Company Results

Red Lion Hotels First Quarter 2014 Revenues Increase 10%

Comparable revenue from owned and leased hotels of $23.7 million increased $1.2 million or 5.3 percent compared to the same period a year ago, driven primarily by an increase in comparable rooms revenue. Year over year, comparable first quarter RevPAR increased 5.0 percent to $48.01 driven by a 2.5 percent increase in ADR to $84.89 and a 130 basis point increase in occupancy. Comparable hotel direct operating margin rose from 10.8 percent to 12.7 percent. First quarter 2014 margins primarily benefitted from increases in ADR.

Red Lion

Red Lion Hotels Corporation (NYSE:RLH) today announced its results for the first quarter ended March 31, 2014.

Highlights:

  • Increased RevPAR for comparable owned and leased hotels by 5.0 percent versus prior year
  • Grew ADR for comparable owned and leased hotels by 2.5 percent versus prior year
  • Increased comparable EBITDA from continuing operations by $0.8 million year over year
  • Appointed industry leader Brian Quinn as Senior Vice President, Chief Franchise Officer
  • Named 20-year hospitality veteran Angela Landgraf as Senior Vice President of Business Development

Comparable operating results and data from continuing operations (as disclosed in the table by the same title) for the periods included in this release exclude from hotel operations the results of the hotels or operations that have been sold in the past four quarters. Throughout this release the company refers to certain non-GAAP financial measures. Please refer to the tables attached to this release for a reconciliation of these non-GAAP financial measures to their most directly comparable financial measure determined in accordance with GAAP.

"We are off to a solid start in 2014 with a 5.0 percent increase in first quarter RevPAR and a 2.5 percent increase in ADR," said President and Chief Executive Officer Greg T. Mount. "Additionally, our hotel margins and profitability showed improvement. To drive efficiencies and grow market share, we have begun to roll out innovative marketing, operational and technology initiatives. Further, we have hired two well-known industry experts in lodging and franchise development to support our growth objectives. Under their leadership, we expect to expand our brands through franchising, joint venture acquisitions and development opportunities in top markets across the country."

First Quarter 2014 Results

Comparable revenue from owned and leased hotels of $23.7 million increased $1.2 million or 5.3 percent compared to the same period a year ago, driven primarily by an increase in comparable rooms revenue. Year over year, comparable first quarter RevPAR increased 5.0 percent to $48.01 driven by a 2.5 percent increase in ADR to $84.89 and a 130 basis point increase in occupancy. Comparable hotel direct operating margin rose from 10.8 percent to 12.7 percent. First quarter 2014 margins primarily benefitted from increases in ADR.

Franchise revenue increased $0.3 million to $1.5 million primarily due to increases in rooms revenue, contractual rates on existing properties and the number of hotels in the franchise system. Net segment profits increased $0.1 million over prior year. 

Entertainment revenue and profitability increased year-over-year, primarily due to a successful run of a Broadway stage production inHonolulu.

On a comparable basis, total company EBITDA from continuing operations for the first quarter increased $0.8 million, compared to the prior year period. The improvement is primarily attributable to improved profitability in the company's business segments, partially offset by additional undistributed corporate expenses for CEO transition costs and self-insured medical costs.

The loss from continuing operations in the first quarter of 2014 was $3.4 million compared to a loss of $3.0 million in the same period a year ago. During the first quarter of 2014, the company recorded income tax expense related to continuing operations of $31,000 compared to an income tax benefit related to continuing operations of $1.9 million in the first quarter of 2013. The primary driver of the year over year difference in income tax expense is the recording of a valuation allowance against the company's net deferred tax assets to reduce them to an amount that is expected to be realized.

Lodging Development Update

Subsequent to the end of first quarter 2014, the company hired two hospitality veterans with the addition of Brian Quinn as Senior Vice President, Chief Franchise Officer and Angela Landgraf as Senior Vice President of Business Development. Quinn will oversee hotel franchise conversion opportunities and Landgraf will manage hotel joint venture acquisitions and development.

Liquidity and Balance Sheet

At March 31, 2014, the company had $13.5 million in cash and cash equivalents and no cash borrowings on its $10 million revolving line of credit. Additionally, at March 31, 2014, the company had outstanding debt of $73.2 million, of which $3.0 million was current.

Capital expenditures, primarily for guest room improvement projects, for the three months ended March 31, 2014, totaled $3.1 million.  

Assets Held for Sale or Sold

As of March 31, 2014, the following assets were listed as held for sale:

  • Red Lion Hotel Canyon Springs, 112 rooms
  • Red Lion Hotel Columbia Center, 162 rooms
  • Red Lion Hotel & Conference Center Kelso/Longview, 161 rooms
  • Red Lion Hotel Pocatello, 150 rooms
  • Red Lion Hotel Wenatchee, 149 rooms
  • Red Lion Hotel Yakima Center, 156 rooms

Subsequent to the end of first quarter 2014, the company sold the Red Lion Hotel Yakima for $3.7 million, using $2.6 million of the proceeds to pay down debt.

Discontinued Operations

The operating results of the Red Lion Hotel Yakima and the Red Lion Hotel Columbia Center in Kennewick had been classified as discontinued operations in the fourth quarter 2013 financial statements as the properties were listed for sale and not expected to continue to operate as Red Lion franchises. However, the buyer of the Yakima hotel signed a franchise agreement upon closing during the second quarter 2014 and the Red Lion Hotel Columbia Center in Kennewick is also expected to remain in the network as a Red Lion franchise, therefore both properties are reported in continuing operations for the first quarter and all comparable periods presented. Listed in discontinued operations are the operating results of the hotels located in Twin Falls and Pocatello, Idaho, Kelso and Wenatchee, Washington,Medford and Eugene, Oregon, and the commercial mall in Kalispell, Montana, and a contract catering business in Yakima, Washington. As required under generally accepted accounting principles ("GAAP"), Red Lion separately reports the results of these operations including any related asset impairment charges, net of income taxes as "Income (loss) from discontinued operations" on the company's consolidated statement of comprehensive income (loss) for all periods presented.

Outlook for 2014

Based on the outlook for the markets in which the company operates and on currently available information, the company affirms its RevPAR guidance for 2014:

  • Full year 2014 RevPAR for comparable owned and leased hotels is expected to increase 3 to 5 percent over 2013.
Red Lion Hotels Corporation
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
($ in thousands, except footnotes and per share amounts)
         
  Three months endedMarch 31,    
  2014 2013 $ Change % Change
         
Revenue:        
Hotels  $ 23,746  $ 22,912  $ 834 3.6%
Franchise  1,526  1,264  262 20.7%
Entertainment  5,105  3,373  1,732 51.3%
Other  33  85  (52) -61.2%
         
Total revenues  30,410  27,634  2,776 10.0%
         
Operating expenses:        
Hotels  20,732  20,730  2 0.0%
Franchise   1,452  1,299  153 11.8%
Entertainment  4,056  2,984  1,072 35.9%
Other  114  108  6 5.6%
Depreciation and amortization   3,143  3,334  (191) -5.7%
Hotel facility and land lease   1,155  1,022  133 13.0%
Loss (gain) on asset dispositions, net   (75)  (92)  17 18.5%
Undistributed corporate expenses  2,114  1,806  308 17.1%
         
Total operating expenses  32,691  31,191  1,500 4.8%
         
Operating income (loss)  (2,281)  (3,557)  1,276 35.9%
         
Other income (expense):        
Interest expense  (1,217)  (1,484)  267 18.0%
Other income, net  93  101  (8) -7.9%
         
Income (loss) from continuing operations before income taxes  (3,405)  (4,940)  1,535 31.1%
         
Income tax (benefit) expense  31  (1,940)  (1,971) -101.6%
         
Income (loss) from continuing operations  (3,436)  (3,000)  (436) -14.5%
         
Discontinued operations (1,2):        
Income (loss) from discontinued business units, net of income tax (benefit) expense of $0 and ($50) respectively  (83)  (65)  (18) -27.7%
Loss on disposal and impairment of the assets of the discontinued business units, net of income tax (benefit) expense of $0 and ($25) respectively  --   (45)  45 100.0%
         
Income (loss) from discontinued operations  (83)  (110)  27 24.5%
         
Net income (loss)  (3,519)  (3,110)  (409) -13.2%
         
Comprehensive income (loss)        
Unrealized gains (losses) on cash flow hedge, net of tax  (1)  --   (1) n/m
         
Comprehensive income (loss)  $ (3,520)  $ (3,110)  $ (410) -13.2%
         
Earnings (loss) per share - basic and diluted        
Income (loss) from continuing operations   $ (0.17)  $ (0.15)    
Income (loss) from discontinued operations  $ --   $ (0.01)    
Net income (loss)  $ (0.17)  $ (0.16)    
Weighted average shares - basic   19,716  19,469    
Weighted average shares - diluted  19,716  19,469    
         
 
Non-GAAP Financial Measures:        
         
EBITDA (3)   $ 872  $ 26  $ 846 n/m
EBITDA as a percentage of revenues  2.9% 0.1%    
         
Comparable Adjusted EBITDA from continuing operations (4)   $ 955  $ 153  $ 802 n/m
         
(1) Between the fourth quarter 2011 and first quarter of 2013, we classified the operations of four of our businesses as discontinued as we either sold them or ceased operating them. Those operations were a hotel in Medford, Orgeon, a hotel in Sacramento, California, a commercial mall in Kalispell, Montana and a catering company in Yakima, Washington.
(2) The company has classified as discontinued operations for all periods presented four hotel properties located in Kelso and Wenatchee, Washington and in Twin Falls and Pocatello, Idaho. Additionally in the fourth quarter of 2013, the company entered into an agreement to assign the ground lease for its hotel in Eugene, Oregon and ceased operating the hotel in the first quarter of 2014. This property has also been classified as a discontinued operation for all periods presented.
(3) The definition of "EBITDA" and how that measure relates to net income (loss) is discussed further in this release under Non-GAAP Financial Measures.
(4) The definition of "Comparable EBITDA from continuing operations" and how that measure relates to net income (loss) is discussed further in this release under Non-GAAP Financial Measures.
 
Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
     
  March 31, December 31, 
  2014 2013
Assets:    
Current assets:    
Cash and cash equivalents  $ 13,515  $ 13,058
Accounts receivable, net  6,555  6,283
Notes receivable  643  672
Inventories  1,238  1,386
Prepaid expenses and other  2,461  2,873
Deferred income taxes  761  1,034
Other current assets  7  393
Assets held for sale  18,483  18,346
Total current assets  43,663  44,045
     
Property and equipment, net  166,252  166,356
Goodwill  8,512  8,512
Intangible assets  6,992  6,992
Notes receivable, long term  4,445  4,423
Other assets, net  4,263  4,298
     
Total assets  $ 234,127  $ 234,626
     
Liabilities:    
Current liabilities:    
Accounts payable  $ 4,394  $ 4,763
Accrued payroll and related benefits  3,430  2,786
Accrued interest payable  17  25
Advance deposits  442  199
Other accrued expenses  11,715  8,465
Long-term debt, due within one year  3,000  3,000
Total current liabilities  22,998  19,238
     
Long-term debt, net of discount  39,336  40,058
Deferred income  3,338  3,455
Deferred income taxes  3,575  3,841
Debentures due Red Lion Hotels Capital Trust  30,825  30,825
Total liabilities  100,072  97,417
     
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; 19,718,005 and 19,687,232 shares issued and outstanding  197  197
Additional paid-in capital  152,669  152,303
Accumulated other comprehensive loss, net of tax  (160)  (159)
Accumulated deficit  (18,651)  (15,132)
Total stockholders' equity  134,055  137,209
     
Total liabilities and stockholders' equity  $ 234,127  $ 234,626
 
Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)
               
System-wide Hotels as of March 31, 2014            
        Meeting Space      
  Hotels   Rooms (sq. ft.)      
Red Lion Owned or Leased Hotels (1)              
Continuing Operations  20    4,057  190,272      
Discontinued Operations  4    572  34,433      
Red Lion Franchised Hotels (1)  28    4,385  232,517      
Leo Hotel Collection  2    3,256  241,000      
Total   54    12,270  698,222      
               
               
Comparable Hotel Statistics from Continuing Operations  (1,2,3)
  Three months ended March 31, 2014 Three months ended March 31, 2013
  Average       Average    
  Occupancy (4)   ADR (5) RevPAR (6)  Occupancy (4) ADR (5) RevPAR (6) 
Owned and Leased Hotels 56.5%    $ 84.89  $ 48.01 55.2%  $ 82.83  $ 45.73
Franchised Hotels 45.3%    $ 85.10  $ 38.54 43.9%  $ 81.94  $ 35.98
Total System Wide 51.2%    $ 84.98  $ 43.53 49.8%  $ 82.46  $ 41.09
               
Change from prior comparative period:            
Owned and Leased Hotels  130  bps  2.5% 5.0%      
Franchised Hotels  140  bps  3.9% 7.1%      
Total System Wide  140  bps  3.1% 5.9%      
               
               
(1) Includes all hotels owned, leased and franchised, presented on a comparable basis for hotel statistics. The Missoula and Pendletonproperties have been excluded from the owned and leased hotel statistics and included in the franchised statistics for all periods shown.
(2) Excludes a total of six hotels identified as a discontinued operations, including one that was sold in the third quarter 2013 and one hotel that ceased operation in the first quarter of 2014.
(3) Excludes statistics for the Leo Hotel Collection.
(4) 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.
(5) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(6) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.
 
Red Lion Hotels Corporation
Comparable Operating Results and Data From Continuing Operations
(unaudited)
($ in thousands)
     
Certain operating results for the periods included in this report are shown on a comparable hotel basis. Comparable hotels are defined as properties that are owned or leased by the company and the operations of which are included in the consolidated results from continuing operations for the entirety of the reporting periods being compared. Comparable operating results from continuing operations and comparable operating results from continuing operations represent reported operating results less the impact of the Missoula property, which was sold in February 2013 and the Pendleton property, which was sold in April 2013. We utilize these measures because management finds them 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, ongoing operations. We believe they are a complement to reported operating results. Comparable operating results from continuing operations are not intended to represent reported operating results defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. 
     
  Three months ended March 31,
  2014 2013
     
Total revenue per the consolidated statement of comprehensive income (loss)  $ 30,410  $ 27,634
less: Revenue from Missoula and Pendleton properties  --   (370)
Comparable total revenue  $ 30,410  $ 27,264
     
Room revenue from continuing operations  $ 17,524  $ 17,001
less: Room revenue from Missoula and Pendleton properties  --   (306)
Comparable room revenue  $ 17,524  $ 16,695
     
Food and beverage revenue from continuing operations  $ 5,608  $ 5,406
less: Food and beverage revenue from Missoula and Pendleton properties  --   (58)
Comparable food and beverage revenue  $ 5,608  $ 5,348
     
Other hotel revenue from continuing operations  $ 614  $ 505
less: Other hotel revenue from Missoula and Pendleton properties  --   (6)
Comparable other hotel revenue  $ 614  $ 499
     
Total hotel revenue from continuing operations  $ 23,746  $ 22,912
less: Total hotel revenue from Missoula and Pendleton properties  --   (370)
Comparable total hotels revenue  $ 23,746  $ 22,542
     
The reconciliation of hotel operating expense per the consolidated statements of comprehensive income (loss) to comparable hotel operating expense is as follows:
     
  Three months ended March 31,
  2014 2013
     
Hotel operating expenses from continuing operations  $ 20,732  $ 20,730
less: Hotel operating expenses from Missoula and Pendleton properties  --   (621)
Comparable hotel operating expenses  $ 20,732  $ 20,109
     
Hotel revenue from continuing operations  $ 23,746  $ 22,912
less: Hotel revenue from Missoula and Pendleton properties  --   (370)
Comparable hotel revenue  $ 23,746  $ 22,542
     
Hotel direct operating margin from continuing operations  $ 3,014  $ 2,182
less: Hotel direct operation margin from Missoula and Pendleton properties  --   251
Comparable hotel direct margin  $ 3,014  $ 2,433
Comparable hotel direct margin % 12.7 % 10.8 %
     
     
The reconciliation of EBITDA from continuing operations to comparable EBITDA from continuing operations is as follows:
     
  Three months ended March 31,
  2014 2013
     
EBITDA from continuing operations  $ 955  $ (122)
less: EBITDA of Missoula and Pendleton properties  --   275
Comparable EBITDA from continuing operations  $ 955  $ 153
 
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 (loss) for the periods presented:
     
  Three months ended March 31,
  2014 2013
     
EBITDA from continuing operations  $ 955  $ (122)
Income tax benefit (expense) - continuing operations  (31)  1,940
Interest expense - continuing operations  (1,217)  (1,484)
Depreciation and amortization - continuing operations  (3,143)  (3,334)
     
Net income (loss) from continuing operations  (3,436)  (3,000)
Income (loss) on discontinued operations, net of tax  (83)  (110)
Net income (loss)  $ (3,519)  $ (3,110)
     
     
  Three months ended March 31,
  2014 2013
     
EBITDA   $ 872  $ 26
Income tax benefit (expense)   (31)  2,015
Interest expense  (1,217)  (1,484)
Depreciation and amortization  (3,143)  (3,667)
Net income (loss)  $ (3,519)  $ (3,110)

NON-GAAP FINANCIAL MEASURES

EBITDA is defined as net income, 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 and other financial performance measures provided in accordance with generally accepted accounting principles in the United States("GAAP").

We use EBITDA to measure financial performance 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 tax 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, which is the most comparable financial measure calculated and presented in accordance with GAAP. EBITDA does not represent cash provided by operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income 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.



Logos, product and company names mentioned are the property of their respective owners.

comments powered by Disqus