Red Lion Hotels Reports Fourth Quarter and Full Year 2011 Results

SPOKANE, Wash., Feb. 28, 2012 // PRNewswire // -- Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, today announced its results for the fourth quarter and year ended December 31, 2011. Comparable operating results and data from continuing operations (as disclosed in the table by the same title) 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 the company is therefore required to report its financial results in continuing operations.

Fourth Quarter Overview:

  • RevPAR for comparable owned and leased hotels decreased 0.9 percent year over year
  • Comparable EBITDA from continuing operations before special items increased $1.9 million compared with fourth quarter 2010
  • Recorded pre-tax goodwill and asset impairment charges of $20.5 million in continuing operations
  • Net loss from continuing operations, including the impairment charges, was $20.2 million compared to $7.1 million in the prior year
  • Acquired 10 previously leased hotels in a tax-deferred exchange
  • Added three new franchised hotels in New Mexico

Full Year Overview:

  • RevPAR from comparable owned and leased hotels increased 2.7 percent
  • Comparable EBITDA from continuing operations before special items decreased $3.9 million compared to prior year
  • Recorded pre-tax goodwill and asset impairment charges of $22.7 million in continuing operations
  • Sold Seattle Fifth Avenue for $71 million and recorded a gain of $33.5 million.
  • Net loss from continuing operations was $6.0 million compared to $7.9 million in the prior year
  • Added six new franchised hotels

"In 2011, our RevPAR growth exceeded that of our competitors in our markets and we continued to maintain our market share," said Jon E. Eliassen, President and Chief Executive Officer of Red Lion Hotels Corporation. "At the same time, we significantly improved our balance sheet by paying down debt and acquiring previously leased hotels. As we look forward, we believe our hotels will be well positioned to compete for business when the economy recovers in our region."

Total revenue from continuing operations reported during the fourth quarter was $33.2 million compared to $36.0 million in the fourth quarter of 2010. On a comparable basis, total revenue increased $0.4 million from $32.8 million in the fourth quarter of 2010. Fourth quarter 2011 reported a net loss from continuing operations of $20.2 million, or $1.05 per share, compared to a net loss from continuing operations of $7.1 million, or $0.38 per share, for the prior year period. Fourth quarter 2011 results from continuing operations include $20.5 million in pre-tax impairment charges, of which $14.2 million is related to the Company's goodwill and $6.3 million is related to the assets of the Red Lion Hotel Denver Southeast and Red Lion Hotel Vancouver at the Quay hotels. These impairment charges are reflected as special items in 2011 results. In the fourth quarter of 2011, comparable EBITDA from continuing operations before special items was $1.7 million, compared to ($0.2) million, for the fourth quarter of 2010.

Summary Results

Revenue and EBITDA from continuing operations for the three months and full year ended December 31, 2011, and December 31, 2010, follow:

 

($ 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.

 
                   
                 

In addition, on a comparable continuing operations basis, key hotel operating metrics and EBITDA for the three months and full year ended December 31, 2011, and December 31, 2010, are highlighted below for owned and leased hotels:

                   
   

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.

 
                 

Fourth Quarter 2011 Results

In the fourth quarter of 2011, for comparable owned and leased hotels from continuing operations, excluding Seattle Fifth Avenue, occupancy decreased 60 basis points to 49.6 percent and ADR increased 0.5 percent to $76.71.  Both contributed to a 0.9 percent decrease in comparable RevPAR year over year.

On a comparable hotel basis, EBITDA from continuing operations before special items was $1.7 million for the fourth quarter compared to ($0.2) million in the prior year period.  Hotel revenue on a comparable basis of $28.9 million was flat compared to the same period a year ago.  Food and beverage revenue on a comparable basis increased $0.2 million compared to the prior year at $8.5 million.  Hotel direct operating margin on a comparable basis increased to 13.8 percent from 8.4 percent in the same period in 2010.  This improvement was due to prior year workers’ compensation recoveries, payroll cost containment initiatives and an improvement in food margins.

Franchise revenue increased to $1.1 million from $0.8 million. Profitability improved year-over-year as fourth quarter 2010 results were negatively impacted by the termination of the franchise agreement with the previous subtenant of the Sacramentoproperty.

Revenue in the entertainment segment was essentially flat at $2.4 million compared to the same period last year.

Full Year Ended December 31, 2011 Results

Total revenue on a comparable basis for the full year ended December 31, 2011 was $150.1 million versus $145.0 million in the prior year.  Comparable revenue from hotels of $132.3 million was up $2.2 million, or 1.7 percent. Comparable hotel direct operating margin declined to 19.2 percent from 20.5 percent in the prior year period, primarily driven by increased sales, marketing, energy and maintenance costs.  Labor costs for 2011 were positively impacted by seasonal reductions in the fourth quarter.

RevPAR for comparable owned and leased hotels increased 2.7 percent driven by a 120 basis point increase in occupancy and a 0.6 percent increase in ADR.

Franchise revenue increased to $4.0 million from $3.2 million.  Profitability improved year-over-year as fourth quarter 2010 results were negatively impacted by the termination of the franchise agreement with the previous subtenant of the Sacramentoproperty.  

Entertainment revenue increased $2.1 million driven by a favorable mix of productions during the year. This increase was partially offset by a decrease in revenue from the ticketing portion of this segment.  Ticketing revenue was negatively impacted by weak demand for entertainment events in the company’s markets.

Discontinued Operations

During the quarter, the company listed for sale its hotels in Medford, Ore., and Missoula, Mont., two non-core assets in which the company does not expect to maintain significant continuing involvement.  Accordingly, the operations of these properties have been classified as “discontinued operations” in the company’s statement of operations.  This presentation, as required under generally accepted accounting principles (“GAAP”), separately reports the revenue and expenses including any related asset impairment charges, net of income taxes as “net income (loss) from discontinued operations” on the company’s statement of operations for this quarter and any comparable periods presented.

Asset Impairments

During the fourth quarter, the company recorded $20.5 million in pre-tax goodwill and asset impairment charges in continuing operations as follows:

  • The company conducted its annual goodwill impairment analysis in the fourth quarter and concluded that, due to the decline in hotel profitability, the portion of the goodwill asset related to hotel operations was fully impaired.  As a result, the company recorded $14.2 million in goodwill impairment. 
  • The company recorded an impairment of the assets of the Red Lion Hotel Denver Southeast totaling $4.6 million to reflect the estimated fair value of the hotel net of selling costs. 
  • Due to an anticipated right of way acquisition by the State of Washington of the Red Lion Hotel Vancouver at the Quay property in order to construct a replacement of the I-5 Bridge, the company recorded an asset impairment of $1.7 million to reflect the fair value of the related assets.

 

In the third quarter, the company recorded a $2.2 million pre-tax asset and goodwill impairment charge related to the held for sale hotel in Helena, Mont., to reflect the estimated fair value of the hotel net of selling costs.

These impairment charges are excluded from our reported EBITDA from continuing operations before special items for 2011 and separately identified in the Company’s operating results.

Liquidity and Balance Sheet

As of December 31, 2011, the company had $1.9 million in cash and cash equivalents, and $6.8 million available on its line of credit.  Additionally, as of December 31, 2011, the company had outstanding debt of $101.3 million, of which $4.1 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 full year ended December 31, 2011, totaled $8.9 million primarily for hotel improvement projects.

The Red Lion Colonial Hotel in Helena, Red Lion Inn Missoula, Red Lion Hotel Denver Southeast and Red Lion Hotel Medford were classified as assets held for sale on the balance sheet at December 31, 2011.  Denver Southeast, Medford and Missoulawere added to this classification in the fourth quarter of 2011.  

In November, the company paid $37 million to purchase 10 previously leased hotels from a subsidiary of iStar Financial Inc.

In October, the company completed an expanded $40 million credit facility with Wells Fargo Bank, making available up to $10 million on a revolving line, in addition to $30 million in term debt obtained in September 2011. In connection with the expansion of this credit facility, the company retired $22 million of CMBS debt.

Franchise Update

In November and December, the company added three franchised hotels in Farmington, Gallup and Grants, N.M.  These hotels expanded the company’s western United States footprint from eight states to nine.

Subsequent Events

In January, the company listed for sale the Red Lion Hotel Denver Southeast.  The company expects to maintain the hotel’s Red Lion affiliation as a franchised property.

Outlook for 2012

Based on the outlook for the markets in which the company operates and information available today, the company is providing the following guidance for 2012:

  • Full year 2012 RevPAR for comparable owned and leased hotels is expected to increase 2 to 4 percent over 2011 on an annual basis.
  • The company expects to invest $10 million in capital improvements in 2012.

 

 

 

 

 

 

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

     
           

 

 

SOURCE Red Lion Hotels Corporation

http://www.redlion.com

###

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