Lodgian Reports 2009 First Quarter Results
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Lodgian Reports 2009 First Quarter Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-05-07
Lodgian, Inc. (NYSE Alternext US: LGN), one of the nation’s largest independent hotel owners and operators, today reported results for the 2009 first quarter ended March 31, 2009.
The company will host a 10 a.m. Eastern time conference call today to discuss results for the 2009 first quarter.
The “35 continuing operations hotels” comprise those Lodgian properties that were not held for sale as of March 31, 2009. Lists of properties, both continuing operations and held for sale, are attached to this press release.
First Quarter 2009 Highlights
• Revenue per available room (RevPAR) Index (performance compared to pre-defined competitors in the markets in which the company operates) held steady in a highly competitive market.
• Reduced corporate overhead by $1.8 million compared to the 2008 first quarter, of which $1.1 million related to severance costs incurred in 2008.
• Sold one hotel in the 2009 first quarter and a second hotel early in the 2009 second quarter.
Statistics for 35 Continuing Operations Hotels
1Q 1Q % Change
2009* 2008*
Rooms revenue $36,635 $43,848 -16.5%
RevPAR $61.17 $72.37 -15.5%
Total revenue $49,176 $57,972 -15.2%
Loss from continuing
operations $(6,131) $(5,989) -2.4%
EBITDA $6,328 $6,325 0.0%
Adjusted EBITDA
(defined below) $6,874 $8,466 -18.8%
Consolidated Financial Results
Loss from continuing
operations $(6,131) $(5,989) -2.4%
Loss from discontinued
operations $(951) $(1,529) 37.8%
Net loss attributable to
common stock $(6,922) $(7,518) 7.9%
Net loss per share
attributable to
common stock $(0.32) $(0.33) 3.0%
*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.
First Quarter 2009 Results
First quarter 2009 total revenue for continuing operations declined 15.2 percent to $49.2 million, compared to the same 2008 period. During the 2009 first quarter, the displacement of total revenue resulting from renovations at three properties was $0.7 million, compared to $0.9 million in the 2008 first quarter. Loss from continuing operations was $(6.1) million in the 2009 first quarter, compared to $(6.0) million in the 2008 first quarter.
Net loss attributable to common shares was $(6.9) million, or $(0.32) per diluted share in the 2009 first quarter, compared to a net loss of $(7.5) million, or $(0.33) per diluted share in the 2008 first quarter.
EBITDA from continuing operations was flat to the prior year’s first quarter at $6.3 million. Adjusted EBITDA for the same group of properties decreased 18.8 percent, from $8.5 million in the 2008 first quarter to $6.9 million in the 2009 first quarter. Adjusted EBITDA margins for the continuing operations hotels decreased by 60 basis points to 14.0 percent during the 2009 first quarter compared to the 2008 first quarter, due to lower revenues.
Management Comments
“Our hotels fared reasonably well in a poor market in January and February, posting RevPAR index increases in each of those two months, giving us 10 consecutive months of improvement,” said Peter Cyrus, Lodgian interim president and chief executive officer. “Discount pricing intensified in March, resulting in a relatively flat RevPAR Index for the quarter, off just 20 basis points compared to the 2008 first quarter,” he said.
“We continue to be very focused on cost control and revenue improvement. In the first quarter, we reduced total rooms payroll by over 10 percent and increased our food and beverage margins by 260 basis points,” he said. “We have renegotiated pricing with numerous vendors at both the corporate and property levels and are beginning to see the benefits of those efforts.”
Asset Disposition Program
During the first quarter, the Holiday Inn in East Hartford, Conn. was sold for gross proceeds of $3.5 million. There were no net proceeds from the sale of this hotel due to seller financing and the cost of buying out the land lease.
Following the close of the first quarter, the Holiday Inn Select in Windsor, Ontario was sold for gross proceeds of CAD$7.0 million (USD$5.6 million). The net proceeds of USD$5.2 million were used for general corporate purposes.
As of May 1, 2009, a total of four properties remained classified as held for sale and were in varying stages of the sale process. One of these hotels is the Holiday Inn in Phoenix, Ariz. To date, the company’s efforts to sell this property have been unsuccessful, and the hotel’s operating performance continues to decline, primarily due to oversupply in the local market. Management has concluded that the hotel’s market value is less than the $9.4 million of mortgage debt which encumbers the property. Accordingly, the company recently began discussions with the lender aimed at returning the property on a consensual basis by a deed in lieu of foreclosure. 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 March 31, 2009, 35 hotels were encumbered as collateral for various mortgage debt facilities totaling approximately $331.5 million. A summary of mortgage debt facilities is included in the supplemental information attached to this release.
“In connection with the upcoming debt maturities in July 2009, we continue to pursue a number of options, including refinancing of the existing encumbered hotels, financing certain unencumbered assets and seeking an extension of the current facilities,” said James MacLennan, executive vice president and chief financial officer.
“To date, however, we have been unable to secure refinancing, and we expect it will remain difficult to refinance the debt prior to the July 1 maturity date. We are currently engaged in discussions with the servicers of the maturing debt to seek extensions to allow us additional time to secure financing. We cannot currently predict whether our efforts to obtain extensions will be successful.”
Reverse Stock Split Update
On April 29, 2009, the company’s shareholders approved a reverse split of the company’s common stock at split ratios ranging from 1-for-5 to 1-for-10 in half share increments. However, at this time, the Board of Directors has elected to defer a decision on effecting the reverse stock split pending resolution of the company’s efforts to extend or refinance the debt that matures in July of this year.
Conference CallNon-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
Lodgian will hold a conference call to discuss its 2009 first quarter results today, May 6, 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, Q1 Earnings Conference Call. A recording of the call will be available by telephone until midnight on Wednesday, May 13, 2009 by dialing (800) 405-2236, reference number 11129330. A replay of the conference call will be posted on Lodgian’s website.
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