Lodgian Reports 2009 Second Quarter Results
ATLANTA – Lodgian, Inc. (NYSE: LGN) , one of the nation's largest independent hotel owners and operators, today reported results for the 2009 second quarter ended June 30, 2009.
The company will host a 10 a.m. Eastern time conference call today to discuss results for the 2009 second quarter.
The "36 continuing operations hotels" comprise those Lodgian properties that were not held for sale as of June 30, 2009. Lists of properties, both continuing operations and held for sale, are attached to this press release.
Second Quarter 2009 Highlights
Obtained maturity extensions on $120 million of mortgage debt which matured July 1, 2009, with the terms of the extensions ranging from 90 days to three years.
Statistics for 36 Continuing Operations Hotels
2Q 2Q % Change
2009* 2008* --------
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Rooms revenue $40,238 $50,185 -19.8%
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RevPAR $65.12 $81.08 -19.7%
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Total revenue $54,863 $67,902 -19.2%
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(Loss)/income from continuing
operations $(5,348) $284 n/m
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EBITDA $7,362 $12,950 -43.2%
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Adjusted EBITDA (defined below) $11,193 $18,530 -39.6%
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Consolidated Financial Results
(Loss)/income from continuing
operations $(5,348) $284 n/m
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(Loss)/income from discontinued
operations $(1,969) $6,083 n/m
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Net (loss)/income attributable to
common stock $(6,975) $6,367 n/m
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Net (loss)/income per share
attributable to common stock $(0.33) $0.29 n/m
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*Dollars in thousands except for RevPAR and per share data.
In this press release, Lodgian uses the term "Adjusted EBITDA" to mean earnings before interest, taxes, depreciation and amortization ("EBITDA"), but excluding the effects of the following charges: impairment losses; restructuring expenses; gains/losses on debt extinguishment; and casualty (gains)/losses, net, for properties damaged by events such as hurricane, fire or flood. A reconciliation of Adjusted EBITDA to (loss)/income from continuing operations is included in the tables that accompany this press release.
Second Quarter 2009 Results
Second quarter 2009 total revenue for continuing operations declined 19.2 percent to $54.9 million, compared to the same period in 2008. During the 2009 second quarter, the displacement of total revenue resulting from renovations at three properties was $0.4 million, compared to $0.6 million in the 2008 second quarter. Loss from continuing operations was $(5.3) million in the 2009 second quarter, compared to income of $0.3 million in the 2008 second quarter.
Net loss attributable to common shares was $(7.0) million, or $(0.33) per diluted share in the 2009 second quarter, compared to net income of $6.4 million, or $0.29 per diluted share in the 2008 second quarter. The 2009 second quarter net loss includes total impairment charges of $7.5 million in both continuing operations and discontinued operations.
EBITDA from continuing operations declined 43.2 percent from the 2008 second quarter to $7.4 million. Adjusted EBITDA for the same group of properties decreased 39.6 percent, from $18.5 million in the 2008 second quarter to $11.2 million in the 2009 second quarter. Adjusted EBITDA margins for the continuing operations hotels decreased by 690 basis points to 20.4 percent during the 2009 second quarter compared to the 2008 second quarter, due to lower revenues.
Management Comments
"Our results in the second quarter of 2009 showed the same trend as the hospitality industry in general," said Dan Ellis, Lodgian president and chief executive officer. "Our RevPAR Index for the quarter was relatively flat, indicating that we maintained our fair share within our markets."
"Our focus at this time is on cost control, both in our corporate departments and in the field. To this end, we have made significant progress with annualized reductions of $1.0 million in corporate overhead costs and reductions of $3.5 million at the hotels. We continue our efforts to streamline our infrastructure and expect to reap the benefits of these moves in future periods."
Asset Disposition Program
During the second quarter, two hotels were sold for gross proceeds of $13.9 million. The two hotels were the Holiday Inn Select in Windsor, Ontario, Canada and the Holiday Inn Cromwell Bridge in Towson, Md. Of the net proceeds, $6.8 million was used to reduce debt and the remainder for general corporate purposes.
As of August 1, 2009, a total of two properties remained classified as held for sale.
During the 2009 second quarter, the Holiday Inn in Phoenix, Ariz. was reclassified to continuing operations from discontinued operations because it no longer met the criteria to be classified as held for sale. Prior to the reclassification, the company's efforts to sell this property had been unsuccessful, and the hotel's operating performance continued to decline, primarily due to oversupply in the local market. The company had concluded that the hotel's market value was less than the $9.4 million of mortgage debt which encumbers the property. Accordingly, the company began discussions with the lender during the 2009 second quarter aimed at returning the property and a receiver has recently been appointed. The company is currently not making mortgage payments on this loan. The mortgage debt on this hotel is non-recourse to Lodgian, except in certain limited circumstances and is not cross-collateralized with any other of the company's mortgage debt. The company does not believe the debt recourse provisions of this loan will be triggered by this transaction.
Balance Sheet Update
As of June 30, 2009, 34 hotels were encumbered as collateral for various mortgage debt facilities totaling approximately $323.6 million. A summary of mortgage debt facilities is included in the supplemental information attached to this release.
Approximately $120 million of mortgage debt was previously scheduled to mature on July 1, 2009. This mortgage debt, which was originated in June 2004 by Merrill Lynch and securitized into the collateralized mortgage-backed securities market, had been divided into three pools referred to by the company as the Merrill Lynch Fixed Rate Pools #1, #3 and #4 (the company repaid the Merrill Lynch Fixed Rate Pool #2 in 2007). The company obtained extensions of these pools with terms ranging from 90 days to three years.
As of July 1, 2009, the principal amount of the Merrill Lynch Fixed Rate Pool #1 ("Pool #1") was $36.5 million (June 30, 2009 balance of $38.7 million). The company and the special servicer for Pool #1 have agreed to two separate six-month extensions of the maturity date for this indebtedness. Assuming that the second six-month extension is exercised by the company, the maturity date of Pool #1 will be July 1, 2010. The interest rate on Pool #1 will remain fixed at 6.58% during the term of the extension. The company has paid the special servicer an extension fee of approximately $183,000 and will pay an additional extension fee of approximately $266,000 if the company chooses to exercise the second six month extension. Additionally, the company made a principal reduction payment of $2 million (reducing the principal balance of Pool #1 to $36.5 million as of July 1, 2009), and will make an additional $1 million principal reduction payment on or before December 30, 2009 if it exercises the second six month extension. The company also has agreed to make additional principal reduction payments of approximately $83,000 per month during the first six month extension and approximately $166,000 per month during the second six month extension, if exercised.
As of July 1, 2009, the principal amount of the Merrill Lynch Fixed Rate Pool #4 ("Pool #4") was $35.1 million (June 30, 2009 balance of $35.6 million). The company and the special servicer for Pool #4 have agreed to extend the maturity date to July 1, 2012. The interest rate on Pool #4 will remain fixed at 6.58%. In connection with this agreement, the company paid an extension fee of approximately $175,000 and made a principal reduction payment of $500,000. The parties also have agreed to revise the allocated loan amounts for each property serving as collateral for Pool #4 and to allow partial prepayments of the indebtedness. Pursuant to this agreement, the company may release individual assets from Pool #4 by paying the lender specified amounts (in excess of the allocated loan amounts) in connection with property sales or refinancing. The company also agreed to pay the lender an "exit fee" upon a full or partial repayment of the loan. The amount of this fee will increase each year but, assuming the loan is held for the full three year term, will effectively increase the current interest rate by 100 basis points per annum. The company also has issued a full recourse guaranty of Pool #4 in connection with this amendment.
The company and the special servicer for Pool #3 have entered into a second extension agreement to further extend the maturity date of this indebtedness until October 1, 2009 (the previous extension ended on August 1, 2009). Given the extension of the maturity date, the company is not in default of the original loan, which had a balance of $45.7 million as of June 30, 2009. The 60-day extension is intended to provide the parties an opportunity to reach an agreement on a longer-term maturity extension. The company and the special servicer are currently negotiating a longer-term maturity extension for Pool #3; however, the company can provide no assurances that the parties will reach such an agreement. In the event that the company is unable to achieve a long-term extension of Pool #3, the company expects that anticipated cash flow from the hotels securing Pool #3 may not be sufficient to meet the related debt service obligations and it may be necessary to transfer the properties securing this indebtedness to the lender in satisfaction of the company's obligations.
Conference Call
Lodgian will hold a conference call to discuss its 2009 second quarter results today, August 5, 2009 at 10 a.m. Eastern time. To hear the webcast, interested parties may visit the company's website at www.lodgian.com and click on Investor Relations and then Webcast, Q2 2009 Lodgian Earnings Conference Call. A recording of the call will be available by telephone until midnight on Wednesday, August 12, 2009 by dialing (800) 406-7325, reference number 4119462. A replay of the conference call will be posted on Lodgian's website.
Non-GAAP Financial Measures
The historical non-GAAP financial measures included in this press release are reconciled to the comparable GAAP measures in the schedules attached to this press release.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP measures and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. The company uses EBITDA and Adjusted EBITDA to measure its performance and to assist in the assessment of hotel property values. EBITDA is also a widely used industry measure which Lodgian believes provides pertinent information to investors and is an additional indicator of the company's operating performance.
The company defines Adjusted EBITDA as EBITDA excluding the effects of certain charges such as impairment losses; restructuring expenses; gains/losses on debt extinguishment; and casualty losses or gains related to damage to and insurance recoveries for properties damaged by events such as hurricane, fire or flood.
RevPAR Index
RevPAR Index is computed by dividing the company's RevPAR for a particular period by the market's RevPAR over the same period. To derive the market's RevPAR, we identify the hotels that the company considers to be competing hotels for each market in which the company operates. The group of hotels in each market is known as the competitive set. We then obtain RevPAR for each competitive set from Smith Travel Research, a leading provider of lodging industry data. We believe that RevPAR Index is a meaningful indicator of our performance because it measures our hotels in relation to our competitors. We use RevPAR Index to determine if our hotels are increasing market share, which is one of our key business objectives.
About Lodgian
Lodgian is one of the nation's largest independent hotel owners and operators. The company currently owns and/or manages a portfolio of 38 hotels with 7,078 rooms located in 22 states. Of the company's 38-hotel portfolio, 18 are InterContinental Hotels Group brands (Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express), 12 are Marriott brands (Marriott, Courtyard by Marriott, SpringHill Suites by Marriott, Residence Inn by Marriott and Fairfield Inn by Marriott), two are Hilton brands, and five are affiliated with other nationally recognized franchisors including Starwood, Wyndham and Carlson. One hotel is an independent, unbranded property, which is currently closed and held for sale. For more information about Lodgian, visit the company's website: .
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, including, among others, statements regarding Lodgian's negotiations with special servicers and lenders, optional maturity extensions, property dispositions, future financial position, business strategy, projected performance and financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Lodgian and members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Many of these factors are beyond the company's ability to control or predict. Such factors include, but are not limited to, the effects of regional, national and international economic conditions, our ability to refinance or extend maturing mortgage indebtedness, competitive conditions in the lodging industry and increases in room supply, requirements of franchise agreements (including the right of franchisors to immediately terminate their respective agreements if we breach certain provisions), our ability to complete planned hotel dispositions, the effects of unpredictable weather events such as hurricanes, the financial condition of the airline industry and its impact on air travel, the effect of self-insured claims in excess of our reserves and our ability to obtain adequate insurance at reasonable rates, and other factors discussed under Item IA (Risk Factors) in Lodgian's Form 10-K for the year ended December 31, 2008, and as updated in our Forms 10-Q for the quarters ended March 31 and June 30, 2009. We assume no duty to update these statements.
Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to Lodgian or persons acting on its behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless otherwise required by law.
Debi Neary Ethridge
Vice President, Finance & Investor Relations
404-365-2719
Lodgian
