Winston Hotels Reports Third Quarter 2001 Results
RALEIGH, N.C., Nov. 12 /PRNewswire/ — Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust and owner of premium limited-service, high-end extended-stay and full-service hotels, today announced results for the third quarter and nine months ended September 30, 2001. FFO totaled $6.7 million for the third quarter of 2001 as compared to $8.9 million for the third quarter of 2000. On a per share basis, FFO for the third quarter of 2001 totaled $0.37 on 18.3 million weighted average shares outstanding compared to $0.49 on 18.2 million weighted average shares outstanding for the same quarter a year ago. Lease revenue prior to the adoption of SAB 101 totaled $13.8 million for the third quarter of 2001 as compared to $16.5 million for the third quarter of 2000.
Summary of Third Quarter and YTD 2001 Unaudited Financial Highlights
($ in thousands, except per share amounts)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2001 2000 Change 2001 2000 Change
Percentage Lease
Revenue Pre-SAB 101 $13,753 $16,487 (16.6) $44,677 $48,757 (8.4)%
Deferred Lease
Revenue $ 802 $ 2,257 (64.5)% $(9,961) $(9,789) (1.8)%
Percentage Lease
Revenue $14,555 $18,744 (22.3)% $34,716 $38,968 (10.9)%
Interest, Joint
Venture and
Other Income $456 $ 469 (2.8)% $ 1,771 $ 818 116.5%
FFO $6,715 $ 8,914 (24.7)% $22,846 $24,803 (7.9)%
FFO Per Diluted
Common Share $ 0.37 $ 0.49 (24.5)% $ 1.25 $ 1.36 (8.1)%
Bob Winston, Chief Executive Officer, commented: Although our results were negatively affected by the tragic events of September 11, 2001, in an already weakening economy, we are optimistic about where our Company is positioned for the future. Our segments and locations should benefit from changes in travel patterns, as well as the inherent lower supply growth, for the next several years. These results, combined with our conservative balance sheet, cash position and debt structure, allow Winston to continue to pay a dividend, although at a lower rate.
Winston Hotels President & Chief Operating Officer, James D. Rosenberg, commented on the third quarter highlights:
For the quarter, our RevPar decreased 10.2%. Relative to the other hotel segments, our segments have performed well during uncertain economic times. We believe that the recent performance of these hotel segments supports our business plan, which focuses on investing in premium limited service hotels and certain upscale brands, rather than in large full service hotels that tend to create more earnings volatility.
Winston's financial strength remains strong as evidenced by the following:
* Our total debt to EBITDA multiple is 3.3 based on our trailing 12 month
EBITDA
* Our consolidated debt to total assets at cost is 36%
* Our annual interest coverage ratio multiple is 3.3
* Although our current line of credit for $140 million matures in early
January 2002, we expect to receive a commitment from our bank group to
renew the credit with a $125 million facility for an additional
three-year period. While our existing credit facility maintains
several spreads to LIBOR depending upon our corporate leverage, we
always have qualified for a LIBOR spread of 1.45%. We anticipate that
the comparable spread under our renewed facility will be 2.00%.
Moreover, we are in full compliance with all of our current debt
covenants and expect to be throughout the term of our renewed
facility.
* The leases for our hotels are still owned by third parties, such as
Meristar Hotels and Resorts, Inc. As such, our lessees bear the risks
of reduction in the hotel profit margins, not the REIT, which could be
generated from a reduction in RevPar. Although at some time in the
future, we may elect to purchase our leases, we do not believe that it
is prudent for the Company to incur additional debt at this time to do
so.
* We are very pleased with the physical condition of our portfolio. We
have spent approximately $43 million on our hotels over the last
4 years, which represents approximately 8.6% of room revenues and is
significantly above industry benchmarks.
* Based on information provided by Smith Travel Research, the year to
date RevPar yield for our entire portfolio exceeded 105%, which
indicates that our portfolio achieved a greater RevPar than our fair
share.
* Preliminary estimates from Smith Travel Research indicate that the US
Hotel Industry RevPar for the month of October was a -16% to
-18%, while Winston's RevPar was -11%.
* Our portfolio generated an unleveraged return on assets of 11.6% for
the trailing 12-month period.
* The year to date return to common shareholders is 24%, based on our
stock price at the beginning of the year through November 8, 2001,
including our dividend payments.
Operating Statistics
For the 48 hotels that were open during the entire quarters ended September 30, 2001 and September 30, 2000, lease revenues and related statistics are as follows (note that the Company does not exclude for sale or under renovation hotels when making these comparisons):
Three Months Ended September 30,
2001 2000 % Change
Lease Revenues* $13,753 $16,196 (15.1)
Average Daily Rate $80.40 $79.67 0.9
Occupancy 63.72% 71.58% (11.0)
Rev PAR $51.23 $57.03 (10.2)
(*Pre SAB 101, $ in thousands)
Outlook for Remainder of 2001 and Expectations for 2002
We are adjusting our guidance on FFO to $0.20 to $0.24 per share for the fourth quarter and $1.41 to $1.45 per share for the year based upon our revised projected changes in RevPar of -16% to -12%, for the remainder of the year. Given the current economy and world events, it is very difficult to provide meaningful guidance with any precision. However, given the current circumstances, for 2002, we are forecasting a RevPar change of 0% to -2%, with negative performance during the first two quarters and positive performance during the last two quarters of the year. Of course, our estimates are based upon the assumption that the economy rebounds next year and that no further terrorist attacks occur. As reliable information becomes available during the next several weeks, we should be in a better position to give FFO guidance for 2002.
Dividend Performance
During the third quarter, Winston Hotels declared a cash dividend of $0.28 per common share. The cash dividend was paid on October 16, 2001 to shareholders of record on September 30, 2001. The regular quarterly dividend is equivalent to $1.12 on an annualized basis. Also in the third quarter, the Company announced its regular quarterly cash dividend to preferred shareholders of record of $0.578125 per share. This dividend also was paid on October 16, 2001 to shareholders of record on September 30, 2001.
Winston Hotels, Inc.'s Board of Directors has decided to pay a dividend of $0.15 per common share and a dividend of $0.578125 per preferred share for the fourth quarter of 2001. Furthermore, we believe that we can continue to pay a quarterly dividend per common share throughout 2002 of $0.15 to $0.20 and the $0.578125 per preferred share, barring any further economic crises or terrorist attacks. Moreover, as conditions permit, the Board intends to monitor the Company's dividend policy closely and act accordingly as earnings dictate. Under our stated dividend policy and RevPar assumptions, the Company's FFO payout ratio should continue to be among the lowest in the industry. We anticipate that this dividend policy will provide the REIT with additional cash flow for potential investments and capital expenditure needs.
Winston Hotels' third quarter investor conference call is scheduled for 10 a.m. EST on November 12, 2001. This call also will be simulcast over the Internet via the Company's website at http://www.winstonhotels.com . The replay will be available on the Winston Hotels' website for 7 days, or via the telephone by dialing 800-475-6701, access code 595456.
About the Company
Raleigh, North Carolina-based Winston Hotels, Inc. is a real estate investment trust specializing in the development, acquisition and rehabilitation of premium limited-service, high-end extended-stay and full-service hotel properties, with a portfolio increasingly weighted toward the leading brands in the lodging industry's upscale segment. The Company currently owns 48 operating hotels with 6,574 rooms in 12 states, as well as a 49% ownership interest in 3 other operating hotels with 454 rooms. Additionally, the Company has provided mezzanine financing to a third party for the development and construction of a Hilton Garden Inn hotel in Atlanta, which opened in April of this year, and a Hilton Garden Inn Hotel in Tampa, which is scheduled to open in the first quarter of 2002.
Forward-Looking Statements
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to, statements referring to estimated FFO per share in 2001 for the year and by quarter, and expected RevPar decline for 2001 and 2002. You can identify these statements by use of words like intends, guidance, may, believe, will, expect, project, anticipate, estimate, or continue or similar expressions. These statements represent the Company's judgment and are subject to risks and uncertainties that could cause actual operating results to differ materially from those expressed or implied in the forward looking statements including, but not limited to, changes in general economic conditions, further terrorist attack, lower occupancy rates, lower average daily rates, development risks including risk of construction delay, cost overruns, occupancy and other governmental permits, zoning, the increase of development costs in connection with projects that are not pursued to completion, and the risk of non-payment of mezzanine loans. Other risks are discussed in the Company's filings with the Securities and Exchange Commission, including but not limited to its Form S-3 Registration Statement filed on September 2, 1999 as amended on September 29, 1999 and its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and its other periodic reports.
For more information, call Patti Bell, Investor Relations Manager of Winston Hotels, Inc., at (919) 510-8003.
For more information on Winston Hotels visit the
Winston Hotels page at www.winstonhotels.com .
WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
ASSETS
September 30, December 31,
2001 2000
(unaudited)
Land $ 41,043 $ 41,948
Buildings and improvements 358,333 361,768
Furniture and equipment 43,278 40,539
Operating properties 442,654 444,255
Less accumulated depreciation 91,304 77,609
351,350 366,646
Properties under development 626 236
Net investment in hotel properties 351,976 366,882
Corporate FF&E, net 1,116 1,285
Cash 1,021 167
Lease revenue receivable 7,682 7,127
Notes receivable 3,516 1,080
Investment in joint ventures 8,134 8,700
Deferred expenses, net 2,564 3,375
Prepaid expenses and other assets 5,644 5,694
$381,653 $394,310
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt $ 67,989 $ 68,872
Due to banks 100,300 103,800
Deferred percentage lease revenue 10,460 499
Accounts payable and accrued expenses 9,193 6,220
Distributions payable 6,838 6,829
Minority interest in Partnership 7,847 9,374
202,627 195,594
Shareholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
3,000,000 shares issued and outstanding
(liquidation preference of $76,734) 30 30
Common stock, $.01 par value,
50,000,000 shares authorized,
16,925,928 and 16,897,028 shares issued
and outstanding 169 169
Additional paid-in capital 230,137 229,796
Unearned compensation (656) (771)
Accumulated other comprehensive income (loss) (1,961) —
Distributions in excess of earnings (48,693) (30,508)
Total shareholders' equity 179,026 198,716
Total liabilities and shareholders' equity $381,653 $394,310
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months Three Months
Ended Ended
September 30, September 30,
2001 2000
Revenue:
Percentage lease revenue $14,555 $18,744
Interest, joint venture and other income 456 469
Total revenue 15,011 19,213
Expenses:
Real estate taxes and property
and casualty insurance 1,752 1,473
General and administrative 1,232 1,139
Interest 2,984 3,460
Depreciation 5,132 5,293
Amortization 226 236
Total expenses 11,326 11,601
Income before loss on sale of property and
allocation to minority interest 3,685 7,612
Loss on sale of property — 588
Income before allocation to minority interest 3,685 7,024
Income allocation to minority interest 139 379
Net income 3,546 6,645
Preferred stock distribution (1,734) (1,734)
Net income applicable to common shareholders $ 1,812 $ 4,911
Earnings per share:
Net income per common share $ 0.11 $ 0.29
Net income per common share
assuming dilution $ 0.11 $ 0.29
Weighted average number of common shares 16,926 16,897
Weighted average number of common shares
assuming dilution 18,258 18,195
WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2001 2000
Revenue:
Percentage lease revenue $ 34,716 $ 38,968
Interest, joint venture and other income 1,771 818
Total revenue 36,487 39,786
Expenses:
Real estate taxes and property
and casualty insurance 5,506 5,260
General and administrative 3,729 3,558
Interest 9,277 10,057
Depreciation 15,667 15,829
Amortization 693 694
Total expenses 34,872 35,398
Income before loss on sale of property,
allocation to minority interest, and
cumulative effect of change in accounting
principle 1,615 4,388
Loss on sale of property 683 850
Income before allocation to minority
interest and cumulative effect of change
in accounting principle 932 3,538
Loss allocation to minority interest (304) (117)
Income before cumulative effect of
change in accounting principle 1,236 3,655
Cumulative effect of change in accounting
principle — gross — (720)
Cumulative effect of change in accounting
principle — allocation to minority interest — 52
Cumulative effect of change in accounting
principle — net — (668)
Net income 1,236 2,987
Preferred stock distribution (5,203) (5,203)
Net loss applicable to common shareholders $ (3,967) $ (2,216)
Earnings per share:
Loss before cumulative effect of change
in accounting principle per common share $ (0.23) $ (0.09)
Loss before cumulative effect of change
in accounting principle per common share
assuming dilution $ (0.23) $ (0.09)
Net loss per common share $ (0.23) $ (0.13)
Net loss per common share assuming dilution $ (0.23) $ (0.13)
Weighted average number of common shares 16,926 16,887
Weighted average number of common
shares assuming dilution 18,244 18,185
WINSTON HOTELS, INC.
CALCULATION OF FFO AND EBITDA
(in thousands, except per share data)
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Funds from
operations: (unaudited) (unaudited) (unaudited) (unaudited)
Net Income $3,546 $6,646 $1,237 $2,987
Minority interest
allocation 139 379 (304) (168)
Preferred stock
dividend (1,734) (1,734) (5,203) (5,203)
Depreciation 5,132 5,293 15,667 15,829
Depreciation from
joint ventures 191 — 427
Deferred revenue (802) (2,257) 9,960 10,508
Deferred revenue from
joint ventures 243 — 380
Loss on sale of property — 588 682 850
Funds from
operations $6,715 $8,914 $22,846 $24,803
Weighted average
common shares
assuming dilution 18,259 18,194 18,244 18,185
FFO per share $0.37 $0.49 $1.25 $1.36
Earnings before interest,
taxes, depreciation
and amortization (EBITDA):
FFO $6,715 $8,914 $22,846 $24,803
Interest expense 2,984 3,460 9,277 10,057
Interest expense
from joint ventures 243 — 538 —
Amortization 226 236 693 694
Dividend on
preferred stock 1,734 1,734 5,203 5,203
EBITDA $11,902 $14,344 $38,557 $40,757
Winston Hotels, Inc.
Third Quarter 2001
RevPAR Statistical Highlights
Portfolio of 48 Hotels
# of WXH – QTR 3 WXH – Year to Date
Properties 2001 2000 % Change 2001 2000 % Change
Brand
Comfort/Quality Inn/
Suites 10 36.74 41.02 -10.4% 40.05 43.62 -8.2%
Hampton Inn/Suites 17 51.95 57.67 -9.9% 53.76 55.39 -2.9%
Hilton Garden Inn 3 65.09 70.47 -7.6% 68.57 69.42 -1.2%
Holiday Inn/
Express/Select 5 62.01 69.13 -10.3% 63.54 66.06 -3.8%
Homewood Suites 7 57.56 65.02 -11.5% 66.88 67.06 -0.3%
Courtyard/Fairfield
& Residence Inn 6 52.81 58.02 -9.0% 56.20 58.59 -4.1%
Geographic
East North Central 2 66.54 77.76 -14.4% 64.25 68.46 -6.2%
Mountain 3 31.20 39.07 -20.1% 49.51 51.75 -4.3%
Northeast/
Middle Atlantic 5 89.54 90.50 -1.1% 85.38 82.22 3.9%
South Atlantic 35 46.27 52.31 -11.6% 49.98 52.70 -5.2%
West South Central 3 47.38 53.09 -10.8% 50.32 53.30 -5.6%
Segment
Mid-scale w/ F&B 3 81.79 83.94 -2.6% 79.57 80.53 -1.2%
Mid-scale w/o F&B 29 45.19 50.80 -11.0% 47.77 50.07 -4.6%
Upscale 16 54.70 61.47 -11.0% 60.75 62.71 -3.1%
Service
Limited-service 28 44.90 50.43 -11.0% 47.47 49.73 -4.6%
Full-service 11 63.02 68.27 -7.7% 64.04 66.47 -3.6%
Extended-stay 9 53.02 60.30 -12.1% 63.24 64.14 -1.4%
Total Portfolio 48 51.23 57.03 -10.2% 54.68 56.78 -3.7%
Categories: Trends