Red Lion Hotels 8-K Red Lion Hotels Reports Second Quarter 2011 Results

Exhibit 99.1

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

Red Lion Hotels Reports Second Quarter 2011 Results

SPOKANE, WA, August 4, 2011- Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, today announced its results for the second quarter ended June 30, 2011.

Comparable hotel basis operating results for the periods included in this release exclude 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, therefore, the company is required to report its financial results in continuing operations.

Overview:

• Closed $71 million sale of Seattle Fifth Avenue property

• Negotiating refinance of maturing debt

• RevPAR for comparable owned and leased hotels increased 6.3 percent year over year

• ADR for comparable owned and leased hotels up 1.2 percent compared to prior year

• Occupancy for comparable owned and leased hotels increased 290 basis points over prior year

• EBITDA before special items decreased $1.9 million to $5.6 million, primarily driven by increased hotel and franchise operating expense

Total revenue reported during the second quarter was $45.4 million. Revenue from hotels of $39.3 million increased slightly compared to $38.6 million in the prior year period. Second quarter 2011 reported net income was $18.6 million, or $0.97 per diluted share, compared to a net loss of $0.1 million, or $0.00 per share, for the prior year period. Second quarter 2011 results include a $33.5 million gain on the sale of Seattle Fifth Avenue which is classified as a special item. EBITDA from continuing operations before special items for the second quarter of 2011 was $5.6 million, compared to $7.5 million for the second quarter of 2010. On a comparable hotel basis, EBITDA from continuing operations before special items was $4.6 million for the quarter compared to $6.1 million in the prior year period.

“The completion of the sale of our Seattle Fifth Avenue property was an important first step in our strategy to restructure our balance sheet and reduce debt,” said President and Chief Executive Officer Jon E. Eliassen. “Unlocking the real estate value on the Seattle property while maintaining the hotel as a franchise affords us the balance sheet flexibility to reduce debt, retire leases or use sale proceeds for other company needs.”

Summary results for the second quarter and six months ended June 30, 2011 and June 30, 2010 follow:

	Three months ended June 30,								Six months ended June 30,
($ in thousands, except per share)	2011			2010		% change			2011			2010			% change
Total revenue, as reported	$	45,380		$	42,455		6.9	%	$	79,652		$	76,757			3.8	%
Results before special items:(1)
EBITDA from continuing operations	$	5,601		$	7,549		-25.8	%	$	5,448		$	9,421			-42.2	%
Net income (loss) from continuing operations	$	(363	)	$	67		n/m		$	(5,134	)	$	(3,372	)		-52.3	%
Earnings (loss) per share from continuing operations — diluted	$	(0.02	)	$	—		n/m		$	(0.27	)	$	(0.18	)		-50.0	%
Results as reported:
EBITDA from continuing operations	$	39,150		$	7,549		n/m		$	38,997		$	8,202			n/m
Net income (loss) from continuing operations	$	18,760		$	67		n/m		$	13,989		$	(4,158	)		n/m
Earnings (loss) per share from continuing operations — diluted	$	0.98		$	0.00		n/m		$	0.73		$	(0.23	)		n/m

⁽¹⁾ Excludes $33.5 million gain on the sale of the Seattle Fifth Avenue property recorded in the second quarter of 2011 and $1.2 million of separation costs related to the departure of the company’s former President and Chief Executive Officer recorded in the first quarter of 2010.

In addition, on a comparable hotel basis, key hotel operating metrics and hotel revenues and operating margin for the second quarter and six months ended June 30, 2011 and June 30, 2010, are highlighted below for owned and leased hotels:

	Three months ended June 30,									Six months ended June 30,
	2011			2010			change			2011			2010			change
RevPAR (revenue per available room)	$	50.43		$	47.44			6.3	%	$	43.56		$	42.21			3.2	%
ADR (average daily rate)	$	82.20		$	81.23			1.2	%	$	80.11		$	79.64			0.6	%
Occupancy		61.3	%		58.4	%		2.90			54.4	%		53.0	%		1.40
Hotels revenue:
Rooms	$	26,725		$	25,144			6.3	%	$	45,924		$	44,500			3.2	%
Food and beverage		8,558			8,806			-2.8	%		16,016			16,685			-4.0	%
Other revenue		847			855			-0.9	%		1,507			1,464			2.9	%
Total hotels revenue	$	36,130		$	34,805			3.8	%	$	63,447		$	62,649			1.3	%
Hotel direct operating margin		22.2	%		24.6	%		-9.8	%		16.2	%		19.2	%		-15.6	%

Second Quarter 2011 Results

In the second quarter of 2011, comparable owned and leased hotels occupancy increased 290 basis points to 61.3 percent and ADR increased 1.2 percent to $82.20, both contributing to a 6.3 percent increase in comparable RevPAR year over year. Including franchised hotels, system wide RevPAR on a comparable basis for the quarter increased 6.5 percent, due to a 390 basis point increase in occupancy, with ADR remaining relatively flat.

Second quarter hotel revenue on a comparable basis of $36.1 million increased 3.7 percent from $34.8 million in the prior year period. Rooms revenue increased approximately $1.6 million or 6.3 percent, due to an increase in occupancy and ADR. Food and beverage revenue on a comparable basis declined slightly to $8.6 million versus $8.8 million in the prior year period primarily due to reduced banquet business. Hotel direct operating margin on a comparable basis declined to 22.2 percent during the quarter from 24.6 percent in the same period in 2010. This decline was driven by an increase in operating expenses including labor cost, utility costs and repairs and maintenance.

Franchise revenue remained essentially flat at $0.9 million in the second quarter of 2011. Profitability in the segment was impacted by an increase in lease costs relating to the company’s subleased and franchised Sacramento property.

Revenue in the entertainment segment increased $2.3 million to $4.6 million, driven by a successful 11-day run ofWickedin the Best of Broadway series. Profitability in the entertainment segment was $0.5 million, despite reduced margins in the ticketing portion of the business.

Six Months Ended June 30, 2011 Results

Total revenue on a comparable hotel basis for the six months ended June 30, 2011 was $73.7 million versus $70.2 million in the prior year period. Comparable revenue from hotels of $63.4 million was up $0.8 million, or 1.3 percent. Comparable hotel direct operating margin declined to 16.2 percent from 19.2 percent in the prior year period.

RevPAR for comparable owned and leased hotels increased 3.2 percent driven by a 140 basis point increase in occupancy and a 0.6 percent increase in ADR. Including franchised hotels, system wide RevPAR on a comparable basis for the period increased 4.7 percent due to a 250 basis point increase in occupancy, while ADR remained flat.

Liquidity and Balance Sheet

As of June 30, 2011, the company had approximately $51.5 million in cash and cash equivalents. The company used a portion of the proceeds from the sale of the Seattle Fifth Avenue property to retire the line of credit that was secured by the property. The balance of the proceeds will be used to further reduce debt and lease obligations and for other corporate purposes.

As of June 30, 2011, the company had outstanding debt of $106.3 million, including $30.8 million of trust preferred securities. The company is negotiating a refinance of $24.6 million of debt classified as current.

Capital expenditures for the six months ended June 30, 2011, totaled $3.1 million for hotel improvement projects.

Franchise Update

On June 14, 2011, the company entered into a franchise agreement on the Seattle Fifth Avenue property under which the hotel will continue to operate as a Red Lion.

On May 19, 2011, the company announced that a 109-room limited service hotel in Rancho Cordova officially converted to the Red Lion brand. The Red Lion Inn Rancho Cordova is located near Sacramento, increasing the company’s brand presence in California.

Outlook for 2011

The company is reaffirming its RevPAR guidance for 2011, previously provided on May 5, 2011, based on the outlook for the markets in which the company operates and information available today:

• Full year 2011 RevPAR for comparable company owned and leased hotels is expected to increase 3 to 5 percent over 2010 on an annual basis.

• The company expects to invest approximately $11.0 million to $13.0 million in capital improvements in 2011.

Conference Call Information

The company will conduct a conference call on August 4, 2011 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 President and Chief Executive Officer Jon E. Eliassen and Executive Vice President and Chief Financial Officer Dan Jackson. Executive Vice President and Chief Operating Officer George Schweitzer will also be available to answer questions.

To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 230-1085. International callers should dial (612) 288-0329.

This conference call will also be webcast live at http://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 fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 4:00 p.m. Pacific Time on August 4, 2011, through September 4, 2011, at (800) 475-6701 or (320) 365-3844 (International) access code — 210796. 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 and leisure Company primarily engaged in the ownership, operation and franchising of midscale hotels under its Red Lion^® brand. As of June 30, 2011, the RLH hotel network was comprised of 44 hotels located in eight states and one Canadian province, with 8,457 rooms and 424,387 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, 2010 and in other documents filed by the Company with the Securities and Exchange Commission.

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)

($ in thousands, except footnotes)

	Three months ended June 30,
	2011			2010			$ Change			% Change
Revenue:
Hotels	$	39,276		$	38,632		$	644			1.7	%
Franchise		945			889			56			6.3	%
Entertainment		4,640			2,340			2,300			98.3	%
Other		519			594			(75	)		-12.6	%
Total revenues		45,380			42,455			2,925			6.9	%
Operating expenses:
Hotels		30,613			28,620			1,993			7.0	%
Franchise		1,070			810			260			32.1	%
Entertainment		4,138			1,986			2,152			108.4	%
Other		435			413			22			5.3	%
Depreciation and amortization		4,757			5,164			(407	)		-7.9	%
Hotel facility and land lease		2,187			1,779			408			22.9	%
Loss (gain) on asset dispositions, net(1)		(33,497	)		(57	)		33,440			n/m
Undistributed corporate expenses		1,553			1,362			191			14.0	%
Total expenses		11,256			40,077			(28,821	)		-71.9	%
Operating income (loss)		34,124			2,378			31,746			n/m
Other income (expense):
Interest expense		(2,272	)		(2,314	)		42			1.8	%
Other income, net		381			9			372			n/m
Income (loss) before income taxes		32,233			73			32,160			n/m
Income tax (benefit) expense		13,473			6			13,467			n/m
Net income (loss) from continuing operations		18,760			67			18,693			n/m
Discontinued operations:
Income (loss) from operations of discontinued business units, net of income tax (benefit) expense of ($66)		—			(129	)		129			100.0	%
Net income (loss) from discontinued operations		—			(129	)		129			100.0	%
Net income (loss)		18,760			(62	)		18,822			n/m
Less: Net income or loss attributable to noncontrolling interest		(112	)		(2	)		(110	)		n/m
Net income (loss) attributable to Red Lion Hotels Corporation (1)	$	18,648		$	(64	)	$	18,712			n/m
Earnings per share — basic
Net income (loss) from continuing operations	$	0.99			0.00
Net Income (loss) from discontinued operations	$	0.00			0.00
Net income (loss) attributable to Red Lion Hotels Corporation	$	0.98			0.00
Weighted average shares — basic (2)		19,023			18,420
Earnings per share — diluted
Net income (loss) from continuing operations	$	0.98			0.00
Net Income (loss) from discontinued operations	$	0.00			0.00
Net income (loss) attributable to Red Lion Hotels Corporation	$	0.97			0.00
Weighted average shares — diluted (2)		19,182			18,651
EBITDA(1,3)	$	39,150		$	7,365		$	31,785			n/m
EBITDA as a percentage of revenues		86.3	%		17.3	%
EBITDA from continuing operations(1,3)	$	39,150		$	7,549		$	31,601			n/m
EBITDA from continuing operations as a percentage of revenues		86.3	%		17.8	%

(1)	Includes $33.5 million gain on the sale of hotel property located in Seattle, as discussed further in this release under Disclosure of Special Items.
(2)	For the three months ended June 30, 2011 40,157 of the 335,926 options to purchase common shares outstanding as of that date were considered dilutive, as were 74,740 of the 303,974 restricted stock units outstanding. For the three months ended June 30, 2010, 125,384 of the 904,189 options to purchase common shares outstanding as of the date were considered dilutive. Of the 262,684 restricted stock units outstanding, 60,738 shares were considered dilutive during the second quarter of 2010. For both comparative periods, all of the 44,837 convertible operating partnership units were considered dilutive.
(3)	The definition of “EBITDA” and how that measure relates to net income attributable to Red Lion Hotels Corporation is discussed further in this release under Non-GAAP Financial Measures.

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)

	Six months ended June 30,
	2011			2010			$ Change			% Change
Revenue:
Hotels	$	69,434		$	69,253		$	181			0.3	%
Franchise		1,652			1,447			205			14.2	%
Entertainment		7,440			4,818			2,622			54.4	%
Other		1,126			1,239			(113	)		-9.1	%
Total revenues		79,652			76,757			2,895			3.8	%
Operating expenses:
Hotels		57,782			55,212			2,570			4.7	%
Franchise		1,964			1,388			576			41.5	%
Entertainment		6,752			3,999			2,753			68.8	%
Other		828			835			(7	)		-0.8	%
Depreciation and amortization		10,063			10,374			(311	)		-3.0	%
Hotel facility and land lease		4,298			3,526			772			21.9	%
Loss (gain) on asset dispositions, net(1)		(33,583	)		(155	)		33,428			n/m
Undistributed corporate expenses(2)		2,897			3,805			(908	)		-23.9	%
Total expenses		51,001			78,984			(27,983	)		-35.4	%
Operating income (loss)		28,651			(2,227	)		30,878			n/m
Other income (expense):
Interest expense		(4,573	)		(4,550	)		(23	)		-0.5	%
Other income, net		385			46			339			n/m
Income (loss) before income taxes		24,463			(6,731	)		31,194			n/m
Income tax (benefit) expense		10,474			(2,573	)		(13,047	)		n/m
Net income (loss) from continuing operations		13,989			(4,158	)		18,147			n/m
Discontinued operations:
Income (loss) from operations of discontinued business units, net of income tax (benefit) expense of ($142)		—			(283	)		283			100.0	%
Net income (loss) from discontinued operations		—			(283	)		283			100.0	%
Net income (loss)		13,989			(4,441	)		18,430			n/m
Less: Net income or loss attributable to noncontrolling interest		(102	)		9			(111	)		n/m
	—
Net income (loss) attributable to Red Lion Hotels Corporation (1,2)	$	13,887		$	(4,432	)	$	18,319			n/m
Earnings per share — basic
Net income (loss) from continuing operations	$	0.74		$	(0.23	)
Net Income (loss) from discontinued operations	$	0.00		$	(0.01	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	0.73		$	(0.24	)
Weighted average shares — basic (3)		18,999			18,345
Earnings per share — diluted
Net income (loss) from continuing operations	$	0.73		$	(0.23	)
Net Income (loss) from discontinued operations	$	0.00		$	(0.01	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	0.72		$	(0.24	)
Weighted average shares — diluted (3)		19,163			18,345
EBITDA(1,2,4)	$	38,997		$	7,803		$	31,194			n/m
EBITDA as a percentage of revenues		49.0	%		10.2	%
EBITDA from continuing operations(1,2,4)	$	38,997		$	8,202		$	30,795			n/m
EBITDA from continuing operations as a percentage of revenues		49.0	%		10.7	%

(1)	Includes $33.5 million gain on the sale of hotel property located in Seattle, as discussed further in this release under Disclosure of Special Items.
(2)	Includes $1.2 million of cash and non-cash expense recorded in the first quarter of 2010 related to the separation of the company’s former President and CEO, as discussed further in this release under Disclosure of Special Items.
(3)	For the six months ended June 30, 2011, 42,260 of the 335,926 options to purchase common shares outstanding as of that date were considered dilutive as were 99,670 of the 303,974 restricted stock units outstanding. In addition, 22,542 of the 44,837 convertible operating partnership units were considered dilutive. For the six months ended June 30, 2010 none of the 904,189 options to purchase common shares outstanding were considered dilutive due to the loss for the period, nor were any of the 262,684 restricted stock units outstanding or 44,837 convertible operating partnership units.
(4)	The definition of “EBITDA” and how that measure relates to net income attributable to Red Lion Hotels Corporation is discussed further in this release under Non-GAAP Financial Measures.

Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)

($ in thousands, except share data)

	June 30,		December 31,
	2011		2010
Assets:
Current assets:
Cash and cash equivalents	$	46,818	$	4,012
Restricted cash		4,707		4,120
Accounts receivable, net		6,532		5,985
Inventories		1,519		1,328
Prepaid expenses and other		3,090		1,937
Assets held for sale		9,805		—
Total current assets		72,471		17,382
Property and equipment, net		227,574		272,030
Goodwill		22,749		28,042
Intangible assets, net		7,961		7,984
Other assets, net		5,991		6,044
Total assets	$	336,746	$	331,482
Liabilities:
Current liabilities:
Accounts payable	$	4,893	$	7,146
Accrued payroll and related benefits		5,023		4,367
Accrued interest payable		255		276
Advance deposits		931		487
Other accrued expenses		11,554		10,178
Revolving credit facility		—		18,000
Long-term debt, due within one year		24,594		25,275
Total current liabilities		47,250		65,729
Long-term debt, due after one year		50,901		51,877
Deferred income		4,891		4,859
Deferred income taxes		16,955		7,427
Debentures due Red Lion Hotels Capital Trust		30,825		30,825
Total liabilities		150,822		160,717
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; 19,067,541 and 18,869,254 shares issued and outstanding		191		189
Additional paid-in capital, common stock		148,002		146,834
Retained earnings		37,624		23,737
Total Red Lion Hotels Corporation stockholders’ equity		185,817		170,760
Noncontrolling interest		107		5
Total equity		185,924		170,765
Total liabilities and stockholders’ equity	$	336,746	$	331,482

Red Lion Hotels Corporation
Consolidated Statement of Cash Flows
(unaudited)

($ in thousands)

	Six months ended June 30,
	2011			2010
Operating activities:
Net income (loss)	$	13,989		$	(4,441	)
Adjustments to reconcile net income (loss) attributable to Red Lion Hotels Corporation to net cash provided by (used in) operating activities:
Depreciation and amortization		10,063			10,400
Gain on disposition of property, equipment and other assets, net		(33,583	)		(155	)
Deferred income tax provision (benefit)		9,589			(2,926	)
Equity in investments		23			25
Stock based compensation expense		655			1,050
Provision for doubtful accounts		65			131
Change in current assets and liabilities:
Restricted cash		(587	)		(1,422	)
Accounts receivable		(612	)		(1,851	)
Inventories		(229	)		69
Prepaid expenses and other		(1,153	)		(600	)
Accounts payable		(2,253	)		3,501
Accrued payroll and related benefits		656			2,868
Accrued interest payable		(21	)		(17	)
Deferred income		275			—
Other accrued expenses and advance deposits		1,812			2,733
Net cash (used in) provided by operating activities		(1,311	)		9,365
Investing activities:
Purchases of property and equipment		(3,070	)		(3,832	)
Proceeds from disposition of property and equipment		68,331			8
Advances to Red Lion Hotels Capital Trust		(27	)		(27	)
Other, net		(694	)		198
Net cash (used in) provided by investing activities		64,540			(3,653	)
Financing activities:
Borrowings on revolving credit facility		10,000			4,500
Repayment of revolving credit facility		—			(9,500	)
Retirement of revolving credit facility		(28,000	)		—
Repayment of long-term debt		(1,657	)		(1,570	)
Proceeds from stock options exercised		513			304
Proceeds from issuance of common stock under employee stock purchase plan		63			71
Additions to deferred financing costs		(1,220	)		(171	)
Common stock redeemed		(122	)		(84	)
Net cash (used in) provided by financing activities		(20,423	)		(6,450	)
Net change in cash from operating activities of discontinued operations		—			1
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents		42,806			(737	)
Cash and cash equivalents at beginning of period		4,012			3,882
Cash and cash equivalents at end of period	$	46,818		$	3,145

Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)

System-wide Hotels as of June 30, 2011

							Meeting Space
	Hotels			Rooms			(sq. ft.)
Red Lion Owned and Leased Hotels(1)		30			5,824			290,766
Red Lion Franchised Hotels(1)		14			2,633			133,621
Total Red Lion Hotels		44			8,457			424,387
Comparable Hotel Statistics(1)
	Three months ended June 30, 2011									Three months ended June 30, 2010
	Average									Average
	Occupancy(2)			ADR (3)			RevPAR (4)			Occupancy(2)			ADR (3)		RevPAR (4)
Owned and Leased Hotels		61.3	%	$	82.20		$	50.43			58.4	%	$	81.23	$	47.44
Franchised Hotels		68.7	%	$	86.19		$	59.19			62.2	%	$	88.79	$	55.23
Total System Wide		63.3	%	$	83.35		$	52.75			59.4	%	$	83.32	$	49.51
Change from prior comparative period:
Owned and Leased Hotels		2.9			1.2	%		6.3	%
Franchised Hotels		6.5			-2.9	%		7.2	%
Total System Wide		3.9			0.0	%		6.5	%
	Six months ended June 30, 2011									Six months ended June 30, 2010
	Average									Average
	Occupancy(2)			ADR (3)			RevPAR (4)			Occupancy(2)			ADR (3)		RevPAR (4)
Owned and Leased Hotels		54.4	%	$	80.11		$	43.56			53.0	%	$	79.64	$	42.21
Franchised Hotels		61.9	%	$	84.64		$	52.42			56.3	%	$	86.10	$	48.48
Total System Wide		56.4	%	$	81.43		$	45.91			53.9	%	$	81.43	$	43.87
Change from prior comparative period:
Owned and Leased Hotels		1.4			0.6	%		3.2	%
Franchised Hotels		5.6			-1.7	%		8.1	%
Total System Wide		2.5			0.0	%		4.7	%

(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)	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.
(3)	Average daily rate (“ADR”) represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4)	Revenue per available room (“RevPAR”) represents total room and related revenues divided by total available rooms.

Red Lion Hotels Corporation
Comparable Operating Data
(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 for the entirety of the reporting periods being compared.

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Comparable total revenue(2)	$	42,234		$	38,628		$	73,665		$	70,153
Comparable hotel revenue(2)		36,130			34,805			63,447			62,649
Comparable hotel operating expense (3)		28,117			26,237			53,143			50,629
Comparable hotel direct operating profit (1)		8,013			8,568			10,304			12,020
Comparable hotel direct operating margin(1)		22.2	%		24.6	%		16.2	%		19.2	%
Comparable total EBITDA before special items(4)	$	4,599		$	6,104		$	3,747		$	7,400

(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 June 30,						Six months ended June 30,
	2011			2010			2011			2010
Total revenue per the consolidated statements of operations	$	45,380		$	42,455		$	79,652		$	76,757
less: Revenue from Seattle Fifth Avenue property		(3,146	)		(3,827	)		(5,987	)		(6,604	)
Comparable total revenue	$	42,234		$	38,628		$	73,665		$	70,153
Hotel revenue per the consolidated statements of operations	$	39,276		$	38,632		$	69,434		$	69,253
less: Revenue from Seattle Fifth Avenue property		(3,146	)		(3,827	)		(5,987	)		(6,604	)
Comparable hotel revenue	$	36,130		$	34,805		$	63,447		$	62,649

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

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Hotel operating expense per the consolidated statements of operations	$	30,613		$	28,620		$	57,782		$	55,212
less: Operating expense from Seattle Fifth Avenue property		(2,496	)		(2,383	)		(4,639	)		(4,583	)
Comparable hotel operating expense	$	28,117		$	26,237		$	53,143		$	50,629

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

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
EBITDA before special items per the table “Disclosure of Special Items”	$	5,601		$	7,549		$	5,448		$	9,421
less: EBITDA of Seattle Fifth Avenue property		(1,002	)		(1,445	)		(1,701	)		(2,020	)
Comparable total EBITDA before special items	$	4,599		$	6,104		$	3,747		$	7,401

Red Lion Hotels Corporation
Disclosure of Special Items
(unaudited)

During the second quarter 2011, the Company recorded a $33.5 million gain from the sale of its Red Lion Hotel on Fifth Avenue in Seattle, Washington and in the first quarter of 2010, the Company recorded an expense of $1.2 million resulting from the separation of the Company’s former President and Chief Executive Officer. As a result, the operations as presented in the accompanying financial statements for the three and six months ended June 30, 2011 compared to 2010 do not reflect a meaningful comparison between periods. The following table represents a reconciliation of certain earnings measures before special items to net income / (loss) from continuing operations.

	Three months ended June 30, 2011								Three months ended June 30, 2010
	Net income / (loss)								Net income / (loss)
	from continuing								from continuing
($ in thousands except per share data)	operations			EBITDA		Diluted EPS			operations		EBITDA		Diluted EPS
Amount before special items	$	(363	)	$	5,601	$	(0.02	)	$	67	$	7,549		0.00
Special items:
Gain on asset disposition(1)		33,549			33,549		1.75			—		—		—
Income tax benefit (expense) of special items, net(3)		(14,426	)		—		(0.75	)		—		—		—
Amount per consolidated statement of operations	$	18,760		$	39,150	$	0.98		$	67	$	7,549		0.00

	Six months ended June 30, 2011								Six months ended June 30, 2010
	Net income / (loss)								Net income / (loss)
	from continuing								from continuing
($ in thousands except per share data)	operations			EBITDA		Diluted EPS			operations			EBITDA			Diluted EPS
Amount before special items	$	(5,134	)	$	5,448	$	(0.27	)	$	(3,372	)	$	9,421		$	(0.18	)
Special items:
Gain on asset disposition(1)		33,549			33,549		1.75			—			—			—
Separation costs(2)		—			—					(1,219	)		(1,219	)		(0.07	)
Income tax benefit (expense) of special items, net(3)		(14,426	)		—		(0.75	)		433			—			0.02
Amount per consolidated statement of operations	$	13,989		$	38,997	$	0.73		$	(4,158	)	$	8,202		$	(0.23	)

(1)	Amount as included in the line item “Loss (gain) on asset dispositions, net” on the accompanying consolidated statements of operations.
(2)	Amount as included in the line item “Undistributed corporate expenses” on the accompanying consolidated statements of operations.
(3)	Represents taxes on special items at the Company’s expected incremental tax rate as applicable.

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 June 30,						Six months ended June 30,
	2011			2010			2011			2010
EBITDA	$	39,150		$	7,365		$	38,997		$	7,803
Income tax benefit (expense)		(13,473	)		60			(10,474	)		2,715
Interest expense		(2,272	)		(2,314	)		(4,573	)		(4,550	)
Depreciation and amortization		(4,757	)		(5,175	)		(10,063	)		(10,400	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	18,648		$	(64	)	$	13,887		$	(4,432	)

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
EBITDA from continuing operations	$	39,150		$	7,549		$	38,997		$	8,202
Income tax benefit (expense)		(13,473	)		(6	)		(10,474	)		2,573
Interest expense		(2,272	)		(2,314	)		(4,573	)		(4,550	)
Depreciation and amortization		(4,757	)		(5,164	)		(10,063	)		(10,374	)
Discontinued operations, net of tax		—			(129	)		—			(283	)
Net income (loss) attributable to Red Lion Hotels Corporation	$	18,648		$	(64	)	$	13,887		$	(4,432	)

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.