Boykin Lodging Company (NYSE: BOY), a hotel real estate investment trust, today reported financial results for the fourth quarter and full year ended December 31, 2001. The 2001 fourth quarter FFO (funds from operations) of $3.6 million, or $0.20 per share exceeded analysts’ expectations, although these results were significantly lower than the $7.5 million or $0.40 per share in the year earlier period. The decline had been expected because of the recession and the dramatic drop in lodging demand following September 11.
Non Recurring Charges Recorded:
As previously announced, on January 1, 2002, Boykin Lodging Company acquired leasehold interests for 28 of its hotels from two of its operators; Boykin Management Company and Meristar Hotels & Resorts (NYSE: MMH). Following the transaction, 31 of Boykin Lodging’s 33 hotel properties are operated under the Taxable REIT Subsidiary structure. This structural change gave rise to a one-time charge in the fourth quarter of 2001 of $15.0 million relating to the acquisition and termination of the leases, of which $11.4 million was a non-cash charge. “Going forward, this change in our structure clearly aligns the financial interests of our operators with those of the Company, improving long-term profitability and shareholder value,” commented Richard C. Conti, President and Chief Operating Officer. “Furthermore, the new structure enhances our flexibility to re-shape our portfolio over the long run.”
The Company also booked a one-time, non-cash charge of $24.0 million in the fourth quarter of 2001 to reduce the carrying value of certain assets. “Unfortunately, new hotel construction in certain markets and the decline in lodging demand because of the recession and the tragic events of September 11 caused the net realizable value of eight hotel properties to decline below book value,” commented Robert W. Boykin, Chairman and Chief Executive Officer.
Fourth Quarter Results:
Total revenues for the 2001 fourth quarter were $23.8 million, compared with $32.6 million for the same period last year. Including the one-time charges, a net loss of $31.6 million, or $1.84 per diluted share was recorded in the most recent period compared to net income of $5.1 million, or $0.29 per diluted share in the fourth quarter of 2000.
On a same-unit basis, fourth-quarter room revenue per available room (REVPAR) decreased 19.7 percent to $46.51 from $57.93 for 2000. Occupancy for the 2001 fourth quarter was down 15.4 percent to 52.3 percent from 61.8 percent. The average daily room rate decreased 5.1 percent from $93.81 to $89.00. Renovation activities at the Company’s Chicago, Illinois and Meadowlands, New Jersey properties resulted in 17,000 room nights out of service, or about two percent of the Company’s room inventory for the quarter.
Mr. Boykin said: “The fourth quarter concluded a very difficult year; however, our operating statistics fell between the Smith Travel Research all industry average and the upper upscale category, which is reflective of where our hotels are positioned in their respective markets. While we are glad the year is over, we took a number of steps in 2001 to improve the Company’s future profitability once the economic recovery takes hold. We have implemented a series of efficiency programs that are controlling costs quite well at the present low occupancy rates. We are thus well positioned for the inevitable return to more normal traffic patterns.”
Mr. Boykin continued, “Looking forward, we expect REVPAR comparisons to stay negative for the first half of 2002 with the first quarter shaping up to be 13 to 17 percent lower than last year and the second quarter 8 to 12 percent down. A recovery in the second half of 2002 should result in full year REVPAR comparisons to come out flat to five percent below the 2001 levels. We also anticipate that lower occupancies will cause our hotel operating profit margins to decline in the first two quarters of 2002, but recover in the second half, finishing the year flat or slightly better than 2001. Based on these ranges, FFO should come in between $0.20 and $0.28 per share in the first quarter, between $0.45 and $0.58 per share in the second quarter and should fall between $1.45 and $1.85 per share for the whole year.”
“We fully understand that a major component of shareholder returns from an investment in Boykin Lodging Company is the cash dividend,” Mr. Boykin added. “We are working hard to achieve results that will allow us to strengthen our balance sheet, to reinstate the dividend and grow it once our financial improvements accelerate. Based upon our current REVPAR and cash flow expectations, management’s recommendation to the board will be to resume the dividend in the third quarter of 2002 with the objective to distribute approximately 40 to 50 percent of our annualized FFO per share going forward, or approximately $0.18 per quarter based on the low end of the Company’s current FFO guidance.”
For the full year 2001, FFO was $36.2 million, or $1.95 per diluted share, as compared with $46.0 million in 2000, or $2.47 per diluted share. Total revenues for the year were $80.1 million for 2001 and $93.8 million for 2000. Including the one-time charges, a net loss of $29.6 million, or $1.71 per diluted share was recorded for 2001, compared to net income of $7.7 million, or $0.45 per diluted share in 2000.
On a same-unit basis, REVPAR for the year decreased 9.0 percent to $58.30 from $64.04 in the prior year. Occupancy for the year was 62.2 percent for 2001, compared with 67.4 percent for 2000. Average daily rate decreased to $93.82 from $95.05.
For comparative purposes, pro forma financial results for the full years 2000 and 2001, and for each of the 2001 quarters are included with this release. The pro forma financial statements are presented as if the acquisition of 28 leasehold interests from Boykin Management Company and Meristar Hotels and Resorts that were converted to management contracts effective January 1, 2002, had occurred on January 1, 2000.
The Company will hold a conference call with financial analysts to discuss the fourth-quarter and full-year results at 2:00 p.m. eastern time today, February 20, 2002. A live webcast of the call can be heard on the Internet by visiting the Company’s website at www.boykinlodging.com and clicking on the investor relations page or by visiting other websites that provide links to corporate webcasts.