Red Lion Hotels Reports Third Quarter 2011 Results and Achieves Strategic Milestones
SPOKANE, Wash., Nov. 3, 2011 // PRNewswire // -- Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, today announced its results for the third quarter ended September 30, 2011. Comparable operating results for the periods included in this release exclude from hotel operations the results of the Red Lion Hotel on Fifth Avenue in Seattle, which was sold in the second quarter of 2011. Following the sale, this property continues to operate as a franchised hotel and, therefore, the company is required to report its financial results in continuing operations.
Third Quarter and Key Subsequent Event Overview:
- RevPAR for comparable owned and leased hotels increased 3.5 percent year over year
- ADR for comparable owned and leased hotels increased 0.3 percent compared to prior year
- Occupancy for comparable owned and leased hotels increased 210 basis points over prior year
- On a comparable basis, EBITDA from continuing operations before special items decreased $2.3 million compared to prior year
- Completed acquisition of 10 previously leased hotels
- Signed three new hotel franchise agreements in New Mexico
- Completed refinance of maturing debt; closed on expanded credit facility
Total revenue reported during the third quarter was $46.2 million compared to total revenue of $49.8 million in the third quarter of 2010. On a comparable basis, total revenue increased $0.8 million from $45.4 million in the third quarter of 2010. Third quarter 2011 reported net loss from continuing operations was $0.1 million, or $0.01 per share, compared to net income from continuing operations of $3.2 million, or $0.17 per diluted share, for the prior year period. EBITDA from continuing operations before special items for the third quarter of 2011 was $8.2 million, compared to $12.4 million ($10.5 million on a comparable basis) for the third quarter of 2010. Third quarter 2011 results include a $2.2 million impairment charge, which is classified as a special item, related to the Red Lion Colonial Hotel in Helena, MT. The Red Lion Colonial Hotel is classified as an asset held for sale on the balance sheet.
"We were pleased with our RevPAR growth this quarter, particularly when compared with national results among midscale hotels," said Jon E. Eliassen, President and Chief Executive Officer of Red Lion Hotels Corporation. "We also achieved several key objectives, all resulting in improving our balance sheet. We refinanced maturing debt on three properties and completed an expanded credit facility. In addition, today we announced the acquisition of ten previously leased properties which was an important strategic move for the company. These actions provide us significant financial and operational flexibility going forward and allow us to focus on the Red Lion brand."
Operating results for the three and nine months ended September 30, 2011, and September 30, 2010, follow:
In addition, on a comparable basis, key hotel operating metrics and hotel revenues and operating margin for the three and nine months ended September 30, 2011, and September 30, 2010, are highlighted below for owned and leased hotels:
Third Quarter 2011 Results
In the third quarter of 2011, for comparable hotels, excluding Seattle Fifth Avenue, occupancy increased 210 basis points to 71.3 percent and ADR increased 0.3 percent to $87.21, both contributing to a 3.5 percent increase in comparable RevPAR year over year. Including franchised hotels, a 260 basis point increase in occupancy drove a 3.8 percent increase in system wide RevPAR.
On a comparable hotel basis, EBITDA from continuing operations before special items was $8.2 million for the third quarter compared to $10.5 million in the prior year period. Hotel revenue on a comparable basis of $42.9 million increased 2.9 percent from $41.7 million in the prior year period. Comparable rooms revenue increased approximately $1.1 million or 3.5 percent, primarily due to an increase in occupancy. Food and beverage revenue on a comparable basis was flat compared to the prior year at $8.5 million. Hotel direct operating margin on a comparable basis declined to 26.7 percent from 30.4 percent in the same period in 2010. This decline was driven by an increase in operating expenses including payroll, sales, marketing and maintenance.
Franchise revenue increased to $1.2 million from $1.0 million. Profitability in the segment was impacted by an increase in marketing on behalf of the franchise hotels and costs relating to the company's subleased and franchised Sacramento property.
Revenue in the entertainment segment decreased to $1.5 million compared to $2.0 million, primarily due to a decline in sales processed through the ticketing division.
Nine Months Ended September 30, 2011 Results
Total revenue on a comparable basis for the nine months ended September 30, 2011 was $119.9 million versus $115.5 million in the prior year period. Comparable revenue from hotels of $106.4 million was up $2.0 million, or 1.9 percent. Comparable hotel direct operating margin declined to 20.5 percent from 23.7 percent in the prior year period, primarily driven by increased labor, sales, marketing, energy and maintenance costs.
RevPAR for comparable hotels increased 3.3 percent driven by a 170 basis point increase in occupancy and a 0.5 percent increase in ADR. Including franchised hotels, system wide RevPAR on a comparable basis for the period increased 4.3 percent due to a 250 basis point increase in occupancy, while ADR remained flat.
Liquidity and Balance Sheet
As of September 30, 2011, the company had $50.9 million in cash and cash equivalents. The company had outstanding debt of $106.4 million, of which $8.4 million is current. This compares to outstanding debt of $126.0 million, of which $43.3 million was current, at December 31, 2010.
Capital expenditures for the nine months ended September 30, 2011, totaled $7.3 million primarily for hotel improvement projects
On September 13, 2011, the company completed the first step of an expansion of its credit facility with Wells Fargo Bank. Under the secured facility, Red Lion Hotels obtained $18 million in new term debt in addition to the renewal of $12 million outstanding under the original facility. Substantially all of the additional term debt proceeds were used to pay off maturing loans secured by the Red Lion Hotel at the Park in Spokane and the Red Lion Hotel Olympia.
On September 20, 2011, the company entered into franchise license agreements with the owners of two New Mexico hotels in Farmington and Gallup. The two properties are among a group of hotels beneficially owned by Positive Investments, Inc., which is also the owner of the Red Lion Hotel Oakland International Airport in California. The hotels are expected to convert to the Red Lion brand in the fourth quarter, expanding the company's western United States footprint from eight states to nine.
Subsequent to the quarter end, on October 10, 2011, the company entered into a third franchise license agreement with Positive Investments, Inc. for a hotel in Grants, NM.
On October 11, 2011, the company used cash reserves to retire the maturing debt of $5.0 million secured by the Red Lion Colonial Hotel in Helena, MT.
On October 13, 2011, the company completed its $40 million credit facility with Wells Fargo Bank, making available $10 million in revolving credit, in addition to $30 million in term debt obtained in September 2011.
On November 2, 2011, the company completed a purchase for $37 million of 10 hotels formerly leased from a subsidiary of iStar Financial Inc. Approximately $32 million of the purchase price was funded with cash proceeds received from the sale of Red Lion Hotel on Fifth Avenue and structured as a tax deferred exchange. The transaction will reduce the company's lease obligations by approximately $4.3 million per year.
Outlook for 2011
The company is reducing its RevPAR guidance for 2011, previously provided on May 5, 2011, based on the outlook for the markets in which the company operates and information available today:
- Full year 2011 RevPAR for comparable company owned and leased hotels is expected to increase 1 to 3 percent over 2010 on an annual basis.
- The company expects to invest approximately $10 million in capital improvements in 2011.
Conference Call Information
The company will conduct a conference call on November 3, 2011, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), to discuss the results for interested investors, analysts and portfolio managers. Hosting the call will be President and Chief Executive Officer Jon E. Eliassen and Executive Vice President and Chief Financial Officer Julie Shiflett. Executive Vice President and Chief Operating Officer George Schweitzer will also be available to answer questions.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 230-1085. International callers should dial (612) 234-9960.
This conference call will also be webcast live at http://www.redlion.com in the Investor Relations section of the website. To listen to the live call, please go to the Red Lion website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 4:00 p.m. Pacific Time on November 3, 2011, through December 3, 2011 at (800) 475-6701 or (320) 365-3844 (International) access code - 221163. The replay will also be available shortly after the call on the Red Lion website.
About Red Lion Hotels Corporation:
Red Lion Hotels Corporation is a hospitality and leisure company primarily engaged in the ownership, operation and franchising of midscale hotels under its Red Lion® brand. As of September 30, 2011, the RLH hotel network was comprised of 44 hotels located in eight states and one Canadian province, with 8,457 rooms and 424,387 square feet of meeting space. The company also owns and operates an entertainment and event ticket distribution business. For more information, please visit the company's website at www.redlion.com.
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the Company's annual report on Form 10-K for the year ended December 31, 2010 and in other documents filed by the Company with the Securities and Exchange Commission.
NON-GAAP FINANCIAL MEASURES
EBITDA is defined as net income attributable to Red Lion Hotels Corporation, before interest, taxes, depreciation and amortization. EBITDA is considered a non-GAAP financial measurement. We believe it is a useful financial performance measure for us and for our shareholders and is a complement to net income attributable to Red Lion Hotels Corporation and other financial performance measures provided in accordance with generally accepted accounting principles in the United States ("GAAP").
We use EBITDA to measure financial performance because it excludes interest, taxes, depreciation and amortization, which bear little or no relationship to operating performance. By excluding interest expense, EBITDA measures our financial performance irrespective of our capital structure or how we finance our properties and operations. We generally pay federal and state income taxes on a consolidated basis, taking into account how the applicable taxing laws apply to our company in the aggregate. By excluding taxes on income, we believe EBITDA provides a basis for measuring the financial performance of our operations excluding factors that our hotels and other operations cannot control. By excluding depreciation and amortization expense, which can vary from hotel to hotel based on historical cost and other factors unrelated to the hotels' financial performance, EBITDA measures the financial performance of our hotels without regard to their historical cost. For all of these reasons, we believe that EBITDA provides us and investors with information that is relevant and useful in evaluating our business.
However, because EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our long-lived assets. In addition, because EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt nor does it show trends in interest costs due to changes in our borrowings or changes in interest rates. EBITDA, as defined by us, may not be comparable to EBITDA as reported by other companies that do not define EBITDA exactly as we define the term. Because we use EBITDA to evaluate our financial performance, we reconcile all EBITDA measures to net income attributable to Red Lion Hotels Corporation, which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash provided by operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income attributable to Red Lion Hotels Corporation determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity.
SOURCE Red Lion Hotels Corporation