Press Release: Candlewood Hotel Company, Inc.
February 23, 2001
WICHITA, KS -- Candlewood Hotel Company, Inc. (Nasdaq: CNDL), a leading owner, manager, developer and franchisor
of high-quality, value-oriented, business-travel hotels, yesterday announced results for its fourth quarter and
year ended December 31, 2000. In 2000, the company reported income before preferred dividends of $5.7 million versus
a $2.8 million loss before preferred dividends in 1999. Total operating revenues rose 23 percent, driven by more
mature properties, a larger portfolio, and direct sales and marketing initiatives.
``The strong execution of our strategies and a commitment to our goals resulted in significant growth in income
from operations in 2000,'' said Jack P. DeBoer, chairman and chief executive officer. ``With 11 percent more properties
in our portfolio and successful national advertising initiatives, which augments our unique direct sales effort,
supporting a 7.8 percentage point increase in occupancy, we improved corporate hotel operations revenues by 21
percent, and expanded revenue per available room (RevPAR) by 11.8 percent. Income before preferred dividends was
positive as a result of the higher revenues and an increase in hotel operating margin. Our more mature properties
and our ability to leverage economies of scale contributed to the margin improvement. At year end, the Candlewood
and Cambridge brands had 101 hotels open or under construction, 63 of which have been in operation for two years
or more.''
2000 Results
Total hotel operating revenues for 2000 were $131.2 million compared with $106.9 million a year earlier. Income
from hotel operations (hotel operating revenues less hotel and related corporate operating expenses and hotel opening
costs) was $56.5 million for 2000 compared with $40.2 million for 1999. Hotel operating margin improved 5.5 percentage
points to 43.1 percent from 37.6 percent. Income before preferred dividends was $5.7 million compared with a loss
of $2.8 million in 1999. Net loss after preferred stock dividends improved to $2.3 million, or $0.26 per share,
from a net loss of $10.8 million, or $1.20 per share, a year earlier.
Comparing the operating results of the Candlewood hotels owned, leased and managed by the Company (including unconsolidated
entities, but excluding franchise results), RevPAR increased 11.8 percent to $44.00 from $39.34 in 1999. The average
daily rate (ADR) for these properties in 2000 was $58.25 versus $58.12 a year earlier. Average occupancy for these
properties was 75.5 percent, up substantially from 67.7 percent in 1999. The Company owned, leased or managed 73
hotels, including 66 owned or leased and seven operated through joint ventures as of December 31, 2000, compared
with 66 hotels -- 65 owned or leased and one joint venture -- at December 31, 1999.
Fourth Quarter Results
Total hotel operating revenues for the 2000 fourth quarter were $31.2 million compared with $28.2 million a year
earlier. Income from hotel operations for the fourth quarter of 2000 was $12.3 million compared with $9.8 million
for the same period in 1999. The loss before preferred dividends was $665,000 compared with a loss of $3.0 million
for the fourth quarter of 1999. Net loss after preferred stock dividends narrowed to $2.7 million, or $0.30 per
share, compared with a loss of $5.0 million, or $0.56 per share, for the last three months of 1999. The fourth
quarter is traditionally the weakest period for the Company as business travel slows from mid-November through
December.
Comparing the operating results of the Candlewood hotels owned, leased and managed by the Company (including unconsolidated
entities but excluding franchise results), RevPAR increased 7.1 percent to $41.39 from $38.66 last year. ADR for
these properties in the fourth quarter of 2000 was $59.05 versus $55.60 a year earlier. Average occupancy for these
properties was 70.1 percent, up from 69.5 percent for the fourth quarter of 1999.
Interest and Dividend Coverage Expands
Commenting on the financial position of the Company, Warren D. Fix, chief financial officer, said, ``We ended the
year with a cash balance of $21.8 million. Operationally, our coverage of EBITDA, before capital expenditures,
to net interest and dividends was 1.24 times for the year, compared with 0.9 times in 1999. This is indicative
of the maturation of our properties and growth in our fee-based business. Our fee-based revenue, including franchise
royalties, management fees and our participation in joint venture income, increased 137 percent in 2000 compared
with 1999, and represented 11 percent of EBITDA in 2000.''
Outlook Promising as Franchisee Pipeline Grows
``The efforts of our young franchising program are now paying off, as we broke ground on the 101st hotel at year
end, exceeding an objective we set at the beginning of the year. In 2000, we opened six franchised hotels, began
construction on an additional nine franchised hotels and executed 23 new franchise applications. Moreover, our
franchisee pipeline is robust as we enter 2001. As we've stated before, we believe that franchising is our primary
vehicle for brand growth, and expect to maintain this approximate level of activity over the next 12 months,''
said DeBoer.
``Incremental growth will come from our joint venture properties where we provide our expertise in exchange for
management and development fees and a significant stake in the equity of the project. Our joint ventures have been
structured to support income growth and portfolio expansion. We plan to open three new joint-venture properties
in the first half of the year, supporting continued growth in this high-margin, fee-based business.''
DeBoer continued, ``The Company's goal for 2001 is to exceed industry RevPAR growth, which is estimated to be approximately
3-4 percent. Our goal is based on decelerating supply and the historically strong RevPAR growth of the extended-stay
segment of the hospitality market. Additionally, as we expand our national presence through aggressive advertising
and a successful franchising program, we expect more aggressive yield (RevPAR) management. Finally, the opening
of 'our Jersey City hotel in April and the continued ramp up of the first full year of operation at our Las Vegas
hotel should favorably impact revenues.''
Year 2000 Conference Call
Candlewood's fourth quarter and 2000 investor conference call is scheduled for 10 a.m. ET today. This call will
be simulcast and available over the Internet via the web site www.streetfusion.com . The webcast will be available
for replay for a period of 30 days.
Candlewood Hotel Company, headquartered in Wichita, Kansas, owns, operates and franchises Candlewood Suites --
hotel properties that target mid-market business travelers and others on short- or long-term stays. Candlewood
also franchises an upscale brand, Cambridge Suites. The Company was founded in late 1995.
The financial results reported in this press release are unaudited. The 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 the Company's results include: the risk that
openings may be delayed, the availability of financing 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 inability to improve RevPAR through the management of occupancy levels
and pricing, the ability to attract and retain quality personnel, the risk that overbuilding in the hospitality
industry will adversely affect occupancy levels and pricing, operating performance of the Company's hotels and
general economic conditions. Actual results may differ materially from management's expectations.
CANDLEWOOD HOTEL COMPANY, INC.
FOURTH QUARTER OPERATING RESULTS
(Unaudited) (In thousands, except per share data)
For the three
months ended For the year ended
December 31, December 31,
2000 1999 2000 1999
Revenues:
Hotel operations $30,067 $27,709 $127,771 $105,467
Other income 1,169 478 3,458 1,459
Total hotel operating revenues 31,236 28,187 131,229 106,926
Proceeds from sales of hotels, net
of deferred gain of $0
and $2,319, respectively - - - 24,281
Deferred gain recognition on sales
of hotels 596 425 2,183 1,329
Total revenues 31,832 28,612 133,412 132,536
Operating costs and expenses:
Hotel operating expenses 16,964 16,465 68,005 60,218
Corporate operating expenses 1,828 1,855 6,437 5,390
Rent expense on leased hotels 6,204 6,240 25,056 24,821
Hotel opening costs 122 98 279 1,103
Abandoned site costs - 1,180 - 2,043
Depreciation and amortization 2,661 2,493 10,521 8,452
Total operating costs and expenses 27,779 28,331 110,298 102,027
Cost of hotels sold - - - 24,281
4,053 281 23,114 6,228
Interest income 316 271 1,150 1,034
Interest expense (5,034) (3,540) (18,577) (10,053)
Income (loss) before preferred
dividends (665) (2,988) 5,687 (2,791)
Preferred stock dividends (2,017) (2,022) (8,025) (8,025)
Net loss available to common
stockholders $(2,682) $(5,010) $(2,338) $(10,816)
Per share data:
Net loss per share of common stock
- basic and diluted $(0.30) $(0.56) $(0.26) $(1.20)
Average weighted shares of common
stock outstanding 9,025 9,025 9,025 9,025
CANDLEWOOD HOTEL COMPANY, INC.
For the three
months ended For the year ended
December 31, December 31,
2000 1999 2000 1999
Hotel statistics (all owned, leased
or managed)
# of Hotels 73 66 73 66
Average occupancy % 70.1% 69.5% 75.5% 67.7%
Average daily rate $59.05 $55.60 $58.25 $58.12
Revenue per available room $41.39 $38.66 $44.00 $39.34
Growth 7.1% 11.8%
Hotel statistics - comparable hotels
(owned, leased or managed open as
of beginning of period)
# of Hotels 65 65 54 54
Average occupancy % 70.1% 69.9% 77.1% 68.8%
Average daily rate $56.63 $55.56 $56.35 $58.19
Revenue per available room $39.71 $38.84 $43.42 $40.03
Growth 2.2% 8.5%
As of December 31,
2000 1999
Open Hotels
Owned 32 31
Leased 34 34
Managed (a) 2 2
Joint Venture 6 -
Franchised (b) 17 11
Total Open 91 78
Under Construction
Owned 1 2
Leased - -
Managed - -
Joint Venture 3 6
Franchised 7 5
Total Under Construction 11 13
Total Hotels 102 91
Open Rooms
Owned 3,971 3,695
Leased 3,893 3,893
Managed (a) 179 179
Joint Venture 785 -
Franchised (b) 1,907 1,240
Total Open 10,735 9,007
Under Construction Rooms
Owned 214 492
Leased - -
Managed (a) - -
Joint Venture 373 785
Franchised 666 563
Total Under Construction 1,253 1,840
Total Rooms 11,988 10,847
Signed Franchise Agreements 27 13
(a) includes 2 Managed Hotels not under the Candlewood Brand
(b) includes 1 hotel that is both a Joint Venture and Managed by
the Company
SOURCE: Candlewood Hotel Company, Inc.