Jerry Daly or Carol McCune Daly Gray Public Relations (Media) jerry@dalygray.com
(404) 365-2719
(703) 435-6293
Lodgian Reports Fourth Quarter and Year 2004 Results
ATLANTA, Ga., March 10, 2005—Lodgian, Inc. (AMEX: LGN), one of the nation’s largest independent owners and operators of full-service hotels, reported results for the fourth quarter and year ended December 31, 2004.
4Q
2004*
4Q 2003*
% Change
Year 2004*
Year 2003*
% Change
Rooms revenue - Continuing Operations
$
52,253
$
52,089
0.3
%
$
238,946
$
229,519
4.1
%
Total revenue - Continuing Operations
$
74,166
$
73,456
1.0
%
$
322,109
$
311,414
3.4
%
Loss from continuing operations
$
(11,070
)
$
(17,028
)
35.0
%
$
(35,846
)
$
(27,074
)
-32.4
%
(Loss)/income from discontinued operations
$
(2,694
)
$
522
-616.1
%
$
4,012
$
(4,603
)
187.2
%
Net loss attributable to common stock
$
(13,764
)
$
(16,506
)
16.6
%
$
(31,834
)
$
(39,271
)
18.9
%
Earnings before interest, taxes, depreciation and amortization (EBITDA)
$
2,520
$
1,705
47.8
%
$
49,547
$
39,052
26.9
%
Adjusted EBITDA
$
9,675
$
12,950
-25.3
%
$
59,695
$
57,242
4.3
%
*In thousands
Continuing Operations include two hotels in Florida that are closed due to hurricane damage.
Adjusted EBITDA is EBITDA excluding the effects of certain charges such as pre-emergence reorganization expenses, post-emergence Chapter 11 expenses included in corporate and other on our consolidated statement of operations, impairment losses and casualty losses for damage caused to properties by hurricanes.
For the year 2004, EBITDA (a non-GAAP measure) rose to $49.5 million, which included $10.2 million of hurricane damage, impairment losses and reorganization-related charges, up from $39.1 million in 2003, which included $18.1 million in impairment losses and reorganization-related charges. Adjusted EBITDA increased to $59.7 million from $57.2 million.
The company has submitted business interruption claims for September through December 2004 in the amount of $2.1 million for two hotels in Florida that closed as a result of hurricane damage. The recovery of any portion of these claims is not reflected in the 2004 financial results as these claims are subject to negotiation with the company’s insurance carriers.
In the fourth quarter, the company reported $0.3 million of casualty losses and repair expenses related to hurricane damage at eight of its hotels in Florida and South Carolina, bringing the total for the year to $2.3 million. Two of the company’s hotels — the Crowne Plaza West Palm Beach, Fla. and the Holiday Inn Melbourne, Fla. — remain closed. Room revenue displacement at these two hotels was $2.2 million for the fourth quarter and $2.7 million for the full year. Due to hurricane warnings and damage, the other six impacted hotels had displaced room revenues of $0.5 million with an estimated impact on operating results of $0.3 million for the full year.
The company is recognizing expenses related to hurricane damage repairs as these expenses are incurred at all eight damaged hotels. For the year ended December 31, 2004, the company incurred $1.9 million in hurricane clean-up and repair costs, wrote off damaged assets with a net book value of $3.7 million, and recorded $3.3 million as an insurance receivable to cover a portion of these repairs and asset replacements, net of insurance deductibles, which resulted in a net casualty loss of $2.3 million. Upon completion of all claims, the proceeds the company will receive for the hurricane losses will be reduced by the aggregate deductible of $3.1 million on six of its hotels, plus an as-yet-to-be-determined amount for repairs and upgrades not covered by insurance. In addition, the company incurred repair expenses at two other hotels which did not meet the deductible.
During 2004, 16 hotels were under renovation, causing additional displacement of $2.6 million of total revenues.
Also impacting 2004 results were Sarbanes-Oxley compliance costs, which were $1.4 million for the full year.
“Following one of the most challenging periods in the lodging industry’s history, we have moved into a strong, multi-year recovery,” said W. Thomas Parrington, president and chief executive officer. “Business travel demand has continued to improve, and is augmented by the leisure sector which has remained strong. These improving fundamentals and an expanding U.S. economy, combined with the positive effects of our completed renovations, allowed us to report solid results for a very difficult year filled with more challenges than we had anticipated.
“These results were achieved in spite of reduced occupancy due to displacement at hotels that were undergoing renovations and despite the temporary closure and disruption of business at eight of our properties damaged by hurricanes in the third quarter.”
For the 2004 fourth quarter, revenue per available room (RevPAR) at the company’s continuing operations hotels, excluding the two temporarily closed Florida hotels, rose 4.9 percent, as occupancy increased 0.6 percent and average daily rate (ADR) improved 4.3 percent, compared to the 2003 fourth quarter. Full year RevPAR, also excluding the two temporarily closed hotels, rose 4.8 percent, on a 1.9 percent increase in occupancy and a 2.9 percent rise in ADR.
“For the year, we made measurable progress in a number of key areas:
•
We completed 16 hotel renovations in 2004, spending $35.2 million on our continuing operations hotels, and expect to wind up our three-year, $110–million-plus program during 2005, after which our portfolio will be in good competitive condition;
•
We sold 11 properties and two land parcels in 2004 for total net proceeds of $41.7 million, of which we used $37.4 million to reduce our debt. There are currently eight hotels and one land parcel on our list of assets held for sale;
•
We completed a one-for-three reverse stock split and a common stock offering, a portion of the proceeds of which were used to redeem our Series A preferred shares, resulting in annual savings of approximately $17 million in preferred dividend interest expense;
•
We refinanced our mortgage debt, fixing the interest rate and lengthening the maturity on a substantial portion of our debt.”
Renovation Program
Parrington noted that, as anticipated, the company’s renovation program had a short-term, negative impact on fourth quarter earnings. “We spent approximately $9.7 million on capital improvements in the 2004 fourth quarter, excluding hurricane repairs, which increased displacement at the affected hotels to $0.4 million in room revenues and $0.3 million in operating profits. We had expected to complete the program in the 2005 first quarter, but as a result of last fall’s hurricanes, which damaged eight of our properties, we diverted some resources to more pressing repair issues.
“For the year, we completed major renovations at 16 of our hotels, bringing to 34 the number of properties that have completed significant upgrades in the past three years. We have major projects under way at 11 additional hotels. Going forward, we will maintain our hotels on a more normal five-to-seven year cycle of refurbishment, which will be completed on a phased, scheduled basis.
“Our properties that were renovated in 2003 and 2004 experienced improved occupancy and much stronger average daily rates,” Parrington said. “As we complete our renovation programs, we anticipate our occupancy and ADR performance will continue to improve. We continue to look for ways to control expenses and maximize profitability at our hotels, taking advantage whenever possible of the operating synergies and economies of scale our size affords us. Creating cost and guest service efficiencies at each of our hotels remains a top priority for us.”
During 2005, Lodgian expects to spend $84.8 million in capital improvements at its continuing operations hotels, which includes $48.0 million for hurricane repairs, much of which is anticipated to be covered by insurance proceeds. This spending will substantially complete its deferred renovations. “Including the additional projects currently under way and planned, we will have refurbished and updated approximately 70 percent of our core hotel properties by the end of 2005,” he added.
Disposition/Acquisition Program
After selling two hotels in the 2004 fourth quarter, the company continued to execute its hotel disposition strategy in the 2005 first quarter with the sale of two additional hotels for aggregate net proceeds of $6.4 million, which were used to reduce debt. To date, Lodgian has sold a total of 14 hotels, two parcels of land and its only office building under its plan, designed to reduce debt and interest costs, improve the overall quality of its portfolio and position the company to take advantage of the current rebound in the lodging industry. In January, the company identified three additional hotel assets to include in its disposition program. These three properties, with 736 rooms, had a combined 2004 GAAP net loss of $6.1 million, negative EBITDA of $5.0 million and negative Adjusted EBITDA of $0.5 million.
“Since we announced the program in October 2003, we have reduced debt by approximately $49.2 million to date with proceeds from the sale of these properties. As we continue to wind down our disposition program and reduce our leverage, we also will recycle our sales proceeds into acquisitions that offer higher yields or better long-term growth potential. In December 2004 we acquired the 107-room SpringHill Suites by Marriott in Pinehurst, N.C., and we have additional candidates in our pipeline.”
The company’s acquisition profile remains primarily upscale, premium-branded, limited-service hotels, with 100 to 250 rooms, in strong suburban and urban markets. To a lesser extent, the company will review smaller upper upscale, full-service hotels, as well. Parrington noted that the company had $36.2 million in cash on hand as of December 31, 2004 for operations, capital expenditures and future growth plans.
Outlook
“The industry outlook remains very positive for the foreseeable future, supported by solid fundamentals marked by increasing demand and relatively low levels of new supply,” Parrington said. “Most industry analysts are predicting solid RevPAR gains in 2005.
“We are beginning to see the benefits of our portfolio improvement program at our hotels where renovations were completed in 2003 and 2004. With the finalization of our renovation and repositioning program during 2005, we will be better positioned to take full advantage of the industry’s anticipated growth. With our stronger balance sheet, we have the flexibility to respond to acquisition and other opportunities that we expect will further drive our external growth. We remain quite optimistic about the sustainability of the industry’s current uptrend and the long-term outlook for our industry.”
Guidance
Two of the company’s most profitable hotels will remain closed until mid-year due to hurricane damage, plus an additional 11 hotels are undergoing, or about to begin, major renovations. As a result, EBITDA and Adjusted EBITDA guidance for 2005 will not be provided. RevPAR for continuing operations, excluding the two hotels in Florida that are closed, is expected to increase 4 to 5 percent in the first quarter of 2005, and 5 to 7 percent for the full year. Both increases are net of the impact of renovation displacement.
Non-GAAP Financial Measures
The historical non-GAAP financial measures included in this press release are reconciled to the comparable GAAP measures in the schedules attached to this press release.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP measures and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. The company uses EBITDA and Adjusted EBITDA to measure its performance and to assist in the assessment of hotel property values. EBITDA is also a widely used industry measure which Lodgian believes provides pertinent information to investors and is an additional indicator of the company’s operating performance.
The company defines Adjusted EBITDA as EBITDA excluding the effects of certain charges such as pre-emergence reorganization expenses, post-emergence Chapter 11 expenses included in corporate and other on our consolidated statement of operations, impairment losses and casualty losses for damage caused to Lodgian’s properties by the hurricanes that hit the southeastern United Stated in the third quarter.
About Lodgian
Lodgian is one of the largest independent owners and operators of full-service hotels in the United States. The company currently manages a portfolio of 84 hotels with 15,858 rooms located in 31 states and Canada. Of the company’s 84-hotel portfolio, 72 are InterContinental Hotels Group brands (Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express) and Marriott brands (Courtyard by Marriott, Fairfield Inn by Marriott, SpringHill Suites by Marriott and Residence Inn by Marriott), and nine are affiliated with four other nationally recognized hospitality brands. Three hotels are independent, unbranded properties. For more information about Lodgian, visit the company’s Website:www.lodgian.com.
Forward-Looking Statements
This press release includes forward-looking statements related to Lodgian’s operations that are based on management’s current expectations, estimates and projections. These statements are not guarantees of future performance and actual results could differ materially. The words “may,” “should,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “plan,” and similar expressions are intended to identify forward-looking statements. Certain factors are not within the company’s control and readers are cautioned not to put undue reliance on forward-looking statements. These statements involve risks and uncertainties including, but not limited to, the company’s ability to generate sufficient working capital from operations and other risks detailed from time to time in the company’s SEC reports. The company undertakes no obligations to update events to reflect changed assumptions, the occurrence of unanticipated events or changes to future results over time.
- 30 -
1
LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OFOPERATIONS
Successor
Predecessor
November 23, 2002 to
January 1, 2002 to
2004
2003
December 31, 2002
November 22, 2002
(unaudited)
($in thousands, except per share data)
Revenues:
$
$
Rooms
$
238,946
$
229,519
16,902
220,898
Food and beverage
72,429
70,791
7,415
66,709
Other
10,734
11,104
989
11,660
322,109
311,414
25,306
299,267
Operating expenses:
Direct:
Rooms
68,054
65,814
6,246
59,378
Food and beverage
51,067
48,686
5,447
46,822
Other
8,029
7,970
880
7,836
127,150
122,470
12,573
114,036
194,959
188,944
12,733
185,231
Other operating expenses:
Other hotel operating costs
97,261
91,982
8,883
82,375
Property and other taxes, insurance and leases
21,884
25,014
3,298
20,162
Corporate and other
17,263
20,892
1,801
15,675
Casualty losses
2,313
—
—
—
Depreciation and amortization
27,376
29,761
3,113
40,523
Impairment of long-lived assets
7,416
12,667
—
—
Other operating expenses
173,513
180,316
17,095
158,735
21,446
8,628
(4,362
)
26,496
Other income (expenses):
Interest income and other
681
807
14
4,940
Interest expense and other financing costs:
Preferred stock dividend
(9,383
)
(8,092
)
—
—
Other interest expense
(42,990
)
(28,581
)
(2,512
)
(25,761
)
Gain on asset dispositions
—
445
—
—
Loss on preferred stock redemption
(6,063
)
—
—
—
(Loss) income before income taxes, reorganization items and minority interests
(36,309
)
(26,793
)
(6,860
)
5,675
Reorganization items
—
(1,397
)
—
11,038
(Loss) income before income taxes and minority interests
(36,309
)
(28,190
)
(6,860
)
16,713
Minority interests
691
1,294
147
126
(Loss) income before income taxes — continuing operations
(35,618
)
(26,896
)
(6,713
)
16,839
(Provision) benefit for income taxes — continuing operations
(228
)
(178
)
(32
)
160
(Loss) income from continuing operations
(35,846
)
(27,074
)
(6,745
)
16,999
Discontinued operations:
(Loss) income from discontinued operations before income taxes
4,012
(4,603
)
(2,581
)
(5,833
)
Income tax (provision) benefit
—
—
—
1,200
(Loss) income from discontinued operations
4,012
(4,603
)
(2,581
)
(4,633
)
Net (loss) income
(31,834
)
(31,677
)
(9,326
)
12,366
Preferred stock dividend
—
(7,594
)
(1,510
)
—
$
Net (loss) income attributable to common stock
$
(31,834
)
$
(39,271
)
$
(10,836
)
12,366
Basic and diluted loss per common share:
$
Net (loss) income attributable to common stock
$
(2.30
)
$
(16.83
)
$
(4.64
)
0.43
Upon emergence from Chapter 11, the Company adopted fresh start reporting.
As a result, all assets and liabilities were restated to reflect fair values. The consolidated financial statements of the new
reporting entity (the “Successor”) are not comparable to the reporting entity prior to the Company’s emergence from Chapter 11 (the “Predecessor”).
2
LODGIAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
12.25% Cumulative preferred shares subject to mandatory redemption
—
142,177
Other long-term liabilities
393,117
409,115
Total long-term liabilities
393,117
551,292
Total liabilities
495,044
666,248
Minority interests
1,629
2,320
Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized;
24,579,255 and 2,333,591 issued at December 31, 2004
and December 31, 2003, respectively
246
23
Additional paid-in capital
306,943
89,874
Unearned stock compensation
(315
)
(508
)
Accumulated deficit
(81,941
)
(50,107
)
Accumulated other comprehensive income
1,777
1,324
Treasury stock, at cost, 7,211 and nil shares at December 31, 2004
and December 31, 2003, respectively
(76
)
—
Total stockholders’ equity
226,634
40,606
$
$
723,307
709,174
3
LODGIAN, INC. AND SUBSIDIARIES Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP measures) with Loss from Continuing Operations (a GAAP measure)
2002
Combined
2004
2003
Period
(unaudited)
($in thousands)
Continuing operations:
$
(Loss) income from continuing operations
$
(35,846
)
$
(27,074
)
10,254
Depreciation and amortization
27,376
29,761
43,636
Fresh start adjustments
—
—
(33,318
)
Interest income
(647
)
(486
)
(639
)
Interest expense
42,990
28,581
28,273
Preferred stock dividends
9,383
8,092
—
Loss on preferred stock redemption
6,063
—
—
Provision (benefit) for income taxes — continuing operations
228
178
(128
)
$
$
$
EBITDA from continuing operations
49,547
39,052
48,078
Adjustments to EBITDA:
Post-emergence Chapter 11 expenses, included in corporate
$
$
$
and other on our consolidated statement of operations
457
4,789
800
Reorganization expenses
—
1,397
22,278
Impairment loss
7,416
12,667
—
Gain on asset dispositions
—
(445
)
—
Casualty losses for damage caused to our properties by the hurricanes that hit the southeastern United States in the third quarter
2,313
—
—
Adjustments to bankruptcy claims reserves
(38
)
(218
)
—
$
$
$
Adjusted EBITDA from continuing operations
59,695
57,242
71,156
4
LODGIAN, INC. AND SUBSIDIARIES QUARTERLY OPERATING DATA
2004
2003
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
(unaudited)
(unaudited)
($in thousands)
Revenues:
Rooms
$
52,253
$
64,805
$
64,325
$
57,563
$
52,089
$
62,506
$
61,010
$
53,914
Food and beverage
19,555
16,950
19,436
16,488
18,800
16,407
18,977
16,607
Other
2,358
2,806
2,816
2,754
2,567
2,841
2,838
2,858
74,166
84,561
86,577
76,805
73,456
81,754
82,825
73,379
Operating expenses:
Direct:
Rooms
16,355
18,722
16,960
16,018
16,023
17,697
16,730
15,363
Food and beverage
14,225
12,595
12,713
11,534
12,557
12,030
12,365
11,734
Other
1,885
2,095
2,077
1,972
2,178
2,013
1,842
1,938
32,465
33,412
31,750
29,524
30,758
31,740
30,937
29,036
41,702
51,149
54,827
47,281
42,698
50,014
51,888
44,343
Other operating expenses:
Other hotel operating costs
23,790
25,577
23,822
24,072
22,546
24,164
22,797
22,475
Property and other taxes, insurance and leases
5,160
5,597
5,376
5,751
5,343
6,087
6,923
6,661
Corporate and other
3,548
4,519
4,782
4,413
4,612
4,235
6,075
5,970
Casualty gains and losses
295
2,019
—
—
—
—
—
—
Depreciation and amortization
6,635
7,066
6,870
6,805
7,194
7,572
7,573
7,422
Impairment of long-lived assets
6,809
607
—
—
11,286
2
1,378
—
Other operating expenses
46,236
45,385
40,850
41,041
50,981
42,060
44,746
42,528
(4,535
)
5,764
13,977
6,240
(8,283
)
7,954
7,142
1,815
Other income (expenses):
—
—
—
—
—
—
—
Interest income and other
360
212
66
43
486
114
124
83
Interest expense and other financing costs:
—
—
—
—
—
—
—
—
Preferred stock dividend
—
(865
)
(4,233
)
(4,285
)
(4,065
)
(4,027
)
—
Other interest expense
(7,561
)
(7,350
)
(19,920
)
(8,159
)
(7,718
)
(7,665
)
(6,919
)
(6,279
)
Gain on asset dispositions
—
—
—
—
445
—
—
—
Loss on preferred stock redemption
—
(4,471
)
(1,592
)
—
—
—
—
—
(Loss) income before income taxes, reorganization items and
minority interests
(11,735
)
(6,710
)
(11,702
)
(6,161
)
(19,135
)
(3,624
)
347
(4,381
)
Reorganization items
—
—
—
—
647
—
(808
)
(1,237
)
Loss before income taxes and minority interest
(11,735
)
(6,710
)
(11,702
)
(6,161
)
(18,488
)
(3,624
)
(461
)
(5,618
)
Minority interests
406
503
(71
)
(147
)
1,412
99
(69
)
(148
)
Loss before income taxes — continuing operations
(11,329
)
(6,207
)
(11,773
)
(6,308
)
(17,076
)
(3,525
)
(530
)
(5,767
)
(Provision) benefit for income taxes — continuing operations
259
(337
)
(75
)
(76
)
48
(75
)
(75
)
(76
)
Loss from continuing operations
(11,070
)
(6,544
)
(11,847
)
(6,384
)
(17,028
)
(3,600
)
(605
)
(5,841
)
Discontinued operations:
—
—
—
(Loss) income from discontinued operations before income taxes
(2,694
)
2,807
4,601
(702
)
522
(46
)
(1,836
)
(3,243
)
Income tax benefit (provision)
—
—
—
—
—
—
—
—
(Loss) income from discontinued operations
(2,694
)
2,807
4,601
(702
)
522
(46
)
(1,836
)
(3,243
)
Net loss
(13,764
)
(3,737
)
(7,246
)
(7,087
)
(16,506
)
(3,646
)
(2,441
)
(9,084
)
Preferred stock dividend
—
—
—
—
—
—
(3,818
)
(3,776
)
Net loss attributable to common stock
$
(13,764
)
$
(3,737
)
$
(7,246
)
$
(7,087
)
$
(16,506
)
$
(3,646
)
$
(6,259
)
$
(12,860
)
5
LODGIAN, INC. AND SUBSIDIARIES Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP measures) with Loss from Continuing Operations (a GAAP measure)
2004
2003
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
(unaudited)
(unaudited)
($in thousands)
($in thousands)
Continuing operations:
(Loss) income from continuing operations
$
(11,071
)
$
(6,544
)
$
(11,847
)
$
(6,384
)
$
(17,028
)
$
(3,600
)
$
(605
)
$
(5,841
)
Depreciation and amortization
6,635
7,066
6,870
6,805
7,194
7,572
7,573
7,422
Fresh start adjustments
—
—
—
—
—
—
—
—
Interest income
(345
)
(175
)
(80
)
(47
)
(196
)
(72
)
(104
)
(114
)
Interest expense
7,561
7,350
19,920
8,159
7,718
7,665
6,919
6,279
Preferred stock dividends
—
865
4,233
4,285
4,065
4,027
—
Loss on preferred stock redemption
—
4,471
1,592
—
—
—
—
—
Provision (benefit for income taxes — continuing operations
(260
)
337
75
76
(48
)
75
75
76
EBITDA from continuing operations
$
2,520
$
13,370
$
20,763
$
12,894
$
1,705
$
15,667
$
13,858
$
7,822
Adjustments to EBITDA:
Post-emergence Chapter 11 expenses, included in corporate
and other on consolidated statement of operations
$
90
$
67
$
100
$
200
$
1,269
$
320
$
1,000
$
2,200
Reorganization expenses
—
—
—
—
(648
)
45
800
1,200
Impairment loss
6,809
607
—
—
11,287
2
1,378
—
Gain on asset dispositions
—
—
—
—
(445
)
—
—
—
Casualty losses for damage caused to our properties by the
294
2,019
—
—
—
—
—
—
hurricanes that hit the Southeastern United States in the third
quarter
Adjustments to bankruptcy claims reserves
(38
)
—
—
—
(218
)
—
—
—
Adjusted EBITDA from continuing operations
$
9,675
$
16,063
$
20,863
$
13,094
$
12,950
$
16,034
$
17,036
$
11,222
6
LODGIAN, INC. AND SUBSIDIARIES Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP measures) with Net Loss (a GAAP measure) for Three New Held for Sale Assets
2004
(unaudited)
($in thousands)
Net loss
$
(6,124
)
Depreciation and amortization
430
Interest expense
739
EBITDA
$
(4,954
)
Adjustments to EBITDA:
Impairment loss
4,460
Adjusted EBITDA
$
(493
)
7
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