1
EXHIBIT 99.1
DOUBLETREE CORPORATION
410 North 44th Street
Suite 700
Phoenix, Arizona 85008
602 220-6666
FOR IMMEDIATE RELEASE
Contact: William L. Perocchi
Executive VP & CFO
Phone: (602) 220-6810
DOUBLETREE ANNOUNCES THIRD QUARTER NET INCOME
UP 51 PERCENT
PHOENIX, OCTOBER 16, 1996 -- Doubletree Corporation (NASDAQ: TREE), a
leading hotel management and franchise company, announced results for the third
quarter of 1996. Net income of $8.0 million increased 51 percent over pro forma
third quarter 1995 results. Earnings per share were 34 cents compared to 24
cents in the year-ago pro forma period, a gain of 42 percent. Revenues
increased 30 percent to $68.6 million.
On February 27, 1996, the Company acquired all of the outstanding stock
of RFS, Inc. (RFS), a privately-held hotel operator, in exchange for
approximately 2.7 million shares of the Company's common stock. The business
combination was accounted for as a pooling-of-interests combination and,
accordingly, the Company's 1995 financial results have been restated to include
the results of RFS. Also, RFS, as a Subchapter S corporation, was generally not
liable for income taxes during 1995. A pro forma adjustment to increase RFS's
provision for income taxes to the Company's effective tax rate of 35 percent,
has been reflected in the pro forma 1995 results.
In the third quarter of 1996, the average room rate at the Company's
comparable hotels managed under the Doubletree brand increased 10.8 percent
from the year-ago period to $96, and occupancy improved one percentage point to
76 percent, resulting in a 12.2 percent increase in revenue per available room
(REVPAR) for the quarter. Comparable hotels managed under other franchisors'
brands or as independents experienced an 8.8 percent increase in average room
rate to $78 for the third quarter of 1996 over the prior year period and
occupancy was essentially flat at 80 percent, resulting in an 8.1 percent
increase in REVPAR for the quarter.
-more-
2
Doubletree Third Quarter Results
Page 2
For the first nine months of 1996, Doubletree reported a 44 percent
increase in net income to $20.4 million and a 38 percent increase in earnings
per share to 88 cents over the comparable pro forma 1995 period. Nine month
revenues increased 29 percent to $186.0 million from $144.2 million in the
comparable 1995 period.
During the first nine months of 1996, the average room rate at the
Company's comparable hotels managed under the Doubletree brand increased 8.6
percent from the year-ago period to $96, and occupancy improved one and
one-half percentage points to 75 percent, resulting in a 10.8 percent increase
in REVPAR. Comparable hotels managed under other franchisors' brands or as
independents experienced a 7.2 percent increase in average room rate to $74 for
the first nine months of 1996 over the prior year period and occupancy
increased nearly one percentage point to 78 percent, resulting in an 8.3
percent increase in REVPAR.
The Company added eight new contracts totaling 1,890 rooms during the
third quarter and terminated three contracts totaling 686 rooms, resulting in a
net addition of five contracts aggregating 1,204 rooms. For the first nine
months of 1996, the Company added 68 contracts totaling 11,821 rooms (net of
terminations and including the RFS acquisition of 50 contracts totaling 6,979
rooms). As of September 30, 1996, the Company had a portfolio of 184 properties
totaling 42,436 rooms under management contract or franchise agreement. This
represents a 41 percent increase in the number of rooms compared to September
30, 1995 and an 18 percent increase excluding the RFS acquisition.
In addition, the Company announced on September 12, 1996 that it had
entered into a definitive agreement to acquire Red Lion Hotels, Inc. ("Red
Lion")(NYSE:RL) in a cash-and-stock merger valued at approximately $1.2
billion including the assumption of approximately $200 million of debt. As
of September 30, 1996, Red Lion operated 56 hotels containing approximately
14,900 rooms. Red Lion has
-more-
3
Doubletree Third Quarter Results
Page 3
called a special meeting of its stockholders to be held on Friday, November 8,
1996 to vote on the proposed merger transaction. Assuming that the proposed
merger transaction is approved by Red Lion's stockholders and assuming that all
other closing conditions have been satisfied, the Company expects to close the
proposed merger transaction as soon as practicable after Red Lion's special
stockholders' meeting.
Doubletree Corporation is a leading hotel management company and is the
exclusive franchisor of Doubletree Hotels, Doubletree Guest Suites and Club
Hotels by Doubletree hotel brands.
###
4
DOUBLETREE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1996 1995 1996 1995
Actual Pro Forma(a) Actual Pro Forma(a)
------- ------------ -------- ------------
REVENUES:
Management and franchise fees $ 9,739 $ 7,695 $ 28,258 $ 22,231
Owned hotel revenues 1,993 1,892 5,972 5,200
Leased hotel revenues 51,380 38,794 137,701 104,328
Purchasing and service fees 4,215 4,064 11,800 11,542
Other fees and income 1,261 448 2,233 941
------- ------- -------- --------
Total revenues 68,588 52,893 185,964 144,242
------- ------- -------- --------
OPERATING COSTS AND EXPENSES:
General and administrative 4,170 3,735 12,811 10,841
Owned hotel expenses 1,523 1,467 4,740 4,403
Leased hotel expenses 47,418 36,257 127,153 97,265
Purchasing and service expenses 3,046 3,338 8,694 9,684
Depreciation and amortization 1,477 1,196 4,417 3,252
------- ------- -------- --------
Total operating costs and expenses 57,634 45,993 157,815 125,445
------- ------- -------- --------
Operating income 10,954 6,900 28,149 18,797
Interest expense (32) (49) (175) (181)
Interest income 1,388 1,236 3,478 3,094
------- ------- -------- --------
Income before income taxes and minority
interest 12,310 8,087 31,452 21,710
Minority interest share of net loss 28 84 6 77
------- ------- -------- --------
Income before income taxes 12,338 8,171 31,458 21,787
Income tax expense 4,318 2,860 11,011 7,625
------- ------- -------- --------
Net income $ 8,020 $ 5,311 $ 20,447 $ 14,162
======= ======= ======== ========
Earnings per share $ 0.34 $ 0.24(a) $ 0.88 $ 0.64(a)
------- ------- -------- --------
Weighted average common and
common equivalent shares outstanding 23,879 22,443 23,183 22,137
======= ======= ======== ========
(a) On February 27, 1996, the Company acquired the outstanding common stock of
RFS, Inc. (RFS), a privately-held hotel operator, in exchange for approximately
2.7 million shares of the Company's common stock. The business combination was
accounted for as a pooling-of-interests combination and, accordingly, the
Company's 1995 financial results have been restated to include the results of
RFS. Also, RFS, as a Subchapter S corporation, was generally not liable for
income taxes during 1995. A pro forma adjustment to increase the provision for
income taxes by $297,000 and $833,000 to the Company's effective tax rate of
35%, has been reflected in the 1995 pro forma results for the quarter and nine
months ended September 30, 1995, respectively.