Total revenue reported during the third quarter was $46.2 million compared to total revenue of $49.8 million in the third quarter of 2010. On a comparable basis, total revenue increased $0.8 million from $45.4 million in the third quarter of 2010.
Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, today announced its results for the third quarter ended September 30, 2011.
Comparable operating results for the periods included in this release exclude from hotel operations the results of the Red Lion Hotel on Fifth Avenue in Seattle, which was sold in the second quarter of 2011. Following the sale, this property continues to operate as a franchised hotel and, therefore, the company is required to report its financial results in continuing operations.
Third Quarter and Key Subsequent Event Overview:
Total revenue reported during the third quarter was $46.2 million compared to total revenue of $49.8 million in the third quarter of 2010. On a comparable basis, total revenue increased $0.8 million from $45.4 million in the third quarter of 2010. Third quarter 2011 reported net loss from continuing operations was $0.1 million, or $0.01 per share, compared to net income from continuing operations of $3.2 million, or $0.17 per diluted share, for the prior year period. EBITDA from continuing operations before special items for the third quarter of 2011 was $8.2 million, compared to $12.4 million ($10.5 million on a comparable basis) for the third quarter of 2010. Third quarter 2011 results include a $2.2 million impairment charge, which is classified as a special item, related to the Red Lion Colonial Hotel in Helena, MT. The Red Lion Colonial Hotel is classified as an asset held for sale on the balance sheet.
"We were pleased with our RevPAR growth this quarter, particularly when compared with national results among midscale hotels," said Jon E. Eliassen, President and Chief Executive Officer of Red Lion Hotels Corporation. "We also achieved several key objectives, all resulting in improving our balance sheet. We refinanced maturing debt on three properties and completed an expanded credit facility. In addition, today we announced the acquisition of ten previously leased properties which was an important strategic move for the company. These actions provide us significant financial and operational flexibility going forward and allow us to focus on the Red Lion brand."
Summary Results
Operating results for the three and nine months ended September 30, 2011, and September 30, 2010, follow:
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($ in thousands, except per share) |
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|
Three months ended September 30, |
Nine months ended September 30, |
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|
2011 |
2010 |
% change |
2011 |
2010 |
% change |
||||
|
Total revenue, as reported |
$ 46,212 |
$ 49,843 |
-7.3% |
$ 125,864 |
$ 126,600 |
-0.6% |
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|
Results before special items: (1) |
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|
EBITDA from continuing operations |
$ 8,238 |
$ 12,377 |
-33.4% |
$ 13,686 |
$ 21,798 |
-37.2% |
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|
Net income (loss) from continuing operations |
$ 1,100 |
$ 3,157 |
-65.2% |
$ (4,033) |
$ (217) |
n/m |
|||
|
Earnings (loss) per share from continuing operations - diluted |
$ 0.06 |
$ 0.17 |
-64.7% |
$ (0.21) |
$ (0.01) |
n/m |
|||
|
Results as reported: |
|||||||||
|
EBITDA from continuing operations |
$ 6,082 |
$ 12,377 |
-50.9% |
$ 45,079 |
$ 20,579 |
119.1% |
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|
Net income (loss) from continuing operations |
$ (129) |
$ 3,157 |
-104.1% |
$ 13,861 |
$ (1,003) |
n/m |
|||
|
Earnings (loss) per share from continuing operations - diluted |
$ (0.01) |
$ 0.17 |
-105.9% |
$ 0.72 |
$ (0.05) |
n/m |
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|
(1) Excludes a $2.2 million impairment charge on the Red Lion Colonial Hotel in Helena, MT, recorded in the third quarter of 2011, a $33.5 million gain on the sale of the Seattle Fifth Avenue property recorded in the second quarter of 2011, and $1.2 million of separation costs related to the departure of the company's former President and Chief Executive Officer recorded in the first quarter of 2010. |
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In addition, on a comparable basis, key hotel operating metrics and hotel revenues and operating margin for the three and nine months ended September 30, 2011, and September 30, 2010, are highlighted below for owned and leased hotels:
|
Three months ended September 30, |
Nine months ended September 30, |
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|
2011 |
2010 |
change |
2011 |
2010 |
change |
|||||
|
RevPAR (revenue per available room) |
$ 62.22 |
$ 60.14 |
3.5% |
$ 49.85 |
$ 48.26 |
3.3% |
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|
ADR (average daily rate) |
$ 87.21 |
$ 86.95 |
0.3% |
$ 82.95 |
$ 82.56 |
0.5% |
||||
|
Occupancy |
71.3% |
69.2% |
210 |
bps |
60.1% |
58.4% |
170 |
bps |
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|
Hotels revenue: |
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|
Rooms |
$ 33,336 |
$ 32,224 |
3.5% |
$ 79,260 |
$ 76,723 |
3.3% |
||||
|
Food and beverage |
8,532 |
8,476 |
0.7% |
24,548 |
25,160 |
-2.4% |
||||
|
Other revenue |
1,060 |
1,041 |
1.8% |
2,567 |
2,506 |
2.4% |
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|
Total hotels revenue |
$ 42,928 |
$ 41,741 |
2.8% |
$ 106,375 |
$ 104,389 |
1.9% |
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|
Hotel direct operating margin |
26.7% |
30.4% |
20.5% |
23.7% |
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Third Quarter 2011 Results
In the third quarter of 2011, for comparable hotels, excluding Seattle Fifth Avenue, occupancy increased 210 basis points to 71.3 percent and ADR increased 0.3 percent to $87.21, both contributing to a 3.5 percent increase in comparable RevPAR year over year. Including franchised hotels, a 260 basis point increase in occupancy drove a 3.8 percent increase in system wide RevPAR.
On a comparable hotel basis, EBITDA from continuing operations before special items was $8.2 million for the third quarter compared to $10.5 million in the prior year period. Hotel revenue on a comparable basis of $42.9 million increased 2.9 percent from $41.7 million in the prior year period. Comparable rooms revenue increased approximately $1.1 million or 3.5 percent, primarily due to an increase in occupancy. Food and beverage revenue on a comparable basis was flat compared to the prior year at $8.5 million. Hotel direct operating margin on a comparable basis declined to 26.7 percent from 30.4 percent in the same period in 2010. This decline was driven by an increase in operating expenses including payroll, sales, marketing and maintenance.
Franchise revenue increased to $1.2 million from $1.0 million. Profitability in the segment was impacted by an increase in marketing on behalf of the franchise hotels and costs relating to the company's subleased and franchised Sacramento property.
Revenue in the entertainment segment decreased to $1.5 million compared to $2.0 million, primarily due to a decline in sales processed through the ticketing division.
Nine Months Ended September 30, 2011 Results
Total revenue on a comparable basis for the nine months ended September 30, 2011 was $119.9 million versus $115.5 millionin the prior year period. Comparable revenue from hotels of $106.4 million was up $2.0 million, or 1.9 percent. Comparable hotel direct operating margin declined to 20.5 percent from 23.7 percent in the prior year period, primarily driven by increased labor, sales, marketing, energy and maintenance costs.
RevPAR for comparable hotels increased 3.3 percent driven by a 170 basis point increase in occupancy and a 0.5 percent increase in ADR. Including franchised hotels, system wide RevPAR on a comparable basis for the period increased 4.3 percent due to a 250 basis point increase in occupancy, while ADR remained flat.
Liquidity and Balance Sheet
As of September 30, 2011, the company had $50.9 million in cash and cash equivalents. The company had outstanding debt of$106.4 million, of which $8.4 million is current. This compares to outstanding debt of $126.0 million, of which $43.3 million was current, at December 31, 2010.
Capital expenditures for the nine months ended September 30, 2011, totaled $7.3 million primarily for hotel improvement projects.
On September 13, 2011, the company completed the first step of an expansion of its credit facility with Wells Fargo Bank. Under the secured facility, Red Lion Hotels obtained $18 million in new term debt in addition to the renewal of $12 million outstanding under the original facility. Substantially all of the additional term debt proceeds were used to pay off maturing loans secured by the Red Lion Hotel at the Park in Spokane and the Red Lion Hotel Olympia.
Franchise Update
On September 20, 2011, the company entered into franchise license agreements with the owners of two New Mexico hotels inFarmington and Gallup. The two properties are among a group of hotels beneficially owned by Positive Investments, Inc., which is also the owner of the Red Lion Hotel Oakland International Airport in California. The hotels are expected to convert to the Red Lion brand in the fourth quarter, expanding the company's western United States footprint from eight states to nine.
Subsequent to the quarter end, on October 10, 2011, the company entered into a third franchise license agreement with Positive Investments, Inc. for a hotel in Grants, NM.
Subsequent Events
On October 11, 2011, the company used cash reserves to retire the maturing debt of $5.0 million secured by the Red Lion Colonial Hotel in Helena, MT.
On October 13, 2011, the company completed its $40 million credit facility with Wells Fargo Bank, making available $10 millionin revolving credit, in addition to $30 million in term debt obtained in September 2011.
On November 2, 2011, the company completed a purchase for $37 million of 10 hotels formerly leased from a subsidiary of iStar Financial Inc. Approximately $32 million of the purchase price was funded with cash proceeds received from the sale of Red Lion Hotel on Fifth Avenue and structured as a tax deferred exchange. The transaction will reduce the company's lease obligations by approximately $4.3 million per year.
Outlook for 2011
The company is reducing its RevPAR guidance for 2011, previously provided on May 5, 2011, based on the outlook for the markets in which the company operates and information available today:
