Operations of $11.8 million Compared to $0.6 million
Loss for the 2nd Qtr of 2003
Plans to Reduce 87-hotel Portfolio by Nine Hotels
|ATLANTA - Aug. 9, 2004 -- Lodgian, Inc. (AMEX: LGN), one of the nation's
largest independent owners and operators of full-service hotels, reported
results for the second quarter and six months ended June 30, 2004.
Second quarter 2004 room revenues from continuing operations increased 5.4 percent to $64.3 million, and total revenues from continuing operations rose 4.5 percent to $86.6 million. During the quarter, eight hotels were under renovation, causing a displacement of $0.5 million of rooms revenue.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for the 2004 second quarter, reconciled to loss-continuing operations in the attached schedules, increased 36.5 percent to $20.8 million, including $0.1 million of bankruptcy-related charges, from $15.2 million for the same period last year, including $1.8 million of bankruptcy-related charges. Adjusting EBITDA to exclude bankruptcy-related charges would result in an adjusted EBITDA for the second quarter 2004 and 2003 of $20.9 million and $17.0 million, respectively.
Loss from continuing operations was $11.8 million, including $13.7 million of costs related to Lodgian's recent debt refinancing and preferred stock redemption and $4.2 million of preferred stock dividends reported as interest expense, compared to a $0.6 million loss for the second quarter of 2003, during which the preferred stock dividends were not reported as interest expense.
Income from discontinued operations was $4.6 million, including a $4.2 million gain on sale of assets, compared to a $1.8 million loss in the second quarter of 2003. Lodgian's net loss attributable to common stock for the second quarter of 2004 was $7.2 million, or $(2.04) per share. This compares to a net loss attributable to common stock of $6.3 million, or $(2.68) per share for the second quarter of 2003.
"We achieved several important milestones during the second quarter, including $370 million of new debt financing to retire existing debt, an 18.3 million share common stock offering and the exchange of 1,483,558 shares of preferred stock for 3,941,115 shares of common stock," said Tom Parrington, president and chief executive officer. "In July, we used a portion of the offering proceeds to redeem the remaining shares of preferred stock. The balance of the proceeds will be used to fund the remainder of our renovation program and pursue our planned growth strategy. We now have the strength, stability and flexibility to take advantage of the growth opportunities ahead."
Lodgian posted substantially improved operating results in the 2004 second quarter. "Our revenue per available room (RevPAR) from continuing operations rose 5.4 percent in the 2004 second quarter. Of particular note is that the RevPAR improvement was driven more by room rate, which rose 3.8 percent, than by occupancy, up 1.6 percent--another positive sign that the hotel economy is improving. Higher rate also translated into better adjusted EBITDA margins for us--24.2 percent versus 20.6 percent in last year's second quarter."
Parrington noted that the company spent $7.9 million on capital expenditures during the 2004 second quarter, bringing to $12.9 million the total amount invested through the 2004 first half. "Short-term, these renovations will have a negative impact on our hotels. In the 2004 second quarter, for example, we tracked $0.5 million of displaced revenues directly attributable to the renovation program. However, we expect to see significant improvements in revenues over the long term as these hotels complete their renovation programs and become much more competitive in their respective markets."
Lodgian expects to invest approximately $43 million in capital improvements during 2004, with an additional $11 million that will be spent in the first quarter 2005 to complete the projects started in 2004. These improvements, funded with proceeds from its recent common stock offering and with cash reserves, will substantially complete all of Lodgian's deferred renovations.
During the quarter, the company sold three hotels for net proceeds of approximately $18.8 million as part of its previously announced plan to sell non-strategic assets. To date since October 2003, the company has sold a total of 10 hotels and an office building and used the proceeds to pay down approximately $38.7 million of debt. "We have an additional nine hotels and three land parcels earmarked for sale," Parrington said. "Our objective remains to complete the disposition program by year-end 2004."
Parrington said the company had $54.0 million in cash on hand at June 30, 2004 for operations and future growth plans. "Short-term, we are focusing primarily on our renovation program and internal growth. During this interim period, we expect to be more opportunistic than aggressive in our acquisitions. Our goal is to buy quality assets that have long-term upside potential."
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.
During the quarter, the company closed on the $370 million refinance secured by 64 of its hotels. The company obtained a $110 million floating rate facility, priced at LIBOR plus 340 basis points and secured by 29 hotels, and a five-year, fixed rate, $260 million facility carrying an interest rate of 6.58 percent, secured by 35 hotels. The floating rate facility will mature in two years, with three optional one year extensions. As a result of the refinancing, the company reduced its percentage of floating rate debt from 80 percent to 24 percent, with a weighted average interest rate for all of its debt of 6.6 percent at June 30, 2004.
In late June, the company completed a public offering of 18.3 million shares of its common stock at $10.50 per share. Net proceeds of $176.2 million will be used to redeem Lodgian's Series A Preferred stock in July 2004; fund capital expenditures; fund a reserve account pursuant to requirements in the company's debt financing; for general corporate purposes and the company's growth strategy. In addition, certain significant holders of Lodgian's Series A Preferred stock--Oaktree Capital Management, Blackstone Real Estate Advisors and Merrill Lynch, Pierce, Fenner & Smith Incorporated--exchanged shares of their outstanding Series A Preferred stock, valued at approximately $41.4 million, for approximately 3.9 million shares of common stock at $10.50 per share. Total number of common shares outstanding following the offering and preferred stock exchange is 24.6 million.
"With this refinancing, we have completed the restructuring of our balance sheet and attained a debt-to-total capital ratio, excluding debt on assets held for sale, of 60.4 percent--a level that we are comfortable with," he said. "By redeeming our preferred stock, which carried a coupon rate of 12.25 percent, we substantially reduced our fixed charges. We now have a much stronger balance sheet and greater flexibility to respond to opportunities as the hotel industry continues its recovery."
Six Months Results
For the first six months, room revenues from continuing operations increased 6.1 percent to $121.9 million, and total revenues from continuing operations rose 4.6 percent to $163.4 million. EBITDA rose to $33.7 million, including $0.3 million of bankruptcy-related charges, up from $23.1 million, including $5.2 million in bankruptcy-related charges. Loss from continuing operations was $18.2 million, including $13.7 million of costs related to Lodgian's debt refinancing and preferred stock redemption and $8.5 million of preferred stock dividends reported as interest expense, compared to a loss of $6.4 million for the first six months of 2003.
During the period, 11 hotels were under renovation, causing a displacement of $0.9 million of room revenues.
"We are increasingly confident about the industry recovery and particularly pleased to see improving business transient demand as the corporate sector gains strength," Parrington said. "For 2004, we will remain focused on internal growth and enhancing the quality of our hotel portfolio through renovations and reflaggings. While we are not yet focused on acquisitions, we will evaluate appropriate candidates as they come along."
For the 2004 third quarter, the company expects RevPAR growth from continuing operations in a range of 2 percent to 4 percent, net of displacement impact of approximately 2 percent. Estimated EBITDA from continuing operations for 2004, excluding anticipated non-recurring items, special charges and reorganization expenses, is projected in a range of $63 million to $66 million.
Non-GAAP Financial Measures
The non-GAAP financial measures included in this press release are reconciled
to the comparable GAAP measures in the schedules attached to this press
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 87 hotels with 16,366 rooms located in 30 states and Canada. Of the company's 87-hotel portfolio, 74 are under the InterContinental Hotels Group (Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express) and Marriott brands (Courtyard by Marriott, Fairfield Inn and Residence Inns), and 10 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.
This press release includes forward-looking statements related to Lodgian's operations that are based on management's current expectations, estimates and projections.
|Also See:||Lodgian, Inc. Sells the 261-room Holiday Inn Grand Island (Buffalo/Niagara), New York to American Hospitality Group, LLC for $3.35 million / July 2004|
|Lodgian's 179-room Mayfair House Hotel in Miami Sold for $14.7 million / May 2004|
|Lodgian Sells Four Hotels in Separate Transactions for an Aggregate Price of $11.3 million / April 2004|