Candlewood Hotel Company, Inc. (OTC: CNDL), a leading owner, manager, and franchisor of high-quality, value-oriented, business?travel hotels, today announced results for its second quarter ended June 30, 2002. Second Quarter 2002 Results Comparing the operating results of the Candlewood hotels owned, leased and managed by the Company for the second quarter of 2002, occupancy increased 5.3 points to 78.9 percent, compared to 73.6 percent in the second quarter of 2001. Average daily rate (ADR) for the quarter was $55.13, an 11 percent decrease, compared to $61.92 in the second quarter of 2001. Revenue per available room (RevPAR) was $43.51, a decrease of 4.5 percent from $45.56 in the second quarter of 2001, but a sequential improvement over the first quarter 2002 RevPAR of $40.72.
“Given the challenging environment in the lodging industry, we are quite pleased with the 5.3 point gain in our occupancy this quarter over the comparable period last year,” commented Jack P. DeBoer, Chairman and Chief Executive Officer. “In addition, our 4.5 percent decline in RevPAR for the second quarter of 2002 compares favorably to our peers. During the second quarter we sold 18,500 more rooms to guests staying seven or more nights as compared to last year. This increase in extended stay business - which is typically priced at a lower ADR when compared to our other guests - had a direct effect on our overall ADR for the quarter.”
Hotel operations revenue for the three-month period ended June 30, 2002 was $32.4 million, compared to $33.4 million for the same period in 2001. Income from hotel operations (hotel operating revenues less hotel and related corporate operating expenses and hotel opening costs) was $11 million for the second quarter of 2002, compared with $14.2 million for the comparable period in 2001. The Company reported a one-time $2.1 million loss on extinguishments of debt in the 2002 second quarter, as part of the previously announced sale-leaseback transaction with Hospitality Properties Trust (HPT).
Loss before preferred dividends was $4.3 million for the three months ended June 30, 2002, compared with a gain of $947,000 for the same time period in 2001. The net loss over the comparable period during 2001 was primarily attributable to four factors. These include: the one-time loss on extinguishments of debt of $2.1 million in accordance with GAAP; a decrease in revenue of 2.9 percent - partially attributable to the operating results from the properties in the weaker Chicago market, and an increase in hotel operating expenses, inclusive of a greater allocation towards the sales and marketing efforts, as well as higher insurance costs. During the second quarter of 2002, two franchise hotels opened, bringing the total additional properties year-to-date to three new franchise hotels and one acquisition.
As of June 30, 2002, there were two Candlewood franchised hotels under construction. Financial Position During the second quarter of 2002, the company completed a sale-leaseback transaction with Hospitality Properties Trust for 21 Candlewood Hotels, and improved the Company’s financial position through refinancing and the repayment of debt. Commenting on the financial position, Warren D. Fix, the Company’s Chief Financial Officer, said, “We have made strides in providing the Company with financial flexibility this quarter, using the proceeds from the previously announced HPT transaction and GMAC refinancing to reduce our mortgage debt level by 66 percent, repay the $15 million note due to Hilton and extend the maturity of the Company’s $59 million of outstanding debt until 2006. In addition, we have $14.6 million in cash available as of June 30, 2002, enabling us to continue to focus on our strategy of growing RevPAR.”
Form 10Q Certifications The Company filed its Form 10Q Report for the quarterly period ended June 30, 2002, on August 13, 2002. The Form was accompanied by the certificates of the Chief Executive Officer and Chief Financial Officer, as provided in Section 9.06 of the Sarbanes-Oxley Act of 2002. About the Company 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. Jack DeBoer, Chairman and CEO and founder of Residence Inn, started Candlewood Hotel Company in late 1995. 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. www.candlewoodsuites.com CANDLEWOOD HOTEL COMPANY, INC. SECOND QUARTER OPERATING RESULTS (Unaudited) (In thousands, except share and per share data) For the three-months ended For the six-months ended June 30, June 30, 2002 2001 2002 2001 Revenues: Hotel operations $32,397 $33,369 $62,373 $64,553 Other income 887 1,068 1,343 1,745 Total hotel operating revenues 33,284 34,437 63,716 66,298 Proceeds from sales of hotels, net of deferred gain of $0 and $0, respectively 145,000 - 145,000 - Deferred gain recognition on sales of hotels 355 346 638 692 Total revenues 178,639 34,783 209,354 66,990 Operating costs and expenses: Hotel operating expenses 20,570 18,270 39,772 36,145 Corporate operating expenses 1,726 1,866 3,168 3,375 Rent expense on leased hotels 10,946 6,335 18,120 12,661 Hotel opening costs - 132 - 230 Depreciation and amortization 1,121 2,853 3,790 5,630 Impairment loss on assets held for sale - - 8,604 - Loss on extinguishment of debt 2,115 - 2,115 - Total operating costs and expenses 36,478 29,456 75,569 58,041 Costs of hotels sold 145,000 - 145,000 - (2,839) 5,327 (11,215) 8,949 Interest income 92 134 185 381 Interest expense (1,527) (4,514) (4,955) (9,124) Income (loss) before preferred stock dividends (4,274) 947 (15,985) 206 Preferred stock dividends (2,000) (2,000) (3,979) (3,979) Net (loss) available to common stockholders $(6,274) $(1,053) $(19,964) $(3,773) Per share data: Net (loss) per share of common stock - basic and diluted $(0.69) $(0.12) $(2.21) $(0.42) Weighted average shares outstanding - basic and diluted 9,025 9,025 9,025 9,025