Prime Hospitality Corp. Reports Fourth Quarter Results - fourth quarter profits up 9 pct
FAIRFIELD, N.J., Feb. 8 / Prime Hospitality Corp.
Net income for the fourth quarter of 2000 was $12.0 million, or $.26 per share, compared to net income of $11.0 million, or $.22 per share, for the fourth quarter last year. Earnings per share before asset transactions and special charges grew by 8.3% to $.26 per share for the fourth quarter of 2000 versus $.24 per share in the prior year's quarter.
"We are pleased that we achieved the goals we outlined at the beginning of the year," said A.F. Petrocelli, Chairman and Chief Executive Officer of Prime. "First, we continued to improve our operating results. Our comparable REVPAR grew by 5.5% in the fourth quarter and 4.9% for the full year. Second, we made significant progress in growing our AmeriSuites and Wellesley Inn & Suites brands. During the year, we added 36 new AmeriSuites including the conversion of 27 Sumner Suites in the fourth quarter. With our Wellesley brand, we added our first franchisee-constructed Wellesley Inn and demonstrated that our 1999 conversion of 38 hotels was a success by generating REVPAR growth of 20%.
"Our third goal was to strengthen our balance sheet through the divestiture of real estate. During the year, we sold $214 million of assets, reduced our debt by $203 million and repurchased approximately four million shares. With growing brands and one of the strongest balance sheets in the industry, we are optimistic about our future."
For the year ended December 31, 2000, net income was $62.5 million, or $1.34 per share, as compared to $34.9 million, or $.67 per share, in 1999. Income before property transactions and special charges was $1.17 per share for 2000 versus $1.05 per share in 1999. Non-recurring charges for 2000 were comprised of gains on asset sales of $.17 per share. For 1999, non-recurring items were comprised of a loss of $.36 per share related to valuation reserves, a loss of $.10 per share due to a change in accounting principle related to the write-off of start-up costs and net gains on asset sales of $.08 per share.
Operating Results
For the quarter, revenues were $134.6 million and earnings before interest, taxes, depreciation and amortization (EBITDA) were $37.3 million. Excluding the impact of hotels divested in the past year, revenue grew by 15.3% and EBITDA before lease expense grew by 17.6% over the same quarter in 1999.
For the year ended December 31, 2000, revenues were $559.9 million and EBITDA was $170.1 million. Excluding the impact of hotels divested in the past year, revenues increased by 13.7% and EBITDA before lease expense grew by 13.8%.
For the quarter, Prime's comparable owned hotels achieved a 5.5% revenue per available room (REVPAR) growth rate over the same quarter in 1999. Occupancy advanced by 2.1 percentage points to 61.8% and average daily rate ("ADR") increased by 1.8% to $77.30. For the year, REVPAR at comparable owned hotels grew by 4.9% over 1999, as occupancy increased by 2.5 percentage points to 68.2% and ADR increased by 1.0% to $82.06.
Interest expense declined by 32.7%, or $4.1 million, to $8.5 million for the quarter ended December 31, 2000 as compared to the same period in the prior year primarily due to significant debt reductions as a result of asset divestitures and strong operating cash flow. For the year, interest expense declined by 5.3% to $41.3 million.
System-Wide Performance
For the quarter, Prime reported a 2.0% REVPAR growth rate at its comparable AmeriSuites hotels, as occupancy decreased by 0.5 percentage points to 62.0% and ADR increased by 2.7% to $81.85. The results for the fourth quarter were affected by adverse weather conditions, which limited occupancy in the Midwest, particularly in the Chicago and Detroit markets where AmeriSuites has a significant presence. For the year, REVPAR growth at comparable AmeriSuites hotels was 3.8%, driven by a 2.3 percentage point increase in occupancy to 69.2% and a 0.3% increase in ADR to $81.80.
For the quarter, Prime reported 12.6% REVPAR growth at its comparable Wellesley Inns & Suites hotels, as occupancy increased by 6.2 percentage points to 61.8% and ADR increased by 1.3% to $59.34. Prime experienced particularly strong growth at the 38 Wellesley Inn & Suites hotels, which were converted in the fourth quarter of 1999. These hotels generated a 22.1% REVPAR growth rate over the prior year's fourth quarter. For all of 2000, REVPAR growth at comparable Wellesley Inn & Suites hotels was 5.6% with occupancy increasing by 2.6 percentage points to 67.3% and ADR increasing by 1.6% to $61.39.
Prime's comparable non-proprietary brand hotels, which consist primarily of upscale full-service hotels in the Northeast, achieved a 6.6% REVPAR increase for the fourth quarter of 2000 as occupancy increased by 1.3 percentage points to 68.8% and ADR increased by 4.7% to $101.15. For all of 2000, REVPAR grew by 7.7% at these hotels with occupancy advancing by 2.7 percentage points to 73.1% and ADR increasing by 3.7% to $103.40.
Brand Development
Prime currently has 133 AmeriSuites and 70 Wellesley Inn & Suites hotels in operation. During the quarter, the Company made significant progress in further expanding its brands.
In November 2000, the Company converted 27 Sumner Suites hotels to its AmeriSuites brand. Prime had previously acquired the leasehold interests on these hotels in July 2000 from Sholodge, Inc ("Sholodge") for $1.6 million. In addition, pursuant to the transaction, Sholodge is constructing three additional AmeriSuites, two of which are funded by Sholodge and one by Prime. The 27 existing hotels, along with the three hotels under construction, are located in 14 states primarily in the Southeast, Midwest and Southwest regions of the United States and have an average age of approximately three years. The conversion increased AmeriSuites units by almost 30% over its previous level.
During the quarter, three new AmeriSuites hotels developed by franchisees opened. These hotels are located in Nashville, TN, Burr Ridge, IL and Orlando, FL. For the year, ten new AmeriSuites were constructed, eight of which are owned by franchisees. Currently, there are eight AmeriSuites hotels under construction (four by franchisees, three by Sholodge and one by Prime), including a 245-room franchised hotel located near the Chicago/O'Hare Airport. In addition, Prime has a pipeline of another 60 executed franchise agreements for new AmeriSuites to be built, ten of which are scheduled to begin construction in the next 90 to 120 days.
During the quarter, the first franchisee-constructed Wellesley Inn & Suites opened in St. Augustine, FL. Prime also has four executed franchise agreements for new Wellesley Inn & Suites hotels to be built. Given the successful conversion of 38 hotels to the Wellesley Inn & Suites brand in 1999, Prime intends to further grow the brand through conversions from other hotel brands. Prime is currently converting one of its owned hotels in Wayne, NJ to the Wellesley chain and will begin converting three additional hotels, one of which is owned by Prime, in the next 90 to 120 days.
Financial Condition/Asset Sales
During the quarter, Prime sold three Wellesley Inns and one AmeriSuites bringing total asset sales in 2000 to $214 million. Asset sales in 2000 included five AmeriSuites, ten Wellesley Inns, two full-service hotels and the remaining five HomeGate hotels which were not converted to Wellesley Inn & Suites.
Prime utilized the proceeds from asset sales along with its cash flow from operations to reduce its debt balance since the beginning of the year by $203 million to $346 million as of December 31, 2000. Prime also repurchased 3.9 million of its outstanding shares in 2000 at a total average cost of $7.98 per share. This brings the total number of shares repurchased in the past two years to 9.7 million, or 18.0%, of the shares outstanding on January 1, 1999. As of December 31, 2000, Prime's debt to EBITDA ratio was 2.1 times, and its debt to book capitalization percentage was 34%. This represents a significant improvement in the ratios from the December 1999 levels.
2001 Outlook
Prime currently expects REVPAR growth at its comparable owned hotels to be in the 3-4% percent range in 2001. This projected growth rate reflects both the slower economic growth forecast for 2001 and reductions in new hotel supply growth. Excluding the impact of asset sales, the Company expects the percentage growth in revenues and EBITDA to be in the mid-single digits over 2000. Prime anticipates the growth to be driven by the REVPAR increases at comparable hotels, the ramp up of the 27 recently converted AmeriSuites hotels and additional franchise fees associated with new hotel openings. The revenue growth is expected to be offset somewhat by labor and energy costs rising in excess of the anticipated inflation rate.
Prime is currently comfortable with consensus EPS estimates for 2001 of $1.30 which represents an 11.1% growth rate over 2000 earnings before asset transactions of $1.17. Prime expects the 2001 first quarter EPS to be equal to the $.22 per share reported in the first quarter of 2000, due primarily to the net effect of the Frenchman's Reef Resort which contributed an additional $.03 per share to the 2000 first quarter prior to its sale in March 2000. Prime expects revenues for 2001 to be in the $580 - $585 million range and EBITDA to be in the $160 - $165 million range. Prime anticipates generating approximately $40 - $45 million of free cash flow in 2001, which reflects approximately $40 million of development spending and $20 million of maintenance capital. The above estimates do not contemplate any asset sales due to the difficulty in predicting the volume and timing of these sales.
In the event that the economic slowdown is greater than forecasted, each one point decrease in REVPAR growth would likely have a pre-tax impact on 2001 earnings and cash flow of $4 - $5 million, or $.05 - $.06 per share. Prime believes that, given its relatively low leverage and limited development commitments, its financial condition would not be materially affected by a greater than anticipated economic slowdown.
Prime Hospitality Corp., one of the nation's premiere lodging companies, owns, manages, develops and franchises 239 hotels throughout the United States. The Company owns and operates two proprietary brands that compete in different segments: AmeriSuites® (all-suites) and Wellesley Inns & Suites® (limited-service). Also within its portfolio are owned and/or managed hotels operated under franchise agreements with national hotel chains including Hilton, Radisson, Sheraton, Crowne Plaza, Holiday Inn and Ramada. Prime can be accessed over the internet at
Prime Hospitality Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three and Twelve Months Ended December 31, 2000 and 1999
(In Thousands, Except Per Share Amounts)
Three Months Ended Year Ended
December 31, December 31,
2000 1999 2000 1999
Revenues:
Hotel revenues 129,172 126,747 538,409 532,746
Management, franchise and
other fees 4,314 4,125 17,230 13,637
Rental and other 1,155 1,707 4,304 6,349
Total revenues 134,641 132,579 559,943 552,732
Costs and expenses:
Hotel operating expenses 69,150 67,422 275,641 275,643
Rent and other occupancy 21,868 17,047 84,100 70,862
General and administrative 6,312 7,568 30,131 29,200
Depreciation and amortization 9,830 9,221 41,610 45,835
Other charges -- 2,000 -- 30,456
Total costs and expenses 107,160 103,258 431,482 451,996
Operating income 27,481 29,321 128,461 100,736
Investment income 651 354 1,936 1,613
Interest expense (8,470) (12,587) (41,325) (43,634)
Other income, net 19 984 13,902 7,182
Income before income taxes and
cumulative effect of a
change in accounting
principle and extraordinary
items 19,681 18,072 102,974 65,897
Provision for income taxes 7,676 7,048 40,160 25,700
Income before the cumulative
effect of a change in
accounting principle and
extraordinary items 12,005 11,024 62,814 40,197
Cumulative effect of a change
in accounting principle,
net of income taxes -- -- -- (5,315)
Extraordinary items -- loss on
discharge of indebtedness,
net of income taxes (10) -- (314)
Net income $11,995 $11,024 $62,500 $34,882
Earnings per common share:
Basic:
Income before the cumulative
effect of a change in
accounting principle and
extraordinary items $0.27 $0.22 $1.37 $0.79
Cumulative effect of a change
in accounting principle -- -- -- (0.11)
Extraordinary items -- loss
on discharge of indebtedness -- -- --
Net earnings $0.27 $0.22 $1.37 $0.68
Diluted:
Income before the cumulative
effect of a change in
accounting principle and
extraordinary items $0.26 $0.22 $1.34 $0.77
Cumulative effect of a change
in accounting principle -- -- -- (0.10)
Extraordinary items -- loss on
discharge of indebtedness -- -- --
Net earnings $0.26 $0.22 $1.34 $0.67
Prime Hospitality Corp.
Balance Sheet Information
(Unaudited)
(In Thousands, Except per share amounts)
December 31, December 31,
2000 1999
Cash and marketable securities $5,736 $15,502
Fixed assets 1,048,514 1,227,719
Total assets 1,174,844 1,328,779
Revolving credit facility -- 125,000
Other debt 345,689 424,032
Total debt 345,689 549,032
Stockholders' equity 668,101 632,000
Shares outstanding -- end of year 44,842 48,483
Book value per outstanding common share $14.90 $13.04
Prime Hospitality Corp.
Comparable Hotel Performance Summary
December 31, 2000
Three Months Twelve Months
Ended Ended
December 31, December 31,
2000 1999 Variance 2000 1999 Variance
Owned Hotels:
Occupancy 61.8% 59.7% 2.1 pts. 68.2% 65.7% 2.5 pts.
ADR $77.30 $75.93 1.8% $82.06 $81.21 1.0%
REVPAR $47.80 $45.32 5.5% $55.99 $53.36 4.9%
System-Wide Hotels:
AmeriSuites
Occupancy 62.0% 62.5% (0.5 pts.) 69.2% 66.9% 2.3 pts.
ADR $81.85 $79.67 2.7% $81.80 $81.56 0.3%
REVPAR $50.78 $49.80 2.0% $56.61 $54.56 3.8%
Wellesley Inn & Suites
Occupancy 61.8% 55.6% 6.2 pts. 67.3% 64.7% 2.6 pts.
ADR $59.34 $58.60 1.3% $61.39 $60.43 1.6%
REVPAR $36.65 $32.56 12.6% $41.30 $39.10 5.6%
Non-Proprietary Brands
Occupancy 68.8% 67.5% 1.3 pts. 73.1% 70.4% 2.7 pts.
ADR $101.15 $96.66 4.7% $103.40 $99.69 3.7%
REVPAR $69.62 $65.29 6.6% $75.57 $70.18 7.7%
Prime Hospitality Corp.
Hotel Statistics
December 31, 2000
December 2000 December 1999 Change
Number of Number of Number of
Hotels Rooms Hotels Rooms Hotels Rooms
AmeriSuites
Owned 65 8,409 69 8,916 (4) (507)
Leased 46 5,710 19 2,403 27 3,307
Managed 4 542 1 128 3 414
Franchised 18 2,205 8 1,026 10 1,179
Total 133 16,866 97 12,473 36 4,393
Wellesley Inn & Suites
Owned 58 6,747 66 7,475 (8) (728)
Leased -- -- -- -- --
Managed 5 463 -- -- 5 463
Franchised 7 673 -- -- 7 673
Total 70 7,883 66 7,475 4 408
Non-Proprietary Brands
Owned 12 2,303 16 3,276 (4) (973)
Leased 9 1,464 9 1,464 --
Managed 15 2,234 16 2,604 (1) (370)
Franchised -- -- -- -- --
Total 36 6,001 41 7,344 (5) (1,343)
Total Portfolio
Owned 135 17,459 151 19,667 (16) (2,208)
Leased 55 7,174 28 3,867 27 3,307
Managed 24 3,239 17 2,732 7 507
Franchised 25 2,878 8 1,026 17 1,852
Total 239 30,750 204 27,292 35 3,458