Red Lion Hotels Third Quarter 2012 Revenues Increase 2.1%

2012-11-09
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  • Red Lion Net income from continuing operations increased $434,000 over the prior year quarter

    SPOKANE, Wash., Nov. 8, 2012 -- Red Lion Hotels Corporation (NYSE: RLH), a western U.S. based owner and franchisor of midscale hotels, announced its results for the third quarter ended Sept. 30, 2012.  The company reported third quarter revenues of $45.4 million and EBITDA of $8.4 million, each from continuing operations before special items.

    Overview:

    • RevPAR for comparable owned and leased hotels increased 4.6 percent year over year
    • Occupancy for comparable owned and leased hotels increased 270 basis points year over year, driven primarily by increases in the transient segment
    • ADR for comparable owned and leased hotels increased 0.9 percent year over year
    • Comparable EBITDA from continuing operations before special items increased $645,000 over the prior year quarter
    • Net income from continuing operations increased $434,000 over the prior year quarter
    • Since June 30, the company has closed on the sale of three hotel properties using a portion of the proceeds to pay down $17.7 million in debt
    • Since June 30, the company has signed franchise agreements on three new locations and two previously owned properties

    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 Red Lion Hotel on Fifth Avenue in Seattle, which was sold in the second quarter of 2011 and the Red Lion Colonial Hotel in Helena, Montana, which was sold in the third quarter of 2012.  Following the sales, these properties continue to operate as franchised hotels and the company is therefore required to report their financial results in continuing operations.

    Total revenue from continuing operations reported during the third quarter of 2012 was $45.4 million compared to $44.5 million in the third quarter of 2011.  Hotel revenue increased by $1.5 million on a comparable basis and franchise revenue increased by $0.3 million. Partially offsetting these increases was a slight decline in entertainment and other revenues of $0.1 million.  Third quarter net income from continuing operations was $0.4 million, or $0.02 per diluted share, compared to approximately breakeven results from continuing operations in the third quarter of 2011. In the third quarter of 2012, comparable EBITDA from continuing operations before special items increased to $8.5 million, compared to $7.8 million in the third quarter of 2011.

    "We are pleased to report another quarter of favorable RevPAR growth.  Considering our performance year to date and our outlook for the fourth quarter, we have updated our RevPAR guidance to an increase of three to five percent in 2012 over 2011," said Jon E. Eliassen, President and Chief Executive Officer of Red Lion Hotels Corporation.  "We also continue to make excellent progress on selling properties, franchising new hotels and reducing debt.  Since June 30, we have sold three hotels and all of the buyers have signed franchise agreements for either the purchased property or a different location.  Proceeds from our property sales have been used to pay down $17.7 million in debt.  Additionally, we have signed two new franchise agreements for properties at the Denver Airport in Colorado and Cathedral City near Palm Springs, California."

    Summary Results

    On the basis of comparable continuing operations before special items, key owned and leased hotel operating metrics and total company EBITDA for the three and nine months ended Sept. 30, 2012, and Sept. 30, 2011, are highlighted below:

    Third Quarter 2012 Results

    In the third quarter of 2012, for comparable owned and leased hotels from continuing operations, RevPAR increased 4.6 percent year-over-year driven by a 270 basis point increase in occupancy to 74.6 percent and a 0.9 percent increase in ADR to $88.49.  On a comparable basis, EBITDA from continuing operations before special items increased to $8.5 million for the third quarter compared to $7.8 million in the prior year period. The acquisition of the previously leased iStar hotels contributed facility lease savings of $0.6 million in the quarter.

    Comparable hotel revenue of $42.0 million was 3.6 percent higher compared to the same period a year ago.  Comparable hotel direct operating margin decreased to 26.1 percent from 26.9 percent in the same period in 2011 driven primarily by reservation costs associated with the higher transient volume and higher food and beverage costs.

    During the third quarter, the company listed for sale the Red Lion Hotel Pendleton in Oregon.  As a result, the company recorded a pre-tax asset impairment charge of $1.9 million in continuing operations as a result of fair market value indications related to the property. 

    Franchise revenue increased to $1.6 million from $1.2 million.  Revenue and profitability improved year-over-year primarily due to the addition of franchises to the system.

    Revenue in the entertainment segment remained essentially flat at $1.5 million.  Profitability declined slightly in the ticketing portion of the business.   

    Franchise Update

    • Since June 30, 2012, the company has signed franchise agreements on five hotels:
    • Red Lion Colonial Hotel, Helena, Montana, effective in July 2012
    • Red Lion Hotel Woodlake Conference Center Sacramento, converted in October 2012
    • Red Lion Hotel Denver Southeast, effective in October 2012
    • Red Lion Inn & Suites Cathedral City, expected to convert in the fourth quarter of 2012
    • Red Lion Inn & Suites Denver Airport, expected to convert in the first quarter of 2013

    The Helena and Denver Southeast hotels were formerly owned by the company and each was sold with a Red Lion franchise agreement.

    Discontinued Operations

    In the third quarter of 2012, the operations of the company's commercial mall in Kalispell, Montana have been classified as discontinued operations.  Additional operating results classified as discontinued include the properties in Medford, Oregon and Missoula, Montana and the ownership of certain real estate in Sacramento, California. This presentation, as required under generally accepted accounting principles ("GAAP"), separately reports the revenue and expenses including any related asset impairment charges, net of income taxes as "net income (loss) from discontinued operations" on the company's statement of operations for all periods presented.

    The operating results of the Red Lion Hotel Denver Southeast had been reclassified as discontinued operations in the second quarter financial statements as the property was not expected to continue to operate as a Red Lion franchise.  However, upon closing of the sale of the hotel, the buyers signed a franchise license agreement with the company for one of the towers creating a 190-room Red Lion Inn & Suites on the site, therefore the property is reported as a continuing operation for the third quarter and all comparable periods presented.

    Liquidity and Balance Sheet

    As of Sept. 30, 2012, the company had $14.1 million in cash and cash equivalents, and $10.0 million available on its revolving line of credit.  As of Sept. 30, 2012, the company had outstanding debt of $89.3 million, of which $58.5 million is classified as current debt.  Subsequent to quarter end, the company reduced the current debt balance by $9.0 million, primarily using proceeds from asset sales.

    Capital expenditures for the nine months ended Sept. 30, 2012, totaled $5.8 million.

    Assets Held for Sale

    As of Sept. 30, 2012, the following were classified as assets held for sale on the balance sheet; the Red Lion Inn Missoula, Red Lion Hotel Medford, Red Lion Hotel Denver Southeast, the Red Lion Hotel Pendleton and the company's commercial mall in Kalispell, Montana.  The company's hotel property in Pendleton and the commercial mall were added to this classification in the third quarter of 2012.

    Since June 30, 2012, the company has sold three properties:

    • Red Lion Colonial Hotel, Helena, Montana, closed in July 2012 for $5.6 million
    • Red Lion Hotel Sacramento at Arden Village, California, closed in August 2012 for $9.0 million
    • Red Lion Hotel Denver Southeast, Colorado, closed in October 2012 for $13.0 million

    Outlook for 2012

    The company is updating its RevPAR guidance and plans for capital expenditures for 2012 as follows:  

    • Full year 2012 RevPAR for comparable company owned and leased hotels is expected to increase 3 to 5 percent compared to 2011 on an annual basis.
    • The company had committed to invest approximately $10.0 million in capital improvements in 2012, but due to scheduling, some of the expenditures will not occur until the first quarter of 2013.

    About Red Lion Hotels Corporation:

    Red Lion Hotels Corporation is a hospitality and leisure Company primarily engaged in the ownership, operation and franchising of midscale hotels under its Red Lion® brand. As of Sept. 30, 2012, the RLH hotel network was comprised of 47 hotels located in nine states and one Canadian province, with 8,872 rooms and 443,587 square feet of meeting space. The Company also owns and operates an entertainment and event ticket distribution business. 

    Red Lion Hotels Corporation

    Consolidated Statements of Operations

    (unaudited)

    ($ in thousands, except footnotes and per share amounts)

    Three months ended September 30,

    2012

    2011

    $ Change

    % Change

    Revenue:

    Hotels

    $ 42,285

    $ 41,632

    $    653

    1.6%

    Franchise

    1,555

    1,218

    337

    27.7%

    Entertainment

    1,456

    1,499

    (43)

    -2.9%

    Other

    94

    126

    (32)

    -25.4%

    Total revenues

    45,390

    44,475

    915

    2.1%

    Operating expenses:

    Hotels

    31,369

    30,468

    901

    3.0%

    Franchise 

    1,219

    1,144

    75

    6.6%

    Entertainment

    1,475

    1,484

    (9)

    -0.6%

    Other

    201

    191

    10

    5.2%

    Depreciation and amortization 

    3,779

    4,102

    (323)

    -7.9%

    Hotel facility and land lease 

    1,209

    1,768

    (559)

    -31.6%

    Asset impairment

    1,868

    2,156

    (288)

    -13.4%

    Loss (gain) on asset dispositions, net 

    (16)

    (115)

    (99)

    -86.1%

    Undistributed corporate expenses

    1,602

    1,457

    145

    10.0%

    Total expenses

    42,706

    42,655

    51

    0.1%

    Operating income (loss)

    2,684

    1,820

    864

    47.5%

    Other income (expense):

    Interest expense

    (1,751)

    (1,994)

    243

    12.2%

    Other income, net

    46

    28

    18

    64.3%

    Income (loss) before income taxes

    979

    (146)

    1,125

    n/m

    Income tax (benefit) expense

    543

    (148)

    (691)

    n/m

    Net income (loss) from continuing operations

    436

    2

    434

    n/m

    Discontinued operations (2,3,4):

    Income (loss) from operations of discontinued business units,

      net of income tax (benefit) expense of $127 and $(74) respectively

    224

    (131)

    355

    n/m

    Loss on disposal and impairment of the assets of the discontinued

      business

      units, net income tax (benefit) expense of $(889) and $0 respectively

    (1,566)

    -

    (1,566)

    n/m

    Net income (loss) from discontinued operations

    (1,342)

    (131)

    (1,211)

    n/m

    Net income (loss)

    (906)

    (129)

    (777)

    n/m

    Less net income or loss attributable to noncontrolling interest

    -

    (7)

    7

    n/m

    Net income (loss) attributable to Red Lion Hotels Corporation 

    $   (906)

    $   (122)

    $   (784)

    n/m

    Earnings per share - basic and diluted

    Net income (loss) from continuing operations 

    $    0.02

    $       -

    Net Income (loss) from discontinued operations

    $  (0.07)

    $  (0.01)

    Net income (loss) attributable to Red Lion Hotels Corporation

    $  (0.05)

    $  (0.01)

    Weighted average shares - basic

    19,366

    19,089

    Weighted average shares - diluted

    19,438

    19,209

    Non-GAAP Financial Measures:

    EBITDA  (1)   

    $  4,478

    $  6,082

    $(1,604)

    -26.4%

    EBITDA as a percentage of revenues 

    9.9%

    13.7%

    EBITDA from continuing operations (1)   

    $  6,509

    $  5,957

    $    552

    9.3%

    EBITDA from continuing operations 

    14.3%

    13.4%

    as a percentage of revenues 

    (1)

    The definition of "EBITDA" and how that measure relates to net income (loss) attributable to Red Lion Hotels Corporation

    is discussed further in this release under Non-GAAP Financial Measures.

    (2)

    During the fourth quarter 2011, the company listed for sale its hotels in Medford, Oregon and Missoula, Montana, two

    non-core assets in which the company does not expect to maintain significant continuing involvement. Accordingly, the operations of these properties have been classified as discontinued operations for all periods presented.

    (3)

    During the second quarter 2012, based on the company's right to sell its hotel in Sacramento, California to its tenant and

    on continuing negotiations regarding transaction terms, the operating results from the ownership of this real estate and land were classified as discontinued operations for all periods presented. This hotel sale was completed in the third quarter of 2012.

    (4)

    During the third quarter 2012, the company listed for sale its commercial mall in Kalispell, Montana.   The company does

    not expect to maintain significant involvement in the property following a sale. Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.

     

     

    Red Lion Hotels Corporation

    Consolidated Statements of Operations

    (unaudited)

    ($ in thousands, except footnotes and per share amounts)

    Nine months ended Setember 30,

    2012

    2011

    $ Change

    % Change

    Revenue:

    Hotels

    $ 107,425

    $ 109,390

    $  (1,965)

    -1.8%

    Franchise

    3,953

    2,870

    1,083

    37.7%

    Entertainment

    6,356

    8,940

    (2,584)

    -28.9%

    Other

    327

    320

    7

    2.2%

    Total revenues

    118,061

    121,520

    (3,459)

    -2.8%

    Operating expenses:

    Hotels

    84,616

    86,591

    (1,975)

    -2.3%

    Franchise 

    3,487

    2,897

    590

    20.4%

    Entertainment

    6,245

    8,236

    (1,991)

    -24.2%

    Other

    601

    522

    79

    15.1%

    Depreciation and amortization 

    11,483

    13,517

    (2,034)

    -15.0%

    Hotel facility and land lease 

    3,632

    5,201

    (1,569)

    -30.2%

    Asset impairment

    8,061

    2,156

    5,905

    n/m

    Loss (gain) on asset dispositions, net 

    (223)

    (33,698)

    (33,475)

    -99.3%

    Undistributed corporate expenses

    4,885

    4,355

    530

    12.2%

    Total expenses

    122,787

    89,777

    33,010

    36.8%

    Operating income (loss)

    (4,726)

    31,743

    (36,469)

    n/m

    Other income (expense):

    Interest expense

    (5,388)

    (6,553)

    1,165

    17.8%

    Other income, net

    74

    411

    (337)

    -82.0%

    Income (loss) before income taxes

    (10,040)

    25,601

    (35,641)

    n/m

    Income tax (benefit) expense

    (3,668)

    10,790

    14,458

    n/m

    Net income (loss) from continuing operations

    (6,372)

    14,811

    (21,183)

    n/m

    Discontinued operations (2,3,4):

    Income (loss) from operations of discontinued business units,

      net of income tax (benefit) expense of $184 and $(539) respectively

    324

    (950)

    1,274

    n/m

    Loss on disposal and mpairment of the assets of the discontinued business 

      units, net of income tax (benefit) expense of $(2,833) and $0 respectively

    (4,996)

    -

    (4,996)

    n/m

    Net income (loss) from discontinued operations

    (4,672)

    (950)

    (3,722)

    n/m

    Net income (loss)

    (11,044)

    13,861

    (24,905)

    n/m

    Less net income or loss attributable to noncontrolling interest

    (7)

    96

    (103)

    n/m

    Net income (loss) attributable to Red Lion Hotels Corporation 

    $ (11,037)

    $  13,765

    $(24,802)

    n/m

    Earnings per share - basic and diluted

    Net income (loss) from continuing operations 

    $    (0.33)

    $      0.78

    Net Income (loss) from discontinued operations

    $    (0.24)

    $    (0.05)

    Net income (loss) attributable to Red Lion Hotels Corporation

    $    (0.57)

    $      0.72

    Weighted average shares - basic 

    19,294

    19,029

    Weighted average shares - diluted

    19,294

    19,170

    Non-GAAP Financial Measures:

    EBITDA  (1)   

    $       136

    $  45,078

    $(44,942)

    -99.7%

    EBITDA as a percentage of revenues 

    0.1%

    37.1%

    EBITDA from continuing operations (1)   

    $    6,838

    $  45,575

    $(38,737)

    -85.0%

    EBITDA from continuing operations 

    5.8%

    37.5%

    as a percentage of revenues 

    (1)

    The definition of "EBITDA" and how that measure relates to net income (loss) attributable to Red Lion Hotels Corporation is discussed further

    in this release under Non-GAAP Financial Measures.

    (2)

    During the fourth quarter 2011, the company listed for sale its hotels in Medford, Oregon and Missoula, Montana, two non-core assets in

    which the company does not expect to maintain significant continuing involvement. Accordingly, the operations of these properties have been classified as discontinued operations for all periods presented.

    (3)

    During the second quarter 2012, based on the company's right to sell its hotel in Sacramento, California to its tenant and on continuing

    negotiations regarding transaction terms, the operating results from the ownership of this real estate and land were classified as discontinued operations for all periods presented. This hotel sale was completed in the third quarter of 2012.

    (4)

    During the third quarter 2012, the company listed for sale its commercial mall in Kalispell, Montana. The company does not expect to

    maintain significant involvement in the property following a sale. Accordingly, the operations of this property have been classified as discontinued operations for all periods presented.

     

     

     

     

    Red Lion Hotels Corporation

    Additional Hotel Statistics

    (unaudited)

    System-wide Hotels as of September 30, 2012

    Meeting Space

    Hotels

    Rooms

    (sq. ft.)

    Red Lion Owned or Leased Hotels (1):

        Comparable Continuing Operations

    27

    5,414

    265,074

        Discontinued Operations

    2

    261

    10,192

    Red Lion Franchised Hotels (1)

    18

    3,197

    168,321

    Total Red Lion Hotels

    47

    8,872

    443,587

    Comparable Hotel Statistics from Continuing Operations  (1,2)

    Three months ended September 30, 2012

    Three months ended September 30, 2011

    Average

    Average

    Occupancy (3)

    ADR (4)

    RevPAR (5)

    Occupancy (3)

    ADR (4)

    RevPAR (5)

    Owned and Leased Hotels

    74.6%

    $       88.49

    $           65.99

    71.9%

    $         87.72

    $               63.09

    Franchised Hotels

    76.7%

    $       94.76

    $           72.64

    77.8%

    $         90.58

    $               70.48

    Total System Wide

    75.2%

    $       90.28

    $           67.86

    73.6%

    $         88.57

    $               65.16

    Change from prior comparative period:

      Owned and Leased Hotels

    2.7

    0.9%

    4.6%

      Franchised Hotels

    (1.1)

    4.6%

    3.1%

      Total System Wide

    1.6

    1.9%

    4.1%

    Nine months ended September  30, 2012

    Nine months ended September  30, 2011

    Average

    Average

    Occupancy (3)

    ADR (4)

    RevPAR (5)

    Occupancy (3)

    ADR (4)

    RevPAR (5)

    Owned and Leased Hotels

    63.8%

    $       83.80

    $           53.44

    60.6%

    $         83.23

    $               50.45

    Franchised Hotels

    68.4%

    $       89.57

    $           61.27

    68.7%

    $         87.12

    $               59.81

    Total System Wide

    65.1%

    $       85.50

    $           55.64

    62.9%

    $         84.42

    $               53.07

    Change from prior comparative period:

      Owned and Leased Hotels

    3.2

    0.7%

    5.9%

      Franchised Hotels

    (0.3)

    2.8%

    2.4%

      Total System Wide

    2.2

    1.3%

    4.8%

    (1)

    Includes all hotels owned, leased and franchised, presented on a comparable basis for hotel statistics. The Seattle and Helena properties have been

    excluded from the owned and leased hotel statistics and included in the franchised statistics for all periods shown.

    (2)

    Excludes two hotels identified as discontinued operations.

    (3)

    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.

    (4)

    Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.

    (5)

    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.

    Three months ended September  30,

    Nine months ended September 30,

    2012

    2011

    2012

    2011

    Comparable total revenue(2)

    $            45,065

    $            43,350

    $          115,748

    $          112,084

    Comparable hotel revenue (2)

    41,960

    40,507

    105,112

    99,954

    Comparable hotel operating expense(3)

    31,013

    29,620

    82,734

    79,470

    Comparable hotel direct operating profit(1)

    10,947

    10,887

    22,378

    20,484

    Comparable hotel direct operating margin (1)

    26.1%

    26.9%

    21.3%

    20.5%

    Comparable total EBITDA from continuing operations before special items(4)

    $              8,480

    $              7,835

    $            14,541

    $            11,518

    (1)

    Operating profit margins are calculated by dividing the applicable operating profit  by the related revenue amount.  GAAP margins are calculated using amounts

    presented in the consolidated statements of operations.  Comparable margins are calculated using amounts presented in the table above.

    (2)



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

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