Press Release: Suburban Lodges of America, Inc.
August 3, 2001
ATLANTA, GA -- Suburban Lodges of America, Inc. (Nasdaq:SLAM), owner/franchisor of the Suburban Lodge and GuestHouse
International hotel brands and operator of 65 Company-owned Suburban Lodge hotels, today announced financial results
for its second quarter ended June 30, 2001.
Total revenue for the quarter increased by 3% to $19.9 million from $19.3 million in the second quarter of 2000.
The quarter's operating results were affected by several unusual charges, all of which are described below, resulting
in a net loss for the quarter of $7.0 million, or $0.58 per share. In the prior year second quarter, the Company
reported net income of $2.1 million, or $0.16 per share, including an after-tax gain of approximately $0.04 per
share from an insurance settlement.
As previously disclosed, the Company incurred a second-quarter 2001 after-tax loss of $7.6 million, or $0.64 per
share, as a result of the recent termination of its strategic relationship with HotelTools, Inc. and the resulting
write-off of $12.2 million of notes receivable from that entity. The impact of this write-off was mitigated by
estimated tax benefits of $4.6 million.
Further, the Company incurred a pre-tax charge of approximately $663,000 during the current year second quarter
in connection with the recent proxy contest, including its reimbursement of the expenses incurred by its two new
directors. Finally, the Company's bad debts expense increased by $398,000 in the second quarter of 2001 in comparison
with the second quarter of 2000. The bulk of the current year increase was attributable to the Company's franchise
operations, primarily because of the failure or inability of several GuestHouse International franchisees to pay
their fees. The current economic downturn has contributed to these hotels' inability to pay their franchise fees,
and two of the hotels are currently in receivership.
In the second quarter, Average Weekly Rates (AWR) for Company-owned hotels increased by 3% to $201.67 from $196.62
in the prior year second quarter, with an average occupancy rate of 81.3% versus 81.7% a year earlier. For the
quarter, weekly revenue per available room (RevPAR) increased by 2% to $163.37 from $160.64 in the second quarter
of 2000.
For the first six months of 2001, total revenue increased to $38.6 million, up 6% from revenue of $36.4 million
in the first half of 2000. The Company has recorded a net loss of $10.8 million, or $0.90 per share, in the current
year six-month period, including the effects of the second-quarter items discussed above and a first-quarter after-tax
loss of $4.2 million, or $0.35 per share, in impairment losses on land the Company has had in inventory for two
to three years and has now decided to sell rather than develop.
For the first six months of 2001, Average Weekly Rates (AWR) for Company-owned hotels increased by 2% to $200.97
from $196.62 in the prior year first half, with an average occupancy rate of 79.5% versus 77.8% a year earlier.
Weekly revenue per available room (RevPAR) increased by 4% to $158.98 in the first half of 2001 in comparison to
$152.59 in the first half of 2000.
David E. Krischer, Chairman and Chief Executive Officer, stated: ``The first half of 2001 has yielded several headline
events for Suburban Lodges but, at the heart of all of the news lies a solid business concept, the economy extended
stay hotel. Despite accelerating softness in the economy, our year-over-year RevPAR comparisons have outpaced the
hotel industry's comparisons every month this year. We have also held hotel-level operating expenses in line even
though we have seen large increases in two categories of expense, utilities and maintenance.
``As we enter the third quarter, economic malaise continues and business travel is down. Although less important
to our overall business, leisure travel is off as well. Year-over-year occupancy comparisons have worsened as we
enter the second half of the year. Preliminary July numbers indicate an approximate decline of between 375 and
425 basis points in the average occupancy rates for Company-owned hotels. Despite our best efforts, we see no reason
to believe that comparisons will improve as the quarter progresses although we expect the performance of our owned
hotels to continue to lead our industry.
``Although we've taken some large write-offs this year, each has been in connection with strategic decisions that
we believe have strengthened the Company and allowed us to sharpen our focus on our core businesses. We are continuing
to work with the Company's Board to review ways in which we may capitalize on our strengths in order to maximize
shareholder value,'' Mr. Krischer concluded.
Corporate Governance Matters
The Company also announced that, on July 31, 2001, its Board of Directors unanimously approved amendments to the
Company's By-Laws that (1) reduce the number of shares required to call a special meeting of shareholders from
40% to 25% of the outstanding shares and (2) require the unanimous approval of all of the directors in attendance
in order to take any action to restore the so-called ``dead hand'' (or ``continuing director'') provision to the
Company's shareholder rights plan. The Company's board of directors removed such provision from the Company's shareholder
rights plan in May 2001.
Forward-Looking Statements
This news release contains statements concerning the Company's plans, beliefs and expectations for the third quarter
of 2001 and its beliefs with respect to the effects of certain strategic decisions made this year which constitute
``forward-looking statements'' within the meaning of the federal securities laws. These forward-looking statements
involve known and unknown risks and uncertainties that could cause actual results to differ materially from the
expectations expressed or implied in such statements. These risks and uncertainties include, among others, changes
in economic conditions, financial markets or consumer demand for extended stay and other forms of lodging, the
level of competition in the extended stay and other lodging markets, the Company's financial condition and other
risks and uncertainties set forth in the Company's filings with the Securities and Exchange Commission.
All forward-looking statements included in this press release are based upon management's present expectations
and the information available at this time. The Company does not undertake any obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or other factors.
Suburban Lodges of America, Inc. owns, franchises and manages Suburban Lodge hotels, the nation's largest economy
extended stay lodging chain, and franchises GuestHouse International hotels, the owner-friendly brand of mid-market
nightly hotels.
Suburban Lodges of America, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
Revenue:
Hotel revenue $18,735 $18,072 $36,212 $34,031
Franchising revenue 964 904 1,987 1,685
Management and other revenue 206 298 381 653
-------- -------- -------- --------
Total revenue 19,905 19,274 38,580 36,369
-------- -------- -------- --------
Operating costs and expenses:
Hotel operating expenses 9,724 9,194 19,509 18,309
Corporate operating expenses 3,164 2,664 6,027 5,465
Bad debt expense 466 68 602 126
Proxy contest expenses 663 663
Expenses incurred in connection
with review of strategic
alternatives 6 481
Undeveloped site carrying costs 63 44 110 88
Depreciation and amortization 2,554 2,405 5,080 4,803
Impairment of long lived assets 545 6,687 545
Gains realized on property sales (68) (68)
-------- -------- -------- --------
Operating costs and
expenses - net 16,640 14,852 39,159 29,268
-------- -------- -------- --------
Income (loss) from operations 3,265 4,422 (579) 7,101
Other income (expense):
Interest income 209 189 443 434
Interest expense (2,486) (2,088) (4,916) (4,134)
Write-off of notes receivable
from HotelTools (12,213) (12,213)
Proceeds from legal settlement 842 842
Other (93) 5 (92) 15
-------- -------- -------- --------
Income (loss) before income
taxes (11,318) 3,370 (17,357) 4,258
Provision for income taxes (4,326) 1,264 (6,509) 1,597
-------- -------- -------- --------
Net income (loss) ($6,992) $2,106 ($10,848) $2,661
======== ======== ======== ========
Earnings (loss) per common
share:
Basic ($0.58) $0.16 ($0.90) $0.20
======== ======== ======== ========
Diluted ($0.58) $0.16 ($0.90) $0.20
======== ======== ======== ========
Weighted average number of
common shares outstanding:
Basic 11,981 13,335 11,992 13,603
======== ======== ======== ========
Diluted 11,981 13,335 11,992 13,603
======== ======== ======== ========
Suburban Lodges of America, Inc.
Consolidated Balance Sheets
(in thousands)
(Unaudited)
June 30, December 31,
2001 2000
------------ ------------
Assets
Current assets:
Cash and cash equivalents $7,360 $10,856
Accounts receivable, net of
reserves of $771 (2001) and
$327 (2000) 1,442 1,520
Notes receivable 608
Hotel inventory and supplies 2,539 2,538
Prepaid and refundable income taxes 4,296 260
Deferred income taxes 710 469
Prepaid expenses and other current
assets 2,235 2,081
------------ ------------
Total current assets 19,190 17,724
Assets held for sale 14,619
Property and equipment, net of
accumulated depreciation and
amortization of $32,439 (2001)
and $27,863 (2000) 278,485 299,392
Notes receivable from HotelTools, Inc. - 7,997
Other notes receivable 3,588 4,508
Acquired intangible assets - net 3,341 3,515
Deferred loan costs 1,899 2,097
Other assets 2,837 2,393
------------ ------------
Total assets $323,959 $337,626
============ ============
Liabilities and shareholders'
equity Current liabilities:
Current portion of long-term debt $1,852 $1,547
Construction accounts payable 905 1,314
Trade accounts payable 1,998 3,161
Accrued property taxes 1,264 720
Accrued wages and benefits 1,483 703
Other accrued liabilities 2,508 1,504
Other current liabilities 788 648
------------ ------------
Total current liabilities 10,798 9,597
Long-term debt, excluding
current portion 118,164 119,574
Deferred income taxes 1,549 3,958
Other liabilities 162 167
------------ ------------
Total liabilities 130,673 133,296
------------ ------------
Shareholders' equity:
Common stock 120 157
Additional paid-in capital 179,612 202,280
Retained earnings 13,760 24,608
------------ ------------
193,492 227,045
Less treasury stock, at cost 206 22,715
------------ ------------
Shareholders' equity, net 193,286 204,330
------------ ------------
Total liabilities and
shareholders' equity $323,959 $337,626
============ ============
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Contact:
Suburban Lodges of America, Inc.
Paul A. Criscillis, Jr., 770/799-5000