UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File No. 1-11342
LODGIAN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2093696
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3445 PEACHTREE ROAD, N.E.,
SUITE 700, ATLANTA, GA 30326
-------------------------- -----
(Address of principal executive offices) (Zip Code)
(404) 364-9400
-----------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, NOT APPLICABLE
if changed since last report) --------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
CLASS OUTSTANDING AS OF MAY 12, 1999
----- ------------------------------
Common 27,992,104
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998...........................3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1999 and 1998.............4
Condensed Consolidated Statements of Stockholders'
Equity for the Three Months Ended March 31, 1999
and for the Year Ended December 31, 1998.......................5
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999 and 1998.................6
Notes to Condensed Consolidated Financial Statements..............7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................13
SIGNATURES .................................................................14
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 18,293 $ 19,185
Cash, restricted ............................................... 6,127 6,302
Accounts receivable, net of allowances ......................... 28,612 25,498
Other current assets ........................................... 26,678 27,956
---------------- ----------------
Total current assets .............................................. 79,710 78,941
Property and equipment, net ....................................... 1,329,968 1,317,470
Deposits for capital expenditures ................................. 16,186 30,386
Other assets, net ................................................. 68,816 71,124
---------------- ----------------
$1,494,680 $1,497,921
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $ 56,935 $ 57,253
Accrued liabilities ............................................ 48,988 50,633
Current portion of long-term obligations ....................... 36,122 36,134
---------------- ----------------
Total current liabilities ......................................... 142,045 144,020
Long-term obligations, less current portion ....................... 818,627 816,644
Deferred income taxes ............................................. 61,841 63,469
Commitments and contingencies ..................................... - -
Minority interests:
Preferred redeemable securities ................................ 175,000 175,000
Other .......................................................... 15,642 15,021
Stockholders' equity
Common Stock, $.01 par value--75,000,000
shares authorized; 27,981,501 shares and 27,937,057 shares
issued and outstanding at March 31, 1999 and December 31,
1998, respectively .......................................... 278 278
Additional paid-in capital ..................................... 262,176 261,976
Retained earnings .............................................. 20,664 23,106
Accumulated other comprehensive loss ........................... (1,593) (1,593)
---------------- ----------------
Total stockholders' equity ........................................ 281,525 283,767
---------------- ----------------
$1,494,680 $1,497,921
================ ================
</TABLE>
See accompanying notes.
-3-
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rooms...................................................... $ 96,784 $ 55,833
Food and beverage.......................................... 32,070 22,146
Other...................................................... 6,950 4,902
-------------- --------------
-------------- --------------
Total revenues................................................ 135,804 82,881
-------------- --------------
Operating expenses:
Direct:
Rooms................................................... 26,264 15,509
Food and beverage....................................... 24,108 17,647
General and administrative................................. 5,229 2,387
Depreciation and amortization.............................. 13,750 7,207
Other...................................................... 47,840 27,650
-------------- --------------
Total operating expenses...................................... 117,191 70,400
-------------- --------------
Income from operations........................................ 18,613 12,481
Other Income (expenses):
Interest income and other.................................. 348 454
Interest expense........................................... (19,128) (7,846)
Minority interests:
Preferred redeemable securities............................ (3,159) -
Other...................................................... (744) (94)
-------------- --------------
(Loss) income before income tax............................... (4,070) 4,995
Benefit (provision) for income taxes.......................... 1,628 (1,999)
-------------- --------------
Net (loss) income............................................. $ (2,442) $ 2,996
============== ==============
(Loss) income per common share: .............................. $ (0.09) $ 0.14
============== ==============
(Loss) income per common share-assuming dilution.............. $ (0.09) $ 0.14
============== ==============
</TABLE>
See accompanying notes.
-4-
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
ACCUMU-
LATED
OTHER TOTAL
COMMON STOCK ADDITIONAL COMPRE- STOCK-
---------------------------- PAID-IN RETAINED HENSIVE HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
---------------- ---------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 ............ 20,974,852 $ 210 $ 211,577 $ 28,327 $ (579) $ 239,535
Issuance of common stock in
connection with the Merger ........ 9,400,000 94 82,626 - - 82,720
401(k) Plan contribution ............ 88,205 - 430 - - 430
Exercise of stock options ........... 134,900 1 1,143 - - 1,144
Tax benefit from exercise of stock
options ........................... - - 245 - - 245
Purchase of common stock ............ (2,660,900) (27) (34,045) - - (34,072)
Net loss ............................ - - - (5,221) - (5,221)
Currency translation adjustments .... - - - - (1,014) (1,014)
---------------- ---------- ------------- ------------ ----------- ------------
Balance at December 31, 1998 ............ 27,937,057 278 261,976 23,106 (1,593) 283,767
401(k) Plan contribution ............ 44,444 - 200 - - 200
Net loss ................................ - - - (2,442) - (2,442)
================ ========== ============= ============ =========== ============
Balance at March 31, 1999 ............... 27,981,501 $ 278 $ 262,176 $ 20,664 $ (1,593) $ 281,525
================ ========== ============= ============ =========== ============
</TABLE>
The data for the three months ended March 31, 1999 is unaudited.
See accompanying notes.
-5-
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $9,968 $ 9,568
------------ -----------
<S> <C> <C>
INVESTING ACTIVITIES:
Capital expenditures, net ......................................... (29,848) (14,258)
Proceeds from sale of assets ...................................... 3,600 -
Acquisitions of property and equipment ............................ - (35,411)
Net withdrawals (deposits) for capital expenditures ............... 14,200 (5,232)
Deposits for asset purchases ...................................... - (8,558)
Other ............................................................. - 692
------------ -----------
Net cash used in investing activities ............................. (12,048) (62,767)
------------ -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations ................... 6,273 54,788
Proceeds from issuance of common stock ............................ - 515
Principal payments on long-term obligations ....................... (4,302) (1,512)
Payments of deferred loan costs ................................... (660) (900)
Contributions from (distributions to) minority interests .......... (123) 232
------------ -----------
Net cash provided by financing activities ......................... 1,188 53,123
------------ -----------
Net decrease in cash and cash equivalents ............................. (892) (76)
Cash and cash equivalents at beginning of period ...................... 19,185 15,243
------------ -----------
Cash and cash equivalents at end of period ............................ $18,293 $15,167
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for:
Interest, net of amount capitalized ............................... $22,015 $ 6,636
============ ===========
Income taxes ...................................................... - $ 285
============ ===========
</TABLE>
See accompanying notes.
-6-
<PAGE>
LODGIAN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The condensed consolidated financial statements include the accounts of Lodgian,
Inc. ("Lodgian" or the "Company"), its wholly-owned subsidiaries and
partnerships in which Lodgian exercises control over the partnerships' assets
and operations. Lodgian believes it has control of partnerships when the Company
manages and has control of the partnerships' assets and operations, has the
ability and authority to enter into financing arrangements on behalf of the
entity or to sell the assets of the entity within reasonable business
guidelines. Investments in partnerships (operating seven hotels) where the
Company's ownership is between 20%-50% are accounted for on the equity method.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The accounting policies followed for quarterly financial reporting are the same
as those disclosed in Note 1 of the Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting primarily of normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of March 31, 1999, and the results of its operations and its cash
flows for the three month periods ended March 31, 1999 and 1998. While
management believes that the disclosures presented are adequate to make the
information not misleading, these financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
(In Thousands, except
per share data)
Numerator:
Net (loss) income .............................. $(2,442) $2,996
============ ===========
Denominator:
Denominator for basic earnings per
share--weighted-average shares .......... 27,056 20,989
Effect of dilutive securities:
Employee stock options ................... - 448
------------ -----------
Denominator for dilutive earnings per
share--adjusted weighted-average shares .. 27,056 21,437
============ ===========
Basic earning per share:
Net (loss) income ........................... $(0.09) $0.14
============ ===========
Diluted earnings per share:
Net (loss) income ........................... $(0.09) $0.14
============ ===========
The 1999 computation of diluted earnings per share did not include shares
associated with the assumed conversion of the Convertible Redeemable Equity
Structure Trust Securities, employee stock options and contingent shares in
connection with the Merger because their inclusion would have been antidilutive.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Management believes that results of operations in the hotel industry are best
explained by four key performance measures: occupancy levels, average daily rate
("ADR"), revenue per available room ("RevPAR") and Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") margins. These measures are
influenced by a variety of factors including national, regional and local
economic conditions, the degree of competition with other hotels in the area and
changes in travel patterns. The demand for accommodations is also affected by
normally recurring seasonal patterns and most of our hotels experience lower
occupancy levels in the fall and winter months (November through February) which
may result in lower revenues, lower net income and less cash flow during these
months.
Our business strategy includes the acquisition of underperforming hotels and the
implementation of our operational initiatives and repositioning and renovation
programs to achieve revenue and margin improvements. Such initiatives typically
require a 12 to 18 month period before newly acquired, underperforming hotels
are repositioned and stabilized. During this period, the revenues and earnings
of these hotels may be adversely affected and may have a negative impact on
RevPAR, average daily rate and occupancy rate performance, as well as operating
margins for the Company overall. In addition, our strategy also includes
developing new full service hotels. Newly developed properties typically require
24 months following completion to stabilize. To track the execution of our
repositioning and development growth strategy's impact on the Company's results
of operations, we classify our hotels as either "Stabilized Hotels,"
"Stabilizing Hotels" or "Being Repositioned Hotels," as described below:
STABILIZED HOTELS are properties which have experienced little or no
disruption to their operations over the past 24 to 36 months as the result
of redevelopment or repositioning efforts or newly-constructed hotels which
have been in service for 24 months or more.
STABILIZING HOTELS are (1) properties which have undergone renovation or
repositioning investment within the last 36 months, which work is now
completed, or (2) newly developed properties placed into service within the
past 24 months. Management believes that these properties should experience
higher rates of growth in RevPAR and operating margin than the Stabilized
Hotels. On average, our hotels which have undergone renovation have
generally reached stabilization within approximately 12 to 18 months after
their completion date, and our newly developed hotels have reached
stabilization in approximately 24 months after their completion date.
BEING REPOSITIONED HOTELS are hotels experiencing disruption to their
operations due to renovation and repositioning. During this period
(generally 12 to 18 months) hotels will usually experience lower operating
results, such as RevPAR, and operating margins. We expect significant
improvements in the operating performance of those hotels which have
undergone repositioning once the renovation is completed. After the
reposition work is completed these properties will be reclassified as
Stabilizing Hotels.
Management classifies each hotel into one of the three categories at the
beginning of each fiscal year. Management will determine the category most
appropriate for each hotel based on its evaluation of objective and subjective
factors, including the time of completion of renovation and whether the full
benefit of renovations have been realized.
-8-
<PAGE>
THREE MONTHS ENDED MARCH 31, 1999 ("FIRST QUARTER 1999") COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1998 ("FIRST QUARTER 1998")
HISTORICAL RESULTS OF OPERATIONS
In June 1998, the Company acquired AMI Operating Partners, L.P. ("AMI"), an
entity that owned and operated 14 hotels, three of which were subsequently sold.
In December 1998, the Company merged (the "Merger") with Impac Hotel Group, LLC
("Impac"), an entity that owned or managed 55 hotels, three of which are under
construction. Because these transactions were accounted for using the purchase
accounting method, the results of AMI and Impac are included in our consolidated
results of operations from the time they were acquired. This makes comparisons
of our historical operating results with prior periods less meaningful.
REVENUES
Revenues are composed of room, food and beverage and other revenues. Room
revenues are derived from guest room rentals, whereas food and beverage revenues
primarily include sales from our hotel restaurants, room service and hotel
catering. Other revenues include charges for guests' long-distance telephone
service, laundry service, use of meeting facilities and fees earned by us for
services rendered in conjunction with managed properties.
Revenues for the Company were $135.8 million for the First Quarter 1999, a 63.8%
increase over revenues of $82.9 million for the First Quarter 1998. Of this
$52.9 million increase, $49 million was attributable to the acquisition of AMI
and the Merger.
The following table summarizes certain operating data for the Company's hotels
for the three months ended March 31, 1999 and 1998. The Stabilized, Stabilizing
and Being Repositioned Hotels refers to classifications in these respective
categories as of January 1, 1999.
<TABLE>
<CAPTION>
HOTELS (1) ADR OCCUPANCY REVPAR
------------------- ----------------------- --------------------- -----------------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stabilized ........... 77 50 $ 73.94 $75.25 62.50% 60.90% $46.20 $ 45.80
Stabilizing .......... 33 12 $ 75.51 $70.79 58.30% 53.90% $44.01 $ 38.18
Being Repositioned ... 21 8 $ 73.81 $73.08 42.50% 47.10% $31.37 $ 34.45
-------- -------- ----------- ---------- ---------- --------- ---------- -----------
Total ................ 131 70 $ 74.23 $74.25 57.80% 57.70% $42.90 $ 42.82
======== ======== =========== ========== ========== ========= ========== ===========
</TABLE>
(1) Excludes two hotels managed for third parties and the seven partially owned
non-consolidated hotels. All 1998 figures in the table exclude AMI and the
Merger.
OPERATING EXPENSES
Operating expenses are composed of direct, general and administrative, other
hotel operating expenses and depreciation and amortization. Direct expenses,
including both rooms and food and beverage operations, reflect expenses directly
related to hotel operations. These expenses are primarily variable with
available rooms and occupancy rates, but also have a small fixed component which
can be leveraged with increases in revenues. General and administrative expenses
represent corporate salaries and other corporate operating expenses and are
generally fixed. Other expenses include primarily property level expenses
related to general operations such as marketing, utilities, repairs and
maintenance and other property administrative costs. These expenses are
primarily fixed.
Direct operating expenses for the Company were $50.4 million (39.1% of direct
revenues) for the First Quarter 1999 and $33.2 million (42.5% of direct revenue)
for the First Quarter of 1998. Of the $17.2 million increase, $16.1 million was
attributable to the acquisition of AMI and the Merger.
-9-
<PAGE>
General and administrative expenses were $5.2 million in First Quarter 1999 and
$2.4 million in First Quarter 1998. Of the $2.8 million increase, approximately
$2.3 million was attributable to the acquisition of AMI and the Merger.
Additionally, $.5 million represents non-recurring expenses, principally
severance.
Depreciation and amortization were $13.8 million in First Quarter 1999 and $7.2
million in First Quarter 1998. The $6.6 million increase was attributable to the
acquisition of AMI, the Merger and the completion of renovation projects.
Other operating expenses were $47.8 million in First Quarter 1999 and $27.6
million in First Quarter 1998. Of the $20.2 million increase, $18.4 million was
attributable to the acquisition of AMI and the Merger. In addition, $1.0 million
was attributable to the Company's share of loss from an unconsolidated
partnership, including $.5 million of depreciation.
As a result of the above, income from operations was $18.6 million in First
Quarter 1999 as compared to $12.5 million in First Quarter 1998.
Interest expense was $19.1 million in First Quarter 1999 and $7.8 million in
First Quarter 1998. This increase is primarily a result of an increase in the
level of debt associated with the acquisition of AMI and the Merger.
Minority interest expense was $3.9 million in First Quarter 1999 and $.1 million
in First Quarter 1998. Of the $3.8 million increase, $3.2 million represents
interest on the Company's Convertible Redeemable Equity Structure Trust
Securities that were issued in June 1998.
NET INCOME (LOSS)
After a tax benefit of $1.6 million in First Quarter 1999 and a provision for
income taxes of $2.0 million in First Quarter 1998, the Company had a net loss
of $2.4 million ($.09 per share) in First Quarter 1999 compared with net income
of $3.0 million ($.14 per share) in First Quarter 1998.
INCOME TAXES
As of December 31, 1998 the Company had a net operating loss carryforward of
approximately $45.3 million for federal income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are existing cash balances and cash
flow from operations. The Company had earnings from operations before interest,
taxes, depreciation and amortization ("EBITDA") for the three months ended March
31, 1999 of $32.9 million, a 66.2% increase over the $19.8 million for the 1998
period. EBITDA is a widely regarded industry measure of lodging performance used
in the assessment of hotel property values although EBITDA is not indicative of
and should not be used as an alternative to net income or net cash provided by
operations as specified by generally accepted accounting principles. Net cash
provided by operating activities for the three months ended March 31, 1999 was
$10.0 million as compared to $9.6 million for the 1998 period.
At March 31, 1999, the Company had a working capital deficit of $62.3 million as
compared to a working capital deficit of $65.1 million at December 31, 1998.
At March 31, 1999 the Company's long-term obligations were $818.6 million, not
including $175 million of Convertible Redeemable Equity Structure Trust
Securities. The Company's long-term obligations were $816.6 million at December
31, 1998.
Certain of the Company's hotels are operated under license agreements that
require the Company to make capital improvements in accordance with a specified
time schedule. Additionally, in connection with the refinancing of hotels, the
Company has agreed to make certain capital improvements and, as of March 31,
1999, has approximately
-10-
<PAGE>
$16 million escrowed for such improvements. The Company estimates its remaining
obligations for all of such commitments to be approximately $62 million, of
which approximately $27 million is expected to be spent during 1999 and 2000.
In connection with the Merger on December 11, 1998, the Company obtained $265
million of mortgage notes from Lehman Brothers Holding, Inc. ("Lehman"). The net
proceeds were used to repay existing debt and related obligations. This
financing contains various covenants and coverage ratios, with which the Company
is in compliance at March 31, 1999.
At the time of the Merger, $23 million of the $265 million provided by Lehman
was set aside in escrow for future capital improvements. In March 1999, Lehman
released $15 million from escrow, and simultaneously issued the Company a
commitment for $15 million to replenish this escrow at a future date. This
additional loan is expected to close in May, thereby increasing the total
facility to $280 million on the same terms and conditions as previously
described.
Continuation of the Company's current growth strategy will require additional
financing. Further, under the terms of the Lehman financing, future acquisitions
will be subject to Lehman's prior approval, and the Company does not currently
have any lines of credit. The Company's financial position may, in the future,
be strengthened through an increase in revenues, the refinancing of its
properties or capital from equity or debt markets. There is no assurance the
Company will be successful in these efforts.
INFLATION
The rate of inflation has not had a material effect on the Company's revenues or
costs and expenses in recent years and it is not anticipated that inflation will
have a material effect on the Company in the near term.
YEAR 2000 MATTERS
The Year 2000 Issue is the result of certain computer programs being written
using two digits rather than four to define the applicable year. Certain of the
Company's computer programs may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in miscalculations causing
disruptions of operations, including a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on its recently completed assessment, the Company determined that it will
be required to modify or replace portions of its existing software so that its
computer systems will properly utilize dates beyond December 31, 1999.
The Company has divided its year 2000 issues into what it considers to be
critical and non-critical issues. The Company believes that in its line of
business the critical issues revolve around the ability to process transactions
from the reservation stage through settlements and collection at the hotel.
Additionally, of prime importance is the maintenance of accurate accounting and
corporate records.
The systems that the Company has identified as being critical include but may
not be limited to the following: Unix Operating System, Property Management
Systems, Point of Sale Systems, Oracle General Ledger System and Credit Card
Processing, as well as the Company's banking relationships and
telecommunications vendors.
The Company has also identified non-critical issues including, but not limited
to, stand alone personal computers, other third party vendors and possible
security issues.
The Company has initiated formal communications with its significant suppliers
to determine the Company's vulnerability to those third parties' failure to
remediate their own Year 2000 Issue. There can be no guarantee that the systems
of the Company's suppliers will be timely converted and would not have an
adverse effect on the Company.
-11-
<PAGE>
The Company will utilize both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. The Company has not
determined the total cost of the year 2000 project. However, the costs are
neither expected to exceed $1,000,000 nor have a material effect on its
financial statements. All expenditures have been appropriately identified
through the 1999 hotel capital improvements budget. The Company has spent less
than $150,000 to date, all of which has been expensed. The Company anticipates
completing the Year 2000 project not later than August 31, 1999, which is prior
to any anticipated impact on its operating systems.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated.
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q which express "belief," "anticipation," or
"expectation," as well as other statements which are not historical fact, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve risks and uncertainties. Moreover,
there are important factors which include, but are not limited to, general and
local economic conditions, risks relating to the acquisition, renovation and
operation of hotels, government legislation and regulation, competition in the
lodging industry, changes in interest rates, the impact of rapid growth, the
availability of capital to finance growth, the historical cyclicality of the
lodging industry, year 2000 matters and other factors described in other
Lodgian, Inc. filings with the United States Securities and Exchange Commission,
all of which are difficult to predict and many of which are beyond the control
of the Company. Actual results could differ materially from these
forward-looking statements. In light of the risks and uncertainties, there is no
assurance that the forward-looking statements contained in this Form 10-Q will
in fact prove correct or occur. The Company does not undertake any obligation to
publicly release the results of any revisions to these forward-looking
statements to reflect future events or circumstances.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of the exhibits required to be filed as part of this
Report on Form 10-Q is set forth in the "Exhibit Index" which
immediately precedes such exhibits, and is incorporated herein by
reference.
(b) Reports on Form 8-K
A report on Form 8-K/A was filed on February 26, 1999, relating
to pro forma financial statements with respect to the Merger.
A report on Form 8-K was filed on April 2, 1999, relating to
Lodgian's Shareholder Rights Plan.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LODGIAN, INC.
Registrant
DATE: May 15, 1999 /s/ Robert S. Cole
Robert S. Cole
President and Chief Executive Officer
DATE: May 15, 1999 /s/ Kenneth R. Posner
Kenneth R. Posner
Chief Financial Officer
-14-
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule (For SEC use only)
-15-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1999 AND CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 24420
<SECURITIES> 0
<RECEIVABLES> 28612
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79710
<PP&E> 1329968
<DEPRECIATION> 0
<TOTAL-ASSETS> 1494680
<CURRENT-LIABILITIES> 142045
<BONDS> 818627
0
175000
<COMMON> 278
<OTHER-SE> 281247
<TOTAL-LIABILITY-AND-EQUITY> 1494680
<SALES> 0
<TOTAL-REVENUES> 135804
<CGS> 0
<TOTAL-COSTS> 117191
<OTHER-EXPENSES> 3555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19128
<INCOME-PRETAX> (4070)
<INCOME-TAX> 1628
<INCOME-CONTINUING> (2442)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2442)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
