Red Lion Hotels Reports Third Quarter 2013 Results

ADR and RevPar for Comparable Owned and Leased Hotels Continues to Improve

SPOKANE, Wash. - Nov. 4, 2013 // PRNewswire // - Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner, operator and franchisor of midscale hotels, today announced its results for the third quarter 2013.

Highlights:

  • Improved ADR and RevPAR for comparable owned and leased hotels for the quarter by 4.2 percent and 2.8 percent respectively, over prior year
  • Increased comparable hotel direct operating margin for the quarter by 220 basis points, over prior year
  • Increased comparable EBITDA from continuing operations before special items for the quarter by 8.3 percent, over prior year
  • Launched individual hotel microsites
  • Achieved 2013 goal of 30 franchised hotels

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 hotels or operations that have been sold in the past four quarters. Throughout this release the company refers to certain non-GAAP financial measures. Please refer to the tables attached to this release for a reconciliation of these non-GAAP financial measures to their most directly comparable financial measure determined in accordance with GAAP.

"With the recent conversion of three hotels to Red Lion brands, we have added a record 11 franchises this year, achieving our goal of 30 franchised properties in the Red Lion network by the end of 2013," said Interim President and Chief Executive Officer James P. Evans. "We also increased our ADR by 4.2 percent, improved hotel direct operating margin by 220 basis points and grew comparable EBITDA from continuing operations before special items by 8.3 percent year-over-year. We are pleased with our strong operational performance."

Evans continued, "The search for our next president and chief executive officer is well underway. The national executive search firm Spencer Stuart has identified numerous qualified candidates who have expressed interest in the position, underscoring the strength of the Red Lion brand and the company's future."

Third Quarter 2013 Results

Total comparable revenue from owned and leased hotels of $38.6 million increased $0.8 million or 2.1 percent compared to the same period a year ago, driven primarily by an increase in comparable rooms revenue. Year over year, comparable third quarter ADR increased by 4.2 percent to $93.85, which resulted in a RevPAR increase of 2.8 percent to $70.86. The ADR increase generated a 220 basis point improvement in comparable hotel direct operating margin from 26.7 percent to 28.9 percent.

Franchise revenue increased to $2.4 million from $1.6 million, led by the increase in the number of franchised hotels in the system and contractual increases in room rate on existing franchised hotels. Net segment profits increased $0.2 million over prior year to $0.5 million.

Entertainment revenue of $1.6 million rose $0.2 million from the 2012 third quarter, primarily due to increased ticketing demand.

On a comparable basis, total company EBITDA from continuing operations before special items was $8.3 million for the 2013 third quarter, compared to $7.7 million in the prior year period.

Income from continuing operations in the 2013 third quarter improved to $1.5 million compared to $0.6 million in the third quarter of 2012.

Discontinued Operations

The operations of the company's previously owned commercial mall in Kalispell, Montana, the Red Lion Hotel Medford in Oregon, the ownership of certain real estate in Sacramento, California, and a contract catering business in Yakima, Washington, were classified as discontinued operations in prior periods. As required under generally accepted accounting principles ("GAAP"), Red Lion separately reports the results of these operations including any related asset impairment charges, net of income taxes as "Income (loss) from discontinued operations" on the company's consolidated statement of comprehensive income (loss) for all periods presented.

Liquidity and Balance Sheet

At Sept. 30, 2013, the company had $27.3 million in cash and cash equivalents and no cash borrowings on its $10 million revolving line of credit. Additionally, at Sept. 30, 2013, the company had outstanding debt of $75.4 million, of which $3.0 million was current.

Capital expenditures, primarily for guest room improvement projects, for the three and nine months ended Sept. 30, 2013, totaled $3.8 million and $8.5 million, respectively.

Franchise Update

During the third quarter, the company signed three franchise agreements:

  • Red Lion Inn & Suites Walla Walla, Washington - converted in October 2013
  • Red Lion Hotel Ontario Airport, California – converted in October 2013
  • Red Lion Inn & Suites Perris, California – converted in November 2013

Assets Held for Sale

During the third quarter, the company sold the Red Lion Hotel Medford in Oregon for $2.8 million.

Outlook for 2013

Based on the outlook for the markets in which the company operates and on currently available information, the company reaffirms its previously announced RevPAR guidance and capital expenditure estimates for 2013:

  • Full year 2013 RevPAR for comparable owned and leased hotels is expected to increase 1 to 3 percent over 2012, primarily due to ADR increases.
  • The company expects to invest $12-$16 million in capital improvements in 2013.

Conference Call Information

The company will conduct a conference call on Nov. 4, 2013, 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 Interim President and Chief Executive Officer James P. Evans and Executive Vice President and Chief Financial Officer Julie Shiflett.

To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 230-1092. International callers should dial (612) 332-0107.

This conference call will also be webcast live on 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 15 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 5:00 p.m. Pacific Time on Nov. 4, 2013, through Dec. 2, 2013, at (800) 475-6701 or (320) 365-3844 (International), using access code - 305416. 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 company primarily engaged in the franchising, ownership and operation of hotels located in ten states and one Canadian province. As of Nov. 4, 2013, the company has 55 hotels system wide. The Red Lion Hotels and Red Lion Inn & Suites network is comprised of 53 hotels with 9,195 rooms and 462,822 square feet of meeting space. The Leo Hotel Collection is comprised of two hotels with 3,256 rooms and 241,000 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, 2012, and in other documents filed by the company with the Securities and Exchange Commission.

Company Contact:

Pam Scott
Director of Corporate Communications
(509) 777-6393

 

Red Lion Hotels Corporation

 

Consolidated Statements of Comprehensive Income (Loss)

 

(unaudited)

 

($ in thousands, except footnotes and per share amounts)

 
             
     

Three months ended September 30,

   
     

2013

2012

   $ Change    

   % Change

             

Revenue:

         
 

Hotels

 

$ 38,590

$ 42,397

$(3,807)

-9.0%

 

Franchise

 

2,368

1,555

813

52.3%

 

Entertainment

 

1,623

1,456

167

11.5%

 

Other

 

83

94

(11)

-11.7%

             
 

Total revenues

 

42,664

45,502

(2,838)

-6.2%

             

Operating expenses:

         
 

Hotels

 

27,442

31,324

(3,882)

-12.4%

 

Franchise 

 

1,862

1,219

643

52.7%

 

Entertainment

 

1,458

1,475

(17)

-1.2%

 

Other

 

131

201

(70)

-34.8%

 

Depreciation and amortization 

 

3,561

3,774

(213)

-5.6%

 

Hotel facility and land lease 

 

1,251

1,148

103

9.0%

 

Asset impairment

 

-

1,868

(1,868)

n/m

 

Loss (gain) on asset dispositions, net 

 

100

(16)

(116)

n/m

 

Undistributed corporate expenses

 

2,835

1,602

1,233

77.0%

             
 

Total expenses

 

38,640

42,595

(3,955)

-9.3%

             

Operating income

 

4,024

2,907

1,117

38.4%

             

Other income (expense):

         
 

Interest expense

 

(1,252)

(1,751)

499

28.5%

 

Other income, net

 

98

46

52

n/m

             

Income (loss) before income taxes

 

2,870

1,202

1,668

n/m

             

Income tax (benefit) expense

 

1,414

624

(790)

n/m

             

Income (loss) from continuing operations

 

1,456

578

878

n/m

             

Discontinued operations (3,4,5,6):

         
 

Income (loss) from operations of discontinued business units,

         
 

  net of income tax (benefit) expense of ($55) and $46 respectively

 

(96)

82

(178)

n/m

 

Loss on disposal and impairment of the assets of the discontinued business 

         
 

  units, net of income tax (benefit) expense of ($75) and ($889) respectively

(133)

(1,566)

1,433

91.5%

             

Income (loss) from discontinued operations

 

(229)

(1,484)

1,255

84.6%

             

Net income (loss)

 

1,227

(906)

2,133

n/m

             

Less net income or loss attributable to noncontrolling interest

 

-

-

-

n/m

             

Net income (loss) attributable to Red Lion Hotels Corporation 

 

1,227

(906)

2,133

n/m

             

Comprehensive income (loss)

         
 

Unrealized gains (losses) on cash flow hedge, net of tax

 

(30)

-

(30)

n/m

             

Comprehensive income (loss) attributable to Red Lion Hotels Corporation 

 

$  1,197

$   (906)

$  2,103

n/m

             

Earnings per share - basic and diluted

         
 

Income (loss) from continuing operations 

 

$    0.07

$    0.03

   
 

Income (loss) from discontinued operations

 

$  (0.01)

$  (0.08)

   
 

Net income (loss) attributable to Red Lion Hotels Corporation

 

$    0.06

$  (0.05)

   

Weighted average shares - basic 

 

19,631

19,366

   

Weighted average shares - diluted

 

19,672

19,438

   
             
             
             

Non-GAAP Financial Measures:

         
             

EBITDA  (1)   

 

$  7,324

$  4,478

$  2,846

63.6%

EBITDA as a percentage of revenues 

 

17.2%

9.8%

   
             

Comparable EBITDA from continuing operations before special items (2)   

 

$  8,322

$  7,684

$    638

8.3%

   

(1)

The definition of "EBITDA" and how that measure relates to net income (loss) attributable to Red Lion Hotels Corporation is discussed further in this release under Non-GAAP Financial Measures.

(2)

The definition of "Comparable EBITDA from continuing operations before special items" can be found in the table named "Comparable Operating Results and Data From Continuing Operations".

(3)

During the fourth quarter 2011, the company listed for sale its hotel in Medford, Oregon, a non-core asset in which the company will not maintain significant continuing involvement following a sale.  Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.  The company completed the sale in the third quarter of 2013.

(4)

During the second quarter 2012, based on the company's right to sell its hotel in Sacramento, California to its tenant and certain transaction terms, the operating results from the ownership of this real estate and land were classified as discontinued operations for all periods presented.  This hotel sale was completed in the third quarter of 2012.

(5)

During the third quarter 2012, the company listed for sale its commercial mall in Kalispell, Montana.   The company will not maintain significant continuing involvement in the property following a sale.  Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.  The company completed the sale in the second quarter of 2013.

(6)

During the first quarter 2013, the company gave notice to the City of Yakima, Washington to terminate its contract to operate as the catering company for the Convention Center and ceased operations in the second quarter 2013.  Accordingly, the operations under this agreement have been classified as discontinued operations for all periods presented.

 

Red Lion Hotels Corporation

 

Consolidated Statements of Comprehensive Income (Loss)

 

(unaudited)

 

($ in thousands, except footnotes and per share amounts)

 
             
     

Nine months ended September 30, 

   
     

2013

2012

     $ Change

    % Change

             

Revenue:

         
 

Hotels

 

$ 96,744

$ 107,074

$(10,330)

-9.6%

 

Franchise

 

5,574

3,953

1,621

41.0%

 

Entertainment

 

6,774

6,356

418

6.6%

 

Other

 

256

327

(71)

-21.7%

             
 

Total revenues

 

109,348

117,710

(8,362)

-7.1%

             

Operating expenses:

         
 

Hotels

 

76,226

84,196

(7,970)

-9.5%

 

Franchise 

 

5,174

3,487

1,687

48.4%

 

Entertainment

 

6,558

6,245

313

5.0%

 

Other

 

371

601

(230)

-38.3%

 

Depreciation and amortization 

 

10,839

11,459

(620)

-5.4%

 

Hotel facility and land lease 

 

3,597

3,430

167

4.9%

 

Asset impairment

 

-

8,797

(8,797)

n/m

 

Loss (gain) on asset dispositions, net 

 

(21)

(223)

(202)

-90.6%

 

Undistributed corporate expenses

 

6,500

4,885

1,615

33.1%

             
 

Total expenses

 

109,244

122,877

(13,633)

-11.1%

             

Operating income (loss)

 

104

(5,167)

5,271

n/m

             

Other income (expense):

         
 

Interest expense

 

(4,281)

(5,388)

1,107

20.5%

 

Other income, net

 

401

74

327

n/m

             

Income (loss) before income taxes

 

(3,776)

(10,481)

6,705

64.0%

             

Income tax (benefit) expense

 

(1,127)

(3,827)

(2,700)

-70.6%

             

Income (loss) from continuing operations

 

(2,649)

(6,654)

4,005

60.2%

             

Discontinued operations (3,4,5,6):

         
 

Income (loss) from operations of discontinued business units,

         
 

  net of income tax (benefit) expense of $31 and $75 respectively

 

52

136

(84)

-61.8%

 

Loss on disposal and impairment of the assets of the discontinued business 

         
 

  units, net of income tax (benefit) expense of ($280) and ($2,566) respectively

(493)

(4,526)

4,033

89.1%

             

Income (loss) from discontinued operations

 

(441)

(4,390)

3,949

90.0%

             

Net income (loss)

 

(3,090)

(11,044)

7,954

72.0%

             

Less net income or loss attributable to noncontrolling interest

 

-

(7)

7

n/m

             

Net income (loss) attributable to Red Lion Hotels Corporation 

 

(3,090)

(11,037)

7,947

72.0%

             

Comprehensive income (loss)

         
 

Unrealized gains (losses) on cash flow hedge, net of tax

 

(164)

-

(164)

n/m

             

Comprehensive income (loss) attributable to Red Lion Hotels Corporation 

 

$ (3,254)

$ (11,037)

$    7,783

70.5%

             

Earnings per share - basic and diluted

         
 

Income (loss) from continuing operations 

 

$  (0.14)

$    (0.34)

   
 

Income (loss) from discontinued operations

 

$  (0.02)

$    (0.23)

   
 

Net income (loss) attributable to Red Lion Hotels Corporation

 

$  (0.16)

$    (0.57)

   

Weighted average shares - basic 

 

19,538

19,294

   

Weighted average shares - diluted

 

19,538

19,294

   
             
             
             

Non-GAAP Financial Measures:

         
             

EBITDA  (1)   

 

$ 10,659

$       136

$  10,523

n/m

EBITDA as a percentage of revenues 

 

9.7%

0.1%

   
             

Comparable EBITDA from continuing operations before special items (2)   

 

$ 12,437

$  13,740

$  (1,303)

-9.5%

   

(1)

The definition of "EBITDA" and how that measure relates to net income (loss) attributable to Red Lion Hotels Corporation is discussed further in this release under Non-GAAP Financial Measures.

(2)

The definition of "Comparable EBITDA from continuing operations before special items" can be found in the table named "Comparable Operating Results and Data From Continuing Operations".

(3)

During the fourth quarter 2011, the company listed for sale its hotel in Medford, Oregon, a non-core asset in which the company will not maintain significant continuing involvement following a sale.  Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.  The company completed the sale in the third quarter of 2013.

(4)

During the second quarter 2012, based on the company's right to sell its hotel in Sacramento, California to its tenant and certain transaction terms, the operating results from the ownership of this real estate and land were classified as discontinued operations for all periods presented.  This hotel sale was completed in the third quarter of 2012.

(5)

During the third quarter 2012, the company listed for sale its commercial mall in Kalispell, Montana.   The company will not maintain significant continuing involvement in the property following a sale.  Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.  The company completed the sale in the second quarter of 2013.

(6)

During the first quarter 2013, the company gave notice to the City of Yakima, Washington to terminate its contract to operate as the catering company for the Convention Center and ceased operations in the second quarter 2013.  Accordingly, the operations under this agreement have been classified as discontinued operations for all periods presented.

 

Red Lion Hotels Corporation

Consolidated Balance Sheets

(unaudited)

($ in thousands, except share data)

                 
           

September 30,

      

December 31, 

           

2013

 

2012

Assets:

           
 

Current assets:

       
   

Cash and cash equivalents

 

$        27,302

 

$           6,477

   

Restricted cash

 

6

 

2,417

   

Accounts receivable, net

 

5,565

 

5,774

   

Notes receivable

 

597

 

4,112

   

Inventories

 

1,370

 

1,329

   

Prepaid expenses and other

 

3,299

 

2,648

   

Deferred income taxes

 

950

 

2,342

   

Assets held for sale

 

-

 

18,288

     

Total current assets

 

   

39,089

 

43,387

                 
 

Property and equipment, net

 

192,497

 

195,012

 

Goodwill

 

8,512

 

8,512

 

Intangible assets

 

6,992

 

6,992

 

Notes receivable, long term

 

4,407

 

2,902

 

Other assets, net

 

4,282

 

4,137

                 
     

Total assets

   

$      255,779

 

$       260,942

                 

Liabilities:

         
 

Current liabilities:

       
   

Accounts payable

 

$          6,736

 

$           5,967

   

Accrued payroll and related benefits

 

4,130

 

2,504

   

Accrued interest payable

 

39

 

190

   

Advance deposits

 

245

 

248

   

Other accrued expenses

 

11,795

 

9,286

   

Long-term debt, due within one year

 

3,000

 

49,178

     

Total current liabilities

   

25,945

 

67,373

                 
 

Long-term debt, due after one year, net of discount

 

41,529

 

-

 

Deferred income

 

3,572

 

3,923

 

Deferred income taxes

 

3,070

 

5,913

 

Debentures due Red Lion Hotels Capital Trust

 

30,825

 

30,825

     

Total liabilities

   

104,941

 

108,034

                 

Stockholders' equity:

       
   

Preferred stock - 5,000,000 shares authorized;  $0.01 par value;

       
   

no shares issued or outstanding

 

-

 

-

   

Common stock - 50,000,000 shares authorized; $0.01 par value;  

       
   

19,658,833 and 19,451,849 shares issued and outstanding

 

197

 

195

   

Additional paid-in capital

 

151,980

 

150,798

   

Accumulated other comprehensive income/(loss), net of tax

 

(164)

 

-

   

Retained earnings (accumulated deficit)

 

(1,175)

 

1,915

     

Total stockholders' equity

   

150,838

 

152,908

                 
     

Total liabilities and stockholders' equity

   

$      255,779

 

$       260,942

 

Red Lion Hotels Corporation
Additional Hotel Statistics 
(unaudited)

 

System-wide Hotels as of September 30, 2013

             
       

Meeting Space

       
 

Hotels

 

Rooms

(sq. ft.)

       
                 

Red Lion Owned or Leased Hotels (1)

25

 

4,766

230,305

       

 

Red Lion Franchised Hotels (1)

 

25

 

 

4,137

 

231,830

       

Leo Hotel Collection

2

 

3,256

241,000

       

Total

52

 

12,159

703,135

       
                 
                 
                 
                 

Comparable Hotel Statistics from Continuing Operations  (1,2,3)

         
 

Three months ended September 30, 2013

 

Three months ended September 30, 2012

 

Average

       

Average

   
 

Occupancy (4)

 

ADR (5)

RevPAR (6)

 

Occupancy (4)

ADR (5)

RevPAR (6)

 

Owned and Leased Hotels

75.5%

 

$ 93.85

$           70.86

 

76.5%

$ 90.09

$     68.92

Franchised Hotels

71.7%

 

$ 92.31

$           66.23

 

67.9%

$ 89.20

$     60.53

Total System Wide

74.0%

 

$ 93.24

$           68.97

 

73.0%

$ 89.75

$     65.50

                 

 

Change from prior comparative period:

               

  Owned and Leased Hotels

(100)

 bps

4.2%

2.8%

       

  Franchised Hotels

380

 bps

3.5%

9.4%

       

  Total System Wide

100

 bps

3.9%

5.3%

       
                 
 

Nine months ended September 30, 2013

 

Nine months ended September 30, 2012

 

Average

       

Average

   
 

Occupancy (4)

 

ADR (5)

RevPAR (6)

 

Occupancy (4)

ADR (5)

RevPAR (6)

 

Owned and Leased Hotels

65.5%

 

$ 88.31

$           57.88

 

66.5%

$ 84.78

$     56.34

Franchised Hotels

59.7%

 

$ 88.05

$           52.58

 

58.1%

$ 84.89

$     49.32

Total System Wide

63.2%

 

$ 88.21

$           55.72

 

63.1%

$ 84.82

$     53.48

                 

 

Change from prior comparative period:

               

  Owned and Leased Hotels

(100)

 bps

4.2%

2.7%

       

  Franchised Hotels

160

 bps

3.7%

6.6%

       

  Total System Wide

10

 bps

4.0%

4.2%

       
   

(1)

Includes all hotels owned, leased and franchised, presented on a comparable basis for hotel statistics. The Helena, Denver Southeast, Missoula and Pendleton properties have been excluded from the owned and leased hotel statistics and included in the franchised statistics for all periods shown.  

(2)

Excludes one hotel identified as a discontinued operations that was sold in the third quarter of 2013.        

(3)

Excludes statistics for the Leo Hotel Collection.        

(4)

Average occupancy represents total paid rooms divided by total available rooms.  Total available rooms represents the number of rooms available multiplied by the number of days in the reported period and includes rooms taken out of service for renovation.        

(5)

Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.     

(6)

Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.

 

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.  Comparable operating results from continuing operations and comparable operating results from continuing operations before special items represent reported operating results less the impact of the Helena property, which was sold in July 2012; the Denver Southeast property, which was sold in October 2012; the Missoula property, which was sold in February 2013 and  the Pendleton property, which was sold in April 2013; and less the impact of certain non-recurring charges that do not allow for a meaningful comparison between periods.  We utilize these measures because management finds them a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations.  We believe they are a complement to reported operating results.  Comparable operating results from continuing operations and comparable operating results from continuing operations before special items are not intended to represent reported operating results defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP.

 
   

Three months ended September 30,

 

Nine months ended September 30, 

   

2013

 

2012

 

2013

 

2012

                 

Total revenue per the consolidated statements of comprehensive income (loss)

 

$  42,664

 

$  45,502

 

$   109,348

 

$   117,710

less: Revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(4,596)

 

(373)

 

(11,790)

Comparable total revenue

 

$ 42,664

 

$ 40,906

 

$ 108,975

 

$ 105,920

                 

Room revenue from continuing operations

 

$  31,062

 

$  33,614

 

$    75,605

 

$    81,847

less: Room revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(3,394)

 

(308)

 

(8,269)

Comparable room revenue

 

$ 31,062

 

$ 30,220

 

$   75,297

 

$   73,578

                 

Food and beverage revenue from continuing operations

 

$    6,545

 

$    7,635

 

$    18,997

 

$    22,764

less: Food and beverage revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(969)

 

(59)

 

(2,859)

Comparable food and beverage revenue

 

$   6,545

 

$   6,666

 

$   18,938

 

$   19,905

                 

Other hotel revenue from continuing operations

 

$       983

 

$    1,148

 

$      2,142

 

$      2,463

less: Other hotel revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(233)

 

(6)

 

(662)

Comparable other hotel revenue

 

$      983

 

$      915

 

$     2,136

 

$     1,801

                 

Total hotel revenue from continuing operations

 

$  38,590

 

$  42,397

 

$    96,744

 

$   107,074

less: Total hotel revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(4,596)

 

(373)

 

(11,790)

Comparable total hotels revenue

 

$ 38,590

 

$ 37,801

 

$   96,371

 

$   95,284

                 

The reconciliation of hotel operating expense per the consolidated statements of comprehensive income (loss) to comparable hotel operating expense is as follows:

                 
   

Three months ended September 30,

 

Nine months ended September 30, 

   

2013

 

2012

 

2013

 

2012

                 

Hotel operating expenses from continuing operations

 

$  27,442

 

$  31,324

 

$    76,226

 

$    84,196

less: Hotel operating expenses from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(3,622)

 

(718)

 

(10,302)

Comparable hotel operating expenses

 

$ 27,442

 

$ 27,702

 

$   75,508

 

$   73,894

                 

Hotel revenue from continuing operations

 

$  38,590

 

$  42,397

 

$    96,744

 

$   107,074

less: Hotel revenue from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(4,596)

 

(373)

 

(11,790)

Comparable hotel revenue

 

$ 38,590

 

$ 37,801

 

$   96,371

 

$   95,284

                 

Hotel direct operating margin from continuing operations

 

$  11,148

 

$  11,073

 

$    20,518

 

$    22,878

less: Hotel direct operation margin from Helena, Denver Southeast, Missoula and Pendleton properties

 

-

 

(974)

 

345

 

(1,488)

Comparable hotel direct margin

 

$ 11,148

 

$ 10,099

 

$   20,863

 

$   21,390

Comparable hotel direct margin %

 

28.9 %

 

26.7 %

 

21.6 %

 

22.4 %

                 
                 

The reconciliation of EBITDA from continuing operations before special items per the table entitled "Disclosure of Special Items" to comparable total EBITDA before special items is as follows:

                 
   

Three months ended September 30,

 

Nine months ended September 30, 

   

2013

 

2012

 

2013

 

2012

                 

EBITDA before special items per the table "Disclosure of Special Items"

 

$    8,265

 

$    8,595

 

$    11,926

 

$    15,170

less: EBITDA of Helena, Denver Southeast, Missoula and Pendleton properties

 

57

 

(911)

 

511

 

(1,430)

Comparable total EBITDA from continuing operations before special items

 

$   8,322

 

$   7,684

 

$   12,437

 

$   13,740

 

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 September 30,

 

Nine months ended September 30, 

   

2013

 

2012

 

2013

 

2012

                 

 EBITDA from continuing operations

$ 7,683

 

$ 6,727

 

$ 11,344

 

$    6,373

 

Income tax benefit (expense) - continuing operations

(1,414)

 

(624)

 

1,127

 

3,827

 

Interest expense - continuing operations

(1,252)

 

(1,751)

 

(4,281)

 

(5,388)

 

Depreciation and amortization - continuing operations

(3,561)

 

(3,774)

 

(10,839)

 

(11,459)

 Net income (loss) attributable to Red Lion Hotels Corporation

             
 

from continuing operations

1,456

 

578

 

(2,649)

 

(6,647)

 

Income (loss) on discontinued operations, net of tax

(229)

 

(1,484)

 

(441)

 

(4,390)

 Net income (loss) attributable to Red Lion Hotels Corporation

$ 1,227

 

$  (906)

 

$ (3,090)

 

$(11,037)

                 
                 
   

Three months ended September 30,

 

Nine months ended September 30, 

   

2013

 

2012

 

2013

 

2012

                 

 EBITDA 

$ 7,324

 

$ 4,478

 

$ 10,659

 

$      136

 

Income tax benefit (expense) 

(1,284)

 

219

 

1,376

 

6,318

 

Interest expense

(1,252)

 

(1,751)

 

(4,281)

 

(5,388)

 

Depreciation and amortization

(3,561)

 

(3,852)

 

(10,844)

 

(12,103)

 Net income (loss) attributable to Red Lion Hotels Corporation

$ 1,227

 

$  (906)

 

$ (3,090)

 

$(11,037)

 

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 tax 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.

 

 

Red Lion Hotels Corporation

Disclosure of Special Items

(unaudited)

 

During the third quarter of 2013, the Company recorded $0.6 million in pre-tax separation costs in continuing operations.  Of this, $0.4 million relates to the costs associated with the retirement of the former President and Chief Executive officer and the remaining $0.2 million relates to the separation of the former Executive Vice President and Chief Operating Officer.  During the third quarter of 2012, the Company recorded a $1.9 million pre-tax impairment charge in continuing operations related to its property in Pendleton, Oregon.   During the nine months ended September 30, 2012, the Company recorded $3.9 million, $2.3 million and $0.7 million in pre-tax impairment charges in continuing operations related to its properties in Denver, Colorado, Helena, Montana and Missoula, Montana, respectively, in addition to the Pendleton impairment.  As a result, the operations as presented in the accompanying financial statements for the three and nine months ended September 30, 2013 compared to 2012 do not reflect a meaningful comparison between periods.  The following table represents a reconciliation of EBITDA from continuing operations before special items to EBITDA from continuing operations.

 
   

Three months ended September 30,

 

Nine months ended September 30,

   

2013

2012

 

2013

2012

 

($ in thousands)

EBITDA from continuing operations(1)

 

EBITDA from continuing operations (1)

 

EBITDA from continuing operations (1)

 

EBITDA from continuing operations (1)

                 

Amount before special items

$ 8,265

 

$ 8,595

 

$ 11,926

 

$ 15,170

                 
 

Special items:

             
 

Asset impairment charges (2)

-

 

(1,868)

 

-

 

(8,797)

 

Separation Costs(3)

(582)

 

-

 

(582)

 

-

                 

EBITDA from continuing operations

$ 7,683

 

$ 6,727

 

$ 11,344

 

$ 6,373

                 
                 
   

(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" on the accompanying consolidated statements of comprehensive income (loss).

                       

(3)

Amount as included in the line item "Undistributed corporate expenses" on the accompanying consolidated statements of comprehensive income (loss).

SOURCE Red Lion Hotels Corporation

###

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