Red Lion Hotels Reports First Quarter 2012 Results

Three months ended March 31,

2012

2011

change

RevPAR (revenue per available room)

$ 40.21

$ 37.47

7.3%

ADR (average daily rate)

$ 77.29

$ 77.47

-0.2%

Occupancy

52.0%

48.4%

360

bps

Hotels revenue:

Rooms

$ 20,353

$ 18,759

8.5%

Food and beverage

7,417

7,286

1.8%

Other revenue

571

648

-11.9%

Total hotels revenue

$ 28,341

$ 26,693

6.2%

Hotel direct operating margin

11.1%

9.1%

Comparable EBITDA from continuing operations

before special items⁽¹⁾

$ 1,218

$ (527)

n/m

(1)

The above excludes an asset impairment which is included in the non-GAAP reconciliation schedule named, "Disclosure of Special Items" contained in this release.

Red Lion Hotels Corporation

Consolidated Statements of Operations

(unaudited)

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

Three months ended March 31,

2012

2011

$ Change

% Change

Revenue:

Hotels

$                28,341

$             29,534

$      (1,193)

-4.0%

Franchise

1,089

707

382

54.0%

Entertainment

2,524

2,800

(276)

-9.9%

Other

743

607

136

22.4%

Total revenues

32,697

33,648

(951)

-2.8%

Operating expenses:

Hotels

25,189

26,400

(1,211)

-4.6%

Franchise 

1,172

894

278

31.1%

Entertainment

2,203

2,614

(411)

-15.7%

Other

477

393

84

21.4%

Depreciation and amortization 

4,123

5,205

(1,082)

-20.8%

Hotel facility and land lease 

1,181

1,930

(749)

-38.8%

Asset impairment

5,941

-

5,941

n/m

Loss (gain) on asset dispositions, net 

(104)

(86)

18

-20.9%

Undistributed corporate expenses

1,381

1,344

37

2.8%

Total expenses

41,563

38,694

2,869

7.4%

Operating income (loss)

(8,866)

(5,046)

(3,820)

-75.7%

Other income (expense):

Interest expense

(1,817)

(2,301)

484

21.0%

Other income, net

13

4

9

n/m

Income (loss) before income taxes

(10,670)

(7,343)

(3,327)

-45.3%

Income tax (benefit) expense

(4,074)

(2,843)

1,231

43.3%

Net income (loss) from continuing operations

(6,596)

(4,500)

(2,096)

-46.6%

Discontinued operations (2):

Income (loss) from operations of discontinued business units,

  net of income tax (benefit) expense of $(58) and $(154) respectively

(102)

(271)

169

62.4%

Impairment of the assets of the discontinued business units, net of 

  income tax (benefit) expense of $(266) and $0 respectively

(470)

-

(470)

n/m

Net income (loss) from discontinued operations

(572)

(271)

(301)

n/m

Net income (loss)

(7,168)

(4,771)

(2,397)

-50.2%

Less net income or loss attributable to noncontrolling interest

(7)

(10)

3

30.0%

Net income (loss) attributable to Red Lion Hotels Corporation 

$                 (7,161)

$              (4,761)

$      (2,400)

-50.4%

Earnings per share - basic and diluted

Net income (loss) from continuing operations 

$                  (0.34)

$               (0.24)

Net Income (loss) from discontinued operations

$                  (0.03)

$               (0.01)

Net income (loss) attributable to Red Lion Hotels Corporation

$                  (0.37)

$               (0.25)

Weighted average shares - basic 

19,222

18,974

Weighted average shares - diluted

19,222

18,974

Non-GAAP Financial Measures:

EBITDA  (1)   

$                 (5,619)

$                (151)

$      (5,468)

n/m

EBITDA as a percentage of revenues 

-17.2%

-0.4%

EBITDA from continuing operations (1)   

$                 (4,723)

$                  173

$      (4,896)

n/m

EBITDA from continuing operations 

-14.4%

0.5%

as a percentage of revenues 

(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)

During the fourth quarter 2011, the company listed for sale its hotels in Medford, Oregon and Missoula, Montana, 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 for all periods presented.

Red Lion Hotels Corporation

Consolidated Balance Sheets

(unaudited)

($ in thousands, except share data)

March 31,

December 31, 

2012

2011

Assets:

Current assets:

Cash and cash equivalents

$               3,441

$           1,981

Restricted cash

3,358

3,358

Accounts receivable, net

6,102

7,591

Inventories

1,305

1,346

Prepaid expenses and other

2,369

1,973

Deferred income taxes

7,553

4,291

Assets held for sale

23,769

30,380

Total current assets

47,897

50,920

Property and equipment, net

229,939

232,589

Goodwill

8,512

8,512

Intangible assets, net

6,992

6,992

Other assets, net

5,708

5,883

Total assets

$           299,048

$       304,896

Liabilities:

Current liabilities:

Accounts payable

$               5,439

$           4,928

Accrued payroll and related benefits

3,156

2,103

Accrued interest payable

1,136

231

Advance deposits

798

380

Other accrued expenses

9,622

9,249

Revolving credit facility

-

844

Long-term debt, due within one year

30,802

3,274

Total current liabilities

50,953

21,009

Long-term debt, due after one year

38,535

66,378

Deferred income

4,519

4,643

Deferred income taxes

15,040

16,176

Debentures due Red Lion Hotels Capital Trust

30,825

30,825

Total liabilities

139,872

139,031

Stockholders' equity:

Red Lion Hotels Corporation 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;  

19,257,898 and 19,172,670 shares issued and outstanding

192

192

Additional paid-in capital, common stock

149,556

149,027

Retained earnings

9,428

16,589

Total Red Lion Hotels Corporation stockholders' equity

159,176

165,808

Noncontrolling interest

-

57

Total stockholders' equity

159,176

165,865

Total liabilities and stockholders' equity

$           299,048

$       304,896

Red Lion Hotels Corporation

Additional Hotel Statistics

(unaudited)

System-wide Hotels as of March 31, 2012

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 March 31, 2012

Three months ended March 31, 2011

Average

Average

Occupancy (3)

ADR (4)

RevPAR (5)

Occupancy (3)

ADR (4)

RevPAR (5)

Owned and Leased Hotels

52.0%

$       77.29

$           40.21

48.4%

$         77.47

$         37.47

Franchised Hotels

57.4%

$       82.79

$           47.56

55.1%

$         82.69

$         45.58

Total System Wide

53.5%

$       78.91

$           42.22

50.2%

$         79.04

$         39.69

Change from prior comparative period:

  Owned and Leased Hotels

3.6

-0.2%

7.3%

  Franchised Hotels

2.3

0.1%

4.3%

  Total System Wide

3.3

-0.2%

6.4%

(1)

Includes all hotels owned, leased and franchised, presented on a comparable basis for hotel statistics. The Seattle property has been excluded from the owned and leased hotel statistics and included in the franchised statistics for all periods shown

(2)

Excludes two hotels identified as discontinued operations.

(3)

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.

(4)

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

(5)

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.

Three months ended March 31,

2012

2011

Comparable total revenue (2)

$            32,697

$            30,807

Comparable hotel revenue (2)

28,341

26,693

Comparable hotel operating expense (3)

25,189

24,258

Comparable hotel direct operating profit (1)

3,152

2,435

Comparable hotel direct operating margin (1)

11.1%

9.1%

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

$              1,218

$                (527)

(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 March 31,

2012

2011

Total revenue per the consolidated statements of operations

$              32,697

$              33,648

less: Revenue from Seattle Fifth Avenue property

-

(2,841)

Comparable total revenue

$            32,697

$            30,807

Hotel revenue per the consolidated statements of operations

$              28,341

$              29,534

less: Revenue from Seattle Fifth Avenue property

-

(2,841)

Comparable hotel revenue

$            28,341

$            26,693

(3)

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

Three months ended March 31,

2012

2011

Hotel operating expense per the consolidated statements of operations

$              25,189

$              26,400

less: Operating expense from Seattle Fifth Avenue property

-

(2,142)

Comparable hotel operating expense

$            25,189

$            24,258

(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 March 31,

2012

2011

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

$               1,218

$                  173

less: EBITDA of Seattle Fifth Avenue property

-

(700)

Comparable total EBITDA from continuing operations before special items

$              1,218

$                (527)

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 March 31,

2012

2011

 EBITDA from continuing operations

$              (4,723)

$                  173

Income tax benefit (expense) - continuing operations

4,074

2,843

Interest expense - continuing operations

(1,817)

(2,301)

Depreciation and amortization - continuing operations

(4,123)

(5,205)

 Net income (loss) attributable to Red Lion Hotels Corporation

from continuing operations

(6,589)

(4,490)

Income (loss) on discontinued operations, net of tax

(572)

(271)

 Net income (loss) attributable to Red Lion Hotels Corporation

$              (7,161)

$              (4,761)

Three months ended March 31,

2012

2011

 EBITDA 

$              (5,619)

$                 (151)

Income tax benefit (expense) 

4,398

2,997

Interest expense

(1,817)

(2,301)

Depreciation and amortization

(4,123)

(5,306)

 Net income (loss) attributable to Red Lion Hotels Corporation

$              (7,161)

$              (4,761)

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.

Red Lion Hotels Corporation

Disclosure of Special Items

(unaudited)

During the first quarter of 2012, the Company recorded $5.9 million in pre-tax impairment charges in continuing operations related to its Red Lion Denver Southeast and Red Lion Colonial Hotel properties. As a result, the operations as presented in the accompanying financial statements for the three months ended March 31, 2012 compared to 2011 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 per the consolidated statement of operations.

Three months ended March 31,

2012

2011

($ in thousands)

EBITDA from continuing

operations (1)

EBITDA from continuing

operations (1)

Amount before special items

$ 1,218

$ 173

Special items:

Asset impairment charges (2)

(5,941)

-

Amount per consolidated statement of operations

$ (4,723)

$ 173

(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 operations.