Red Lion Hotels Reports First Quarter 2013 Results

Red Lion Hotels Corporation

Consolidated Statements of Operations

(unaudited)

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

Three months ended

March 31,

2013

2012

$ Change

% Change

Revenue:

Hotels

$ 25,594

$ 28,152

$(2,558)

-9.1%

Franchise

1,264

1,089

175

16.1%

Entertainment

3,373

2,524

849

33.6%

Other

85

110

(25)

-22.7%

Total revenues

30,316

31,875

(1,559)

-4.9%

Operating expenses:

Hotels

23,312

25,038

(1,726)

-6.9%

Franchise 

1,299

1,172

127

10.8%

Entertainment

2,984

2,203

781

35.5%

Other

108

191

(83)

-43.5%

Depreciation and amortization 

3,664

3,842

(178)

-4.6%

Hotel facility and land lease 

1,124

1,126

(2)

-0.2%

Asset impairment

-

6,676

(6,676)

-100.0%

Loss (gain) on asset dispositions, net 

(92)

(104)

(12)

-11.5%

Undistributed corporate expenses

1,806

1,381

425

30.8%

Total expenses

34,205

41,525

(7,320)

-17.6%

Operating income (loss)

(3,889)

(9,650)

5,761

-59.7%

Other income (expense):

Interest expense

(1,484)

(1,817)

333

18.3%

Other income, net

101

13

88

n/m

Income (loss) before income taxes

(5,272)

(11,454)

6,182

54.0%

Income tax (benefit) expense

(2,069)

(4,358)

(2,289)

-52.5%

Net income (loss) from continuing operations

(3,203)

(7,096)

3,893

-54.9%

Discontinued operations ^(3,4,5,6):

Income (loss) from operations of discontinued business units, net of income tax (benefit) expense of $79 and $(40) respectively

138

(72)

210

n/m

Loss on disposal and impairment of the assets of the discontinued business units, net of income tax (benefit) expense of $(25) and $0 respectively

(45)

-

(45)

n/m

Net income (loss) from discontinued operations

93

(72)

165

n/m

Net income (loss)

(3,110)

(7,168)

4,058

-56.6%

Less net income or loss attributable to noncontrolling interest

-

(7)

7

100.0%

Net income (loss) attributable to Red Lion Hotels Corporation 

$ (3,110)

$ (7,161)

$  4,051

-56.6%

Earnings per share - basic and diluted

Net income (loss) from continuing operations 

$   (0.17)

$  (0.37)

Net income (loss) from discontinued operations

$    0.01

$  (0.00)

Net income (loss) attributable to Red Lion Hotels Corporation

$   (0.16)

$  (0.37)

Weighted average shares - basic 

19,469

19,222

Weighted average shares - diluted

19,469

19,222

Non-GAAP Financial Measures:

EBITDA  ⁽¹⁾   

$       26

$ (5,618)

$  5,644

n/m

EBITDA as a percentage of revenues 

0.1%

-17.6%

Comparable EBITDA from continuing operations before special items ⁽²⁾   

$     (32)

$  1,005

$(1,037)

n/m

⁽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 does not expect to maintain significant continuing involvement following a sale.  Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.

⁽⁴⁾

During the second quarter 2012, based on the company's right to sell its hotel in Sacramento, California to its tenant and on negotiations regarding 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 does not expect to 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.

⁽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.  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)

March 31,

December 31, 

2013

2012

Assets:

Current assets:

Cash and cash equivalents

$    5,158

$           6,477

Restricted cash

2,583

2,417

Accounts receivable, net

5,767

5,774

Notes receivable

4,105

4,112

Inventories

1,435

1,329

Prepaid expenses and other

2,608

2,648

Deferred income taxes

2,261

2,342

Assets held for sale

16,449

18,288

Total current assets

40,366

43,387

Property and equipment, net

193,402

195,012

Goodwill

8,512

8,512

Intangible assets

6,992

6,992

Notes receivable, long term

2,922

2,902

Other assets, net

3,992

4,137

Total assets

$ 256,186

$       260,942

Liabilities:

Current liabilities:

Accounts payable

$    5,344

$           5,967

Accrued payroll and related benefits

3,000

2,504

Accrued interest payable

916

190

Advance deposits

510

248

Other accrued expenses

9,556

9,286

Long-term debt, due within one year

48,335

49,178

Total current liabilities

67,661

67,373

Deferred income

3,806

3,923

Deferred income taxes

3,836

5,913

Debentures due Red Lion Hotels Capital Trust

30,825

30,825

Total liabilities

106,128

108,034

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; 19,473,520 and 19,451,849 shares issued and outstanding

195

195

Additional paid-in capital, common stock

151,058

150,798

Retained earnings (accumulated deficit)

(1,195)

1,915

Total stockholders' equity

150,058

152,908

Total liabilities and stockholders' equity

$ 256,186

$       260,942

Red Lion Hotels Corporation

Additional Hotel Statistics

(unaudited)

System-wide Hotels as of March 31, 2013

Meeting Space

Hotels

Rooms

(sq. ft.)

Red Lion Owned or Leased Hotels ⁽¹⁾:

    Comparable Continuing Operations

26

4,936

240,074

 Discontinued Operations

1

185

9,552

Red Lion Franchised Hotels ⁽¹⁾

22

3,744

220,461

Leo Hotel Collection

1

2,956

220,000

Total

50

11,821

690,087

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

Three months ended March 31, 2013

Three months ended March 31, 2012

Average

Average

Occupancy ⁽⁴⁾

ADR ⁽⁵⁾

RevPAR ⁽⁶⁾

Occupancy ⁽⁴⁾

ADR ⁽⁵⁾

RevPAR ⁽⁶⁾

Owned and Leased Hotels

52.9%

$ 80.57

$           42.64

54.2%

$ 77.67

$     42.08

Franchised Hotels

46.7%

$ 82.01

$           38.30

47.7%

$ 78.62

$     37.54

Total System Wide

50.5%

$ 81.08

$           40.96

51.7%

$ 78.01

$     40.32

Change from prior comparative period:

  Owned and Leased Hotels

(1.3)

3.7%

1.3%

  Franchised Hotels

(1.0)

4.3%

2.0%

  Total System Wide

(1.2)

3.9%

1.6%

(1)

Includes all hotels owned, leased and franchised, presented on a comparable basis for hotel statistics. The Helena, Denver Southeast and Missoula 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 operation.

(3)

Excludes statistics for Leo Collection hotel.

(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.

Three months ended March 31,

2013

2012

Comparable total revenue⁽²⁾

$         30,246

$         29,384

Comparable hotel revenue ⁽²⁾

25,524

25,661

Comparable hotel operating expense⁽³⁾

23,174

22,425

Comparable hotel direct operating profit⁽¹⁾

2,350

3,236

Comparable hotel direct operating margin ⁽¹⁾

9.2%

12.6%

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

$             (32)

$          1,005

(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,

2013

2012

Total revenue per the consolidated statements of operations

$        30,316

$        31,875

less: Revenue from Helena, Denver Southeast and Missoula properties

(70)

(2,491)

Comparable total revenue

$        30,246

$        29,384

Hotel revenue per the consolidated statements of operations

$        25,594

$        28,152

less: Revenue from Helena, Denver Southeast and Missoula properties

(70)

(2,491)

Comparable hotel revenue

$        25,524

$        25,661

(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,

2013

2012

Hotel operating expense per the consolidated statements of operations

$        23,312

$        25,038

less: Operating expense from Helena, Denver Southeast and Missoula properties

(138)

(2,613)

Comparable hotel operating expense

$        23,174

$        22,425

(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,

2013

2012

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

$           (124)

$            888

less: EBITDA of Helena, Denver Southeast and Missoula properties

92

117

Comparable total EBITDA from continuing operations before special items

$            (32)

$         1,005

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, Denver Southeast and Missoula properties' results 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 also believe that investors will find them to be 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.

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,

2013

2012

 EBITDA from continuing operations

$                (124)

$                 (5,788)

Income tax benefit (expense) - continuing operations

2,069

4,358

Interest expense - continuing operations

(1,484)

(1,817)

Depreciation and amortization - continuing operations

(3,664)

(3,842)

 Net income (loss) attributable to Red Lion Hotels Corporation from continuing operations

(3,203)

(7,089)

Income (loss) on discontinued operations, net of tax

93

(72)

 Net income (loss) attributable to Red Lion Hotels Corporation

$              (3,110)

$                 (7,161)

Three months ended March 31,

2013

2012

 EBITDA 

$                    26

$                 (5,618)

Income tax benefit (expense) 

2,015

4,398

Interest expense

(1,484)

(1,817)

Depreciation and amortization

(3,667)

(4,124)

 Net income (loss) attributable to Red Lion Hotels Corporation

$              (3,110)

$                 (7,161)

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 $3.9 million, $2.0 million and $0.7 million, in pre-tax impairment charges in continuing operations related to its sold Denver Southeast property, its sold property in Helena, Montana and its sold property in Missoula, Montana, respectively.  As a result, the operations as presented in the accompanying financial statements for the three months ended March 31, 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 per the consolidated statement of operations.

Three months ended March 31,

2013

2012

($ in thousands)

EBITDA from

continuing

operations ⁽¹⁾

EBITDA from

 continuing

operations ⁽¹⁾

Amount before special items

$                (124)

$                  888

Special items:

Asset impairment charges ⁽²⁾

-

(6,676)

EBITDA from continuing operations 

$                (124)

$              (5,788)

⁽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.