RevPAR at system-wide hotels increased 4.7% - Revenues from continuing operations were $38.1 million
Red Lion Hotels Corporation (NYSE:RLH) today announced results for the fourth quarter and the year ended December 31, 2005.
Key Fourth Quarter Results
• RevPAR at system-wide hotels increased 4.7%
• Revenues from continuing operations were $38.1 million
• Net loss from continuing operations was $1.7 million
• Net loss applicable to common shareholders was $0.9 million
• EBITDA from continuing operations increased 26.6%, to $3.8 million
Key Fiscal Year Results
• RevPAR at system-wide hotels increased 5.6%
• Revenues from continuing operations increased to $165.0 million
• Net loss from continuing operations was $1.1 million
• Net income applicable to common shareholders was $4.5 million
• EBITDA from continuing operations increased 5.9%, to $23.9• million
• Completed the sale of $52.8 million of non-core real estate in• 2005, with an additional $5.3 million in January 2006
• Initiated renovation program for all continuing owned and• leased hotels
• Changed the company name to Red Lion Hotels Corporation and• launched new brand image
Arthur M. Coffey, President and CEO of Red Lion Hotels, commenting on the results, said, "In 2005 we improved our technology infrastructure, introduced our revitalized brand image and announced an aggressive five-year growth campaign to double to 100 the number of markets in which Red Lion has a presence. We also completed the sale of seven hotels and our Crescent Court office and retail center, and used the proceeds to begin our renovation program at company-owned and leased hotels. The financial results from the fourth quarter reflect the positive impact of these efforts. The successful implementation of our strategies in 2005 has created momentum on which we plan to capitalize as we approach our busy season in 2006."
Financial Results
Fourth Quarter:
The company's total revenues from continuing operations during the quarter were $38.1 million, down 0.7% from the same quarter of 2004. Revenues increased in all segments except for the entertainment division, which experienced a decline.
Revenues in the hotel segment were up 2.0% to $33.3 million. This increase was due to a 5.1% increase in RevPAR (revenue per available room), which was partially offset by a decline in food and beverage revenue. Franchise and management revenues increased 13.9% to $0.6 million due to increases in system-wide (hotels owned, leased, managed and franchised for at least one year) RevPAR and more franchise agreements on a comparable basis. Revenues in the real estate segment were $1.3 million, up 7.2%. Revenues in the entertainment segment decreased $1.1 million or 29.5%. During the quarter, the entertainment division presented a six week "net" production of Disney's The Lion King, for which it received commissions for tickets sold and other fees, and incurred only limited expenses associated with this show. Comparatively, the entertainment division generated substantially less revenue but substantially more profit on The Lion King than it did on the two shows it presented on a "gross" basis in the fourth quarter of 2004, for which it realized all the revenues but also incurred all the expenses.
EBITDA from continuing operations was $3.8 million, up 26.6% from the same quarter of 2004, reflecting improved profit margins in the hotel and the entertainment divisions. Net loss from continuing operations improved to $1.7 million, compared to a loss of $2.2 million in the same quarter last year. Net loss applicable to common shareholders improved to $0.9 million, or $(0.07) per fully diluted share, compared to a loss of $8.2 million, or $(0.63) per fully diluted share, in the same quarter last year. In the fourth quarter of 2005, net loss applicable to common shareholders included a $1.0 million net after-tax gain from the sale and impairment of non-core real estate. In the fourth quarter of 2004, net loss applicable to common shareholders included a $5.8 million net after-tax loss from impairment of non-core assets identified for disposition.
2005 Fiscal Year:
The company's total revenues from continuing operations for the year ended December 31, 2005 were $165.0 million, up 1.2% from last year. EBITDA from continuing operations increased 5.9%, to $23.9 million. Net loss from continuing operations was $1.1 million, compared to a loss of $0.9 million last year. Net income applicable to common shareholders was $4.5 million, or $0.34 per fully diluted share, compared to a loss of $6.7 million, or $(0.51) per fully diluted share last year. Net income applicable to common shareholders for the year ended December 31, 2005 included a $3.7 million net after-tax gain from the sale and impairment of non-core real estate. For the year ended December 31, 2004, net loss applicable to common shareholders included a $5.8 million net after-tax loss from impairment of non-core assets identified for disposition. Net income was also negatively impacted by increased depreciation in 2005 associated with the company's renovation program.
Hotel Operations
Fourth Quarter:
In the fourth quarter of 2005, RevPAR for comparable system-wide hotels increased 4.7% over the same quarter of the previous year, to $37.64. This increase was the result of a 4.8% increase in ADR (average daily rate) to $71.96. Average occupancy was relatively unchanged during the quarter.
Hotel revenues from continuing operations increased 2%, to $33.3 million. This was due to a 5.1% increase in RevPAR, partially offset by a decline in food and beverage revenue. The increase in RevPAR was driven by a 5.0% increase in ADR, and includes the negative impact of renovation displacement. Occupancy was essentially unchanged. It should be noted that the company does not reduce the number of available rooms to reflect rooms out of service due to renovations. Hotel operating expenses decreased 1.0%, to $28.6 million. Hotel gross margin improved to 14.2%, compared to 11.6% in the fourth quarter of 2004.
"Although we experienced some displacement of revenues from rooms being out-of-service for renovation in the fourth quarter of 2005, we produced growth in RevPAR, marking the ninth consecutive quarter of RevPAR growth," commented John Taffin, Executive Vice President, Hotel Operations. "The period from November through March is typically the slowest travel period of the year, so we plan to complete the majority of our renovations during this time. I am encouraged by the RevPAR growth for the hotels that have completed room renovations so far, and look forward to a positive impact from our renovation program during our peak season later this year."
Fiscal Year 2005:
For 2005, RevPAR for comparable system-wide hotels increased 5.6% over the previous year, to $44.45. This increase was the result of a 3.4% increase in ADR to $73.93. Average occupancy increased 1.3 points in 2005, to 60.1%.
Hotel revenues from continuing operations increased in 2005 by 2.6%, to $146.1 million. This was due to a 5.9% increase in RevPAR, partially offset by a decline in food and beverage revenue. The increase in RevPAR was driven by a 3.4% increase in ADR and a 1.4 point increase in average occupancy, and includes the negative impact of renovation displacement.
Capital Reinvestment Program and Renovation Update
In the fourth quarter, the company substantially completed room renovations at the Red Lion Hotel Seattle Airport in Washington, Red Lion Hotel Boise Downtowner in Idaho and the Red Lion Hotel Kelso in Washington. RevPAR at these hotels in the fourth quarter increased 14.5% in the aggregate, driven by an increase of 9.4% in ADR and a 2.7 point increase in occupancy.
In the fourth quarter, the company commenced renovations at the majority of its hotels. Currently, rooms at 21 of the company's 31 continuing owned and leased hotels have been substantially completed or are in active renovation. The balance of the company's room renovation plan is expected to be completed by mid-2006. Upon completion of the renovation program, Red Lion will enter the peak travel season equipped with a strong network of upgraded hotels.
Highlights and Recent Events
In September 2005, the company changed its name to Red Lion Hotels Corporation to convey its focus on the Red Lion brand. The company also launched its new Red Lion brand image, new website and adopted a new corporate logo, which may be viewed at www.redlion.com/graphics.
Also in September 2005, the company announced that it was initiating a growth strategy to double to 100 the number of primary and secondary markets in which Red Lion has a presence, including the cities of San Francisco, Phoenix, Los Angeles, Minneapolis, Dallas, Chicago, Albuquerque, Tucson and Colorado Springs.
In the fourth quarter, the company completed the sale of the Red Lion Hotel Yakima Gateway and the Crescent Court office and retail center. In January 2006, the company completed the sale of the Red Lion Hotel Hillsboro and the Executive Court portion of the WestCoast Ridpath Hotel. To date, closings under the Company's property disposition plan have yielded aggregate gross proceeds of approximately $58.3 million, and have resulted in the payoff of approximately $18.1 million in debt. The company continues to actively market the remaining three hotels originally identified for disposition.
On February 8, 2006, the company announced the issuance of 135,344 shares of its common stock in exchange for the operating partnership units originally issued by Red Lion Hotels Limited Partnership to the contributor of the WestCoast Ridpath Hotel. The company has agreed to register for public resale the common stock it issued in this exchange. The company expects dilution from issuance of this stock to be partially offset by a reduction in the minority interest for Red Lion Hotels Limited Partnership. The company does not expect that the issuance of this stock will materially affect its per share operating results.
On February 15, 2006, the company announced that William "Bill" Heaney was promoted from Vice President, Sales to Vice President, Brand Development. After a national search, the company decided that Mr. Heaney's extensive experience with the company and its existing franchisees, together with his experience as a spokesman at conferences and other events attended by prospective franchisees made him most qualified for the job. Mr. Heaney has already assumed his new role, but he will continue to oversee the company's sales efforts until his former position has been filled. Mr. Heaney is also expected to play a key role in the search to fill that position.
"We are dedicating our time, talent and resources to the continued success and growth of the Red Lion brand. Our accomplishments thus far represent the initial steps in our overall growth strategy. In 2006, we will complete our renovation plan and continue with our expansion program. I am confident that in the long term the hard work that is going into our renovation program and other initiatives will make Red Lion a preferred hotel brand for guests, owners and investors," Coffey concluded.
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