Hotel Online Special Report Lodgian, Inc. Reports Same-Unit RevPAR for Six months 1999 Up 6.4 %; Occupancy 64.0 % – Credits Repositioning and Renovation ATLANTA, Aug. 10, 1999 – Lodgian, Inc., (NYSE: LOD), one of the nation’s largest owners and operators of hotels, today reported significant gains in same-unit revenue per available room (RevPAR) and further increases in revenues, earnings before interest, taxes, depreciation and amortization (EBITDA) and income from operations for the second quarter and six months ended June 30, 1999.
Management attributes the strong performance to the success of Lodgian’s repositioning and renovation program, continued commitment to operational excellence and the accomplishments of its sales and marketing organization, including efficiencies and improvements provided by the Company’s new centralized Revenue Center.
Summary of Second Quarter Financial Highlights (unaudited; dollars in thousands except per share and RevPAR amounts) Three Months Six Months Ended June 30, Ended June 30, 1999 1998 Change 1999 1998 Change Revenue $159,863 $102,388 +56% $295,667 $185,269 +60% EBITDA $51,409 $29,432 +75% $84,266 $49,260 +71% EBITDA Margin 32.2% 28.7% +12% 28.5% 26.6% +7 % Income From Operations $37,165 $21,716 +71% $55,778 $34,198 +63% Net Income $9,241 $6,228 +48% $6,799 $9,225 -26% Net Income Per Share: Basic $0.34 $0.30 +13% $0.25 $0.44 -43% Diluted $0.32 $0.29 +10% $0.25 $0.44 -43% RevPAR (Same-Unit) $49.88 $47.09 +5.9% $47.85 $44.98 +6.4% RevPAR (Total) $51.08 $47.31 +8.0% $46.95 $44.18 +6.3%
Key Developments
- Lodgian attains an EBITDA margin of 32.2% in 2Q99, compared to 28.7% in 2Q98 for predecessor Servico.
- Repositioning and renovation strategy succeeding as projects completed in last 12 months quickly ramp-up.
- Year-to-date, ten of Lodgian’s non-core assets have been sold, generating a total of $17 million in cash.
- Recapitalization program totaling $565 million completed in July improves debt, cash, liquidity positions.
“We expect to continue realizing significant internal growth opportunities and achieving above industry-average RevPAR growth trends throughout our portfolio as a result of the successful execution of our repositioning strategy, our very talented and experienced operating team and our equally outstanding sales and marketing organization.”—Robert S. Cole, CEO Lodgian, which owns or manages 134 hotels with more than 25,000 rooms, is a successor to Servico, Inc. as a result of Servico’s merger with Impac Hotel Group, LLC. The merger was completed on December 11, 1998. Because the merger was accounted for under the purchase method of accounting, Lodgian’s results for the second quarter 1998 do not reflect Impac’s contributions.
Three Months Results
For the three months ended June 30, 1999, revenues increased 56 percent to $159.9 million versus $102.4 million in the prior year’s quarter. EBITDA for the second quarter 1999 increased 75 percent to $51.4 million, compared with $29.4 million in the year ago quarter. For the second quarter 1999, Lodgian’s 131 consolidated hotels consisted of 77 stabilized hotels, 33 stabilizing hotels and 21 hotels being repositioned. Total RevPAR, composed of $51.08 on an occupancy rate of 66.9 percent and $76.38 average daily rate (ADR), was as follows:
Total RevPAR Second Quarter Ended June 30, 1999 Hotel Classification Occupancy ADR RevPAR Stabilized 70.2% $75.14 $52.75 Stabilizing 64.1% $75.61 $48.50 Being Repositioned 60.3% $81.89 $49.35 Total 66.9% $76.38 $51.08
The same-unit RevPAR increase of 5.9 percent for the second quarter 1999 consisted of 66.6 percent occupancy at a $74.85 ADR on properties owned and operated for at least 12 months. Same-unit RevPAR for the second quarters of 1998 and 1999 was as follows:
Same-Unit RevPAR Second Quarter Ended June 30, Hotel Classification 1998 1999 %Change Stabilized $51.20 $52.75 +3.0% Stabilizing $40.81 $46.98 +15.1% Being Repositioned $38.05 $40.52 +6.5% Total Same-Unit $47.09 $49.88 +5.9%
Net income for the second quarter 1999 was $9.2 million, a 48 percent increase compared to net income of $6.2 million for the second quarter 1998. Net income per share, on 35.6 million diluted weighted average shares outstanding, was $0.32 in the second quarter 1999, a 10 percent increase versus $0.29 net income per share, on 21.6 million diluted weighted average shares outstanding, in the second quarter 1998. The 1998 results include an extraordinary item that reduced net income per share by $0.05.
Six Months Results
For the six months ended June 30, 1999, revenues increased 60 percent to $295.7 million versus $185.3 million in the first six months of 1998. EBITDA for the first half of 1999 increased 71 percent to $84.3 million from $49.3 million for the comparable 1998 period.
For the first six months of 1999, total RevPAR for Lodgian’s 131 consolidated hotels, composed of $46.95 on an occupancy rate of 62.3 percent and $75.42 ADR, was as follows:
Total RevPAR Six Months Ended June 30, 1999 Hotel Classification Occupancy ADR RevPAR Stabilized 66.3% $74.57 $49.45 Stabilizing 61.2% $75.56 $46.26 Being Repositioned 51.3% $78.50 $40.29 Total 62.3% $75.42 $46.95
Same-unit RevPAR for the first six months of 1999 increased 6.4 percent to $47.85 on an occupancy rate of 64.0 percent and $74.72 ADR. For the first six months of 1998 and 1999, same-unit RevPAR was as follows:
Same-Unit RevPAR Six Months Ended June 30, Hotel Classification 1998 1999 %Change Stabilized $47.79 $49.45 +3.5% Stabilizing $37.97 $45.00 +18.5% Being Repositioned $44.47 $43.47 -2.3% Total Same-Unit $44.98 $47.85 +6.4%
Net income for the first six months of 1999 was $6.8 million, a 26 percent decrease from the $9.2 million reported for the comparable 1998 period. Net income per share for the first six months of 1999 was $0.25 based on 26.9 million weighted average shares outstanding as compared with $0.44 per share on 21.6 million diluted weighted average shares outstanding for the first six months of 1998. The 1998 results include an extraordinary item that reduced net income per share by $0.05.
Lodgian Senior Management Comments
Robert S. Cole, Lodgian’s President and Chief Executive Officer, commented: “We are pleased with our second quarter operating results, including the marked improvement in EBITDA margin over the year ago quarter prior to the Servico-Impac merger which formed Lodgian in December 1998. We are especially pleased to report a 5.9 percent increase in same-unit RevPAR— among the best reported by any public lodging company and nearly triple the 2.0 percent industry average. Moreover, we achieved this increase despite an intensely competitive lodging environment and with a significant portion of our portfolio impacted by ongoing hotel renovations during the quarter.”
Cole indicated that the Company has expended approximately $45 million in 1999 under its development, renovation and repositioning program and remains on schedule to complete the current phase early next year. Upon completion of these capital expenditures, more than 80 percent of the hotels in Lodgian’s portfolio will have been renovated, upbranded or newly developed within the past five years. Cited Cole: “We expect to continue realizing significant internal growth opportunities and achieving above industry-average RevPAR growth trends throughout our portfolio as a result of the successful execution of our repositioning strategy, our very talented and experienced operating team and our equally outstanding sales and marketing organization.” Kenneth R. Posner, Lodgian’s Executive Vice President and Chief Financial Officer, commented: “The completion of our $565 million recapitalization program in July put in place a capital structure that allows the company to execute its business strategy without the pressure of near-term debt maturities. We greatly reduced the number of hotels subject to financing that was restrictive in terms of asset sales and prepayment. Also, less than half of Lodgian’s total indebtedness is currently floating rate debt. Completing a transaction of this magnitude in the current tight market for capital demonstrates the confidence the investment community has in the Company’s prospects and our ability to execute Lodgian’s business plan.”
Benefits of this program include:
- Eliminates the short-term debt maturity created in connection with the December 11, 1998 merger of Impac Hotel Group and Servico that formed Lodgian;
- Creates a capital structure that is simpler and more flexible allowing the Company to execute its business plan and strategy that includes reducing leverage through asset sales, free cash flow and internal growth from the successful execution of its repositioning program; and
- Provides for enhanced liquidity with a $50 million revolving credit facility and capacity for conservative external growth with a development facility.
Posner observed: “This recapitalization program and the proceeds from the sale of non-core assets increased our cash position. In the second quarter, Lodgian sold its 50 percent joint venture interest in six hotels in Europe. In July, the Company sold its only Days Inn and its only Howard Johnson, as well as one parcel of land. These transactions, along with a hotel sale in the first quarter of 1999, provided the Company a total of approximately $17 million in cash. Our cash reserves are earmarked primarily for debt reduction and secondarily for select growth opportunities. The divestitures completed so far this year continue to reduce the number of brands in Lodgian’s portfolio. Also, a number of additional hotels have been selected for upbranding or divestiture through year-end 1999 and in 2000.”
“Our second quarter results continue to demonstrate the success of the Company’s internal growth capability. The EBITDA margin of 32.2% represents a more than three-percentage point margin increase over the second quarter of 1998. This is consistent with the margin improvement reported in the first quarter. Moreover, the Company remains on track to reduce the ratio of total debt to EBITDA. Lodgian is also on pace to improve the ratio of 1999 EBITDA to pro forma cash interest expense. We remain committed to reducing the overall level of debt while taking selective advantage of opportunistic investments,” remarked Posner. Cole concluded: “Overall, our second quarter performance underscores the significant strides we are making toward achieving our long-term vision of becoming the premier owner/operator of hotels in the U.S. and a recognized leader in the entire hospitality industry. In addition to making further improvements in our capital structure, our whole management team remains focused on achieving operational excellence, capturing internal growth, increasing market share and improving profit margins—all targeted toward enhancing shareholder value.”
About Lodgian Lodgian, Inc. owns or manages a portfolio of 134 hotels with more than 25,000 rooms in 35 states and Canada. The hotels are primarily full service, providing food and beverage service, as well as lodging and meeting facilities. Substantially all of Lodgian’s hotels are affiliated with nationally recognized hospitality brands such as Holiday Inn, Crowne Plaza, Marriott, Sheraton, Hilton, Doubletree and Westin.
Lodgian’s common shares are listed on the New York Stock Exchange under the symbol “LOD.” Lodgian is a component of both the Russell 2000® Index, representing small cap stocks, and the Russell 3000® Index, representing the broader market.
Forward-Looking Statements Note: Statements in this press release which are not strictly historical are “forward-looking” statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, which may cause the company’s actual results in the future to differ materially from expected results. These risks include, among others, competition within the lodging and contract service industries; the relationship between supply and demand for hotel rooms; the effects of economic conditions; issues associated with the ongoing integration of the former Servico, Inc. and Impac Hotel Group, LLC; the acquisition and renovation of existing hotels and the development of new hotels; operating risks; the cyclical nature of the lodging industry; risks associated with the dependence on franchisers of the company’s lodging properties; and the availability of capital to finance planned growth, as described in the company’s filings with the Securities and Exchange Commission.
Summary of Second Quarter Financial Highlights (unaudited; dollars in thousands except per share and RevPAR amounts) Three Months Six Months Ended June 30, Ended June 30, 1999 1998 Change 1999 1998 Change Revenue $159,863 $102,388 +56% $295,667 $185,269 +60% EBITDA $51,409 $29,432 +75% $84,266 $49,260 +71% EBITDA Margin 32.2% 28.7% +12% 28.5% 26.6% +7 % Income From Operations $37,165 $21,716 +71% $55,778 $34,198 +63% Net Income $9,241 $6,228 +48% $6,799 $9,225 -26% Net Income Per Share: Basic $0.34 $0.30 +13% $0.25 $0.44 -43% Diluted $0.32 $0.29 +10% $0.25 $0.44 -43% RevPAR (Same-Unit) $49.88 $47.09 +5.9% $47.85 $44.98 +6.4% RevPAR (Total) $51.08 $47.31 +8.0% $46.95 $44.18 +6.3% Total RevPAR Second Quarter Ended June 30, 1999 Hotel Classification Occupancy ADR RevPAR Stabilized 70.2% $75.14 $52.75 Stabilizing 64.1% $75.61 $48.50 Being Repositioned 60.3% $81.89 $49.35 Total 66.9% $76.38 $51.08 Same-Unit RevPAR Second Quarter Ended June 30, Hotel Classification 1998 1999 %Change Stabilized $51.20 $52.75 +3.0% Stabilizing $40.81 $46.98 +15.1% Being Repositioned $38.05 $40.52 +6.5% Total Same-Unit $47.09 $49.88 +5.9% Total RevPAR Six Months Ended June 30, 1999 Hotel Classification Occupancy ADR RevPAR Stabilized 66.3% $74.57 $49.45 Stabilizing 61.2% $75.56 $46.26 Being Repositioned 51.3% $78.50 $40.29 Total 62.3% $75.42 $46.95 Same-Unit RevPAR Six Months Ended June 30, Hotel Classification 1998 1999 %Change Stabilized $47.79 $49.45 +3.5% Stabilizing $37.97 $45.00 +18.5% Being Repositioned $44.47 $43.47 -2.3% Total Same-Unit $44.98 $47.85 +6.4% Contact: Ken Posner Chief Financial Officer 404-365-4469 [email protected], or Ginny Gaines Director of Corp. Comm. [email protected] 404-365-3805 both of Lodgian, Inc http://www.lodgian.com Also See: Lodgian Sells Interest in European Hotels to Krasnapolsky Hotels & Restaurants N.V. / June 1999 Lodgian, Inc. (Successor to Servico) Reports RevPAR of $46.36, A 4.1 % Increase Over Previous Year / March 1999