Lodgian Reports 2003 Results
ATLANTA--Lodgian, Inc.
Upon emergence from Chapter 11, the company adopted fresh start reporting in accordance with generally accepted accounting principles (GAAP). As a result, all assets and liabilities were restated to reflect their estimated fair values. The consolidated financial statements of the new reporting entity ("Lodgian" or "Successor"), representing the period subsequent to November 22, 2002, are not comparable to those of the reporting entity prior to the company's emergence from Chapter 11 (the "Predecessor"), representing the period including and prior to November 22, 2002. The term "2002 Combined Period" is used to describe the periods encompassing both the Predecessor and Successor periods during 2002.
2003 Results
For the fourth quarter of 2003, revenues from continuing operations were $73.7 million, compared to $74.9 million in the comparable quarter of the 2002 Combined Period. RevPAR was down less than 1 percent during the quarter, and gross profit margins were flat with last year. During the quarter, there was a net loss from continuing operations of $16.5 million after an impairment charge of $10.2 million, dividends on preferred stock of $4.1 million, and post-emergence Chapter 11 expenses included in general, administrative and other expenses of $0.6 million.
For the year ended December 31, 2003, revenues from continuing operations were $311.4 million, compared with $324.6 million from continuing operations in the 2002 Combined Period. The lower revenues resulted from a decline in occupancy, room rates and catering revenues that reflected a general weakness in travel demand, business disruptions associated with renovations at a number of the company's hotels, brand changes and declining results at hotels in need of renovation.
The loss from continuing operations before income taxes, reorganization items and minority interest in 2003 was $26.8 million (including a $12.7 million impairment charge, $4.6 million for post-emergence Chapter 11 expenses included in general, administrative and other expenses, and $8.1 million of preferred stock dividends reported as interest expense), compared with a loss of $1.2 million for the 2002 Combined Period. Lodgian reported a $4.6 million net loss from discontinued operations in 2003, compared with a $7.2 million loss from discontinued operations for the 2002 Combined Period.
The 2003 $4.6 million net loss from discontinued operations included a $5.4 million impairment charge recorded in connection with the valuation of assets held for sale.
For assets held for sale, as well as for assets not held for sale but having projected future cash flows that are less than the property's carrying value, impairment charges represent the difference between the carrying values of the properties and their anticipated net realizable values.
For 2003, Lodgian reported a net loss attributable to common stock of $39.3 million, or $5.61 per share, after preferred stock dividends of $15.7 million, an impairment charge of $12.7 million, a loss from discontinued operations of $4.6 million and reorganization expenses of $1.4 million. In addition, general, administrative and other expenses included post-emergence Chapter 11 expenses of $4.6 million. Net income reported for the 2002 Combined Period was $1.5 million. Common shares outstanding were 7.0 million for Lodgian and 28.5 million for the Predecessor Company.
In 2003, earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, reconciled to net (loss) income in the attached schedules, were $51.0 million, up from $43.8 million in 2002.
"2003 was a transitional year for us," said W. Thomas Parrington, president and chief executive officer. "Despite a very difficult operating environment, a weak economy and uncertainty surrounding the war in Iraq, we were able to successfully complete our financial restructuring, transition to a strong new management team, and implement an asset improvement program that will allow us to accelerate repayment of our debt and fund a renovation program at our continuing hotels. As part of that plan, we spent $30.8 million on capital expenditures at our continuing hotels, and we sold five hotels and an office building in 2003 and the first two months of 2004, using $14.6 million of the net proceeds to reduce debt. We have targeted for sale an additional 14 non-strategic hotels in 2004, primarily full-service properties in small markets.
"Our remaining properties have long-term growth potential and are being upgraded and positioned to take advantage of the forecasted rebound in travel and the lodging industry," he added. "As the business climate improves and our portfolio strengthens, we also will consider buying hotels in strategic partnership arrangements. Our realigned portfolio is more focused on larger, mid-market full-service and premium limited-service properties in primary and selected secondary markets."
Parrington noted that in 2004, the company planned to concentrate on three key areas. "In addition to our major initiative to refurbish and upgrade our hotels, we plan to further strengthen our balance sheet and opportunistically acquire properties that are consistent with our modified portfolio profile."
Operating Results
Revenue per available room (RevPAR) for the company's 77 consolidated continuing operations hotels declined 3.4 percent for the 12 months ended December 31, 2003, reflecting a 0.8 percent decrease in average daily rate (ADR) and a 2.6 percent decline in occupancy. RevPAR for the company's 58 stabilized hotels also declined by 3.4 percent, reflecting a 0.9 percent decrease in ADR and a 2.5 percent decrease in occupancy. Stabilized hotels include those hotels which were not held for sale as of the end of the quarter, were not undergoing major renovation during 2002 and 2003, and were not subject to a franchise change during 2002 or 2003. As a result, stabilized hotels included a higher proportion of hotels in need of renovation than the company's continuing operations hotels taken as a whole. "The first half of the year was particularly difficult," Parrington said. "In the second half, we were essentially flat with the previous year, with noticeable improvement in December, which has continued through February."
General, administrative and other expenses rose 4.3 percent to $137.9 million in 2003, compared to $132.2 million for the 2002 Combined Period. The higher 2003 expenses reflect increased costs for insurance, utilities, repairs and maintenance, aggregating $3.7 million, and post-emergence Chapter 11 expenses of $4.6 million. Interest expense for Lodgian in 2003 was $28.6 million (excluding the preferred dividends now classified as interest expense), compared to $28.3 million for the 2002 Combined Period. The increase was due primarily to the amortization of financing fees and the interest expense associated with new indebtedness that replaced debt on which the company paid no interest in 2002, as approved by the Bankruptcy Court.
Management Changes
Following the completion of Lodgian's financial restructuring in May, the company named W. Thomas Parrington, a 30-year hospitality veteran and former CEO of Interstate Hotels Co., president and CEO in July. Parrington, a member of Lodgian's board of directors, had been serving as interim chief executive officer. Manuel ("Hank") Artime, the company's former chief accounting officer, was promoted to executive vice president and chief financial officer in October.
Hotel Sales
As of March 1, 2004, Lodgian held 14 hotels and three land parcels for sale, with a goal of completing those sales by year-end 2004. The financial impact of any asset sales and related reduction of debt will be reported in the company's financial statements for the periods in which any such transactions occur.
Outlook
"With each passing month, we are becoming increasingly confident that the hotel industry has turned the corner and is beginning to emerge from one of the toughest periods in our history," Parrington said. "Business travel trends finally are beginning to move in the right direction. RevPAR stabilized in the fourth quarter, including slight growth in December, a trend that has continued and further improved through the first two months of 2004. There are still some soft spots, such as rising energy and health-related costs, that will continue to pressure our margins, and the geopolitical situation remains uncertain, but we are more optimistic now than we have been in the last several years.
"Our first priority is to continue investing in our continuing operations hotels to take advantage of the economic recovery," Parrington concluded. "We want to complete our asset disposition program this year, reduce our debt and improve our flexibility and liquidity. We are optimistic about the outlook for 2004 and beyond and believe these strategies will position Lodgian to better respond to opportunities and challenges in the future."
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 release.
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.
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------
December December
31, 2003 31, 2002
---------
(In thousands,
except per share
data)
ASSETS
Current assets:
Cash and cash equivalents $ 10,897 $ 10,875
Cash, restricted 7,084 19,384
Accounts receivable (net of allowances: 2003
$689; 2002 - $1,594) 8,169 10,681
Inventories 5,609 7,197
Prepaid expenses and other current assets 17,068 15,118
Assets held for sale 68,567
--------
Total current assets 117,394 63,255
Property and equipment, net 563,818 664,565
Deposits for capital expenditures 15,782 22,349
Other assets, net 12,180 11,995
--------
$709,174 $762,164
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities not subject to compromise
Current liabilities:
Accounts payable $ 7,131 $ 12,380
Other accrued liabilities 31,432 41,297
Advance deposits 1,882 1,786
Current portion of long-term debt 16,563 14,550
Liabilities related to assets held for sale 57,948
--------
Total current liabilities 114,956 70,013
Long-term debt:
12.25% Cumulative preferred shares subject to
mandatory redemption 142,177
Long-term debt - other 409,115 389,752
--------
Total long-term debt 551,292 389,752
Liabilities subject to compromise - 93,816
--------
Total liabilities 666,248 553,581
Minority interests 2,320 3,616
Commitments and contingencies
12.25% Cumulative preferred shares subject to
mandatory redemption - 126,510
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 shares
authorized; 7,000,774 and 7,000,000 issued and
outstanding at December 31, 2003 and December
31, 2002, respectively 70 70
Additional paid-in capital 89,827 89,223
Unearned stock compensation (508)
Accumulated deficit (50,107) (10,836)
Accumulated other comprehensive income 1,324
--------
Total stockholders' equity 40,606 78,457
--------
$709,174 $762,164
======== ========
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Successor Predecessor
-------------------
November 23, January 1,
2002 to 2002 to
December November
2003 31, 2002 22, 2002 2001
-------- --------- -----------
Revenues:
Rooms $229,519 $ 16,902 $220,898 $ 257,100
Food and beverage 70,791 7,415 66,709 79,554
Other 11,104 989 11,660 14,418
-------- -------- --------
311,414 25,306 299,267 351,072
-------- -------- --------
Operating expenses:
Direct:
Rooms 65,814 6,246 59,378 69,257
Food and beverage 48,686 5,447 46,822 55,459
Other 7,970 880 7,836 8,540
-------- -------- --------
122,470 12,573 114,036 133,256
-------- -------- --------
188,944 12,733 185,231 217,816
General, administrative
and other 137,888 13,982 118,212 154,320
Depreciation and
amortization 29,761 3,113 40,523 46,065
Impairment of long-lived
assets 12,667 - - 20,503
-------- -------- --------
Other operating
expenses 180,316 17,095 158,735 220,888
-------- -------- --------
8,628 (4,362) 26,496 (3,072)
Other income (expenses):
Interest income and
other 807 14 4,940 709
Interest expense:
Preferred stock
dividend (8,092) - -
Interest expense
(contractual interest:
$29.8 million, 3.0
million, $53.5 million
and $76.1 million for
the Successor periods
ended December 31, 2003
and December 31, 2002,
the Predecessor
periods ended November
22, 2002 and the year
ended December 31,
2001, respectively) (28,581) (2,512) (25,761) (71,817)
Gain on asset
dispositions 445 - - 23,975
-------- -------- --------
(Loss) income before
income taxes,
reorganization items and
minority interests (26,793) (6,860) 5,675 (50,205)
Reorganization items (1,397) - 11,038 (21,672)
-------- -------- --------
(Loss) income before
income taxes and
minority interest (28,190) (6,860) 16,713 (71,877)
Minority interests:
Preferred redeemable
securities (contractual
interest: $12.7 million
and $13.2 million for
the Predecessor period
ended November 22, 2002
and the year ended
December 31, 2001) - - - (12,869)
Other 1,294 147 126 38
-------- -------- --------
(Loss) income before
income taxes
continuing operations (26,896) (6,713) 16,839 (84,708)
(Provision) benefit for
income taxes
continuing operations (178) (32) 160 (2,829)
-------- -------- --------
(Loss) income
continuing operations (27,074) (6,745) 16,999 (87,537)
-------- -------- --------
Discontinued operations:
Loss from discontinued
operations before
income taxes (4,603) (2,581) (5,833) (55,227)
Income tax benefit - - 1,200
-------- -------- --------
Loss from discontinued
operations (4,603) (2,581) (4,633) (55,227)
-------- -------- --------
Net (loss) income (31,677) (9,326) 12,366 (142,764)
Preferred stock dividend (7,594) (1,510) -
-------- -------- --------
Net (loss) income
attributable to common
stock $(39,271) $(10,836) $ 12,366 $(142,764)
======== ======== ======== =========
Basic and diluted loss
per common share:
Net (loss) income
attributable to common
stock $ (5.61) $ (1.55) $ 0.43 $ (5.04)
======== ======== ======== =========
Upon emergence from Chapter 11, the Company adopted fresh start
reporting. As a result, all assets and liabilities were restated
to reflect their 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").
LODGIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Successor Predecessor
--------------------
November 23, January 1,
2002 to 2002 to
December November
2003 31, 2002 22, 2002 2001
-------- --------- -----------
Operating activities:
Net (loss) income $(31,677) $ (9,326) $ 12,366 $(142,764)
Add: loss from
discontinued
operations 4,603 2,581 4,633 55,227
-------- -------- ---------
(Loss) income
continuing
operations (27,074) (6,745) 16,999 (87,537)
Adjustments to reconcile
(loss) income from
continuing operations
to net cash provided
by (used in )
operating activities:
Depreciation and
amortization 29,761 3,113 40,523 46,065
Impairment of
long-lived assets 12,667 - 193,202 20,503
Gain on
extinguishment of
debt - - (226,929)
Fresh start
adjustments
other - - (3,426)
Amortization of
unearned stock
compensation 92 - -
Preferred stock
dividends 8,092 - -
Minority interests (1,296) (147) (126) 12,831
Gain on asset
dispositions (445) - - (23,975)
Write-off and
amortization of
deferred financing
costs 3,884 167 56 25,972
Other 139 (276) 429 542
Changes in
operating assets
and liabilities:
Accounts receivable,
net of allowances 554 3,195 (1,708) 7,029
Inventories (241) 105 (187) 497
Prepaid expenses,
other assets
and restricted
cash 8,908 14,236 (38,752) (1,607)
Accounts payable (3,775) (1,842) 4,718 978
Other accrued
liabilities (1,484) (10,727) 12,058 (3,170)
Related party
balances 4,556 (1,493) (2,421) 5,974
Advance deposits 440 (187) 191 (95)
-------- -------- ---------
Net cash provided by
(used in) operating
activities of
continuing operations 34,778 (601) (5,373) 4,007
-------- -------- ---------
Net cash (used in)
provided by operating
activities of
discontinued
operations (166) 17 (259) (1,440)
-------- -------- ---------
Investing activities:
Capital improvements (30,756) (4,329) (19,014) (23,360)
Proceeds from sale of
assets, net of
related selling
costs 802 - - 67,910
Withdrawals
(deposits) for
capital expenditures 7,219 (7,651) 1,501 (1,221)
Other (192) (1,010) (90)
-------- -------- ---------
Net cash used in
investing activities (22,927) (12,990) (17,603) 43,329
-------- -------- ---------
Financing activities:
Proceeds from
issuance of long
term debt 80,000 - 309,098
Proceeds from
working capital
revolver 2,000 - - 21,000
Proceeds from
issuance of common
stock 114 - -
Principal payments
on long-term debt (87,059) (1,221) (266,601) (58,293)
Principal payments
on working capital
revolver (2,000) (15,000)
Payments of deferred
loan costs (4,839) - (7,599) (598)
-------- -------- ---------
Net cash (used in)
provided by financing
activities (11,784) (1,221) 34,898 (52,891)
-------- -------- ---------
Effect of exchange
rate changes on cash 121 - -
-------- -------- ---------
Net (decrease)
increase in cash and
cash equivalents 22 (14,795) 11,663 (6,995)
Cash and cash
equivalents at
beginning of period 10,875 25,670 14,007 21,002
-------- -------- ---------
$ 10,897 $ 10,875 $ 25,670 $ 14,007
======== ======== ========= =========
Supplemental cash flow
information:
Cash paid during the
period for:
Interest, net of the
amounts capitalized
shown below $ 28,660 $ 1,589 $ 31,132 $ 73,131
Interest capitalized 1,181 149 365 861
Income taxes, net of
refunds 237 (302) 120
Supplemental
disclosure of non
cash investing and
financing activities:
Issuance of preferred
stock on emergence
from Chapter 11 - - 125,000
Issuance of other
securities on
emergence from
Chapter 11 - - 89,293
Net non-cash debt
increase 4,678 16 137
Operating cash
receipts and payments
resulting from
Chapter 11
proceedings:
Professional fees
paid (455) - (11,184) (3,772)
Loan extension fee (1,500) - -
Other reorganization
payments $ (90) $ - $ (908) $ (24)
Upon emergence from Chapter 11, the Company adopted fresh start
reporting. As a result, all assets and liabilities were restated to
reflect their 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").
(In thousands)
2002
Combined
2003 period 2001
-------- ---------
Continuing operations:
(Loss) income - continuing operations $(27,074) $ 10,254 $(87,537)
Depreciation and amortization 29,761 43,636 46,065
Impairment of long-lived asset 12,667 - 20,503
Fresh start adjustments - (33,318)
Interest income and other (807) (4,954) (709)
Interest expense 28,581 28,273 71,817
Preferred stock dividends 8,092 -
(Loss) gain on asset dispositions (445) - (23,975)
Interest on the Preferred redeemable
securities (CRESTS) - - 12,869
(Provision) benefit for income taxes
continuing operations 178 (128) 2,829
-------- --------
EBITDA $ 50,953 $ 43,763 $ 41,862
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