Red Lion Hotels Reports Fourth Quarter and Full Year 2011 Results

($ in thousands)

Three months ended December 31,

Year ended December 31,

2011

2010

% change

2011

2010

% change

Total revenue, as reported

$          33,188

$           35,982

-7.8%

$        156,080

$        159,304

-2.0%

Results before special items: (1)

 EBITDA from continuing operations

$            1,702

$                760

123.9%

$          15,598

$          22,567

-30.9%

Results as reported:

 EBITDA from continuing operations

$        (18,808)

$            (3,413)

n/m

$          26,481

$          17,175

54.2%

(1) The above excludes asset and goodwill impairments, gain on sale of assets, severance charges and charges associated with a franchise and sublease termination which are included in the non-GAAP reconciliation schedule named, “Disclosure of Special Items” contained in this release.

Three months ended December 31,

Year ended December 31,

2011

2010

change

2011

2010

change

RevPAR (revenue per available room)

$            38.01

$             38.35

-0.9%

$            47.45

$            46.22

2.7%

ADR (average daily rate)

$            76.71

$             76.33

0.5%

$            81.71

$            81.24

0.6%

Occupancy

49.6%

50.2%

(60)

bps

58.1%

56.9%

120

Hotels revenue:

Rooms

$          19,454

$           19,627

-0.9%

$          96,355

$          93,855

2.7%

Food and beverage

8,763

8,546

2.5%

32,741

32,968

-0.7%

Other revenue

684

818

-16.4%

3,208

3,276

-2.1%

Total hotels revenue

$          28,901

$           28,991

-0.3%

$        132,304

$        130,099

1.7%

Hotel direct operating margin

13.8%

8.4%

19.2%

20.5%

Comparable EBITDA from continuing operations

before special items (1)

$            1,702

$               (165)

n/m

$          13,897

$          17,755

-21.7%

(1) The above excludes asset and goodwill impairments, gain on sale of assets, severance charges and charges associated with a franchise and sublease termination which are included in the non-GAAP reconciliation schedule named, “Disclosure of Special Items” contained in this release.

Red Lion Hotels Corporation

Additional Hotel Statistics

(unaudited)

System-wide Hotels as of December 31, 2011

Meeting Space

Hotels

Rooms

(sq. ft.)

Red Lion Owned or Leased Hotels (1):

   Comparable Continuing Operations

28

5,563

280,574

   Discontinued Operations

2

261

10,192

Red Lion Franchised Hotels (1)

18

3,186

161,621

Total Red Lion Hotels

48

9,010

452,387

Comparable Hotel Statistics from Continuing Operations  (1,2)

Three months ended December 31, 2011

Three months ended December 31, 2010

Average

Average

Occupancy (3)

ADR (4)

RevPAR (5)

Occupancy (3)

ADR (4)

RevPAR (5)

Owned and Leased Hotels

49.6%

$            76.71

$                 38.01

50.2%

$               76.33

$              38.35

Franchised Hotels

56.1%

$            81.53

$                 45.73

54.1%

$               82.67

$              44.74

Total System Wide

51.3%

$            78.15

$                 40.13

51.3%

$               78.16

$              40.10

Change from prior comparative period:

 Owned and Leased Hotels

(0.6)

0.5%

-0.9%

 Franchised Hotels

2.0

-1.4%

2.2%

 Total System Wide

-

-

0.1%

Year ended December 31, 2011

Year ended December 31, 2010

Average

Average

Occupancy (3)

ADR (4)

RevPAR (5)

Occupancy (3)

ADR (4)

RevPAR (5)

Owned and Leased Hotels

58.1%

$            81.71

$                 47.45

56.9%

$               81.24

$              46.22

Franchised Hotels

64.5%

$            85.59

$                 55.24

60.3%

$               86.70

$              52.27

Total System Wide

59.8%

$            82.86

$                 49.59

57.8%

$               82.80

$              47.88

Change from prior comparative period:

 Owned and Leased Hotels

1.2

0.6%

2.7%

 Franchised Hotels

4.2

-1.3%

5.7%

 Total System Wide

2.0

0.1%

3.6%

Red Lion Hotels Corporation

Comparable Operating Results and Data From Continuing Operations

(unaudited)

($ in thousands)

Certain operating results for the periods included in this report are shown on a comparable hotel basis.  Comparable hotels are defined as properties that are owned or leased by the company and the operations of which are included in the consolidated results from continuing operations for the entirety of the reporting periods being compared.

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

Comparable total revenue (2)

$                     33,188

$                     32,789

$                       150,093

$                             145,025

Comparable hotel revenue (2)

                       28,901

                       28,991

                         132,304

                               130,099

Comparable hotel operating expense (3)

                       24,907

                       26,548

                         106,859

                               103,469

Comparable hotel direct operating profit (1)

                         3,994

                         2,443

                           25,445

                                 26,630

Comparable hotel direct operating margin (1)

13.8%

8.4%

19.2%

20.5%

Comparable total EBITDA from continuing operations before special items (4)

$                       1,702

$                         (165)

$                         13,897

$                               17,755

(1)  Operating profit margins are calculated by dividing the applicable operating profit  by the related revenue amount.  GAAP margins are calculated using amounts presented in the consolidated statements of operations.  Comparable margins are calculated using amounts presented in the table above.  

(2)  The reconciliation of total and hotel revenue per the consolidated statements of operations to comparable total and hotel revenue is as follows:

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

Total revenue per the consolidated statements of operations

$                     33,188

$                     35,982

$                       156,080

$                             159,304

less: Revenue from Seattle Fifth Avenue property

                               -  

                        (3,193)

                           (5,987)

                               (14,279)

Comparable total revenue

$                     33,188

$                     32,789

$                       150,093

$                             145,025

Hotel revenue per the consolidated statements of operations

$                     28,901

$                     32,184

$                       138,291

$                             144,378

less: Revenue from Seattle Fifth Avenue property

                               -  

                        (3,193)

                           (5,987)

                               (14,279)

Comparable hotel revenue

$                     28,901

$                     28,991

$                       132,304

$                             130,099

(3)  The reconciliation of hotel operating expense per the consolidated statements of operations to comparable hotel operating expense is as follows:  

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

Hotel operating expense per the consolidated statements of operations

$                     24,907

$                     28,816

$                       111,498

$                             112,934

less: Operating expense from Seattle Fifth Avenue property

                               -  

                        (2,268)

                           (4,639)

                                 (9,465)

Comparable hotel operating expense

$                     24,907

$                     26,548

$                       106,859

$                             103,469

(4)  The reconciliation of EBITDA from continuing operations before special items per the table titled “Disclosure of Special Items” to comparable total EBITDA before special items is as follows:  

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

EBITDA before special items per the table “Disclosure of Special Items”

$                       1,702

$                          760

$                         15,598

$                               22,567

less: EBITDA of Seattle Fifth Avenue property

                               -  

                           (925)

                           (1,701)

                                 (4,812)

Comparable total EBITDA from continuing operations before special items

$                       1,702

$                         (165)

$                         13,897

$                               17,755

Red Lion Hotels Corporation

Reconciliation of EBITDA to Net Income Attributable to Red Lion Hotels Corporation

(unaudited)

($ in thousands)

The following is a reconciliation of EBITDA and EBITDA from continuing operations to net income (loss) attributable to Red Lion Hotels Corporation for the periods presented:

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

EBITDA

$                   (19,941)

$                      (3,576)

$                     25,139

$                     16,444

Income tax benefit (expense)

5,357

3,892

(4,894)

4,937

Interest expense

(1,802)

(2,241)

(8,372)

(9,073)

Depreciation and amortization

(4,527)

(5,295)

(19,021)

(20,917)

Net income (loss) attributable to Red Lion Hotels Corporation

$                   (20,913)

$                      (7,220)

$                     (7,148)

$                     (8,609)

Three months ended December 31,

Year ended December 31,

2011

2010

2011

2010

EBITDA from continuing operations

$                   (18,808)

$                      (3,413)

$                     26,481

$                     17,175

Income tax benefit (expense)

4,923

3,796

(5,514)

4,520

Interest expense

(1,802)

(2,241)

(8,372)

(9,073)

Depreciation and amortization

(4,461)

(5,192)

(18,651)

(20,462)

Discontinued operations, net of tax

(765)

(170)

(1,092)

(769)

Net income (loss) attributable to Red Lion Hotels Corporation

$                   (20,913)

$                      (7,220)

$                     (7,148)

$                     (8,609)

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.

Three months ended December 31,

2011

2010

($ in thousands)

EBITDA from continuing

operations (1)

EBITDA from continuing

operations (1)

Amount before special items

$                                         1,702

$                                        760

Special items:

Asset impairment charges (2)

(6,274)

(5,733)

Goodwill impairment charge (2)

(14,236)

-

Franchise, sublease termination (5)

-

1,560

Amount per consolidated statement of operations

$                                      (18,808)

$                                   (3,413)

Year ended December 31,

2011

2010

($ in thousands)

EBITDA from continuing

operations (1)

EBITDA from continuing

operations (1)

Amount before special items

$                                       15,598

$                                   22,567

Special items:

Asset impairment charges (2)

(8,430)

(5,733)

Goodwill impairment charge (2)

(14,236)

-

Gain on asset disposition (3)

33,549

-

Franchise, sublease termination (5)

-

1,560

Separation costs (4)

-

(1,219)

Amount per consolidated statement of operations

$                                       26,481

$                                   17,175

(1)  Amount defined on the preceding table “Reconciliation of EBITDA to Net Income Attributable to Red Lion Hotels Corporation”.  

(2)  Amounts as included in the line items “Asset impairment” and “Goodwill impairment” on the accompanying consolidated statements of operations.  

(3)  Amount as included in the line item “Loss (gain) on asset dispositions, net” on the accompanying consolidated statements of operations.  

(4)  Amount as included in the line item “Undistributed corporate expenses” on the accompanying consolidated statements of operations.  

(5)  Amounts as included in the following (expense) line items on the accompanying consolidated statements of operations.  

                                        Franchise

$                                           (257)

                                        Hotel facility and land lease

1,817

                                                          Total

$                                         1,560