WXH Winston Hotels

Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust (REIT) and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced results for the fourth quarter and year ended December 31, 2005. Net income available to common shareholders was $1.9 million for the 2005 fourth quarter, or $0.07 per share, compared to net income available to common shareholders of $0.9 million, or $0.03 per share, for the same period a year earlier. For the year, net loss available to common shareholders was ($1.7) million, or $(0.07) per share, compared to net income available to common shareholders of $7.8 million, or $0.30 per share, for the full year 2004. The full year 2005 results included a non-cash impairment charge of $12.4 million (net of allocation of minority interest). Excluding this charge, 2005 net income available to common shareholders would have been $10.6 million, or $0.39 per share. Funds from operations (FFO) available to common shareholders for the 2005 fourth quarter rose 19 percent to $6.4 million, compared to $5.4 million in the 2004 fourth quarter, or $0.23 and $0.20 per common share, respectively. Excluding the effects of the non-cash impairment charge in 2004 and the non-cash income tax expense (benefits) in both years, the fourth quarter 2005 FFO available to common shareholders would have been $6.5 million, or $0.23 per share, versus $5.1 million, or $0.19 per share for the fourth quarter of 2004. The company had approximately 27.7 million and 27.6 million fully diluted weighted average common shares outstanding in the 2005 and 2004 reporting periods, respectively. For the full year 2005, FFO available to common shareholders decreased to $16.4 million, or $0.59 per common share, compared to $26.2 million, or $0.95 per common share for 2004. Excluding the effects of non-cash impairment charges and non-cash income tax expense/benefits in both years, as well as non-recurring items in both years including the effects of the redemption of the Series A Preferred Stock in 2004, the non-recurring lease agreement acquisition income earned in 2004, as well as $0.06 per share of additional interest income relating to the early payoff of the Cornhusker, Baltimore, Tampa and Kauai hotel loans in 2005, FFO available to common shareholders would have been $28.3 million, or $1.02 per share for 2005 versus $25.8 million, or $0.94 per share for 2004. The company's fully diluted weighted average common shares outstanding was approximately 27.7 million and 27.6 million in the 2005 and 2004 reporting periods, respectively. Recent Developments In February 2006, the company closed on its first loan in a program with GE Commercial Franchise Finance ("GEFF"), announced last year, to provide a highly streamlined, cost-effective loan product for hoteliers. Under the program, GEFF and Winston provide seamless first mortgage loans for up to 85 percent of a project's cost. Winston initially funded $0.6 million of the total $2.3 million first loss piece, or the "B" note, of a $12 million total loan amount for a to-be-built 140 room Hilton Garden Inn in Columbia, SC. Winston is obligated to fund the remaining balance of the "B" note ratably over the projected construction period that has commenced and is expected to be completed during the fourth quarter of 2006. The underlying construction-to-five-year-permanent loan, bears interest at an all in annual yield to the company equal to 30-day LIBOR plus approximately 12 percent. 2005 Highlights "Winston capitalized on all of its growth initiatives in 2005, including acquisitions, development/repositioning and hotel debt financing," said Robert W. Winston, III chief executive officer. "We continue to see significant opportunities in all of our growth strategies." Hotel Acquisitions, Dispositions "Prices for hotels rose significantly during 2005, but we believe that we still will be able to acquire premium-branded hotels at reasonable capitalization rates," said Joe Green, president and chief financial officer. "In attractive markets where hotels are selling in excess of replacement costs, we will consider development on a highly selective basis." -- In the 2005 fourth quarter, the company acquired five Marriott Towneplace Suites and one Courtyard by Marriott for an aggregate cost of $46.9 million. -- In 2005, the company also acquired the Hampton Inn & Suites in Baltimore's Inner Harbor for $16.3 million and a 60 percent interest in the $18 million Stanley Hotel in Estes Park, Colo. -- During the year, the company sold three hotels that no longer fit the company's long-term growth strategy, for aggregate net proceeds of $11.5 million. Hotel Development "We develop hotels for our own account and through joint ventures," Green noted. "In 2005, we began construction on four hotels at an expected total cost of an aggregate of approximately $62 million. We also were designated a preferred developer for the new select-service aloft brand by Starwood and currently are reviewing several potential development sites on which we can build and own aloft-branded hotels." -- The company is nearing completion on its conversion of a former historic apartment building in Kansas City into a 123-room Courtyard by Marriott. The $16.7 million project is expected to be completed in late April 2006. -- Construction is well underway on a 121-room, $12.0 million Hilton Garden Inn in Akron, Ohio, which is expected to open during the fourth quarter of 2006. Winston expects to contribute 70 percent of the total equity investment in the joint-venture project. -- Construction has begun on the wholly owned, 142-room, $19.6 million Homewood Suites hotel in Princeton, N.J., expected to open during the first quarter of 2007. -- Winston recently broke ground on a 119-room, $13.3 million Hilton Garden Inn in Wilmington, N.C. The wholly owned hotel is expected to open during the second quarter of 2007. Hotel Debt Financing Program -- For the full year, the company closed on five loans totaling approximately $23 million, including $14.0 million of four senior participation interests in certain mezzanine loans originated by Credit Suisse First Boston and purchased by the company in the fourth quarter of 2005. -- In 2005, four loans with outstanding balances in the aggregate of $16 million, were repaid to the company, prior to their maturity date, resulting in prepayment and related fees totaling $1.6 million, or approximately $0.06 per share. Financing -- The company expanded its line of credit with GE Capital in 2005 from $155 million to $215 million. Winston had approximately $68 million available under the line as of December 31, 2005. -- In 2005, the company financed four of its existing hotel loans under its $50 million master repurchase agreement with Marathon Structured Finance Fund, L.P. (Marathon), borrowing approximately $9 million. Availability under the Marathon master repurchase agreement is approximately $41 million. -- Winston established two new credit facilities with Marathon totaling $13.2 million to finance hotel loans under the company's hotel debt financing program. Same Store Operating Statistics Revenue per available room (RevPAR) in the 2005 fourth quarter improved 8.3 percent, led by a 6.8 percent improvement in average daily room rate (ADR) and a 1.4 percent increase in occupancy, compared to the same period a year earlier. Fourth quarter 2005 operating margins decreased slightly to 38.4 percent from 38.7 percent in the same period for the previous year, as they were negatively impacted by non-recurring legal fees, rising utility costs and higher franchise fees, offset by pro-active strategies resulting in a decrease in labor costs. The increase in utility costs was generated solely by rate increases, which was mitigated by implementing various energy-saving measures. The following table details the "same store" operating statistics, which includes 44 hotels that were open throughout both the three and twelve months ended December 31, 2005 and the three and twelve months ended December 31, 2004 (includes 41 wholly owned hotels and three jointly owned hotels, including the Ponte Vedra, Fla. Hampton Inn, the West Des Moines, Iowa Fairfield Inn & Suites and the Houston, Texas SpringHill Suites by Marriott). -0- *T Same Store Operating Statistics ---------------------------------------------------------------------- Three Months Ended December, 31, ------------------------------- 2005 2004 Change --------- --------- ------ Hotel room revenues $ 32,367 $ 30,045 7.7% RevPAR $ 56.72 $ 52.35 8.3% Occupancy 64.6% 63.7% 1.4% Average Daily rate $ 87.78 $ 82.22 6.8% Gross Operating Profit margin 38.4% 38.7% -0.3% pts. Twelve Months Ended December, 31, -------------------------------- 2005 2004 Change --------- --------- ------ Hotel room revenues $135,150 $126,836 6.6% RevPAR $ 59.44 $ 55.56 7.0% Occupancy 68.4% 68.4% 0.0% Average Daily rate $ 86.86 $ 81.25 6.9% Gross Operating Profit margin 41.0% 41.1% -0.1% pts. ---------------------------------------------------------------------- *T Dividends During the 2005 fourth quarter, the company declared a regular cash dividend of $0.15 per common share and a cash dividend of $0.50 per share of Series B Preferred Stock. The non-cash impairment charge and the non-cash tax expense do not affect the company's ability to pay out dividends pursuant to its dividend policy. "We continue to evaluate our policy on a quarterly basis and currently are comfortable with the payout level of our current common stock dividend," said Robert W. Winston, III, chief executive officer. 2006 First Quarter Outlook and Guidance For the 2006 first quarter, the company forecasts net income per share available to common shareholders of ($0.02) to $0.00. On a same store basis, the company expects 2006 first quarter RevPAR to increase 5 to 7 percent, compared to the prior year's first quarter, as well as a slight increase in gross operating profit margins for the first quarter of 2006, compared to the previous year's first quarter. FFO per share available to common shareholders is expected to be between $0.16 and $0.18 for the 2006 first quarter. "We expect the gross operating profit from our hotel portfolio for the first quarter 2006 to increase over 2005 by $0.08 to $0.10 per share," Green said. "However, we expect this gain to be offset by higher interest expense, general and administrative costs and, management fees, coupled with lower interest income from hotel loans and the negative impact of the seasonality of the operations of the Stanley Hotel in Estes Park, Colo. "We believe that the anticipated negative impacts in the first quarter will be more than offset in the remaining three quarters of the year," Green said. "For example, the Stanley generates most of its profit in the second and third quarters, and we expect it to be accretive for the full year." This guidance assumes no hotel acquisitions, and no hotel dispositions, developments or placements of hotel debt during the 2006 first quarter. 2006 Yearly Outlook and Guidance For the year ended December 31, 2006, the company forecasts net income per share available to common shareholders of $0.26 to $0.32. On a same store basis, the company expects 2006 RevPAR to increase 5 to 7 percent, compared to the prior year. FFO per share available to common shareholders for the year ended December 31, 2006 is expected to be between $1.04 and $1.10 ($1.13 excluding the expected impact of non-cash income tax expense in 2006). This guidance assumes no hotel acquisitions, or dispositions, developments or placements of hotel debt during the year ended December 31, 2006, except for the operations and related debt of the Courtyard by Marriott hotel in Kansas City, Mo., which is expected to open by the end of April. Moreover the guidance does not include any results from the company's assumption that it will replace some of its current variable rate debt with fixed-rate financing. "We believe interest rates will continue to rise and therefore believe the timing is right to lock in long-term rates," Green noted. "Accordingly, the company is considering several proposals to refinance approximately $160 million of its current portfolio with 10-year fixed rate financing. We expect to complete the refinancing by July 1st of this year." Green also pointed out, "We have active pipelines in all of our growth strategies and anticipate consummating accretive transactions in 2006. However, timing of complex financings, acquisitions and development transactions is very difficult to predict with reasonable accuracy. We are comfortable with our base assumptions for 2006 and expect improvement in our operations. We expect that 2006 will be a productive year for the company." Winston Hotels' 2005 fourth quarter investor conference call is scheduled for 10 a.m. EST today, February 16, 2006. The call also will be simulcast over the Internet via the company's Web site, www.winstonhotels.com. The replay will be available on the company's Web site for 30 days and via telephone for seven days by calling 800-475-6701, access code 816910. About the Company As of December 31, 2005, the company owned or was invested in 56 hotel properties in 17 states having an aggregate of 7,668 rooms. This included 49 wholly owned properties with an aggregate of 6,720 rooms, a 60 percent ownership interest in a joint-venture that owns one hotel with 138 rooms, a 49 percent ownership interest in a joint venture that owns one hotel with 118 rooms, a 48.78 percent ownership interest in a joint venture that owns one hotel with 147 rooms, and a 13.05 percent ownership interest in a joint venture that owns four hotels with an aggregate of 545 rooms. As of December 31, 2005 the company had hotel loans receivable totaling $38.1 million. The company does not hold an ownership interest in any of the hotels for which it has provided financing. For more information about Winston Hotels, visit the company's Web site at www.winstonhotels.com. Notes About Forward-Looking Statements In addition to historical information, this press release contains forward-looking statements. The reader can identify these statements by use of words like "may," "will," "expect," "project," "anticipate," "estimate," "target," "believe," or "continue" or similar expressions, including without limitation its acquisition, disposition and development plans for hotel properties, its hotel lending plans, its dividend policy, and its estimated net income available to common shareholders, net income available to common shareholders per share, FFO available to common shareholders, FFO available to common shareholders per share and RevPAR. 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, lower occupancy rates, lower average daily rates, acquisition risks, development risks including risk of construction delay, cost overruns, occupancy and governmental permits, zoning, the increase of development costs in connection with projects that are not pursued to completion, the risk of non-payment of subordinated loans, or the failure to make additional hotel debt investments and investments in hotels. Other risks are discussed in the company's filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2004. Notes About Non-GAAP Financial Measures This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission ("SEC") rules. As required by SEC rules, the company has provided a reconciliation in this press release of each non-GAAP financial measure to its most directly comparable GAAP measure. We believe that these non-GAAP measures, when combined with the company's primary GAAP presentations required by the SEC, help improve our equity holders' ability to understand our operating performance and make it easier to compare the results of our company with other hotel REITs. A description of each is provided below. FFO and FFO Available to Common Shareholders The company reports FFO in accordance with the definition of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as net income (loss) (determined in accordance with generally accepted accounting principles, or "GAAP"), excluding gains (losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). The company further subtracts preferred stock dividends and loss on redemption of Series A Preferred Stock from FFO to calculate FFO available to common shareholders. FFO available to common shareholders is a performance measure used by the company in its budgeting and forecasting models, it is discussed during Board meetings, and is considered when making decisions regarding acquisitions, sales of properties and other investments, and is a metric in determining executive compensation. The calculation of FFO and FFO available to common shareholders may vary from entity to entity, and as such the presentation of FFO and FFO available to common shareholders by the company may not be comparable to other similarly titled measures of other reporting companies. FFO and FFO available to common shareholders are not intended to represent cash flows for the period. FFO and FFO available to common shareholders have not been presented as an alternative to net income, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. FFO is a supplemental industry-wide measure of REIT operating performance, the definition of which was first proposed by NAREIT in 1991 (and clarified in 1995, 1999 and 2002) in response to perceived drawbacks associated with the presentation of net income under GAAP as applied to REITs. Since the introduction of the definition by NAREIT, the term has come to be widely used by REITs. Historical GAAP cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors have considered presentations of operating results for real estate companies that use historical GAAP cost accounting to be insufficient by themselves. Accordingly, the company believes FFO and FFO available to common shareholders (combined with the company's primary GAAP presentations required by the SEC) improve our investors' ability to understand the company's operating performance. Operating Margin Operating margin is determined by dividing gross operating profit, for the hotels whose operating results are included in the company's consolidated statement of operations, by total revenue. RevPAR RevPAR is an acronym for Revenue Per Available Room, which is determined by multiplying average daily rate by occupancy percentage for any given period. RevPAR does not include food and beverage or other ancillary revenues, such as parking, telephone, or other guest services generated by the property. Similar to the reporting periods for the company's statement of operations, hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) are always reported on a quarter to date and/or year to date basis. -0- *T WINSTON HOTELS, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2005 and 2004 ($ in thousands, except per share amounts) December 31, December 31, 2005 2004 ---------------------------------------------------------------------- ASSETS Land $ 55,758 $ 46,215 Buildings and improvements 421,948 382,458 Furniture and equipment 63,048 54,661 ---------------------------------------------------------------------- Operating properties 540,754 483,334 Less accumulated depreciation 139,222 134,261 ---------------------------------------------------------------------- 401,532 349,073 Properties under development 25,139 3,962 ---------------------------------------------------------------------- Net investment in hotel properties 426,671 353,035 Assets held for sale 10,832 7,037 Corporate furniture fixtures and equipment, net 371 397 Cash 15,047 4,115 Accounts receivable, net 3,820 2,676 Notes receivable 38,050 30,849 Investment in joint ventures 1,795 2,512 Deferred expenses, net 6,807 3,759 Prepaid expenses and other assets 12,557 7,976 Deferred tax asset 11,471 12,024 ---------------------------------------------------------------------- Total assets $ 527,421 $424,380 ====================================================================== LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY Lines of credit $ 157,896 $ 66,850 Mortgage loans 99,874 88,075 Accounts payable and accrued expenses 27,261 13,066 Distributions payable 6,011 5,994 ---------------------------------------------------------------------- Total liabilities 291,042 173,985 ---------------------------------------------------------------------- Minority interest 12,804 10,154 ---------------------------------------------------------------------- Commitments and contingencies - - Shareholders' equity: Preferred stock, Series B, $.01 par value, 5,000,000 shares authorized, 3,680,000 shares issued and outstanding (liquidation preference of $93,840) 37 37 Common stock, $.01 par value, 50,000,000 shares authorized, 26,509,002 and 26,397,574 shares issued and outstanding 265 264 Additional paid-in capital 325,238 323,947 Unearned compensation (1,454) (1,145) Distributions in excess of earnings (100,511) (82,862) ---------------------------------------------------------------------- Total shareholders' equity 223,575 240,241 ---------------------------------------------------------------------- Total liabilities, minority interest and shareholders' equity $ 527,421 $424,380 ====================================================================== WINSTON HOTELS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended December 31, 2005 2004 ---------------------------------------------------------------------- Operating revenue: Rooms $35,094 $28,599 Food and beverage 3,166 2,105 Other operating departments 1,148 818 Joint venture fee income 63 58 ---------------------------------------------------------------------- Total operating revenue 39,471 31,580 ---------------------------------------------------------------------- Hotel operating expenses: Rooms 7,835 6,628 Food and beverage 2,356 1,584 Other operating departments 922 667 Undistributed operating expenses: Property operating expenses 8,355 6,478 Real estate taxes and property and casualty insurance 1,757 1,434 Franchise costs 2,533 2,093 Maintenance and repair 2,176 1,699 Management fees 1,310 709 General and administrative 1,792 1,568 Depreciation 5,033 4,163 Amortization 471 439 ---------------------------------------------------------------------- Total operating expenses 34,540 27,462 ---------------------------------------------------------------------- Operating income 4,931 4,118 ---------------------------------------------------------------------- Interest and other income 2,236 850 Interest expense (3,981) (2,057) ---------------------------------------------------------------------- Income before allocation to minority interest in Partnership, income taxes, and equity in income of unconsolidated joint ventures 3,186 2,911 Income allocation to minority interest in Partnership (93) (72) (Income) loss allocation to minority interest in consolidated joint ventures 129 (45) Income tax benefit (expense) (83) 486 Equity in income of unconsolidated joint ventures 583 24 ---------------------------------------------------------------------- Income from continuing operations 3,722 3,304 Discontinued operations: Income (loss) from discontinued operations 49 (211) Loss on impairment of asset held for sale - (391) ---------------------------------------------------------------------- Net income 3,771 2,702 Preferred stock distribution (1,840) (1,840) ---------------------------------------------------------------------- Net income available to common shareholders $ 1,931 $ 862 ====================================================================== Basic weighted average number of common shares outstanding 26,314 26,234 ---------------------------------------------------------------------- Diluted weighted average number of common shares outstanding 27,654 27,556 ---------------------------------------------------------------------- Income (loss) per common share diluted: Income from continuing operations $ 0.07 $ 0.05 Loss from discontinued operations - (0.02) ---------------------------------------------------------------------- Net income available to common shareholders 0.07 0.03 ---------------------------------------------------------------------- Per share dividends to common shareholders $ 0.15 $ 0.15 ---------------------------------------------------------------------- WINSTON HOTELS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years ended December 31, 2005 2004 ---------------------------------------------------------------------- Operating revenue: Rooms $136,472 $117,475 Food and beverage 10,239 7,589 Other operating departments 4,069 3,516 Percentage lease revenue - 701 Joint venture fee income 250 181 ---------------------------------------------------------------------- Total operating revenue 151,030 129,462 ---------------------------------------------------------------------- Hotel operating expenses: Rooms 29,886 25,822 Food and beverage 7,697 5,715 Other operating departments 3,070 2,632 Undistributed operating expenses: Property operating expenses 29,736 25,705 Real estate taxes and property and casualty insurance 7,038 6,148 Franchise costs 9,910 8,492 Maintenance and repair 7,838 6,575 Management fees 4,264 2,914 General and administrative 7,943 6,858 Depreciation 18,285 15,957 Amortization 1,519 1,405 ---------------------------------------------------------------------- Total operating expenses 127,186 108,223 ---------------------------------------------------------------------- Operating income 23,844 21,239 ---------------------------------------------------------------------- Interest and other income 7,045 2,196 Interest expense (11,633) (7,157) ---------------------------------------------------------------------- Income before allocation to minority interest in Partnership, allocation to minority interest in consolidated joint ventures, income taxes, and equity in income (loss) of unconsolidated joint ventures 19,256 16,278 Income allocation to minority interest in Partnership (537) (398) Income allocation to minority interest in consolidated joint ventures (410) (255) Income tax benefit (expense) (593) 1,540 Equity in income (loss) of unconsolidated joint ventures 625 (61) ---------------------------------------------------------------------- Income from continuing operations 18,341 17,104 Discontinued operations: Income (loss) from discontinued operations (704) 204 Net gain on sale of discontinued operations 366 15 Loss on impairment of asset held for sale (12,386) (440) ---------------------------------------------------------------------- Net income 5,617 16,883 Preferred stock distribution (7,360) (7,315) Loss on redemption of Series A preferred stock - (1,720) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $ (1,743) $ 7,848 ====================================================================== Basic weighted average number of common shares outstanding 26,302 26,224 ---------------------------------------------------------------------- Diluted weighted average number of common shares outstanding 26,302 27,555 ---------------------------------------------------------------------- Income (loss) per common share basic and diluted: Income from continuing operations $ 0.41 $ 0.31 Income (loss) from discontinued operations (0.48) (0.01) ---------------------------------------------------------------------- Net income (loss) available to common shareholders $ (0.07) $ 0.30 ---------------------------------------------------------------------- Per share dividends to common shareholders $ 0.60 $ 0.60 ---------------------------------------------------------------------- WINSTON HOTELS, INC. RECONCILIATION AND CALCULATION OF FFO, FFO AVAILABLE TO COMMON SHAREHOLDERS AND FFO AVAILABLE TO COMMON SHAREHOLDERS PER SHARE ($ in thousands, except per share amounts) Three Months Twelve Months Ended Ended December 31, December 31, ------------------ ----------------- 2005 2004 2005 2004 --------- ------- ------- ------- Net income $ 3,771 $ 2,702 $ 5,617 $16,883 Gain on sale of discontinued operations - - (383) (16) Gain on sale of unconsolidated joint venture hotel (551) - (551) - Minority interest in Partnership allocation of income (loss) 96 79 (96) 398 Minority interest in Partnership allocation of gain on sale of discontinued operations - - 17 1 Minority interest in Partnership allocation of gain on sale of unconsolidated joint venture hotel 26 - 26 - Minority interest in Partnership allocation of income (loss) from discontinued operations (25) (18) (33) 9 Depreciation 4,620 3,901 16,962 15,222 Depreciation from discontinued operations 91 510 1,302 2,189 Depreciation from joint ventures 229 90 889 501 --------- ------- ------- ------- FFO 8,257 7,264 23,750 35,187 Loss on redemption of Series A preferred stock - - - (1,720) Preferred stock dividend (1,840) (1,840) (7,360) (7,315) --------- ------- ------- ------- FFO Available to Common Shareholders $ 6,417 $ 5,424 $16,390 $26,152 ========= ======== ======== ======== Weighted average common shares outstanding assuming dilution 27,654 27,556 27,680 27,555 --------- ------- ------- ------- FFO Available to Common Shareholders per share $ 0.23 $ 0.20 $ 0.59 $ 0.95 ========= ======== ======== ======== ========= ======== ======== ======== Common dividend per share $ 0.15 $ 0.15 $ 0.60 $ 0.60 ========= ======== ======== ======== *T Excluding the effects of the non-cash impairment in 2004 and income tax expense (benefits) in both years, the fourth quarter 2005 FFO available to common shareholders would have been $0.23 per share, versus $0.19 per share for the fourth quarter of 2004. Excluding the effects of non-cash impairment charges and non-cash income tax expense/benefits in both years, as well as non-recurring items in both years including the effects of the redemption of the Series A Preferred Stock in 2004, the non-recurring lease agreement acquisition income earned in 2004, as well as the $0.06 per share of additional interest income relating to the early payoff of the Cornhusker, Baltimore, Tampa and Kauai hotel loans in 2005, FFO available to common shareholders would have been $28.3 million, or $1.02 per share for 2005 versus $25.8 million, or $0.94 per share for 2004. -0- *T WINSTON HOTELS, INC. 2006 FIRST QUARTER AND YEARLY GUIDANCE RECONCILIATION OF NET INCOME TO FFO AVAILABLE TO COMMON SHAREHOLDERS (a) ($ in thousands, except per share amounts) Quarter Ended Year Ended March 31, 2006 December 31, 2006 -------------------------------------- Guidance Range Guidance Range Low High Low High --------- -------- ---------- -------- Net income $ 1,200 $ 1,800 $ 14,600 $16,200 Minority interest - - 300 400 Depreciation 5,100 5,100 21,200 21,200 Depreciation from joint ventures 100 100 200 200 Preferred stock dividend (1,840) (1,840) (7,360) (7,360) --------- -------- ---------- -------- FFO Available to Common Shareholders $ 4,560 $ 5,160 $ 28,940 $30,640 ========= ======== ========= ======== Weighted average common shares assuming dilution 27,900 27,900 27,900 27,900 FFO Available to Common Shareholders per share $ 0.16 $ 0.18 $ 1.04 $ 1.10 (a) Assumes no hotel acquisitions, and no hotel dispositions, developments or placements of hotel debt, except for the operations and related debt of the Courtyard by Marriott hotel in Kansas City, MO opening in April. Winston Hotels, Inc. Three and Twelve Months Ended December 31, Same Store RevPAR Statistics Total for 44 Hotels Quarter Ending December ----------------- 2005 2004 % CH ----- ----- ----- Combined Brands ------------------------------------------------ Comfort Inn/Suites & Quality Suites 39.31 38.49 2.1% Courtyard, Fairfield Inn, Residence Inn 55.37 46.26 19.7% Hampton Inn/Suites 56.45 51.19 10.3% Hilton Garden Inn 70.50 71.61 -1.6% Holiday Inn Express/Select 55.41 50.45 9.8% Homewood Suites 66.65 62.63 6.4% Region ------------------------------------------------ South Atlantic 52.18 48.44 7.7% East North Central 70.69 72.92 -3.1% West South Central 53.95 35.42 52.3% West North Central 51.23 46.55 10.1% Mountain 52.70 52.98 -0.5% New England 62.09 61.89 0.3% Middle Atlantic 76.54 76.14 0.5% Segment ------------------------------------------------ Upscale 64.22 59.00 8.8% Mid-scale w/ F&B 58.74 54.30 8.2% Mid-scale w/o F&B 48.62 45.23 7.5% Service ------------------------------------------------ Limited-service 48.62 45.23 7.5% Full-service 62.08 59.40 4.5% Extended-stay 64.63 55.69 16.1% All Hotels 56.72 52.35 8.3% Twelve Months Ended December ------------------- 2005 2004 % CH ------ ------ ----- Combined Brands ------------------------------------------------ Comfort Inn/Suites & Quality Suites $44.50 $46.22 -3.7% Courtyard, Fairfield Inn, Residence Inn $57.36 $48.67 17.9% Hampton Inn/Suites $58.96 $53.23 10.8% Hilton Garden Inn $74.63 $74.88 -0.3% Holiday Inn Express/Select $57.33 $52.86 8.5% Homewood Suites $67.92 $64.72 4.9% Region ------------------------------------------------ South Atlantic $55.52 $52.45 5.9% East North Central $74.46 $74.05 0.6% West South Central $49.59 $38.36 29.3% West North Central $55.30 $52.52 5.3% Mountain $55.20 $50.77 8.7% New England $66.88 $64.97 2.9% Middle Atlantic $82.07 $78.50 4.5% Segment ------------------------------------------------ Upscale $66.20 $61.43 7.8% Mid-scale w/ F&B $59.50 $58.03 2.5% Mid-scale w/o F&B $52.70 $49.06 7.4% Service ------------------------------------------------ Limited-service $52.70 $49.06 7.4% Full-service $65.01 $63.25 2.8% Extended-stay $64.34 $56.54 13.8% All Hotels $59.44 $55.56 7.0% *T The above presentation includes 41 of the company's 49 wholly owned hotels as of December 31, 2005, as well as three joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Ponte Vedra, Fla. Hampton Inn, the West Des Moines, Iowa Fairfield Inn & Suites and the Houston, Tex. SpringHill Suites by Marriott. It excludes wholly owned properties which were sold prior to December 31, 2005, the Roanoke, Va. Courtyard by Marriott which was acquired in December 2004, the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels acquired in October 2005. The above presentation excludes two joint venture hotels, in which the company owns a 13.05 percent interest, through its Charlesbank joint venture. These joint venture hotels include the Shelton, Conn. Courtyard by Marriott acquired in March 2004 and the West Des Moines, Iowa Quality Suites acquired in August 2004. It also excludes the Chapel Hill, N.C. Courtyard by Marriott which opened in September 2004, in which the company owns a 48.78 percent interest and the Stanley Hotel in Estes Park, Colo., which was acquired September 2005, in which the company owns a 60 percent interest. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. -0- *T Winston Hotels, Inc. Three and Twelve Months Ended December 31, Same Store ADR Statistics Total for 44 Hotels Quarter Ending December --------------------- 2005 2004 % CH ------- ------- ----- Combined Brands ------------------------------------------------ Comfort Inn/Suites & Quality Suites $ 64.57 $ 62.36 3.5% Courtyard, Fairfield Inn, Residence Inn $ 86.05 $ 77.43 11.1% Hampton Inn/Suites $ 87.25 $ 79.54 9.7% Hilton Garden Inn $109.74 $106.87 2.7% Holiday Inn Express/Select $ 88.62 $ 83.43 6.2% Homewood Suites $ 93.33 $ 89.53 4.2% Region ------------------------------------------------ South Atlantic $ 81.18 $ 75.25 7.9% East North Central $111.21 $104.82 6.1% West South Central $ 80.92 $ 72.91 11.0% West North Central $ 73.65 $ 65.98 11.6% Mountain $ 86.55 $ 81.21 6.6% New England $ 98.14 $ 97.94 0.2% Middle Atlantic $115.16 $107.50 7.1% Segment ------------------------------------------------ Upscale $ 95.63 $ 91.35 4.7% Mid-scale w/ F&B $ 88.66 $ 86.23 2.8% Mid-scale w/o F&B $ 78.93 $ 71.84 9.9% Service ------------------------------------------------ Limited-service $ 78.93 $ 71.84 9.9% Full-service $ 96.58 $ 93.84 2.9% Extended-stay $ 90.56 $ 84.66 7.0% All Hotels $ 87.78 $ 82.22 6.8% Twelve Months Ended December -------------------- 2005 2004 % CH ------- ------- ----- Combined Brands -------------------------------------------------- Comfort Inn/Suites & Quality Suites $ 66.55 $ 63.70 4.5% Courtyard, Fairfield Inn, Residence Inn $ 84.26 $ 79.14 6.5% Hampton Inn/Suites $ 84.98 $ 77.68 9.4% Hilton Garden Inn $109.40 $103.98 5.2% Holiday Inn Express/Select $ 88.50 $ 82.51 7.3% Homewood Suites $ 93.55 $ 88.02 6.3% Region -------------------------------------------------- South Atlantic $ 80.62 $ 74.43 8.3% East North Central $105.87 $100.23 5.6% West South Central $ 78.11 $ 75.82 3.0% West North Central $ 77.03 $ 71.53 7.7% Mountain $ 86.32 $ 79.09 9.1% New England $ 98.46 $ 95.77 2.8% Middle Atlantic $114.09 $106.59 7.0% Segment -------------------------------------------------- Upscale $ 95.10 $ 90.31 5.3% Mid-scale w/ F&B $ 90.20 $ 86.12 4.7% Mid-scale w/o F&B $ 77.56 $ 71.10 9.1% Service -------------------------------------------------- Limited-service $ 77.56 $ 71.10 9.1% Full-service $ 96.81 $ 92.57 4.6% Extended-stay $ 89.91 $ 84.17 6.8% All Hotels $ 86.86 $ 81.25 6.9% *T The above presentation includes 41 of the company's 49 wholly owned hotels as of December 31, 2005, as well as three joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Ponte Vedra, Fla. Hampton Inn, the West Des Moines, Iowa Fairfield Inn & Suites and the Houston, Tex. SpringHill Suites by Marriott. It excludes wholly owned properties which were sold prior to December 31, 2005, the Roanoke, Va. Courtyard by Marriott which was acquired in December 2004, the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels acquired in October 2005. The above presentation excludes two joint venture hotels, in which the company owns a 13.05 percent interest, through its Charlesbank joint venture. These joint venture hotels include the Shelton, Conn. Courtyard by Marriott acquired in March 2004 and the West Des Moines, Iowa Quality Suites acquired in August 2004. It also excludes the Chapel Hill, N.C. Courtyard by Marriott which opened in September 2004, in which the company owns a 48.78 percent interest and the Stanley Hotel in Estes Park, Colo., which was acquired September 2005, in which the company owns a 60 percent interest. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above. -0- *T Winston Hotels, Inc. Three and Twelve Months Ended December 31, Same Store Occupancy Statistics Total for 44 Hotels Quarter Ending December ----------------- 2005 2004 % CH ----- ----- ----- Combined Brands --------------------------------------------------- Comfort Inn/Suites & Quality Suites 60.9% 61.7% -1.3% Courtyard, Fairfield Inn, Residence Inn 64.3% 59.8% 7.5% Hampton Inn/Suites 64.7% 64.4% 0.5% Hilton Garden Inn 64.2% 67.0% -4.2% Holiday Inn Express/Select 62.5% 60.5% 3.3% Homewood Suites 71.4% 70.0% 2.0% Region --------------------------------------------------- South Atlantic 64.3% 64.4% -0.2% East North Central 63.6% 69.6% -8.6% West South Central 66.7% 48.6% 37.2% West North Central 69.6% 70.6% -1.4% Mountain 60.9% 65.2% -6.6% New England 63.3% 63.2% 0.2% Middle Atlantic 66.5% 70.8% -6.1% Segment --------------------------------------------------- Upscale 67.2% 64.6% 4.0% Mid-scale w/ F&B 66.3% 63.0% 5.2% Mid-scale w/o F&B 61.6% 63.0% -2.2% Service --------------------------------------------------- Limited-service 61.6% 63.0% -2.2% Full-service 64.3% 63.3% 1.6% Extended-stay 71.4% 65.8% 8.5% All Hotels 64.6% 63.7% 1.4% Twelve Months Ended December ----------------- 2005 2004 % CH ----- ----- ----- Combined Brands ------------------------------------------------- Comfort Inn/Suites & Quality Suites 66.9% 72.6% -7.9% Courtyard, Fairfield Inn, Residence Inn 68.1% 61.5% 10.7% Hampton Inn/Suites 69.4% 68.5% 1.3% Hilton Garden Inn 68.2% 72.0% -5.3% Holiday Inn Express/Select 64.8% 64.1% 1.1% Homewood Suites 72.6% 73.5% -1.2% Region ------------------------------------------------- South Atlantic 68.9% 70.5% -2.3% East North Central 70.3% 73.9% -4.9% West South Central 63.5% 50.6% 25.5% West North Central 71.8% 73.4% -2.2% Mountain 64.0% 64.2% -0.3% New England 67.9% 67.8% 0.1% Middle Atlantic 71.9% 73.6% -2.3% Segment ------------------------------------------------- Upscale 69.6% 68.0% 2.4% Mid-scale w/ F&B 66.0% 67.4% -2.1% Mid-scale w/o F&B 67.9% 69.0% -1.6% Service ------------------------------------------------- Limited-service 67.9% 69.0% -1.6% Full-service 67.2% 68.3% -1.6% Extended-stay 71.6% 67.2% 6.5% All Hotels 68.4% 68.4% 0.0% *T The above presentation includes 41 of the company's 49 wholly owned hotels as of December 31, 2005, as well as three joint venture hotels the company held an ownership interest in throughout the periods presented. These joint venture hotels include the Ponte Vedra, Fla. Hampton Inn, the West Des Moines, Iowa Fairfield Inn & Suites and the Houston, Tex. SpringHill Suites by Marriott. It excludes wholly owned properties which were sold prior to December 31, 2005, the Roanoke, Va. Courtyard by Marriott which was acquired in December 2004, the Hampton Inn & Suites Baltimore Inner Harbor in Maryland which was acquired in September 2005 and the six hotels acquired in October 2005. The above presentation excludes two joint venture hotels, in which the company owns a 13.05 percent interest, through its Charlesbank joint venture. These joint venture hotels include the Shelton, Conn. Courtyard by Marriott acquired in March 2004 and the West Des Moines, Iowa Quality Suites acquired in August 2004. It also excludes the Chapel Hill, N.C. Courtyard by Marriott which opened in September 2004, in which the company owns a 48.78 percent interest and the Stanley Hotel in Estes Park, Colo., which was acquired September 2005, in which the company owns a 60 percent interest. These properties were not open throughout each of the periods presented; therefore they are excluded from the table above.