Interstate Hotels Corporation Reports Third Quarter Results

PITTSBURGH–(BUSINESS WIRE)–Nov. 13, 2001–Interstate Hotels Corporation (Nasdaq:IHCO), one of the largest independent hotel management companies in the United States, today announced results for the third quarter ended September 30, 2001.
For the third quarter of 2001, the Company reported a net loss of $4.4 million compared to a net loss of $4.2 million reflecting earnings per share of $(.72) compared to $(.66) for the same period last year. Earnings before interest, income tax expense and depreciation and amortization (EBITDA) were $1.1 million versus $0.3 million in the third quarter of 2000. Total Company revenues decreased by $55.8 million in the third quarter of 2000 to $10.1 million in the third quarter of 2001 as a result of the conversion of the Equity Inns leases into management contracts on January 1, 2001. The lodging revenues related to the leased hotels that were recorded in 2000 are not reflected in the Company's 2001 financial statements, as the Company records revenues from management fees only.
The Company incurred a loss on impairment of real estate of $3.0 million in the third quarter attributable to its 20% non-controlling interest in a partnership that owns the Renaissance Worldgate Hotel in Kissimmee, Florida. The weakness in the U.S. economy during the first three quarters of 2001 coupled with the severe downturn in the Orlando market after the September 11th terrorist attacks have resulted in the hotel's financial difficulties causing the Company to write-off its investment in the third quarter.
Revenue per available room (RevPAR) for comparable U.S. full-service hotels managed by the Company decreased 19.1% for the quarter to $77.20 from $95.44 for the same period in 2000. Average daily room rate (ADR) decreased to $116.20 from $122.98, while occupancy rates declined by approximately eleven percentage points from 77.6% to 66.4% in the third quarter from a year ago. The Company's third quarter RevPAR growth was adversely impacted by the continued weakness in the U.S. economy which was further affected by the September 11th terrorist attacks.
Interstate Hotels Corporation operates approximately 135 hotels with more than 27,000 rooms in 36 states in the United States as well as Canada, the Caribbean and Russia. For more information, visit www.interstatehotels.com.

– FINANCIAL TABLES FOLLOW –

Comparable Hotel Statistics(a)

Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
— –

U.S. Full-Service
Managed Hotels:
Occupancy 66.4% 77.6% 71.6% 79.2%
ADR $116.20 $122.98 $127.57 $128.19
RevPAR $77.20 $95.44 $90.97 $101.55

(a) Comparable U.S. hotels represent those operated by the Company
since January 1, 2000, excluding hotels that underwent a major
renovation or a change in franchise affiliation.

NOTE:
Certain matters discussed within this press release are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company
believes the expectations reflected in such forward-looking statements
are based on reasonable assumptions, it cannot give assurance that its
expectations will be attained. Factors that could cause actual results
to differ materially from expectations include financial performance,
real estate conditions, execution of hotel development programs,
changes in the availability of additional management contracts, leases
or acquisitions, changes in local or national economic conditions and
other risks detailed from time to time in the Company's reports filed
with the SEC.

INTERSTATE HOTELS CORPORATION
Consolidated Statements of Operations
(Unaudited, in thousands except per share amounts)

Actual Three Months Actual Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000

Lodging revenues:
Rooms $ 1,182 $ 52,971 $ 3,633 $ 147,879
Other departmental 41 3,089 114 8,983
Net management fees 5,689 6,856 18,569 20,901
Other fees 3,148 2,938 11,093 8,566
— — –
Total revenues 10,060 65,854 33,409 186,329
— — –
Lodging expenses:
Rooms 295 13,027 865 35,492
Other departmental 21 1,962 66 5,471
Property costs 410 16,337 1,231 45,891
General and
administrative 2,745 3,779 8,493 10,251
Payroll and
related benefits 4,516 5,132 15,334 15,885
Lease expense 192 24,851 474 69,228
Depreciation
and amortization 2,685 4,145 8,085 12,733
Loss on impairment
of investment in
hotel leases – 12,550 – 12,550
— — –
Total expenses 10,864 81,783 34,548 207,501
— — –
Operating loss (804) (15,929) (1,139) (21,172)

Other (expense) income:
Interest, net (560) 463 (792) 1,447
Other, net (2,556) (4) (2,222) 20
Loss on impairment
of investment in
hotel real estate (3,026) – (3,026) –
— — –
Loss before income
tax benefit (6,946) (15,470) (7,179) (19,705)

Income tax benefit (2,795) (2,771) (2,924) (3,648)
— — –
Loss before
minority
interest (4,151) (12,699) (4,255) (16,057)

Minority interest 40 (8,543) 130 (10,585)
— — –
Net loss $(4,191) $ (4,156) $(4,385) $ (5,472)
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Less mandatorily
redeemable
preferred stock:
Dividends 158 – 476 –
Accretion 16 – 46 –
— — –
Net loss available
to common
stockholders $(4,365) $ (4,156) $(4,907) $ (5,472)
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Earnings per share:
Basic (0.72) (0.66) (0.77) (0.88)
Diluted (0.72) (0.66) (0.77) (0.88)

Common shares
outstanding:
Basic 6,060 6,306 6,358 6,208
Diluted 6,060 6,306 6,358 6,208

EBITDA $ 1,081 $ 294 $ 7,138 $ 1,391
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