet, well positioned to
handle any phase of the lodging cycle."
Joint Venture Investments
The company ended the second quarter with minority ownership in 17
properties through 11 joint venture partnerships. The company's share of
EBITDA from joint venture investments was $1 million in both the second
quarter of 2007 and 2006. The company's share of non-recourse mortgage debt
from joint ventures is $20.1 million.
Leslie Ng, chief investment officer, pointed out that joint ventures
remain a major growth platform for Interstate. "Joint venture investments
provide us with solid returns on our investment through the combination of
our share of the real estate returns, the management fee from the hotel, as
well as the participation in the potential asset value accretion upon sale,
while aligning our interests with our majority partner."
Last week, the company announced that it had entered the Mexican market
by making a $5.7 million investment in a three-property portfolio of Tesoro
Resorts in Mexico, which includes:
Property Location # of Rooms
-------------------------------------------------------
Tesoro Los Cabos Cabo San Lucas, Mexico 286
-------------------------------------------------------
Tesoro Manzanillo Manzanillo, Mexico 331
-------------------------------------------------------
Tesoro Ixtapa Ixtapa, Mexico 203
-------------------------------------------------------
Interstate expects to convert this investment to a 15 percent joint
venture equity interest in the near term. In conjunction with this
investment, Interstate acquired a 50 percent interest in the resorts'
operating company through a separate joint venture, operating as Interstate
de Mexico.
"This investment establishes a solid platform for our entry into Mexico
and Latin America, areas where we see significant opportunities for growth
over the next decade," Ng said. "We continue to seek joint venture
investment opportunities both internationally and domestically that are
consistent with our targeted property profile," he added.
Balance Sheet
On June 30, 2007, Interstate had:
-- Total cash of $27.4 million
-- Total debt of $172.2 million, consisting of $114.7 million of senior
debt and $57.5 million of non-recourse mortgage debt
In May, the company amended its senior secured credit facility to
significantly expand the facility's capacity and provide greater
flexibility in certain of its financial covenants. The total facility
increased by $75 million to $200 million, consisting of a $115 million term
loan and a $85 million revolver. The interest rate of the expanded facility
remained at LIBOR plus 275 basis points. The company used the additional
$50 million term loan and cash on hand to finance the acquisition of the
Westin Atlanta Airport hotel.
"By increasing the capacity of our senior secured facility, we have the
flexibility to continue to execute our strategic business plans, including
the selective acquisition of wholly-owned and joint venture real estate
investments," said Bruce Riggins, chief financial officer. "We currently
have
the entire $85 million available on our revolving credit facility to
fund our growth strategy and our operating needs."
Outlook and Guidance
The company provides the following guidance for full-year 2007:
-- RevPAR, on a same-store basis, is expected to increase 7.0 to 9.0
percent;
-- Net income of $23.5 million to $24.7 million;
-- Diluted earnings per share of $0.74 to $0.78;
-- Adjusted net income of $7.0 million to $8.2 million;
-- Adjusted diluted earnings per share of $0.22 to $0.26;
-- Adjusted EBITDA of $41.5 million to $43.5 million, which includes the
following:
-- $4.0 to $4.5 million from the company's share of EBITDA from
unconsolidated joint ventures;
-- EBITDA from wholly-owned hotels of $20 million to $22 million.
-- Termination fees of approximately $6.0 million;
-- Incentive fees of $17.5 million to $19.5 million;
-- Total capex of approximately $14.0 million, including $4.0 million to
be funded out of mortgage-related escrows.
Interstate will hold a conference call to discuss its second-quarter
results today, August 8, 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 Second-Quarter Conference Call. A
replay of the conference call will be available until midnight on
Wednesday, August 15, 2007, by dialing (800) 405-2236, reference number
11093055, and an archived webcast of the conference call will be posted on
the company's Web site through September 8, 2007.
As of July 31, 2007, Interstate Hotels & Resorts operated 189
hospitality properties with more than 43,000 rooms in 36 states, the
District of Columbia, Belgium, Canada, Ireland, Mexico and Russia,
including six wholly- owned properties and 20 properties with a minority
ownership interest through 13 separate joint ventures. In addition,
Interstate Hotels & Resorts has contracts to manage 16 hospitality
properties with more than 4,600 rooms currently under construction. For
more information about Interstate Hotels & Resorts, visit the company's Web
site: 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 income, and Adjusted
diluted EPS. 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 includes 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 Income 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
that the presentation of Adjusted EBITDA, when combined with the primary
GAAP presentation of net income, 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 income and Adjusted diluted EPS as
net income and diluted EPS, without the effects of those same charges,
transactions and expenses described earlier. We believe that Adjusted
EBITDA, Adjusted net income 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 income 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 the use of EBITDA, Adjusted EBITDA and Adjusted Net
Income
We calculate EBITDA, Adjusted EBITDA, Adjusted net income, 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 income 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 income, 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, 2006.
Contact:
Carrie McIntyre
SVP, Treasurer
(703) 387-3320
Interstate Hotels & Resorts, Inc.
Statements of Operations
(Unaudited, in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- ------- -------- --------
Revenue:
Lodging $18,621 $6,418 $31,697 $11,455
Management fees 11,580 15,187 23,049 32,350
Termination fees (1) 2,418 2,196 3,993 7,896
Other 2,763 2,718 5,032 6,429
-------- ------- -------- --------
35,382 26,519 63,771 58,130
Other revenue from managed
properties 164,793 217,824 341,163 442,773
-------- ------- -------- --------
Total revenue 200,175 244,343 404,934 500,903
Expenses:
Lodging 12,667 4,572 22,039 8,460
Administrative and general 14,575 15,385 27,890 29,030
Depreciation and amortization 3,684 1,546 6,977 3,089
Asset impairments and
write-offs (2) 1,047 92 1,155 8,642
-------- ------- -------- --------
31,973 21,595 58,061 49,221
Other expenses from managed
properties 164,793 217,824 341,163 442,773
-------- ------- -------- --------
Total operating expenses 196,766 239,419 399,224 491,994
-------- ------- -------- --------
OPERATING INCOME 3,409 4,924 5,710 8,909
Interest income 721 545 1,157 931
Interest expense (3) (3,276) (1,970) (6,009) (4,025)
Equity in earnings (losses) of
affiliates 854 123 1,255 (434)
-------- ------- -------- --------
INCOME BEFORE MINORITY INTEREST
AND INCOME TAXES 1,708 3,622 2,113 5,381
Income tax expense (708) (1,611) (855) (2,280)
Minority interest expense (9) (31) (62) (49)
-------- ------- -------- --------
INCOME FROM CONTINUING
OPERATIONS 991 1,980 1,196 3,052
Income from discontinued
operations, net of tax (4) 607 1,029 17,608 703
-------- ------- -------- --------
NET INCOME $1,598 $3,009 $18,804 $3,755
======== ======= ======== ========
BASIC EARNINGS PER SHARE:
Continuing operations $0.03 $0.07 $0.04 $0.10
Discontinued operations 0.02 0.03 0.56 0.02
-------- ------- -------- --------
Basic earnings per share $0.05 $0.10 $0.60 $0.12
======== ======= ======== ========
DILUTED EARNINGS PER SHARE (5):
Continuing operations $0.03 $0.07 $0.04 $0.10
Discontinued operations 0.02 0.03 0.55 0.02
-------- ------- -------- --------
Diluted earnings per share $0.05 $0.10 $0.59 $0.12
======== ======= ======== ========
Weighted average shares
outstanding (in thousands):
Basic 31,642 30,890 31,602 30,788
Diluted 31,989 31,276 31,894 31,089
Interstate Hotels & Resorts, Inc.
Hotel Level Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2007 2006 % change 2007 2006 % change
------- ------- ------- ------- -------- -------
Managed Hotels - Hotel
Level Operating
Statistics: (6)
Full-service hotels:
Occupancy 77.9% 77.1% 1.0% 75.2% 74.0% 1.6%
ADR $145.38 $135.93 7.0% $142.30 $132.99 7.0%
RevPAR $113.21 $104.77 8.1% $107.04 $98.47 8.7%
Select-service hotels:
Occupancy 75.2% 76.2% -1.3% 71.6% 72.6% -1.4%
ADR $102.69 $94.08 9.2% $101.11 $92.59 9.2%
RevPAR $77.23 $71.69 7.7% $72.38 $67.22 7.7%
Total:
Occupancy 77.2% 76.9% 0.4% 74.4% 73.7% 0.9%
ADR $135.43 $126.00 7.5% $132.80 $123.46 7.6%
RevPAR $104.61 $96.85 8.0% $98.75 $90.98 8.5%
Owned Hotels - Hotel
Level Operating
Statistics: (7)
Occupancy 75.9% 76.4% -0.7% 73.1% 73.6% -0.7%
ADR $117.62 $112.56 4.5% $118.26 $113.26 4.4%
RevPAR $89.28 $86.03 3.8% $86.49 $83.40 3.7%
Interstate Hotels & Resorts, Inc.
Reconciliations of Non-GAAP Financial Measures (8)
(Unaudited, in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
2007 2006 2007 2006
-------- -------- --------- --------
Net income $1,598 $3,009 $18,804 $3,755
Adjustments:
Depreciation and amortization 3,684 1,546 6,977 3,089
Interest expense, net 2,555 1,425 4,852 3,094
Depreciation and amortization
from unconsolidated joint
ventures 269 338 518 689
Interest expense, net from
unconsolidated joint ventures 391 571 769 1,100
Discontinued operations, net (4) (607) (1,029) (17,608) (703)
Income tax expense 708 1,611 855 2,280
-------- -------- --------- --------
EBITDA 8,598 7,471 15,167 13,304
Asset impairments and
write-offs (2) 1,047 92 1,155 8,642
Severance (9) 378 - 732 -
Equity interest in the sale of
unconsolidated joint
ventures (10) (558) (24) (686) 176
Minority interest expense 9 31 62 49
-------- -------- --------- --------
Adjusted EBITDA $9,474 $7,570 $16,430 $22,171
======== ======== ========= ========
Three Months Ended Six Months Ended
June 30, June 30,
----------------- ------------------
2007 2006 2007 2006
-------- -------- --------- --------
Net income $1,598 $3,009 $18,804 $3,755
Adjustments:
Asset impairments and
write-offs (2) 1,047 92 1,155 8,642
Severance (9) 378 - 732 -
Discontinued operations, net (4) (607) (1,029) (17,608) (703)
Deferred financing costs
write-off (3) 102 - 632 -
Equity interest in the sale of
unconsolidated joint
ventures (10) (558) (24) (686) 176
Minority interest - 1 50 (65)
Income tax rate adjustment (11) (487) (415) (786) (3,749)
-------- -------- --------- --------
Adjusted net income $1,473 $1,634 $2,293 $8,056
======== ======== ========= ========
Adjusted diluted earnings per
share (5) $0.05 $0.05 $0.07 $0.26
======== ======== ========= ========
Weighted average number of diluted
shares outstanding
(in thousands) (5): 31,989 31,276 31,894 31,089
Interstate Hotels & Resorts, Inc.
Outlook Reconciliation (8), (12)
(Unaudited, in thousands)
Forecast
-----------------
Year Ending
December 31, 2007
-----------------
Net income $24,100
Adjustments:
Depreciation and amortization 15,600
Interest expense, net 11,500
Depreciation and amortization from unconsolidated
joint ventures 1,200
Interest expense, net from unconsolidated joint ventures 1,700
Discontinued operations, net (4) (17,600)
Income tax expense 4,700
-----------------
EBITDA 41,200
Asset impairments and write-offs (2) 1,200
Severance (9) 700
Equity interest in the sale of unconsolidated
joint ventures (10) (700)
Minority interest expense 100
-----------------
-----------------
Adjusted EBITDA $42,500
=================
Forecast
-----------------
Year Ending
December 31, 2007
-----------------
Net income $24,100
Adjustments:
Asset impairments and write-offs (2) 1,200
Severance (9) 700
Discontinued operations, net (4) (17,600)
Deferred financing costs write-off (3) 600
Equity interest in the sale of unconsolidated
joint ventures (10) (700)
Minority Interest 50
Income tax rate adjustment (11) (750)
-----------------
Adjusted net income $7,600
=================
Adjusted diluted earnings per share (5) $0.24
=================
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. In the first quarter of
2006, we recognized $4.1 million of one-time termination fees due to
the sale of 10 MeriStar properties.
(2) This amount represents losses recorded for intangible costs
associated with terminated management contracts.
(3) For 2007, interest expense includes $0.5 million of deferred
financing fees expensed in the first quarter in connection with the
entrance in a new senior secured credit facility and the related pay-
off of all balances outstanding under our old senior secured credit
facility, as well as the write-off of $0.1 million of deferred
financing fees at the time of repayment of the underlying mortgage
note for the Hilton Concord.
(4) In January 2007, we completed the sale of our subsidiary,
BridgeStreet Corporate Housing. We have presented these operations
and the gain on sale as discontinued operations for all periods
presented. The calculation of EBITDA reflects the elimination of
discontinued operations.
(5) Our diluted earnings per share assumes the issuance of common stock
for all potentially dilutive common stock equivalents outstanding.
Potentially dilutive shares include restricted stock and stock
options granted under our comprehensive stock plan and operating
partnership units held by minority partners. No effect is shown for
any securities that are anti- dilutive.
(6) 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
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 reporting periods
being presented. In addition, the operating results of hotels for
which we no longer managed as of June 30, 2007 are also not included
in same- store hotel results for the periods presented herein. Of the
187 properties that we managed as of June 30, 2007, 165 hotels have
been classified as same- store hotels. RevPar is defined as revenue
per available room. ADR is defined as average daily rate.
(7) Owned Hotels - Hotel Level Operating Statistics include periods prior
to our ownership. Hilton Concord was purchased in February 2005,
Hilton Durham was purchased in November 2005, Hilton Garden Inn in
Baton Rouge was purchased in June 2006, Hilton Arlington was
purchased in October 2006, Houston Westchase was purchased in
February 2007, and Westin Atlanta Airport was purchased in May 2007.
Statistics for these properties are also included in the Managed
Hotels - Hotel Level Operating Statistics.
(8) See discussion of EBITDA, adjusted EBITDA, adjusted net income and
adjusted diluted earnings per share, located in the "Non-GAAP
Financial Measures" section, described earlier in this press release.
(9) For 2007, severance expense of $0.7 million relates to the separation
costs of multiple personnel at our corporate offices associated with
the reduction in the number of third party managed properties
throughout the year. These severance costs are recorded as part of
administrative and general expenses on our statement of operations.
No severance expense was recorded in 2006.
(10) For the six months ended June 30, 2007, the adjustment relates to
gains of $0.7 million related to four of our joint ventures, three of
which were sold in prior years. In addition, we also incurred losses
of $0.2 million in the first quarter of 2006 related to the write-off
of a contribution to a joint venture.
(11) This amount represents the effect on income tax expense for the
adjustments made to net income at an effective tax rate of 41.7% for
the six month period ended June 30, 2007 and 42.8% for the six month
period ended June 30, 2006.
(12) Our outlook reconciliation uses the mid-point of our estimates.
SOURCE Interstate Hotels & Resorts
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