EXHIBIT 99.1
For Immediate Release
Red Lion Hotels Corporation Reports
Strong Third Quarter 2007 Results
RevPAR at Owned and Leased Hotels Increases 9.5%
SPOKANE, WA, November 8, 2007 — Red Lion Hotels Corporation (NYSE:RLH) today announced results for the third quarter and nine months ended September 30, 2007.
Key Third Quarter Financial Results
| | • | | RevPAR (revenue per available room) at owned and leased hotels increased 9.5% |
| |
| | • | | ADR (average daily rate) at owned and leased hotels increased 5.2% to $95.43 |
| |
| | • | | Occupancy at owned and leased hotels increased 3.1 percentage points to 76.3% |
| |
| | • | | Total revenues from continuing operations increased 6.0% to $54.5 million |
| |
| | • | | Hotel segment direct operating margin improved 299 basis points |
| |
| | • | | Excluding a $4.9 million expense for early extinguishment of debt in the comparable quarter last year: |
o EBITDA from continuing operations increased 19.3% to $15.3 million
o Net income from continuing operations increased 28.2% to $5.8 million
o EPS from continuing operations increased $0.06 to $0.29 per fully diluted share
| | • | | Reported net income increased to $7.1 million, or $0.36 per fully diluted share |
Recent Significant Announcements
| | • | | Subleased the Red Lion Hotel Sacramento and entered into a long-term franchise agreement |
| |
| | • | | Implemented a $10 million stock repurchase program |
| |
| | • | | Acquired the leasehold interest in a 314 room hotel in Anaheim, California for $8 million in October 2007 |
Commenting on the company’s results for the quarter, Arthur M. Coffey, President and CEO of Red Lion Hotels Corporation, said, “Our excellent third quarter financial results reflect the success of the enhanced Red Lion brand, with continued growth in RevPAR driving significantly improved margins and EBITDA. The Red Lion brand will be further enhanced by the addition of our Anaheim hotel. Once it is repositioned, it will be an exceptional banner for the Red Lion brand in the important California market, and should provide a strong base for further expansion.”
Third Quarter Results
The company’s total revenues from continuing operations during the quarter were $54.5 million, up 6.0% from the same quarter of 2006. Revenues in the hotel segment were up 4.8% over the prior year period to $50.0 million. Franchise and management revenues were $0.7 million, compared to $0.8 million in the same quarter of 2006. Revenues in the entertainment segment increased 20.3% to $3.0 million. Other revenues totaled $0.8 million, up from $0.3 million in the third quarter of 2006.
EBITDA from continuing operations and net income from continuing operations in the third quarter of 2007 were $15.3 million and $5.8 million, respectively. It should be noted that results in the third quarter of 2006 include a $4.9 million expense from the early extinguishment of debt. Excluding this expense, EBITDA from continuing operations and net income from continuing operations in the third quarter of 2007 increased 19.3% and 28.2%, respectively. Overall reported net income was $7.1 million, or $0.36 per fully diluted share, compared to $1.5 million, or $0.07 per fully diluted share, in the prior year period.
Nine Month Results
The company’s total revenues from continuing operations during the nine months ended September 30, 2007, were $142.8 million, up 9.1% from the first nine months of 2006. Revenues in the hotel segment increased 8.4% over the prior year period to $129.3 million. Franchise and management revenues increased to $2.3 million. Revenues in the entertainment segment increased to $9.0 million, and other revenues totaled $2.3 million.
EBITDA from continuing operations and net income from continuing operations in the first nine months of 2007 were $28.4 million and $6.3 million, respectively. Excluding the expense for the early extinguishment of debt and a gain on the disposition of assets in the year ago period, EBITDA from continuing operations and net income from continuing operations in the first nine months of 2007 increased 23.1% and 73.4%, respectively. Overall reported net income was $7.3 million, or $0.37 per fully diluted share, compared to $0.6 million, or $0.03 per fully diluted share, in the prior year period.
Hotel Operations
RevPAR from the company’s owned and leased hotels increased 9.5% in the third quarter of 2007, driven by a 5.2% increase in ADR and a 3.1 percentage point increase in occupancy. For comparable system-wide hotels, RevPAR increased 6.9% in the third quarter of 2007, driven by a 5.1% increase in ADR and a 1.3 percentage point increase in occupancy.
Reported revenues from owned and leased hotels increased 4.8% to $50.0 million during the third quarter of 2007. Revenues at owned and leased hotels in the current quarter include only one-month of revenues from the Red Lion Hotel Sacramento, compared to three months in the year-ago period. Hotel revenues increased 8.3% on a comparable property basis. The hotels segment direct operating profit increased 15.2% to $16.5 million in the third quarter of 2007. Direct operating margin for the hotels segment improved 299 basis points to 33.0% in the third quarter of 2007.
“Since we completed our Red Lion renovation program, we have successfully improved our mix of business to maximize rates and drive RevPAR gains in our markets,” commented John Taffin, Executive Vice President, Hotel Operations. “In the third quarter, our peak travel season, RevPAR growth translated into an improvement of 299 basis points in hotel operating margin.”
RevPAR at the company’s owned and leased hotels increased 13.2% in the first nine months of 2007, driven by a 7.2% increase in ADR and a 3.5 percentage point increase in occupancy. For comparable system-wide hotels, RevPAR increased 8.9% in the first nine months of 2007, driven by a 6.4% increase in ADR and a 1.6 percentage point increase in occupancy.
RevPAR increases in the first nine months of 2007 were due to increases in rate and occupancy driven by the enhanced Red Lion brand and rooms out of service for renovations at owned and leased hotels in the first and second quarters of 2006. The company does not exclude rooms out of service for renovations at owned, leased or franchised hotels in calculating RevPAR or occupancy.
Reported revenues from owned and leased hotels increased 8.4% to $129.3 million during the first nine months of 2007. Hotel revenues increased 10.7% on a comparable property basis. The hotels segment direct operating profit increased 20.4% to $32.9 million in the first nine months of 2007. Direct operating margin for the hotels segment improved 254 basis points to 25.5% in the first nine months of 2007.
Recent Highlights and Key Events
Red Lion Hotel Anaheim
In October 2007, the company acquired the long-term leasehold interest in the 314-room Radisson Hotel Maingate-Anaheim in Orange County, California for a purchase price of $8.0 million. The hotel is located on South Harbor Boulevard in Anaheim, California, adjacent to the Disneyland Resort, Disney’s California Adventure, Downtown Disney and the Anaheim Convention Center, Angel Stadium of Anaheim, the Honda Center and other important area attractions. This transaction marks the company’s re-entry into the Southern California market, where the Red Lion brand carries significant brand equity. The company plans to spend approximately $10 million on extensive renovations to guest rooms and public areas to reposition the hotel as a banner property for the Red Lion brand in this key destination market.
Stock Repurchase Program
On September 28, 2007, the company announced that its Board of Directors authorized a common stock repurchase program that enables the Company to purchase up to $10 million of its common stock. Any stock repurchases will be made from time to time through open market purchases, block purchases or privately negotiated transactions deemed appropriate by the company. In October 2007, the company repurchased 20,700 shares for an aggregate cost of $0.2 million.
Lincoln Plaza
During the quarter, the company completed the sale of the Lincoln and Grant office and retail buildings in Spokane, Washington for gross proceeds of $13.3 million in a tax-advantaged transaction. The Lincoln and Grant buildings were previously held by the company as a component of discontinued operations.
Franchise Update
During the quarter, the company subleased the Red Lion Hotel Sacramento to a third party which simultaneously entered into a long-term franchise agreement and has committed to make a multi-million dollar investment to further improve and reposition the hotel. As of September 30, 2007, the company had 21 franchised hotels representing 3,368 rooms.
In 2006, the company implemented new upscale brand standards that Red Lion Hotels are required to meet by the end of 2007. These new standards are intended to be consistent with or better than the finishes commonly found in new homes and feature upgrades that include granite vanities, plush pillow top beds and other upscale furnishings and décor throughout guestrooms, lobbies and meeting areas. Currently, the company expects fifteen franchised hotels to meet the elevated brand standards. Franchise agreements for three hotels are terminating in the first quarter of 2008, resulting in their removal from the system. The company also anticipates that between two and three franchised hotels may not meet the elevated brand standards, which may result in their termination from the system in the first half of 2008.
Updated Outlook for 2007
The company is raising its guidance for 2007 RevPAR growth for company owned and leased hotels to a range of 11% to 12%, driven by increases in ADR and occupancy. The company’s previous guidance for 2007 RevPAR growth was 9% to 11%. The company continues to expect direct hotel operating margins in 2007 to improve between 150 and 250 basis points and EBITDA from continuing operations in 2007 to be in the range of $32 to $33 million.
Final Comments
“This was an exceptional quarter for Red Lion. Our operations continued to deliver strong results and we continued to execute on our business plan. As demonstrated by our recent acquisition in Anaheim, there are attractive opportunities for growth available in our target markets. We expect that our disciplined approach to growth in our markets and improvements in our operations will continue to enhance shareholder value,” Mr. Coffey said.
Conference Call
The company will host a conference call at 11:00 a.m. PST (2:00 p.m. EST) on Thursday, November 8, 2007 to discuss financial results for the third quarter and nine months ended September 30, 2007. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (800) 288-8960. International callers should dial (612) 288-0340. There is no pass code required for this call. This conference call will be broadcast live over the Internet and can be accessed by all interested parties atwww.redlion.com, in the Investor Relations portion 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 6:00 p.m. PST on November 8, 2007 through December 9, 2007 at (800) 475-6701 or (320) 365-3844 (International) access code — 892792. The replay will also be available shortly after the call on the Red Lion Web site for 90 days.
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 and upscale, full service hotels under its Red Lion® brand. As of September 30, 2007 the RLH hotel network was comprised of 52 hotels located in eight states and one Canadian province, with 9,078 rooms and 467,529 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 atwww.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 quarterly report on Form 10-K for the year ended December 31, 2006 and in other documents filed by the company with the Securities and Exchange Commission.
| | | |
| Contact: | | |
| Red Lion Hotels Corporation | | CCG Investor Relations |
| Julie Langenheim, Investor Relations Manager | | Crocker Coulson, President |
| (509) 777-6322 | | Elaine Ketchmere, VP Financial Writing |
| | | (310) 477-9800 |
###
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
| | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | | |
| | | 2007 | | 2006 | | $ Change | | % Change |
| | | |
| Revenue: | | | | | | | | | | | | | | | | |
| Hotels | | $ | 50,039 | | | $ | 47,762 | | | $ | 2,277 | | | | 4.8 | % |
| Franchise and management | | | 701 | | | | 847 | | | | (146 | ) | | | -17.2 | % |
| Entertainment | | | 3,030 | | | | 2,519 | | | | 511 | | | | 20.3 | % |
| Other | | | 750 | | | | 283 | | | | 467 | | | | 165.0 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Total revenues | | | 54,520 | | | | 51,411 | | | | 3,109 | | | | 6.0 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Hotels | | | 33,546 | | | | 33,446 | | | | 100 | | | | 0.3 | % |
| Franchise and management | | | 190 | | | | 213 | | | | (23 | ) | | | -10.8 | % |
| Entertainment | | | 2,519 | | | | 2,107 | | | | 412 | | | | 19.6 | % |
| Other | | | 454 | | | | 296 | | | | 158 | | | | 53.4 | % |
| Depreciation and amortization | | | 4,194 | | | | 3,156 | | | | 1,038 | | | | 32.9 | % |
| Hotel facility and land lease | | | 1,513 | | | | 1,751 | | | | (238 | ) | | | -13.6 | % |
| Gain on asset dispositions, net | | | (188 | ) | | | (173 | ) | | | (15 | ) | | | -8.7 | % |
| Undistributed corporate expenses | | | 1,555 | | | | 1,557 | | | | (2 | ) | | | -0.1 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Total expenses | | | 43,783 | | | | 42,353 | | | | 1,430 | | | | 3.4 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 10,737 | | | | 9,058 | | | | 1,679 | | | | 18.5 | % |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest expense | | | (2,320 | ) | | | (2,907 | ) | | | 587 | | | | 20.2 | % |
| Expense of early extinguishment of debt, net | | | — | | | | (4,938 | ) | | | 4,938 | | | | 100.0 | % |
| Minority interest in partnerships, net | | | (39 | ) | | | 33 | | | | (72 | ) | | | -218.2 | % |
| Other income, net | | | 379 | | | | 554 | | | | (175 | ) | | | -31.6 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | | | 8,757 | | | | 1,800 | | | | 6,957 | | | | 386.5 | % |
| | | | | | | | | | | | | | | | | |
| Income tax expense | | | 2,958 | | | | 461 | | | | 2,497 | | | | 541.6 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Net income from continuing operations | | | 5,799 | | | | 1,339 | | | | 4,460 | | | | 333.1 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Discontinued operations: | | | | | | | | | | | | | | | | |
| Income (loss) from operations of discontinued business units, net of income tax benefit (expense) of $17 and $(193) | | | (32 | ) | | | 347 | | | | (379 | ) | | | -109.2 | % |
| Net gain (loss) on disposal of discontinued business units, net of income tax benefit (expense) of $(736) and $128 | | | 1,338 | | | | (234 | ) | | | 1,572 | | | | 671.8 | % |
| | | |
| Income from discontinued operations | | | 1,306 | | | | 113 | | | | 1,193 | | | | 1055.8 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 7,105 | | | $ | 1,452 | | | $ | 5,653 | | | | 389.3 | % |
| | | |
| | | | | | | | | | | | | | | | | |
EBITDA(1) | | $ | 17,401 | | | $ | 8,197 | | | $ | 9,204 | | | | 112.3 | % |
EBITDA as a percentage of revenues (2) | | | 31.8 | % | | | 15.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | |
EBITDA from continuing operations(1) | | $ | 15,271 | | | $ | 7,863 | | | $ | 7,408 | | | | 94.2 | % |
| | | | | | | | | | | | | | | | | |
EBITDA from continuing operations (2) as a percentage of revenues | | | 28.0 | % | | | 15.3 | % | | | | | | | | |
| | |
| (1) | | The definition of “EBITDA” and how that measure relates to net income (loss) is discussed further in this release under Non-GAAP Financial Measures. EBITDA represents net income (loss) before interest expense, income tax benefit or expense, depreciation, and amortization. EBITDA is not intended to represent net income (loss) as defined by generally accepted accounting principles in the United States (“GAAP”) and such information should not be considered as an alternative to net income (loss), cash flows from operations or any other measure of performance prescribed by GAAP. We utilize EBITDA because management believes that investors find it 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 on-going operations. EBITDA from continuing operations is calculated in the same manner, but excludes the operating activities of business units identified as discontinued. |
| |
| (2) | | The calculation of EBITDA as a percentage of revenues is based upon total operating revenues, from both continuing and discontinued operations, of $54,747,000 and $54,222,000 for the three months ended September 30, 2007 and 2006, respectively. EBITDA from continuing operations as a percentage of revenues is based upon the operating results of continuing business units as presented in the statements. |
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except footnotes)
| | | | | | | | | | | | | | | | | |
| | | Nine months ended September 30, | | | | |
| | | 2007 | | 2006 | | $ Change | | % Change |
| | | |
| Revenue: | | | | | | | | | | | | | | | | |
| Hotels | | $ | 129,259 | | | $ | 119,242 | | | $ | 10,017 | | | | 8.4 | % |
| Franchise and management | | | 2,272 | | | | 2,064 | | | | 208 | | | | 10.1 | % |
| Entertainment | | | 9,019 | | | | 8,377 | | | | 642 | | | | 7.7 | % |
| Other | | | 2,268 | | | | 1,193 | | | | 1,075 | | | | 90.1 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Total revenues | | | 142,818 | | | | 130,876 | | | | 11,942 | | | | 9.1 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Hotels | | | 96,311 | | | | 91,871 | | | | 4,440 | | | | 4.8 | % |
| Franchise and management | | | 586 | | | | 623 | | | | (37 | ) | | | -5.9 | % |
| Entertainment | | | 7,978 | | | | 7,062 | | | | 916 | | | | 13.0 | % |
| Other | | | 1,402 | | | | 1,437 | | | | (35 | ) | | | -2.4 | % |
| Depreciation and amortization | | | 12,210 | | | | 8,965 | | | | 3,245 | | | | 36.2 | % |
| Hotel facility and land lease | | | 4,964 | | | | 5,162 | | | | (198 | ) | | | -3.8 | % |
| Gain on asset dispositions, net | | | (427 | ) | | | (1,510 | ) | | | 1,083 | | | | 71.7 | % |
| Undistributed corporate expenses | | | 4,510 | | | | 3,825 | | | | 685 | | | | 17.9 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Total expenses | | | 127,534 | | | | 117,435 | | | | 10,099 | | | | 8.6 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 15,284 | | | | 13,441 | | | | 1,843 | | | | 13.7 | % |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest expense | | | (6,871 | ) | | | (9,644 | ) | | | 2,773 | | | | 28.8 | % |
| Expense of early extinguishment of debt, net | | | — | | | | (5,743 | ) | | | 5,743 | | | | 100.0 | % |
| Minority interest in partnerships, net | | | (40 | ) | | | 43 | | | | (83 | ) | | | -193.0 | % |
| Other income, net | | | 971 | | | | 1,626 | | | | (655 | ) | | | -40.3 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before income taxes | | | 9,344 | | | | (277 | ) | | | 9,621 | | | | 3473.3 | % |
| | | | | | | | | | | | | | | | | |
| Income tax (benefit) expense | | | 3,015 | | | | (863 | ) | | | 3,878 | | | | 449.4 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Net income from continuing operations | | | 6,329 | | | | 586 | | | | 5,743 | | | | 980.0 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Discontinued operations: | | | | | | | | | | | | | | | | |
| Income (loss) from operations of discontinued business units, net of income tax benefit (expense) of $62 and $(98) | | | (113 | ) | | | 178 | | | | (291 | ) | | | -163.5 | % |
| Net gain (loss) on disposal of discontinued business units, net of income tax benefit (expense) of $(596) and $112 | | | 1,082 | | | | (204 | ) | | | 1,286 | | | | 630.4 | % |
| | | |
| Income (loss) from discontinued operations | | | 969 | | | | (26 | ) | | | 995 | | | | 3826.9 | % |
| | | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 7,298 | | | $ | 560 | | | $ | 6,738 | | | | 1203.2 | % |
| | | |
| | | | | | | | | | | | | | | | | |
EBITDA(1) | | $ | 30,113 | | | $ | 18,802 | | | $ | 11,311 | | | | 60.2 | % |
EBITDA as a percentage of revenues (2) | | | 20.9 | % | | | 13.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | |
EBITDA from continuing operations(1) | | $ | 28,425 | | | $ | 18,332 | | | $ | 10,093 | | | | 55.1 | % |
| | | | | | | | | | | | | | | | | |
EBITDA from continuing operations (2) as a percentage of revenues | | | 19.9 | % | | | 14.0 | % | | | | | | | | |
| | |
| (1) | | The definition of “EBITDA” and how that measure relates to net income (loss) is discussed further in this release under Non-GAAP Financial Measures. EBITDA represents net income (loss) before interest expense, income tax benefit or expense, depreciation, and amortization. EBITDA is not intended to represent net income (loss) as defined by generally accepted accounting principles in the United States (“GAAP”) and such information should not be considered as an alternative to net income (loss), cash flows from operations or any other measure of performance prescribed by GAAP. We utilize EBITDA because management believes that investors find it 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 on-going operations. EBITDA from continuing operations is calculated in the same manner, but excludes the operating activities of business units identified as discontinued. |
| |
| (2) | | The calculation of EBITDA as a percentage of revenues is based upon total operating revenues, from both continuing and discontinued operations, of $144,226,000 and $137,660,000 for the nine months ended September 30, 2007 and 2006, respectively. EBITDA from continuing operations as a percentage of revenues is based upon the operating results of continuing business units as presented in the statements. |
Red Lion Hotels Corporation
Earnings Per Share
(unaudited)
(shares in thousands)
| | | | | | | | | | | | | |
| | | Three months ended September 30, | | | | |
| | | 2007 | | | 2006 | | | $ Change | |
| | | |
| Earnings per share — basic:(1) |
| Net income from continuing operations | | $ | 0.30 | | | $ | 0.07 | | | $ | 0.23 | |
| Income from discontinued operations | | | 0.07 | | | | 0.01 | | | | 0.06 | |
| | | |
| Net income | | $ | 0.37 | | | $ | 0.08 | | | $ | 0.29 | |
| | | |
| | | | | | | | | | | | | |
| Earnings per share — diluted:(1) |
| Net income from continuing operations | | $ | 0.29 | | | $ | 0.07 | | | $ | 0.22 | |
| Income from discontinued operations | | | 0.07 | | | | — | | | | 0.07 | |
| | | |
| Net income | | $ | 0.36 | | | $ | 0.07 | | | $ | 0.29 | |
| | | |
| | | | | | | | | | | | | |
| Weighted average shares — basic | | | 19,226 | | | | 19,102 | | | | | |
| Weighted average shares — diluted | | | 19,574 | | | | 19,549 | | | | | |
| | | | | | | | | | | | | |
| | | Nine months ended September 30, | | | | |
| | | 2007 | | | 2006 | | | $ Change | |
| | | |
| Earnings per share — basic:(2) |
| Net income from continuing operations | | $ | 0.33 | | | $ | 0.04 | | | $ | 0.29 | |
| Income from discontinued operations | | | 0.05 | | | | — | | | | 0.05 | |
| | | |
| Net income | | $ | 0.38 | | | $ | 0.04 | | | $ | 0.34 | |
| | | |
| | | | | | | | | | | | | |
| Earnings per share — diluted:(2) |
| Net income from continuing operations | | $ | 0.32 | | | $ | 0.03 | | | $ | 0.29 | |
| Income from discontinued operations | | | 0.05 | | | | — | | | | 0.05 | |
| | | |
| Net income | | $ | 0.37 | | | $ | 0.03 | | | $ | 0.34 | |
| | | |
| | | | | | | | | | | | | |
| Weighted average shares — basic | | | 19,191 | | | | 15,840 | | | | | |
| Weighted average shares — diluted | | | 19,573 | | | | 16,275 | | | | | |
| | |
| (1) | | For the three months ended September 30, 2007, 258,594 of the 1,306,617 options to purchase common shares outstanding as of that date were considered dilutive. For the three months ended September 30, 2006, 303,762 of the 1,131,932 options to purchase common shares outstanding as of that date were considered dilutive. For those same periods, 44,837 and 142,663 convertible operating partnership (“OP”) units, respectively, were considered dilutive, as were 44,473 and 11,121 units of unissued restricted stock. All convertible debt instruments then outstanding at September 30, 2006 were considered anti-dilutive. |
| |
| (2) | | For the nine months ended September 30, 2007, 301,568 of the 1,306,617 options to purchase common shares outstanding as of that date were considered dilutive. For the nine months ended September 30, 2006, 339,304 of the 1,131,932 options to purchase common shares outstanding as of that date were considered dilutive. For those same periods, 44,837 and 142,663 convertible operating partnership (“OP”) units were considered dilutive, as were 35,175 and 11,121 units of unissued restricted stock. All convertible debt instruments then outstanding at September 30, 2006 were considered anti-dilutive. |
Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
| | | | | | | | | |
| | | September 30 | | | December 31, | |
| | | 2007 | | | 2006 | |
| Assets: | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 34,618 | | | $ | 13,262 | |
| Investments | | | — | | | | 7,635 | |
| Restricted cash | | | 4,187 | | | | 2,756 | |
| Accounts receivable, net | | | 10,661 | | | | 9,309 | |
| Inventories | | | 1,370 | | | | 1,523 | |
| Prepaid expenses and other | | | 4,754 | | | | 3,907 | |
| Assets of discontinued operations | | | — | | | | 14,539 | |
| | | | | | | |
| Total current assets | | | 55,590 | | | | 52,931 | |
| | | | | | | |
| Property and equipment, net | | | 253,237 | | | | 250,575 | |
| Goodwill | | | 28,042 | | | | 28,042 | |
| Intangible assets, net | | | 11,706 | | | | 12,097 | |
| Other assets, net | | | 7,694 | | | | 7,793 | |
| | | | | | | |
| Total assets | | $ | 356,269 | | | $ | 351,438 | |
| | | | | | | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 6,763 | | | $ | 8,732 | |
| Accrued payroll and related benefits | | | 4,465 | | | | 6,058 | |
| Accrued interest payable | | | 345 | | | | 422 | |
| Advance deposits | | | 439 | | | | 315 | |
| Other accrued expenses | | | 10,697 | | | | 10,381 | |
| Long-term debt, due within one year | | | 5,452 | | | | 2,267 | |
| Liabilities of discontinued operations | | | — | | | | 4,112 | |
| | | | | | | |
| Total current liabilities | | | 28,161 | | | | 32,287 | |
| | | | | | | |
| Long-term debt, due after one year | | | 78,298 | | | | 83,005 | |
| Deferred income | | | 9,413 | | | | 7,017 | |
| Deferred income taxes | | | 16,914 | | | | 14,259 | |
| Minority interest in partnerships | | | 44 | | | | 254 | |
| Debentures due Red Lion Hotels Capital Trust | | | 30,825 | | | | 30,825 | |
| | | | | | | |
| Total liabilities | | | 163,655 | | | | 167,647 | |
| | | | | | | |
| | | | | | | | | |
| 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; 19,228,590 and 19,118,692 shares issued and outstanding | | | 192 | | | | 191 | |
| Additional paid-in capital, common stock | | | 149,415 | | | | 147,891 | |
| Retained earnings | | | 43,007 | | | | 35,709 | |
| | | | | | | |
| Total stockholders’ equity | | | 192,614 | | | | 183,791 | |
| | | | | | | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 356,269 | | | $ | 351,438 | |
| | | | | | | |
Red Lion Hotels Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
| | | | | | | | | |
| | | Nine months ended September 30, | |
| | | 2007 | | | 2006 | |
| Operating activities: | | | | | | | | |
| Net income | | $ | 7,298 | | | $ | 560 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 12,237 | | | | 9,282 | |
| Gain on disposition of property, equipment and other assets, net | | | (427 | ) | | | (1,606 | ) |
| (Gain) loss on disposition of discontinued operations, net | | | (1,678 | ) | | | 321 | |
| Expense of early extinguishment of debt, net | | | — | | | | 5,743 | |
| Deferred income tax provision | | | 2,830 | | | | 1,500 | |
| Minority interest in partnerships | | | 40 | | | | (44 | ) |
| Equity in investments | | | (62 | ) | | | (177 | ) |
| Imputed interest expense | | | 157 | | | | — | |
| Compensation expense related to stock issuance | | | 666 | | | | 545 | |
| Provision for (collection of) doubtful accounts | | | 19 | | | | (411 | ) |
| Change in current assets and liabilities: | | | | | | | | |
| Restricted cash | | | (1,431 | ) | | | 997 | |
| Accounts receivable | | | (1,238 | ) | | | (654 | ) |
| Inventories | | | 158 | | | | 257 | |
| Prepaid expenses and other | | | (813 | ) | | | (2,948 | ) |
| Accounts payable | | | (2,082 | ) | | | 2,756 | |
| Accrued payroll and related benefits | | | (1,613 | ) | | | (661 | ) |
| Accrued interest payable | | | (98 | ) | | | (267 | ) |
| Other accrued expenses and advance deposits | | | 3,380 | | | | 2,252 | |
| | | | | | | |
| Net cash provided by operating activities | | | 17,343 | | | | 17,445 | |
| | | | | | | |
| Investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (14,002 | ) | | | (30,294 | ) |
| Proceeds from disposition of property and equipment | | | 18 | | | | 27 | |
| Proceeds from disposition of discontinued operations | | | 7,918 | | | | 12,724 | |
| Proceeds from short-term liquid investments | | | 7,635 | | | | 1,100 | |
| Proceeds from (advances to) Red Lion Hotels Capital Trust | | | (17 | ) | | | 498 | |
| Other, net | | | (284 | ) | | | 111 | |
| | | | | | | |
| Net cash provided by (used in) investing activities | | | 1,268 | | | | (15,834 | ) |
| | | | | | | |
| Financing activities: | | | | | | | | |
| Repayment of long-term debt including expense of early extinguishment | | | (1,894 | ) | | | (40,893 | ) |
| Borrowings on long-term debt | | | 3,926 | | | | — | |
| Proceeds from common stock offering | | | — | | | | 60,420 | |
| Repayment of debentures including expense of early extinguishment | | | — | | | | (17,403 | ) |
| Proceeds from issuance of common stock under employee stock purchase plan | | | 196 | | | | 156 | |
| Proceeds from stock option exercises | | | 488 | | | | 343 | |
| Distributions to operating partnership unit holders | | | (1 | ) | | | — | |
| Additions to deferred financing costs | | | (27 | ) | | | (909 | ) |
| | | | | | | |
| Net cash provided by financing activities | | | 2,688 | | | | 1,714 | |
| | | | | | | |
| Net change in cash from discontinued operations | | | 57 | | | | 71 | |
| | | | | | | |
| Change in cash and cash equivalents: | | | | | | | | |
| Net increase in cash and cash equivalents | | | 21,356 | | | | 3,396 | |
| Cash and cash equivalents at beginning of period | | | 13,262 | | | | 13,533 | |
| | | | | | | |
| Cash and cash equivalents at end of period | | $ | 34,618 | | | $ | 16,929 | |
| | | | | | | |
Red Lion Hotels Corporation
Hotel Statistics
(unaudited)
System-wide Hotels as of September 30, 2007
| | | | | | | | | | | | | |
| | | | | | | | | | | Meeting Space |
| | | Hotels | | Rooms | | (sq. ft.) |
| | | |
| Red Lion Owned and Leased Hotels | | | 30 | | | | 5,456 | | | | 279,684 | |
| Managed Hotels | | | 1 | | | | 254 | | | | 36,000 | |
| Red Lion Franchised Hotels | | | 21 | | | | 3,368 | | | | 151,845 | |
| | | |
| Total | | | 52 | | | | 9,078 | | | | 467,529 | |
| | | |
| Total Red Lion Hotels | | | 51 | | | | 8,824 | | | | 431,529 | |
Comparable Hotel Statistics(1)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, 2007 | | Three months ended September 30, 2006 |
| | | Average | | | | | | | | | | Average | | | | |
| | | Occupancy(2) | | ADR (3) | | RevPAR (4) | | Occupancy(2) | | ADR (3) | | RevPAR (4) |
| | | | | |
| Red Lion Hotels: | | | | | | | | | | | | | | | | | | | | | | | | |
| Owned and Leased Hotels | | | 76.3 | % | | $ | 95.43 | | | $ | 72.79 | | | | 73.2 | % | | $ | 90.75 | | | $ | 66.45 | |
| Franchised Hotels | | | 69.7 | % | | $ | 76.95 | | | $ | 53.63 | | | | 70.8 | % | | $ | 73.90 | | | | 52.35 | |
| | | | | |
| Total Red Lion Hotels | | | 74.2 | % | | $ | 89.85 | | | $ | 66.63 | | | | 72.4 | % | | $ | 85.30 | | | | 61.79 | |
| | | | | |
System-wide(5) | | | 74.0 | % | | $ | 90.56 | | | $ | 67.00 | | | | 72.7 | % | | $ | 86.17 | | | $ | 62.68 | |
| | | | | |
| Change from prior comparative period: | | | | | | | | | | | | | | | | | | | | | | | | |
| Red Lion Hotels: | | | | | | | | | | | | | | | | | | | | | | | | |
| Owned and Leased Hotels | | | 3.1 | | | | 5.2 | % | | | 9.5 | % | | | | | | | | | | | | |
| Franchised Hotels | | | (1.1 | ) | | | 4.1 | % | | | 2.4 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Red Lion Hotels | | | 1.8 | | | | 5.3 | % | | | 7.8 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
System-wide(5) | | | 1.3 | | | | 5.1 | % | | | 6.9 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine months ended September 30, 2007 | | Nine months ended September 30, 2006 |
| | | Average | | | | | | | | | | Average | | | | |
| | | Occupancy(2) | | ADR (3) | | RevPAR (4) | | Occupancy(2) | | ADR (3) | | RevPAR (4) |
| | | | | |
| Red Lion Hotels: | | | | | | | | | | | | | | | | | | | | | | | | |
| Owned and Leased Hotels | | | 65.4 | % | | $ | 89.84 | | | $ | 58.79 | | | | 61.9 | % | | $ | 83.84 | | | $ | 51.92 | |
| Franchised Hotels | | | 63.0 | % | | $ | 74.46 | | | $ | 46.89 | | | | 64.7 | % | | $ | 71.60 | | | | 46.33 | |
| | | | | |
| Total Red Lion Hotels | | | 64.6 | % | | $ | 84.94 | | | $ | 54.89 | | | | 62.8 | % | | $ | 79.67 | | | | 50.07 | |
| | | | | |
System-wide(5) | | | 64.8 | % | | $ | 85.95 | | | $ | 55.66 | | | | 63.2 | % | | $ | 80.81 | | | $ | 51.10 | |
| | | | | |
| Change from prior comparative period: | | | | | | | | | | | | | | | | | | | | | | | | |
| Red Lion Hotels: | | | | | | | | | | | | | | | | | | | | | | | | |
| Owned and Leased Hotels | | | 3.5 | | | | 7.2 | % | | | 13.2 | % | | | | | | | | | | | | |
| Franchised Hotels | | | (1.7 | ) | | | 4.0 | % | | | 1.2 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Red Lion Hotels | | | 1.8 | | | | 6.6 | % | | | 9.6 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
System-wide(5) | | | 1.6 | | | | 6.4 | % | | | 8.9 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | |
| (1) | | Includes all hotels owned, leased, managed and franchised by Red Lion Hotels Corporation for each of the periods presented. |
| |
| (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. |
| |
| (5) | | Includes all hotels owned, leased, managed and franchised, presented on a comparable basis for hotel statistics. This includes one managed property not utilizing the Red Lion brand. |
Red Lion Hotels Corporation
Disclosure of Special Items
(unaudited)
During the three and nine months ended September 30, 2006, we recorded charges for early extinguishment of debt totaling $4,938,000 and $5,743,000, respectively, in connection with our repayment of long-term debt, our retirement of certain debentures and our cancellation of a credit agreement. In addition, during the second quarter of 2006, we divested the real estate management business in a tax-free reorganization, resulting in a net gain of approximately $993,000. As a result, the operations as presented in the accompanying financial statements may not reflect a meaningful comparison of continuing operations between periods. The following table represents a reconciliation of certain earnings measures from continuing operations before special items to earnings from continuing operations after special items.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, 2007 | | Three months ended September 30, 2006 |
| | | Net Income | | EBITDA | | Diluted EPS | | Net Income | | EBITDA | | Diluted EPS |
| | | from Continuing | | from Continuing | | from Continuing | | from Continuing | | from Continuing | | from Continuing |
| ($ in thousands except per share data) | | Operations | | Operations | | Operations | | Operations | | Operations | | Operations |
| | | | | |
| Amount before special items | | $ | 5,799 | | | $ | 15,271 | | | $ | 0.29 | | | $ | 4,524 | | | $ | 12,801 | | | | 0.23 | |
| Special items: | | | | | | | | | | | | | | | | | | | | | | | | |
Expense of early extinguishment of debt, net(1) | | | — | | | | — | | | | — | | | | (4,938 | ) | | | (4,938 | ) | | | (0.25 | ) |
Income tax benefit of special items(3) | | | — | | | | — | | | | — | | | | 1,753 | | | | — | | | | 0.09 | |
| | | | | |
| Amount per consolidated statement of operations | | $ | 5,799 | | | $ | 15,271 | | | $ | 0.29 | | | $ | 1,339 | | | $ | 7,863 | | | $ | 0.07 | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Change from the comparative period: | | | | | | | | | | | | | | | | | | | | | | | | |
| Amount before special items | | | 28.2 | % | | | 19.3 | % | | | 23.7 | % | | | | | | | | | | | | |
| Amount per consolidated statement of operations | | | 333.1 | % | | | 94.2 | % | | | 317.9 | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | �� | | | | | | | | | | |
| | | Nine months ended September 30, 2007 | | Nine months ended September 30, 2006 |
| | | Net Income | | EBITDA | | Diluted EPS | | Net Income | | EBITDA | | Diluted EPS |
| | | from Continuing | | from Continuing | | from Continuing | | from Continuing | | from Continuing | | from Continuing |
| ($ in thousands except per share data) | | Operations | | Operations | | Operations | | Operations | | Operations | | Operations |
| | | | | |
| Amount before special items | | $ | 6,329 | | | $ | 28,425 | | | $ | 0.32 | | | $ | 3,650 | | | $ | 23,082 | | | | 0.21 | |
| Special items: | | | | | | | | | | | | | | | | | | | | | | | | |
Expense of early extinguishment of debt, net(1) | | | — | | | | — | | | | — | | | | (5,743 | ) | | | (5,743 | ) | | | (0.35 | ) |
| Gain on asset dispositions - | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate Management Business(2) | | | — | | | | — | | | | — | | | | 993 | | | | 993 | | | | 0.06 | |
Income tax benefit of special items(3) | | | — | | | | — | | | | — | | | | 1,686 | | | | — | | | | 0.10 | |
| | | | | |
| Amount per consolidated statement of operations | | $ | 6,329 | | | $ | 28,425 | | | $ | 0.32 | | | $ | 586 | | | $ | 18,332 | | | $ | 0.03 | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Change from the comparative period: | | | | | | | | | | | | | | | | | | | | | | | | |
| Amount before special items | | | 73.4 | % | | | 23.1 | % | | | 50.9 | % | | | | | | | | | | | | |
| Amount per consolidated statement of operations | | | 980.0 | % | | | 55.1 | % | | | 1143.4 | % | | | | | | | | | | | | |
| | |
| (1) | | Line item as presented on the accompanying consolidated statements of operations. |
| |
| (2) | | Amount as included in the line item “Gain on asset dispositions” 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
(unaudited)
($ in thousands)
The following is a reconciliation of EBITDA and EBITDA from continuing operations to net income for the periods presented:
| | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| EBITDA from continuing operations | | $ | 15,271 | | | $ | 7,863 | | | $ | 28,425 | | | $ | 18,332 | |
| Income tax (expense) benefit — continuing operations | | | (2,958 | ) | | | (461 | ) | | | (3,015 | ) | | | 863 | |
| Interest expense — continuing operations | | | (2,320 | ) | | | (2,907 | ) | | | (6,871 | ) | | | (9,644 | ) |
| Depreciation and amortization — continuing operations | | | (4,194 | ) | | | (3,156 | ) | | | (12,210 | ) | | | (8,965 | ) |
| | | | | | | | | | | | | |
| Net income from continuing operations | | | 5,799 | | | | 1,339 | | | | 6,329 | | | | 586 | |
| Income (loss) from discontinued operations | | | 1,306 | | | | 113 | | | | 969 | | | | (26 | ) |
| | | | | | | | | | | | | | | |
| Net income | | $ | 7,105 | | | $ | 1,452 | | | $ | 7,298 | | | $ | 560 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| EBITDA | | $ | 17,401 | | | $ | 8,197 | | | $ | 30,113 | | | $ | 18,802 | |
| Income tax (expense) benefit | | | (3,676 | ) | | | (524 | ) | | | (3,548 | ) | | | 877 | |
| Interest expense | | | (2,417 | ) | | | (2,961 | ) | | | (7,030 | ) | | | (9,836 | ) |
| Depreciation and amortization | | | (4,203 | ) | | | (3,260 | ) | | | (12,237 | ) | | | (9,283 | ) |
| | | | | | | | | | | | | |
| Net income | | $ | 7,105 | | | $ | 1,452 | | | $ | 7,298 | | | $ | 560 | |
| | | | | | | | | | | | | |
NON-GAAP FINANCIAL MEASURES
EBITDA is defined as net income (loss), 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 (loss) and other financial performance measures provided in accordance with generally accepted accounting principles in the United States (“GAAP”). EBITDA from continuing operations is calculated in the same manner, but excludes the operating results of business units identified as discontinued under GAAP.
We use EBITDA to measure the financial performance of our owned and leased hotels 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 (loss), which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income (loss) or net income (loss) 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.
