-- First Full Year of Operating Income --
-- Double Digit Increases in Revenue and EBITDA for Q4 --
Press Release: LodgeNet Entertainment Corporation
February 7, 2002
SIOUX FALLS, SD -- LodgeNet Entertainment Corporation (Nasdaq: LNET) yesterday reported record revenue of $216.9
million and record EBITDA (earnings before interest, taxes, depreciation and amortization) of $75.1 million for
its fiscal year ended December 31, 2001. The results reflect a 10.9% increase in EBITDA over 2000. LodgeNet also
reported its first full year of operating income at $9.1 million. For the fourth quarter of 2001, LodgeNet reported
its 33rd consecutive increase in quarterly revenue and EBITDA. Fourth quarter revenue increased 10.4% to $53.1
million, while EBITDA increased 10.8% to $18.1 million.
The following financial highlights are in thousands, except per-share amount:
Twelve Months Ended December 31,
2001 2000
Total revenue $216,895 $196,817
EBITDA 75,128 67,764
Operating income 9,120 2,294
Net loss (26,408) (39,014)
Net loss per common share $(2.16) $(3.21)
Weighted average shares (thousands) 12,248 12,145
Three Months Ended December 31,
2001 2000
Total revenue $53,078 $48,061
EBITDA 18,117 16,359
Operating income (loss) 1,277 (72)
Net loss (7,937) (20,649)
Net loss per common share $(.65) $(1.69)
Weighted average shares (thousands) 12,284 12,211
``In a challenging year for the hospitality industry we maintained our focus and continued to execute on our predictable
business model, achieving significant performance milestones in every aspect of our business as we posted record
operating profit,'' said Scott C. Petersen, President and Chief Executive Officer of LodgeNet.
``For the 33rd consecutive quarter, LodgeNet has delivered record results,'' continued Petersen. ``Our strengths
include a demographically and geographically diverse room base, as well as revenues driven from an expanding product
line. Equally important, especially in the fourth quarter, was our ability to adjust our operating plans to the
new business environment realities as they developed. Despite the universal decrease in hotel occupancies, we posted
double-digit increases in revenue and EBITDA. For the full year, our operating income surged by almost 300% to
$9.1 million.''
``LodgeNet continues to produce solid financial and operating performance,'' said Gary H. Ritondaro, Senior Vice
President and Chief Financial Officer of LodgeNet. ``We continued our industry-leading growth in the fourth quarter
by adding nearly 18,000 Guest Pay rooms to our base. This was accomplished without increasing debt levels during
the period. We ended the year serving more than 5,400 hotel properties, more than any other interactive services
provider in the world. We added 87,000 net new Guest Pay rooms in 2001 and now serve more than 890,000 interactive
guest rooms worldwide, providing guests with added entertainment choices, convenience and control.''
Ritondaro continued, ``During an especially demanding business environment, our strong cost controls and improved
operating efficiencies resulted in a 5% decline in per-room Guest Pay operating costs and a reduction in SG&A
as a percentage of revenue. While depreciation expense increased modestly, as a percent of revenue it declined
below 32%.''
``LodgeNet enters 2002 with a sound financial foundation, improving fundamentals and an expanding room and product
base,'' concluded Petersen. ``We are executing on our predictable business model, performing for our customers
and on pace to reach profitability. As the economy stabilizes and returns to a growth mode, we are well positioned
for accelerated returns and increases in shareholder value.''
RESULTS FROM OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2001 VERSUS
TWELVE MONTHS ENDED DECEMBER 31, 2000
Total revenue for 2001 was $216.9 million, an increase of $20.1 million or 10.2% compared to 2000. This included
a $19.3 million or 10.3% increase in Guest Pay revenue as a result of a 10.6% increase in average Guest Pay rooms
in operation. Guest Pay Revenue per room was $22.41 in 2001 compared to $22.46 in 2000. Movie revenue per Guest
Pay room decreased 1.4% to $17.93 compared to 2000 due to a lower occupancy rate throughout the hotel industry
post September 11th and due to a relatively less popular selection of major motion pictures during early 2001.
These factors were partially offset by higher prices charged for movies.
The Company's overall gross profit increased 9.1% in 2001 to $124.8 versus $114.4 million during 2000. As a percentage
of revenue, the gross profit margin decreased to 57.5% in 2001 from 58.1% in the prior year. The decrease was due
to increased equipment sales to international licensees which generally earn a lower profit margin.
Guest Pay operating expenses increased by $1.3 million or 4.9% in 2001 versus the prior year. This increase is
primarily attributed to the 10.6% increase in average installed Guest Pay interactive rooms in 2001 compared to
2000. Offsetting the increase in operating costs attributable to the expanded room base were improved cost controls
and greater operating efficiencies. Per average installed room, Guest Pay operations costs were $3.12 in 2001 as
compared to $3.29 in 2000.
Selling, general and administrative expenses increased 9.0% in 2001 from $19.2 million in 2000. This increase is
primarily due to increased payroll, related employee benefits and outside professional fees. As a percentage of
revenue, selling, general and administrative expenses were 9.7% in 2001 and 9.8% in 2000.
Depreciation and amortization expenses increased less than 1% to $66.0 million in 2001 from $65.5 million in the
prior year. This increase is due to the increase in the number of installed Guest Pay interactive rooms previously
described offset by the increase in fully depreciated assets remaining in service. As a percentage of revenue,
depreciation and amortization expenses decreased to 30.4% in 2001 from 33.3% in 2000.
As a result of increased Guest Pay revenue and decreasing operating expenses as a percent of revenue, the Company
generated operating income of $9.1 million as compared to an operating income of $2.3 million in 2000.
EBITDA (defined by the Company as earnings before interest, income taxes, depreciation, amortization and other
non-operating income or expenses) increased 10.9% to $75.1 million in 2001 as compared to $67.8 million in 2000.
This increase is primarily due to a 10.6% increase in the average number of installed rooms receiving Guest Pay
services and the related increase in Guest Pay revenue. As a percentage of total revenue, EBITDA increased to 34.6%
in 2001 a compared to 34.4% in 2000.
RESULTS FROM OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2001 VERSUS
THREE MONTHS ENDED DECEMBER 31, 2000
Total revenue for the fourth quarter of 2001 was $53.1 million, an increase of $5.0 million or 10.4% compare to
the fourth quarter of 2000. This increase was driven by a $4.9 million or 10.7% increase in Guest Pay revenue.
The increase resulted from a 12.1% increase in average Guest Pay interactive rooms in operation, offset by a 1.3%
decrease in average revenue per Guest Pay interactive room ($20.93 per month average in the fourth quarter of 2001
compared to $21.20 in the year earlier quarter). Per room revenue from movies decreased 2.3% to $16.76 per month
in the fourth quarter of 2001 from $17.16 in the fourth quarter of 2000 due to a 490 basis point decrease in occupancy
levels, partially offset by a 8.3% increase in the average price charged per movie.
The company's overall gross profit increased 9.2% to $30.1 million in the fourth quarter of 2001 compared to the
fourth quarter of 2000. The overall gross profit margin is 56.7% in the current quarter compared to 57.4% during
the fourth quarter of 2000, primarily due to fixed cost elements such as Free-to-Guest programming costs and game
royalties.
Guest Pay operating expenses increased 9.6% in the fourth quarter of 2001 compared to the year earlier quarter
but remained flat as a percentage of revenue. Although the overall Guest Pay operations expenses increased in dollars,
the cost per average installed room decreased from $3.00 in the fourth quarter of 2000 to $2.93 in the fourth quarter
of 2001.
Selling, general and administrative expenses increased 3.3%, or $157,000 in the fourth quarter of 2001 compared
to the year earlier results. As a percentage of revenue, such expenses decreased to 9.3% in the fourth quarter
of 2001 from 9.9% in the fourth quarter of 2000.
Depreciation and amortization expenses increased $409,000, or 2.5% to $16.8 million in the fourth quarter of 2001
from $16.4 million in the year earlier quarter. This is due to the increase in the number of installed Guest Pay
interactive rooms in service since the prior year quarter, offset by the continued increase in fully depreciated
assets remaining in service.
EBITDA increased 10.7% to $18.1 million in the fourth quarter of 2001, from $16.4 million in the fourth quarter
of 2000. As a percentage of total revenue, EBITDA was 34.1% in the current quarter as compared to 34.0% in the
same quarter of 2000.
As a result of factors previously described, the Company's operating income increased to $1.3 million in the fourth
quarter of 2001 from a loss of $0.1 million in the year earlier quarter. The Company's net loss for the fourth
quarter of 2001 decreased to $7.9 million versus a loss of $20.6 million recorded in the same quarter of last year.
2002 Outlook
With regard to financial results for the calendar year 2002, LodgeNet expects to report revenue in a range from
$225.0 million to $232.0 million and $79.0 million to $83.0 million in EBITDA. Earnings per share estimates are
$(1.83) to $(2.16) for the full year 2002. With respect to the first quarter of 2002, LodgeNet expects to report
revenue of between $51.0 million and $54.0 million, resulting in $18.0 to $19.5 million in EBITDA. Earnings per
share estimates are $(0.54) to $(0.66) for the first quarter of 2002.
The Company held a conference call on Wednesday, October 6, 2002 at 4:00pm CST. The call was webcast live over
the Internet via ECI at http://www.calleci.com/pages/pub_web.html
. The webcast will be archived at that site for one month and can be accessed via LodgeNet's company website at
http://www.lodgenet.com
LodgeNet Entertainment Corporation ( http://www.lodgenet.com ) is a broadband, interactive services provider which
specializes in the delivery of interactive television and Internet access services to the lodging industry throughout
the United States and Canada as well as select international markets. These services include on-demand digital
movies, music and music videos, Nintendo® video games, high-speed Internet access and other interactive television
services designed to serve the needs of the lodging industry and the traveling public. As one of the largest companies
in the industry, LodgeNet provides service to more than 890,000 rooms (including more than 830,000 interactive
guest pay rooms) in more than 5,400 hotel properties. More than 260 million travelers have access to LodgeNet systems
on an annual basis. LodgeNet is listed on Nasdaq and trades under the symbol LNET.
Except for the historical statements contained herein, all statements made in this release are ``forward-looking
statements'' within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, and are subject to risks, uncertainties, and other factors that could cause actual results, performance
or achievements of the Company to be materially different from those expressed or implied by such forward-looking
statements. Such factors include, among others, the impact of competition and changes to the competitive environment
for the Company's products and services, changes in technology, reliance on strategic partners, uncertainty of
litigation, changes in government regulation and other factors detailed, from time to time, in the Company's filings
with the Securities and Exchange Commission.
(See financial and operational tables below)
LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollar amounts in thousands)
December 31,
2001 2000
Assets
Current assets:
Cash and cash equivalents $1,528 $4,059
Marketable securities -- 1,398
Accounts receivable, net 26,677 26,553
Prepaid expenses and other 2,864 3,610
Total current assets 31,069 35,620
Property and equipment, net 240,274 224,927
Investments in and advances to unconsolidated
affiliates 484 3,500
Debt issuance costs, net 9,176 7,121
Other assets, net 10,482 10,437
$291,485 $281,605
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $14,502 $12,671
Current maturities of long-term debt 8,168 21,563
Accrued expenses and other 10,251 11,988
Deferred revenue 3,100 2,713
Total current liabilities 36,021 48,935
Long-term debt 317,663 269,096
Derivative instruments 5,369 --
Total liabilities 359,053 318,031
Stockholders' equity (deficit):
Common stock, $.01 par value,
50,000,000 shares authorized;
12,284,998 and 12,212,039 shares
outstanding at December 31, 2001 and
2000, respectively 123 122
Additional paid-in capital 151,990 150,663
Accumulated deficit (212,389) (185,981)
Accumulated other comprehensive income (loss) (7,292) (1,230)
Total stockholders' equity (deficit) (67,568) (36,426)
$291,485 $281,605
LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollar amounts, except per share amounts, in thousands)
Years Ended December 31,
2001 2000 1999
Revenues:
Guest Pay $206,001 $186,718 $169,850
Other 10,894 10,099 11,422
Total revenues 216,895 196,817 181,272
Direct costs:
Guest Pay 85,288 76,586 70,632
Other 6,802 5,864 7,858
Total direct costs 92,090 82,450 78,490
Gross profit 124,805 114,367 102,782
Operating expenses:
Guest Pay operations 28,698 27,356 24,908
Selling, general and
administrative 20,979 19,247 17,774
Depreciation and amortization 66,008 65,470 60,778
Total operating expenses 115,685 112,073 103,460
Operating income (loss) 9,120 2,294 (678)
Gain on sales of investments -- -- 14,739
Investment losses (2,790) (13,593) (24,323)
Interest expense (30,306) (27,809) (27,210)
Other income 348 419 1,414
Loss before income taxes (23,628) (38,689) (36,058)
Provision for income taxes (689) (325) (370)
Loss before extraordinary item (24,317) (39,014) (36,428)
Extraordinary item, net (2,091) -- --
Net loss $(26,408) $(39,014) $(36,428)
Per common share (basic and
diluted):
Loss before extraordinary
item $(1.99) $(3.21) $(3.05)
Extraordinary item, net (0.17) -- --
Net loss $(2.16) $(3.21) $(3.05)
Weighted average shares
outstanding (basic and
diluted) 12,248,301 12,145,109 11,948,660
LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
Years Ended December 31,
2001 2000 1999
Operating activities:
Net loss $(26,408) $(39,014) $(36,428)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization 66,008 65,470 60,778
Gain on sales of investments -- -- (14,739)
Investment losses 2,790 13,593 24,323
Non-cash portion of
extraordinary item 2,091 -- --
Change in operating assets
and liabilities:
Accounts receivable (212) 3,011 (1,366)
Prepaid expenses and other 1,080 (1,948) 3,811
Accounts payable 1,435 (1,926) 886
Accrued expenses and
deferred revenue (86) 296 1,294
Other (221) 1,698 2,223
Net cash provided by
operating activities 46,477 41,180 40,782
Investing activities:
Property and equipment
additions (78,386) (60,195) (51,226)
Proceeds from (investment
in) affiliates (1,002) 2,747 (4,219)
Proceeds from sale of
investment 1,393 7,200 --
Net cash used for investing
activities (77,995) (50,248) (55,445)
Financing activities:
Proceeds from long-term
debt 150,000 -- 75,000
Repayment of long-term debt (81,428) (39) (38)
Payment of license
rights liability -- (5,294) (4,954)
Payment of capital
lease obligations (498) (453) (577)
Borrowings under prior
revolving credit facility 27,000 23,000 35,500
Repayments of prior
revolving credit facility (61,000) (10,500) (90,500)
Debt issuance costs (5,829) -- (3,559)
Stock option activity 794 2,328 158
Disgorged profits -- 2,468 --
Net cash provided by
financing activities 29,039 11,510 11,030
Effect of exchange rates
on cash (52) (27) 37
Increase (decrease) in cash
and cash equivalents (2,531) 2,415 (3,596)
Cash and cash equivalents
at beginning of period 4,059 1,644 5,240
Cash and cash equivalents
at end of period $1,528 $4,059 $1,644
LodgeNet Entertainment Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollar amounts, except per share amounts, in thousands)
Quarters Ended December 31,
2001 2000
Revenues:
Guest Pay $50,325 $ 45,464
Other 2,753 2,597
Total revenues 53,078 48,061
Direct costs:
Guest Pay 21,367 18,831
Other 1,614 1,666
Total direct costs 22,981 20,497
Gross profit 30,097 27,564
Operating expenses:
Guest Pay operations 7,051 6,433
Selling, general and administrative 4,929 4,772
Depreciation and amortization 16,840 16,431
Total operating expenses 28,820 27,636
Operating income (loss) 1,277 (72)
Investment losses (1,102) (13,593)
Interest expense (8,217) (6,964)
Other income 360 59
Loss before income taxes (7,682) (20,570)
Provision for income taxes (255) (79)
Net loss $(7,937) $(20,649)
Per common share (basic and diluted):
Net loss $(.65) $(1.69)
Weighted average shares outstanding
(basic and diluted) 12,283,882 12,211,417
LodgeNet Entertainment Corporation
Five Quarter Summary
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
'01 '01 '01 '01 '00
Room Base Statistics
Total Rooms Served(a) 890,546 874,030 849,769 832,899 806,112
Total Guest Pay
Interactive Rooms(b) 812,149 794,359 769,213 744,587 725,075
Guest Pay Per Room
Statistics (per month)
Movie Revenue $16.76 $18.43 $18.55 $18.03 $17.16
Other Interactive
Service Revenue 4.17 4.93 4.59 4.21 4.04
Total Per Guest Pay Room $20.93 $23.36 $23.14 $22.24 $21.20
Guest Pay Operations Expense $2.93 $3.08 $3.15 $3.35 $3.00
Summary Operating Results
(Dollars amount in thousands)
Total Revenue $53,078 $57,681 $55,098 $51,038 $48,061
Gross Profit $30,097 $32,847 $31,846 $30,015 $27,564
EBITDA(c) $18,117 $20,324 $19,309 $17,377 $16,359
EBITDA (Twelve Months
Trailing) $75,127 $73,369 $72,365 $69,584 $67,764
Operating Income (Loss) $1,277 $4,029 $2,938 $876 $(72)
Gross Profit Margin 56.7% 56.9% 57.8% 58.8% 57.4%
SG&A as Percent of
Total Revenue 9.3% 9.3% 9.8% 10.4% 9.9%
EBITDA as Percent of
Total Revenue 34.1% 35.2% 35.0% 34.0% 34.0%
Operating Income (Loss)
Margin 2.4% 7.0% 5.3% 1.7% (0.1)%
(a) Total rooms served represents rooms receiving one or more of the
Company's services including rooms served by international licensees.
(b) Guest Pay interactive rooms receive one or more Guest Pay Services
such as movies, video games, music or other interactive services.
(c) EBITDA is defined by the Company as earnings before interest, income
taxes, depreciation, amortization, and other non-operating income or
expenses.
SOURCE: LodgeNet Entertainment Corporation