BOSTON, Aug. 14, 2006 (PRIMEZONE) -- Sonesta International Hotels Corporation (Nasdaq:SNSTA) today reported a net loss of $233,000, or $(0.06) per share, in the quarter ended June 30, 2006, compared to net income of $893,000, or $0.24 per share, in the quarter ended June 30, 2005. Gross revenues were $22,839,000 in the 2006 quarter, compared to $25,900,000 in the 2005 quarter. The Company had operating income of $115,000 in the second quarter of 2006, compared to $2,049,000 during the same period in 2005.
For the six-month period ended June 30, 2006, the net loss was $223,000, or $(0.06) per share, compared to net income of $4,996,000, or $1.35 per share, for the six-month period ended June 30, 2005. Revenues were $46,777,000 in the 2006 period, compared to $51,028,000 in 2005. Operating income was $706,000 in the six-month period ended June 30, 2006 compared to $3,398,000 in 2005.
The reduction in revenues during the 2006 second quarter was almost entirely due to a $2,926,000 decrease in revenues of Royal Sonesta Hotel New Orleans compared to the 2005 second quarter. The Hotel, along with other hotels in New Orleans, experienced a substantial decrease in group and convention business. The decrease in operating income during the 2006 second quarter was due to decreased income from Royal Sonesta Hotel New Orleans, and a reduction in management fee income from Chateau Sonesta Hotel New Orleans, and from the Company's managed hotels in Egypt. In addition, second quarter operating income from Sonesta Beach Resort Key Biscayne declined by $945,000 compared to the 2005 second quarter. This was mainly due to an $899,000 increase in depreciation expense compared to last year due to additional depreciation charges resulting from the revision of the useful lives of certain furniture and equipment used in connection with the operations of the Hotel, which is scheduled to close August 31, 2006. A partnership in which the Company is a 50% owner intends to redevelop the site with a new, luxury condominium hotel and residences.
The decrease in revenues during the first six months of 2006 was primarily from a $4,154,000 revenue decline at Royal Sonesta Hotel New Orleans. The decrease in operating income of $2,692,000 in the first half of 2006 compared to 2005 was primarily due to decreased income of $544,000 at Royal Sonesta Hotel New Orleans, reduced management fee income of $512,000 from Chateau Sonesta Hotel New Orleans, and a $1,419,000 reduction of income from Sonesta Beach Resort Key Biscayne. The decrease in Key Biscayne resulted from a $1,391,000 increase in depreciation expense.
The Company recorded a net tax benefit of approximately $3,519,000 during the first half of 2005. Prior to December 31, 2004, the Company had recorded valuation allowances of $4,158,000 against federal and state income tax benefits, because it was uncertain whether it would realize a future benefit for losses incurred primarily during 2003 and 2004. A transaction involving the redevelopment of Sonesta Beach Resort Key Biscayne, which included the transfer in April 2005 of the land and improvements of the hotel to a partnership in which the Company is a 50% owner, resulted in substantial taxable income in 2005. Because the Company was able to utilize the loss carry-forwards, it reversed the valuation allowances in the 2005 first quarter.
The reduction in interest expense resulted from the repayment of the mortgage loan on Sonesta Beach Resort Key Biscayne, and the reduction of the principal balance of the mortgage loan on Royal Sonesta Hotel Boston (Cambridge), both in April 2005. These loan repayments were also related to the transaction involving the redevelopment of Sonesta Beach Resort Key Biscayne into a new, luxury condominium hotel and residences. Interest income during 2006 benefited from the increase in short term investment income on the Company's cash balances, which included cash proceeds related to the Key Biscayne transaction.
Sonesta's stock is traded on the NASDAQ stock market under the symbol SNSTA.
SONESTA INTERNATIONAL HOTELS CORPORATION
Financial Summary
(000 omitted except
for per share data) Three months ended Six months ended
June 30 June 30
2006 2005 2006 2005
Operating revenues $ 22,839 $ 25,900 $ 46,777 $ 51,028
Operating income
before depreciation
and amortization
expense 2,972 3,962 6,072 7,299
Depreciation and
amortization 2,857 1,913 5,366 3,901
-------- -------- -------- --------
Operating income 115 2,049 706 3,398
Other income
(deductions):
Interest expense (751) (923) (1,494) (2,447)
Interest income 342 273 716 411
Other income 26 125 36 115
-------- -------- -------- --------
(383) (525) (742) (1,921)
Income (loss) before
income taxes (268) 1,524 (36) 1,477
Income tax provision
(benefit) (35) 631 187 (3,519)
-------- -------- -------- --------
Net income (loss) $ (233) $ 893 $ (223) $ 4,996
Net income (loss) per
share of common stock $ (0.06) $ 0.24 $ (0.06) $ 1.35
Average number of
common shares
outstanding 3,698 3,698 3,698 3,698