LodgeNet Accelerates Drive To Gain Free Cash Flow

MIAMI— LodgeNet Entertainment Corp. reaffirmed its third quarter guidance noting the company has accelerated its target date to reach net free cash flow to third-quarter 2003, according to company President/CEO Scott Petersen. “While we have the available capital and contract backlog to continue on our current growth trajectory, we determined that it is more prudent to modify our capital expenditure program to the benefit of profitability,” said Petersen. “Our focus is to reach net free cash flow after all growth expenditures by the third quarter of next year. Once we reach net free cash flow, it is our intent to continue to grow our company on a self-funded basis without reliance on additional debt financing. Given the size and scope of our company, we have substantial, internally generated cash flows with which to continue adding new rooms to the base while enhancing revenues via the installation of our new digital platform.” SVP/CFO Gary Ritondaro added: “We are modifying our business plan in two respects to achieve our accelerated net free cash flow date. First, we are increasing our required hurdle rates for room-based capital expenditures. Given the enhanced results we are experiencing with the new digital platform, the stricter criteria will increase long-term profitability while giving us the continued ability to serve our valued customers. Second, beginning next quarter, we will start to moderate the level of room-based capital expenditures to reduce our reliance on external debt financing to grow our company.” LodgeNet plans to add 65,000 net Guest Pay interactive rooms to its base this year and approximately 60,000 net rooms during 2003. In addition, the company expects to continue to deleverage its balance sheet during 2003 and be in a position to pay down debt in 2004