Candlewood Hotel Company Reports Fourth Quarter and Full Year 2001 Results
WICHITA, Kan. -- Candlewood Hotel Company, Inc.
"Although we are not happy about fourth quarter results, we are pleased with our operating results for the fourth quarter when compared to our key competitors and the industry overall. As I have said from our founding in 1995, a quality product coupled with a strong direct sales force provide a competitive advantage during slow economic times," said Jack P. DeBoer chairman and chief executive officer. "Our fourth quarter occupancy of 70.7 percent is an increase of 60 basis points over the fourth quarter of 2000 and is the second highest among our competitors."
During the fourth quarter, Candlewood's revenue growth continued to be impacted by the weak economy. In addition, the seasonality of the decreased business traveler demand over the holiday period generally has a negative impact on the company's revenue per available room (RevPAR) during the fourth quarter. The effects of this softer demand were offset by Candlewood's increased market share of the extended stay segment, due in part to its direct sales force efforts. The overall lodging industry experienced an estimated RevPAR decline of 15 percent, compared to a 6.2 percent RevPAR decline at Candlewood.
"While encouraged by our increased market share, our primary goal for 2002 is to grow absolute RevPAR as the economy begins to recover," continued DeBoer. "We are seeing positive macro-economic reports, with lower factory inventories, decreasing unemployment figures, and a modest increase in consumer confidence. Fundamentally, we believe the lodging industry is in a good position to move forward, with historically low supply growth of 1.8 percent forecasted for 2002, in combination with reduced operating expense levels. In addition, the extended stay segment has experienced the sharpest decline in hotel development activity - a 75 percent reduction of new supply from peak levels in the third quarter of 1998. We are beginning to see RevPAR improvements within our portfolio."
The combined results of the Candlewood hotels owned, leased and managed by Candlewood for the fourth quarter of 2001 were as follows: RevPAR of $38.84, average daily rate (ADR) of $54.90 and average occupancy of 70.7 percent. For the fourth quarter of 2000, revenue results were as follows: RevPAR was $41.39, ADR was $59.05 and average occupancy was 70.1 percent.
Total consolidated hotel-operating revenues for the fourth quarter of 2001 were $29.2 million, compared to $31.2 million for fourth quarter of 2000. The decrease in hotel operating revenues is primarily attributable to a decrease in average daily rate. Candlewood had a loss before preferred dividends of $4.8 million in the fourth quarter 2001, compared to $0.7 million in the fourth quarter 2000. After preferred dividends, Candlewood had a loss of $0.76 per share for the quarter ended December 31, 2001 compared to a loss of $0.30 per share for the quarter ended December 31, 2000.
During the fourth quarter of 2001, Candlewood opened one Candlewood Suites franchise hotel in Colorado Springs, Colorado. As of December 31, 2001, Candlewood had 105 hotels open including 27 franchised hotels and 78 hotels owned, leased or managed by Candlewood. At December 31, 2000, Candlewood had 91 hotels open; including 17 franchised hotels and 74 hotels owned, leased or managed by Candlewood.
The combined results for the Candlewood hotels owned, leased and managed by Candlewood for the year ended December 31, 2001 were as follows: RevPAR of $43.32, ADR of $59.36 and average occupancy of 73.0 percent. For the year ended December 31, 2000, revenue results were as follows: RevPAR was $44.00, ADR was $58.25 and average occupancy was 75.5 percent.
Total consolidated hotel-operating revenues for the year ended December 31, 2001 were down slightly to $130.1 million from $131.2 million the prior year. The decrease in 2001 hotel operating revenues compared to 2000 is primarily attributable to the decline in business travel as a result of the softer U.S. economy and to a lesser extent, the impact of the events of September 11. The loss before preferred dividends for the year 2001 was $5.1 million, compared to income before preferred dividends of $5.7 million in the year 2000. For the year ended December 31, 2001, Candlewood had a net loss after dividends of $1.46 per share compared to a net loss after preferred dividends in 2000 of $0.26 per share.
DeBoer commented, "2001 was a challenging year in the lodging industry, however, we laid the groundwork for future growth. We implemented a program with
Commenting on Candlewood's financial position, Warren D. Fix, Chief Financial Officer, said, "The primary reason for the decline in RevPAR that we experienced was a decrease in ADR due to the reduction in short-term higher- ADR business travel. In fact, our occupancy rates improved in the fourth quarter over the same period in 2000. The majority of our variable hotel expenses - labor and utilities - vary as a function of occupancy. The primary contributors to our net loss in 2001 were the decrease in same store RevPAR, increased resources spent on sales and marketing, and significant increases in insurance and utility costs. We implemented a number of cost reducing initiatives during this difficult operating year, including refinements to our labor model. As previously announced, during the fourth quarter we completed a headcount reduction, streamlining communication between senior management and the hotel staff. This has facilitated a more direct reporting system and has met with positive feedback."
"As we stated in the third quarter, our focus was to conserve cash and extend or modify our short-term debt. We reached an agreement with Hilton to extend the maturity on the debt due in November 2001 to June 2002," Fix continued. "We also made the decision to suspend the preferred stock dividends for November 2001 and February 2002. We ended the year 2001 with a cash balance of $18.0 million compared to $21.8 million at December 31, 2000. For 2002, we will continue to conserve cash and explore refinancing opportunities for our hotels, including the potential sale and leaseback of properties."
"In striving to attain our goal of absolute RevPAR growth in 2002, our primary focus will be on greater core customer retention, as well as more effective and efficient sales calls," DeBoer commented. "Industry specialists see increased demand by the corporate business traveler as the catalyst to a lodging industry rebound. The fact that our business model cultivates this type of traveler, combined with recent corporate expense reductions for travel, position Candlewood to capture additional market share when the recovery occurs."
Candlewood Hotel Company, headquartered in Wichita, Kansas, owns, operates and franchises Candlewood Suites and Cambridge Suites -- hotel properties that offer high-quality accommodations for all guests, while catering to mid-market and upscale business and personal travelers seeking multiple night stays. Candlewood Hotel Company was founded in late 1995 by Chairman and CEO Jack DeBoer - founder of Residence Inn.
The financial results may not be indicative of results for future periods. The matters in this press release include "forward looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are qualified by cautionary statements contained herein and in Candlewood Hotel Corporation filings with the Securities and Exchange Commission. Factors which may affect our results include: the impact of terrorist attacks or general economic recession on our results from operations, the inability to extend or modify the terms of our outstanding indebtedness, the inability to secure additional market share due to competition and other factors, the inability to improve RevPAR through the management of occupancy levels and pricing, the risk that overbuilding in the hospitality industry will adversely affect occupancy levels and pricing, our ability to lower operating expenses and gain market share through sales efforts, operating performance of our hotels and general economic conditions, the availability of financing to franchisees on acceptable terms, the market acceptance of the Candlewood brand, the ability to attract and retain franchisees, the risk that signed franchise agreements may not result in the construction or opening of hotels, the ability to attract and retain quality personnel and the risk that openings may be delayed. Actual results may differ materially from management's expectations.
The forward-looking statements made in this release reflect the opinion of management as of the date of the release. Please be advised that subsequent developments are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update this press release or any statement made herein prior to our next quarterly earnings release.
CANDLEWOOD HOTEL COMPANY, INC.
FOURTH QUARTER OPERATING RESULTS
(Unaudited) (In thousands, except share and per share data)
For the three
months ended For the year ended
December 31, December 31,
2001 2000 2001 2000
Revenues:
Hotel operations $29,046 $30,067 $127,092 $127,771
Other income 189 1,170 3,031 3,458
Total hotel operating revenues 29,235 31,237 130,123 131,229
Proceeds from sales of hotels, net
of deferred gain of $64 and $0,
respectively - - 28,850
Deferred gain recognition on sales
of hotels 231 596 1,280 2,183
Total revenues 29,466 31,833 160,253 133,412
Operating costs and expenses:
Hotel operating expenses 18,691 16,965 74,451 67,993
Corporate operating expenses 2,278 1,788 7,162 6,392
Rent expense on leased hotels 7,055 6,204 26,523 25,056
Hotel opening costs - 122 230 279
Depreciation and amortization 2,808 2,701 11,641 10,578
Total operating costs and expenses 30,832 27,780 120,007 110,298
Costs of hotels sold - - 29,064
(1,366) 4,053 11,182 23,114
Interest income 161 316 761 1,150
Interest expense (3,614) (5,034) (17,081) (18,577)
Income (loss) before preferred
dividends (4,819) (665) (5,138) 5,687
Preferred stock dividends (2,023) (2,017) (8,025) (8,025)
Net loss available to common
stockholders (6,842) (2,682) (13,163) (2,338)
Per share data:
Net income (loss) per share of
common stock - basic and diluted $(0.76) $(0.30) $(1.46) $(0.26)
Average weighted shares of common
stock outstanding 9,025 9,025 9,025 9,025
CANDLEWOOD HOTEL COMPANY, INC.
For the three
months ended For the year ended
December 31, December 31,
2001 2000 2001 2000
Hotel statistics (Candlewood owned,
leased or managed)
# of Hotels 77 73 77 73
Average occupancy % 70.7% 70.1% 73.0% 75.5%
Average daily rate $54.90 $59.05 $59.36 $58.25
Revenue per available room $38.84 $41.39 $43.32 $44.00
Growth -6.2% -1.5%
Hotel statistics - comparable hotels
(owned, leased or managed open as
of beginning of period)
# of Hotels 72 72 66 66
Average occupancy % 70.6% 70.5% 73.4% 76.0%
Average daily rate $52.63 $58.85 $56.21 $56.87
Revenue per available room $37.17 $41.48 $41.27 $43.20
Growth -10.4% -4.5%
As of December 31,
2001 2000
Open Hotels
Owned 31 32
Leased 36 34
Managed (A) 2 2
Joint Venture 9 6
Franchised 27 17
Total Open 105 91
Under Construction
Owned - 1
Leased -
Managed -
Joint Venture - 3
Franchised 3 7
Total Under Construction 3 11
Total Hotels 108 102
Open Rooms
Owned 3,783 3,971
Leased 4,294 3,893
Managed (A) 191 179
Joint Venture 1,159 785
Franchised 2,759 1,907
Total Open 12,186 10,735
Under Construction Rooms
Owned - 214
Leased -
Managed -
Joint Venture - 373
Franchised 270 666
Total Under Construction 270 1,253
Total Rooms 12,456 11,988
Signed Franchise Agreements 26 27
(A) Includes two managed hotels not under the Candlewood brand.