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Lodgian, Inc. (AMEX:LGN) , one of the nation's largest independent owners and operators of full-service hotels, today reported results for the fourth quarter and full year ended December 31, 2007.
The "44 Continuing Operations hotels" comprise all Lodgian properties except its held for sale portfolio (two hotels at December 31, 2007).
Fourth Quarter 2007 Highlights for 44 Continuing Operations hotels
• Achieved a 4.3 percent improvement in revenue per available room (RevPAR), despite the displacement caused by three major renovations ongoing in the quarter.
• Increased total revenue 4.3 percent, to $65.5 million.
• Improved direct operating contribution (defined as total revenue less direct operating expenses) by 7.3 percent, resulting in a 180 basis point margin improvement to 63.1 percent.
• Increased Adjusted EBITDA (defined below) to $12.7 million, a 30 percent improvement.
• Improved Adjusted EBITDA margin to 19.4 percent.
Full Year 2007 Highlights for 44 Continuing Operations hotels
• Increased room revenue by 5.3 percent and food and beverage revenue by 9.2 percent, a combined 6.2 percent increase in total revenues.
• Improved direct operating contribution 7.3 percent to $176.8 million in 2007, resulting in a 70 basis point direct operating margin increase.
• Achieved a 70 basis point increase in Adjusted EBITDA margin, with Adjusted EBITDA increasing to $53.6 million.
• Made substantial progress on the conversion of the Holiday Inn Select DFW to a Wyndham hotel, and the conversion of the Doubletree Club Philadelphia hotel to a Four Points by Sheraton.
Statistics for 44 Continuing Operations hotels
4Q 4Q % Year Year % 2007* 2006* Change 2007* 2006* Change
Rooms revenue $47,576 $45,617 4.3% $208,222 $197,719 5.3%
RevPAR $65.27 $62.57 4.3% $72.00 $68.45 5.2%
Total revenue $65,498 $62,817 4.3% $278,079 $261,785 6.2%
Income/(loss)
from continuing
operations $(8,612) $(12,385) 30.5% $(9,926) $(10,267) 3.3%
EBITDA $6,963 $10,100 (31.1)% $44,616 $54,833 (18.6)%
Adjusted EBITDA $12,734 $9,795 30.0% $53,640 $48,775 10.0%
(defined below)
Consolidated Financial Results
Income/(loss)
from continuing
operations $(8,612) $(12,385) 30.5% $(9,926) $(10,267) 3.3%
Income/(loss)
from discontinued
operations $539 $(8,328) n/m $1,480 $(4,909) n/m
Net income/(loss)
attributable to
common stock $(8,073) $(20,713) 61.0% $(8,446) $(15,176) 44.3%
Net income/(loss)
per diluted share
attributable to
common stock $(0.34) $(0.84) 59.5% $(0.35) $(0.62) 43.5%
*Dollars in thousands except for RevPAR and per share data
Corporate Highlights:
• Announced appointment of Peter T. Cyrus as interim president and chief executive officer, following the January 29, 2008 resignation of Edward J. Rohling.
• Continued Lodgian's strategic initiative to redefine the company's portfolio, listing a total of nine hotels for sale, and retaining 35 hotels in continuing operations.
• Continued stock repurchase program, having acquired approximately $27.4 million of common stock from May 2006 through February 21, 2008.
• Sold 23 hotels during 2007 for aggregate gross proceeds of $82.2 million, net proceeds of $76.0 million.
Fourth Quarter 2007 Results
Fourth quarter 2007 total revenue for 44 continuing operations hotels improved 4.3 percent to $65.5 million, compared to the 2006 same period. During the quarter, the displacement of total revenue related to renovations at three properties was $0.8 million. Loss from continuing operations was $(8.6) million, compared to a loss of $(12.4) million in the 2006 fourth quarter, an improvement of $3.8 million. The improvement was driven by the successful implementation by the company of certain sales and profitability initiatives, a $1.1 million reduction in the provision related to self- insurance programs, and a lower effective income tax rate. These gains were offset in part by $5.2 million in impairment charges related to three of the nine hotels which were reclassified to discontinued operations in the 2008 first quarter.
Net loss attributable to common shares was $(8.1) million, or a loss of $(0.34) per diluted share, compared to a net loss of $(20.7) million, or $(0.84) per diluted share in the 2006 fourth quarter.
EBITDA from 44 continuing operations hotels declined $3.1 million, or 31.1 percent, to $7.0 million compared to the prior year, primarily due to the aforementioned impairment charges. Adjusted EBITDA for the same group of properties increased 30.0 percent, from $9.8 million in the fourth quarter of 2006, to $12.7 million in the 2007 fourth quarter.
Full Year 2007 Results
2007 total revenue for the 44 continuing operations hotels improved 6.2 percent to $278.1 million from $261.8 million in 2006. Food and beverage revenues increased 9.2 percent to $60.9 million. During 2007, the impact of displacement related to renovations at six properties was $1.9 million of total revenue. Loss from continuing operations was $(9.9) million, compared to a loss of $(10.3) million in 2006. The 2007 results benefited from a lower effective tax rate, revenue and profitability initiatives, and a $1.2 million reduction in the provision associated with self-insurance programs. However, these gains were more than offset by:
• $5.2 million in impairment charges related to three of the nine hotels which were reclassified to discontinued operations in the 2008 first quarter,
• a $3.4 million loss on debt extinguishment related to refinancing transactions,
• a $3.4 million decrease in business interruption proceeds related to the settlement of claims in 2006 for hotels closed due to hurricane damage during 2004 and 2005, and
• a $1.2 million restructuring charge associated with cost-reduction initiatives to improve future operating performance.
Net loss attributable to common shares in 2007 was $(8.4) million, or a loss of $(0.35) per diluted share, compared to a net loss of $(15.2) million, or $(0.62) per diluted share in 2006.
EBITDA from 44 continuing operations hotels for 2007 was $44.6 million, compared to $54.8 million in 2006. Adjusted EBITDA for the same group of properties increased 10.0 percent, from $48.8 million in 2006, to $53.6 million in 2007.
Management Comments
"Our continuing operations hotels had a very solid fourth quarter, with RevPAR up 4.3 percent compared to the 2006 fourth quarter," said Peter Cyrus, Lodgian interim president and chief executive officer. "For the 2007 full year, RevPAR for the 40 continuing operations hotels open and not under renovation increased 6.8 percent, compared to the 2007 industry average of 5.7 percent, according to Smith Travel Research. The 10 hotels that completed major renovations in 2005 and 2006 reported a 9.2 percent RevPAR increase in 2007 and an impressive 4.4 percent improvement in their RevPAR index. We believe there is still substantial future growth in these hotels."
Adjusted EBITDA margins for the 44 continuing operations hotels improved 385 basis points to 19.4 percent during the 2007 fourth quarter compared to 2006, primarily led by sales and profitability initiatives and a $1.1 million cost reduction in the company's self-insurance programs. For the full-year 2007, Adjusted EBITDA margins rose 66 basis points compared to 2006.
Asset Disposition Program
In the 2006 fourth quarter, the company announced and commenced a program to strategically reposition its hotel portfolio. A total of 27 properties were identified for sale, with two properties sold by the end of 2006. Of the 25 properties being marketed at the beginning of 2007, 23 properties were sold during the year. Aggregate gross proceeds were $82.2 million. Net proceeds, after closing costs and debt paydown, of $76.0 million were used for capital expenditures, share repurchases and general corporate purposes. At year-end 2007, two hotels remained as held for sale from this program.
In the 2007 fourth quarter, the company announced that it would place an additional nine hotels on its held for sale list in 2008. The properties were included in continuing operations for 2007, as they were not reclassified to discontinued operations until the 2008 first quarter. A list of properties currently held for sale is included in the supplemental information attached to this release. Additionally, pro forma income statements for 2006 and 2007 are attached, reflecting the 35 continuing operations hotels effective from the 2008 first quarter.
The company anticipates receiving aggregate gross proceeds of approximately $94 million to $102 million for the 11 remaining hotels, with net proceeds after debt reduction and closing costs of $39 million to $47 million.
Balance Sheet Update
The company significantly strengthened its balance sheet during the past several years. As of December 31, 2007, 38 hotels were encumbered as collateral for various mortgage debt facilities totaling approximately $359 million. A summary of mortgage debt facilities is included in the supplemental information attached to this release. There are no debt maturities requiring refinancing until July 2009. "We have implemented a structure that will provide maximum flexibility to the company going forward, as well as keep our weighted average cost of debt (as of December 31, 2007) at a very acceptable 6.74 percent," said James MacLennan, executive vice president and chief financial officer. "At year-end 2007, the company had $63 million in cash and restricted cash on its balance sheet, providing further flexibility as we move forward."
During the 2007 fourth quarter, Lodgian acquired 863,765 shares of common stock at an average price of $11.75 per share, for a total cost of approximately $10.2 million, as part of its previously announced plan to repurchase up to $30 million of its common shares over a two year period ending no later than August 22, 2009. The company has acquired 2,485,267 shares, or approximately 10 percent of common stock outstanding prior to initiating the repurchase program in May 2006, for a total cost of approximately $27.4 million, as of February 21, 2008. As of February 21, 2008, the company has the approval to acquire up to $7.3 million under the current program.
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