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Avenue Plaza
Suite 4500
Seattle, WA
98154-1065
Telephone
(206) 624-3600
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(206) 389-1708
E-mail
fwoodruff
@riddellwilliams.com
@riddellwilliams.com
Direct Line
(206) 389 1519
October 10, 2006
VIA EDGAR AND FACSIMILE
Mr. Daniel L. Gordon, Branch Chief
Ms. Kristi Beshears, Staff Accountant
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Ms. Kristi Beshears, Staff Accountant
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
| Re: | Red Lion Hotels Corporation Form 10-K for the year ended December 31, 2005 Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006 File No. 001-13957 |
Dear Mr. Gordon and Ms. Beshears:
On behalf of our client, Red Lion Hotels Corporation (the “Company”), we are sending you the attached pro forma consolidated financial statement worksheets of the Company for its fiscal quarter ended June 30, 2006. These worksheets show how the financial statements of the Company filed with its Form 10-Q for that quarter would have changed if the Company’s tenancy-in-common interest in the Kalispell Center Hotel and Retail Complex had been accounted for using the equity method rather than being consolidated. The Company is providing you these worksheets in order for you to assess the impact of the change of accounting treatment. Using Q2 ’06 for the pro formas shows the effects of the change better than using calendar year 2005, because the tenancy in common for the Kalispell property wasn’t created until the second half of that year.
The Company believes that the differences are not material. For example, total assets would have been only 2.3% lower and total revenues would have been only 1.5% lower. Net income and earnings per share would of course have been unchanged.
The Company will account for its interest in the Kalispell property using the equity method prospectively beginning with its fiscal quarter ended September 30, 2006. Please let us know whether you have any further comments.
Very truly yours,
Frank C. Woodruff
of
RIDDELL WILLIAMS P.S.
Enclosures
Red Lion Hotels Corporation
Pro Forma Statements — Effect of Recasting Kalispell TIC as Equity Method
Balance Sheets
Pro Forma Statements — Effect of Recasting Kalispell TIC as Equity Method
Balance Sheets
| June 30, 2006 | ||||||||||||
| (In thousands) | ||||||||||||
| As reported | Adjustments | Proforma | ||||||||||
| Assets: | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 58,721 | $ | (673 | ) | $ | 58,048 | |||||
| Restricted cash | 5,386 | (2,218 | ) | 3,168 | ||||||||
| Accounts receivable, net | 9,321 | (79 | ) | 9,242 | ||||||||
| Inventories | 1,707 | — | 1,707 | |||||||||
| Prepaid expenses and other | 4,701 | (18 | ) | 4,683 | ||||||||
| Assets held for sale: | ||||||||||||
| Assets of discontinued operations | 15,040 | — | 15,040 | |||||||||
| Other assets held for sale | 715 | — | 715 | |||||||||
| Total current assets | 95,591 | (2,988 | ) | 92,603 | ||||||||
| Property and equipment, net | 253,905 | (14,539 | ) | 239,366 | ||||||||
| Goodwill | 28,042 | — | 28,042 | |||||||||
| Intangible assets, net | 12,456 | — | 12,456 | |||||||||
| Other assets, net | 7,859 | 6,254 | 14,113 | |||||||||
| Total assets | $ | 397,853 | $ | (11,273 | ) | $ | 386,580 | |||||
| Liabilities: | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 5,331 | $ | (44 | ) | $ | 5,287 | |||||
| Accrued payroll and related benefits | 4,916 | 7 | 4,923 | |||||||||
| Accrued interest payable | 641 | (23 | ) | 618 | ||||||||
| Advance deposits | 603 | (7 | ) | 596 | ||||||||
| Other accrued expenses | 13,160 | (254 | ) | 12,906 | ||||||||
| Long-term debt, due within one year | 3,866 | (597 | ) | 3,269 | ||||||||
| Liabilities of discontinued operations | 2,597 | — | 2,597 | |||||||||
| Total current liabilities | 31,114 | (918 | ) | 30,196 | ||||||||
| Long-term debt, due after one year | 124,643 | (3,612 | ) | 121,031 | ||||||||
| Deferred income | 7,394 | — | 7,394 | |||||||||
| Deferred income taxes | 14,220 | — | 14,220 | |||||||||
| Minority interest in partnerships | 7,043 | (6,743 | ) | 300 | ||||||||
| Debentures due Red Lion Hotels Capital Trust | 30,825 | — | 30,825 | |||||||||
| Total liabilities | 215,239 | (11,273 | ) | 203,966 | ||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock | 191 | — | 191 | |||||||||
| Additional paid-in capital, common stock | 147,032 | — | 147,032 | |||||||||
| Retained earnings | 35,391 | — | 35,391 | |||||||||
| Total stockholders’ equity | 182,614 | — | 182,614 | |||||||||
| Total liabilities and stockholders’ equity | $ | 397,853 | $ | (11,273 | ) | $ | 386,580 | |||||
Red Lion Hotels Corporation
Pro Forma Statements — Effect of Recasting Kalispell TIC as Equity Method
Statements of Operations
Pro Forma Statements — Effect of Recasting Kalispell TIC as Equity Method
Statements of Operations
| 2006 | ||||||||||||||
| (In thousands) | ||||||||||||||
| Q2 | Q2 | |||||||||||||
| As reported | Adjustments | Proforma | ||||||||||||
| Revenue: | ||||||||||||||
| Hotels | $ | 40,451 | $ | — | $ | 40,451 | ||||||||
| Franchise and management | 641 | — | 641 | |||||||||||
| Entertainment | 2,488 | — | 2,488 | |||||||||||
| Real estate | 953 | (667 | ) | 286 | ||||||||||
| Other | 235 | — | 235 | |||||||||||
| Total revenues | 44,768 | (667 | ) | 44,101 | ||||||||||
| Operating expenses: | ||||||||||||||
| Hotels | 30,549 | — | 30,549 | |||||||||||
| Franchise and management | 187 | — | 187 | |||||||||||
| Entertainment | 2,056 | — | 2,056 | |||||||||||
| Real estate | 613 | (251 | ) | 362 | ||||||||||
| Other | 276 | — | 276 | |||||||||||
| Depreciation and amortization | 3,167 | (137 | ) | 3,030 | ||||||||||
| Hotel facility and land lease | 1,716 | — | 1,716 | |||||||||||
| Gain on asset dispositions, net | (1,155 | ) | — | (1,155 | ) | |||||||||
| Undistributed corporate expenses | 1,234 | — | 1,234 | |||||||||||
| Total expenses | 38,643 | (388 | ) | 38,255 | ||||||||||
| Operating income | 6,125 | (279 | ) | 5,846 | ||||||||||
| Other income (expense): | ||||||||||||||
| Interest expense | (3,453 | ) | 68 | (3,385 | ) | |||||||||
| Expense of early extinguishment of debt | (805 | ) | — | (805 | ) | |||||||||
| Minority interest in partnerships, net | (211 | ) | 115 | (96 | ) | |||||||||
| Other income, net | 456 | 96 | 552 | |||||||||||
| Income from continuing operations before income taxes | 2,112 | — | 2,112 | |||||||||||
| Income tax expense | 226 | — | 226 | |||||||||||
| Net income from continuing operations | 1,886 | — | 1,886 | |||||||||||
| Discontinued operations: | ||||||||||||||
| Income from operations of discontinued business units | 195 | — | 195 | |||||||||||
| Net gain on disposal of discontinued business units | — | — | — | |||||||||||
| Income from discontinued operations | 195 | — | 195 | |||||||||||
| Net income and income applicable to common shareholders | $ | 2,081 | $ | — | $ | 2,081 | ||||||||