SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 18, 2018 (April 12, 2018)
Date of Report (Date of earliest event reported)
RED LION HOTELS CORPORATION
(Exact Name of Registrant as Specified in Charter)
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| Washington | | 001-13957 | | 91-1032187 |
(State or Other Jurisdiction of Incorporation) | | (Commission file number) | | (I.R.S. Employer Identification No.) |
1550 Market St. #350
Denver, CO 80202
(Address of Principal Executive Offices, Zip Code)
(509) 459-6100
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant toRule 14a-12 under the Exchange Act (17 CFR240.14a-12) |
| ☐ | Pre-commencement communications pursuant toRule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant toRule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) orRule 12b-2 of the Securities Exchange Act of 1934 (17CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
On April 12, 2018 RL Bend, LLC completed the sale of the Red Lion Inn and Suites Bend, in Bend, Oregon, to Third Street Ventures LLC, an Oregon limited liability company (the “Purchaser”). The purchase price for the hotel was $5.5 million, which was paid in cash at closing.
At closing, the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of Red Lion Hotels Corporation. The franchise agreement contemplates that the franchisee will initially continue to operate the hotel under the Red Lion Inn and Suites brand, but allows for the conversion of the hotel to the Signature Inn® brand. The franchise agreement provides for a 20 year term and the payment of monthly royalty and program fees equal to a percentage of the hotel’s gross room revenue under the Red Lion brand, and a flat monthly per room fee under the Signature Inn brand. The franchisee may terminate the franchise agreement without penalty on June 1, 2021 or June 1, 2031 providing at least 90 days’ notice of termination. Red Lion Hotels Franchising may terminate the franchise agreement without cause annually by providing notice to the franchisee of termination no later than March 3 of each year. Termination of the franchise agreement by Red Lion Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee.
RL Bend, LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation holds a 55% interest, and therefore the registrant consolidates the assets, liabilities and results of operations of this entity.
| Item 2.04 | Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement |
Immediately following the sale of the hotel described in Item 2.01, RL Venture, LLC repaid $3.8 million in principal balance outstanding under its loan agreement with Pacific Western Bank, as required by the terms of that agreement.
| Item 7.01. | Regulation FD Disclosure. |
A copy of the company’s press release, dated April 17, 2018 announcing the completion of the sale is furnished as Exhibit 99.1 hereto.
Non-GAAP Financial Measures
The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect (i) the sale of hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA and Pasco, WA which were previously reported and (ii) the sale of one hotel asset as described in Item 2.01 of this filing:
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| | | Year Ended
December 31,
2017 | |
Adjusted EBITDA from continuing operations- as previously reported | | $ | 22,374 | |
Less: Redding, Eureka, Boise, Richland and Pasco asset sales | | | (6,067 | ) |
Less: Asset sold with this filing | | | (788 | ) |
| | | | |
Pro Forma Adjusted EBITDA | | $ | 15,519 | |
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EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness. Adjusted EBITDA is an additional measure of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. Refer to our previously filed10-K (April 2, 2018) for the reconciliation from net income to adjusted EBITDA and further discussion ofNon-GAAP measures.
| Item 9.01. | Financial Statements and Exhibits. |
| (b) | Pro Forma Financial Information. |
Attached hereto as Exhibit 99.2 and incorporated by reference herein is unaudited pro forma consolidated financial information of the registrant that gives effect to (i) the sale of hotels in Eureka, CA, Redding, CA, Boise, ID, Richland, WA and Pasco, WA which were previously reported, (ii) the sale of the hotel as described in Item 2.01 of this Form 8-K and (iii) the repayment of principal under the registrant’s loan agreement with Pacific Western Bank described in Item 2.04 of thisForm 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | RED LION HOTELS CORPORATION |
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| Date: April 18, 2018 | | | | By: | | /s/ Douglas L. Ludwig |
| | | | | | Douglas L. Ludwig |
| | | | | | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
