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as Preferred Provider for Interactive Entertainment and Information Services |
SIOUX FALLS, S.D., Feb.
23, 2000 - LodgeNet Entertainment Corporation (Nasdaq: LNET) today reported
record revenue of $181.3 million and record EBITDA (earnings before interest,
taxes, depreciation and amortization) of $60.1 million for its fiscal year
ended December 31, 1999. The results reflect a 24% increase in EBITDA over
1998. In addition, LodgeNet reported its 25th consecutive increase in quarterly
revenue and EBITDA. Revenue in the fourth quarter of 1999 increased to
$45.4 million, while EBITDA increased to $14.6 million.
The following financial highlights are in thousands,
except per-share amount:
�During 1999 we decisively delivered on the goals of Destination 2000, our two-year strategic plan targeted at moving LodgeNet toward profitability and significant free cash flow, while concentrating on creating new revenue streams aimed at permanently expanding the value of the Company,� said Scott C. Petersen, President and Chief Executive Officer of LodgeNet. �We drove record levels of cash flow through our distribution system at record margin rates, and we clearly �turned the corner� with respect to profitability and our drive toward free cash flow.� �We established new records for both EBITDA and our EBITDA margin during the year,� said Jeffrey T. Weisner, Senior Vice President and CFO for LodgeNet. �While EBITDA increased 24% to $60.1 million, our EBITDA margin improved by 400 basis points to 33.2%. These results reflect in part an expanded gross profit margin, but even more importantly, a significant reduction in our operating costs. For the first time in our corporate history, we drove SGA below 10% of revenue. One of the most significant changes produced was a dramatic reduction in our operating loss, which decreased from $9.9 million in 1998 to only $678,000 in 1999. �We experienced a significant decline in our use of external growth capital during the year, as we continued our disciplined Destination 2000 approach toward capital expenditures,� continued Weisner. �Total capital expenditures were just $51 million in 1999, a 25% reduction over 1998. This reduction in the use of capital, coupled with the significant increase in internally generated operating cash flow, caused our long-term debt to increase less than $15 million, a dramatic comparison to the $80 million increase in 1998. As a result, our long-term debt to EBITDA leverage ratio improved substantially from 5.5x to 4.7x over the past twelve months.� �We also made significant progress toward our long term goal of tapping into new revenue streams through our broadband interactive infrastructure,� said Petersen. �We announced many strategic relationships during the past year based on our Internet initiative, from technology-based deals with ATT, Liberate Technology, DIRECTV , LookSmart and Wayport, to �footprint expansion� announcements with the Ritz-Carlton Hotel Company, Wingate Inns (Cendant�s new technology-savvy brand), the Omni Hotel group and just today, we announced that we became the interactive television service provider of choice for Carlson Hospitality Worldwide and its Radisson and Regent brands.� Results from Operations
EBITDA increased 23.7% to $60.1 million in 1999 compared to $48.6 million in 1998. As a percentage of total revenue, EBITDA increased to 33.2% in 1999 compared to 29.2% in 1998. Total revenue for 1999 was $181.3 million, an increase of $14.9 million or 9.0% compared to 1998. This increase included a $23.4 million or 16.0% increase in Guest Pay revenue resulting from a 13.8% increase in average Guest pay rooms in operation and higher average revenue per Guest Pay room of $22.47 per month in 1999 compared to $22.06 in 1998. Other revenue decreased $8.5 million from $19.9 million in 1998 to $11.4 million in 1999. This decrease is due to lower sales of free-to-guest services, televisions and equipment, as well as the ResNet merger transaction in the fourth quarter of 1998 which eliminated ResNet operations from the Company on a going-forward basis effective November 30, 1998. ResNet sales were $5.4 million in 1998 prior to the merger transaction. The Company�s overall gross profit increased 11.3% in 1999 to $102.8 million on a 9.0% increase in revenue from 1998. The overall gross profit margin increased to 56.7% in 1999 from 55.5% in the prior year, primarily due to a shift in sales toward the more profitable Guest Pay services (93.7% of total sales in 1999 compared to 88.1% in 1998). Guest Pay operations expenses consist of costs directly related to the operation of systems at hotel sites. Additionally, prior to the ResNet merger, costs incurred to operate the ResNet systems were included in Guest Pay operations. Such costs incurred by ResNet totaled $2.9 million in 1998. Excluding expenses incurred to operate the ResNet systems, Guest Pay operations expenses increased 12.0%, to $24.9 million from $22.2 million in the prior year. This increase is due to a 13.8% increase in the average number of installed Guest Pay rooms in 1999 compared to 1998, partially offset by lower average operating and service expenses incurred. Per average installed Guest Pay room, Guest Pay operations expenses, excluding ResNet costs incurred in 1998, were $3.30 per month in 1999 compared to $3.35 per month in 1998. Selling, general and administrative expenses decreased 4.7% to $17.8 million in 1999 from $18.6 million in 1998. The decrease is due in part to the ResNet merger, as $1.8 million of SGA expenses were incurred by ResNet during 1998. As a percentage of revenue, SGA expenses decreased to 9.8% of revenue in 1999 compared to 11.2% in 1998. Depreciation and amortization expenses increased
10.1% to $60.8 million in 1999 from $55.2 million in the prior year. Excluding
ResNet depreciation and amortization expenses incurred during 1998 of $3.6
million, depreciation and amortization expense increased $9.2 million or
17.8%. This increase is primarily attributable to the increase in the number
of installed Guest Pay and game service equipped rooms previously described,
as well as the associated software costs and other capitalized costs such
as service vans, equipment and computers that are related to the increased
number of rooms in service since the prior year. Additionally, increases
in administrative and facility related assets have contributed to the increased
depreciation and amortization. As a percentage of revenue, depreciation
and amortization expenses increased to 33.5% in 1999 from 33.2% in 1998.
As a result of the factors previously described, the Company�s operating
loss decreased to $678,000 in 1999 from $9.9 million in 1998. The Company�s
net loss in 1999 decreased to $36.4 million from $39.9 million in 1998.
LodgeNet Entertainment Corporation is a specialized communications company that serves more than 4,900 lodging properties and more than 750,000 rooms in the United States, Canada and other selected international markets. Through its open architecture broadband local area network (b-LAN®) technology, LodgeNet delivers on-demand movies, Nintendo® 64 video games, high-speed Internet access and many other interactive applications, as well as digital-quality DIRECTV® free-to-guest programming. More than 190 million travelers have access to LodgeNet systems on an annual basis. LodgeNet is listed on Nasdaq and trades under the symbol LNET. Except for the historical statements contained herein, all statements made in this release are �forward-looking statements� within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and are subject to risks, uncertainties, and other factors that could cause actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. |
Ann Parker, Director of Corporate Communications of LodgeNet Entertainment Corporation 605-988-1000, [email protected]http://www.lodgenet.com |