Maintains
Operating Margin in Tough 2009 Environment
SPOKANE,
Wash., Feb.
16, 2010 - Red Lion Hotels Corporation (NYSE: RLH),
a western U.S.-based owner of midscale and upscale hotels, today
announced its results for the fourth quarter and full year ended December 31, 2009.
Highlights:
- Fourth
quarter RevPAR for owned and leased hotels decreased 7.2%, a sign of
slowing RevPAR declines
- Fourth
quarter occupancy held steady year-over-year
- 2009
EBITDA was $27.6
million before
special items, down $3.8
million year-over-year
despite a $22.2
million revenue decline
- The
Company completed amendments to its credit facility that modified
covenants and increased financial flexibility
- The
Company recognized an impairment charge of $8.7 million
Total
revenue during the fourth quarter was $35.7
million, down 13.7 percent from $41.3 million in the prior-year period.
Revenue from hotels was $32.0
million, down 9.0 percent from $35.2
million in the
fourth quarter of 2008. EBITDA before special items for the
fourth quarter of 2009 was $2.7
million, compared to $3.6
million for the
fourth quarter of 2008. Net loss before special items was $3.1 million in the quarter, or $0.16 per diluted share, compared
to a net loss of $2.6
million, or $0.15 per diluted share, for the
prior-year period. Reported Net Loss for the fourth quarter
including special items was $8.7
million, compared to $3.9
million in the
prior year period.
President
and Chief Executive Officer Jon
Eliassen commented,
"The lodging industry environment continues to be challenging, but I am
encouraged by the fact that our RevPAR performance only declined at a
single-digit level in the fourth quarter. Our performance was
generally better than that of the industry, which on average continued
to report double-digit RevPAR declines."
Eliassen
continued, "Throughout early 2009, our active response to the economic
downturn helped minimize the negative impact to the bottom line.
Our expense management initiatives exceeded our goals for cost
containment. We are well positioned to maximize profitability and
cash flow when the economy begins to recover. While we reduced
operating expense, we have continued to focus on customer service, as
positively reflected in our customer satisfaction rankings. In
parallel, our ongoing customer retention efforts helped us to grow
revenue from our guest frequency program, the Red Lion R&R Club, by
3.7% and net membership by 35% year-over-year."
Summary results for the three-month and full year periods follow:
($ in thousands, except per share)
Three months ended December 31, Full year ended December 31,
2009 2008 % change 2009 2008 % change
---- ---- -------- ---- ---- --------
Total revenue,
as reported $35,652 $41,313 -13.7% $165,388 $187,570 -11.8%
------------------------------------------------------------------------
Results before
Special
Items: (1)
EBITDA $2,743 $3,622 -24.3% $27,569 $31,378 -12.1%
Net income
(loss) $(3,057) $(2,598) -17.7% $(957) $1,986 -148.2%
Earnings
(loss) per
share -
diluted $(0.16) $(0.15) -5.4% $(0.05) $0.11 -148.0%
-------------------------------------------------------------------------
Results as
reported:
EBITDA $(6,079) $1,555 -490.9% $18,747 $25,657 -26.9%
Net income
(loss) $(8,747) $(3,931) -122.5% $(6,647) $(1,704) -290.1%
Earnings
(loss) per
share -
diluted $(0.48) $(0.22) -118.7% $(0.37) $(0.09) -307.9%
-------------------------------------------------------------------------
(1) Excludes $8.7 million impairment charge incurred in the fourth quarter
of 2009; restructuring charges of approximately $0.1 million and $2.1
million in the fourth quarters of 2009 and 2008, respectively; and
$3.7 million in separation costs incurred in the first quarter of
2008 related to the retirement of the Company's former President and
CEO.
In addition, key hotel operating metrics on a comparable basis, and
reported hotel operating margins for the fourth quarter and full-year
periods ended December 31, 2009 and December 31, 2008 are highlighted
below for owned and leased hotels:
Three months ended December 31, Full year ended December 31,
2009 2008 % change 2009 2008 % change
---- ---- -------- ---- ---- --------
RevPAR
(revenue
per
available
room) $35.96 $38.76 -7.2% $47.49 $54.05 -12.1%
ADR
(average
daily
rate) $76.75 $82.57 -7.0% $83.44 $89.05 -6.3%
Occupancy 46.9% 46.9% - 56.9% 60.7% -3.8%
Hotel
Direct
Operating
Margin 10.7% 13.6% -2.9% 23.1% 23.1% -
Fourth
Quarter Results
Comparing
the fourth quarter 2009 to 2008, occupancy for owned and leased hotels
held steady at 46.9 percent year-over-year. ADR declined 7.0 percent
resulting in a 7.2 percent decline in RevPAR. System-wide RevPAR
(which includes franchised hotels) on a comparable basis for the
quarter decreased 7.0 percent due to a 100 basis point decline in
occupancy and a 4.9 percent decline in ADR.
Compared
to the prior-year period, revenue from hotels was down 9.0 percent to $32.0 million primarily as a result of a
7.6%, or $1.7
million, decrease in room revenue reflecting continuing
challenges across all market segments with the largest decline coming
in the group segment. Hotel direct operating margin declined to
10.7 percent during the fourth quarter 2009 compared to 13.6 percent in
2008. The margin decrease in the quarter was primarily due to
investments in sales and marketing technology and personnel resources,
as well as promotional initiatives designed to help position the
company for room revenue growth in 2010.
Franchise
and management revenue was relatively flat at $0.3 million year-over-year, and
entertainment revenue decreased to $2.7
million, a result of the mix of shows presented during the
comparable periods. However, direct operating margin for the
entertainment segment increased by over 900 basis points to 23.1% due
primarily to expense management in ticketing operations.
Full
Year 2009 Results
Total
revenue for the full year ended December
31, 2009, was $165.4
million, down 11.8 percent from $187.6 million in 2008. Reported revenue
from hotels was $149.4
million, down 12.4 percent from $170.6 million in the prior year.
Despite a $4.8
million decline
in hotel direct operating profit to $34.5
million, hotel direct operating margin was maintained at 23.1%
year-over-year due to the Company's successful focus on profitability.
RevPAR
for owned and leased hotels on a comparable basis for 2009 was down
12.1 percent due to a 380 basis point decrease in occupancy and a 6.3
percent decrease in ADR. System-wide, RevPAR on a comparable basis
decreased 11.9 percent year-over-year due to a 420 basis point decline
in occupancy and a 5.3 percent decline in ADR.
Franchise
and management revenue declined $0.2
million to $1.7 million, primarily due to a reduction of
franchised hotels in the system. Entertainment revenue decreased
slightly to $11.7
million, or by 2.7 percent, and direct operating margin for
Entertainment increased to 19.0 percent from 6.5 percent reported in
2008.
EBITDA
before special items for the full year ended December 31, 2009 was $27.6 million,
compared to $31.4
million in the
prior year. Net loss in 2009 before special items totaled $1.0 million,
or $0.05 per diluted share, compared
to net income before special items of $2.0
million, or $0.11 per diluted share, in the
prior year.
Asset
Impairment
During
the fourth quarter, the Company recognized an impairment loss of $8.5 million on the Red Lion Denver
Southeast hotel. The property was purchased in May 2008 for $25.3 million and the Company has spent
approximately $5.0
millionin renovations since the acquisition. Since September 2008,
the Denver market has experienced a
substantial and sustained decline in demand for hotel rooms across all
market segments. In addition, the Company also recognized a$0.2
million impairment
loss on a second property. These impairments are reflected as a special
item for 2009 and separately identified in the Company's operating
results.
Liquidity
and Balance Sheet
As of December 31, 2009,
the company had approximately $3.9
million in cash
and cash equivalents, and outstanding debt of $137.1 million.
The Company was in compliance with all covenants of its credit
facilities as of December
31, 2009.
On February 8, 2010,
the Company signed an amendment to each of its primary credit line and
term note to increase the Company's financial flexibility. The
amendments modified the Company's total leverage ratio and senior
leverage ratio covenants for 2010 and 2011. In exchange, the rate
in each case was increased modestly and the capacity under the line of
credit was reduced to $37.5
million from $50 million.
Management does not expect the reduction in capacity under the
line of credit to impact its liquidity or operating plans. None
of the Company's other debt agreements contain restrictive financial
covenants.
Capital
expenditures during the full year ended December 31, 2009 totaled $16.4 million,
including $5.6
million and $3.5 million spent on renovations at the
Company's Anaheim and Denver Southeast properties, respectively.
Capital expenditures during 2010 are expected to total $12.7 million for core investments in
maintenance, technology and necessary hotel improvement projects, which
reflects the Company's continued focus on investing as appropriate to
maintain competitive guest services. All capital needs are
expected to be funded with operating cash flow.
Outlook
for 2010
Given
the current economic environment, it is very difficult to provide
definitive guidance for 2010 at this time. In general, industry
expectations suggest continued RevPAR declines in the first half of
2010. In the second half of 2010, we expect RevPAR declines to
abate. Based on the outlook and information available today, the
Company is providing the following broad guidance for 2010, which it
expects to update as the year unfolds:
- 2010
RevPAR for Company owned and leased hotels is expected to be flat to
down 3% compared to 2009 on an annual basis;
- 2009
direct hotel operating margin is expected to range from flat to up 100
basis points; and
- EBITDA
is expected to be $27
to $29 million, before any special items.
Eliassen
concluded, "In 2010, we will focus on our mix of business in an effort
to drive revenue. We will also implement a strategy to expand the
Red Lion brand through a refocused franchising effort across the
western states where we possess strong brand recognition and loyalty.
Longer term, we are committed to improving profitability and
providing competitive returns for our investors."
Conference
Call Information
The
company will conduct a conference call on February 16, 2010 at 11:00 a.m. Pacific
Time (2:00
p.m. Eastern Time), to discuss the results for interested
investors, analysts and portfolio managers. Hosting the call will be
President and Chief Executive Officer Jon
Eliassen, Executive Vice President and Chief Operating Officer George Schweitzer,
and Chief Financial Officer Anthony
Dombrowik.
To
participate in the conference call, please dial the following number
ten minutes prior to the scheduled time: (800) 288-8975.
International callers should dial (612) 332-0107.
This
conference call will also be webcast live at http://www.redlion.com in the Investor Relations
section of the website. To listen to the live call, please go to the
Red Lion website at least fifteen minutes prior to the start of the
call to register, download and install any necessary audio software.
For those unable to participate during the live broadcast, a replay
will be available at 1:30
p.m. PST on February 16, 2010,
through March
16, 2010 at
(800) 475-6701 or (320) 365-3844 (International) access code – 145520.
The replay will also be available shortly after the call on the
Red Lion website.
About
Red Lion Hotels Corporation:
Red
Lion Hotels Corporation is a hospitality and leisure company primarily
engaged in the ownership, operation and franchising of upscale and
midscale hotels under its Red Lion® brand. As of December 31, 2009,
the RLH hotel network was comprised of 45 hotels located in eight
states and one Canadian province, with 8,671 rooms and 431,244 square
feet of meeting space. The company also owns and operates an
entertainment and event ticket distribution business. For more
information, please visit the company's website at www.redlion.com.
This
press release contains forward-looking statements within the meaning of
federal securities law, including statements concerning plans,
objectives, goals, strategies, projections of future events or
performance and underlying assumptions (many of which are based, in
turn, upon further assumptions). The forward-looking statements
in this press release are inherently subject to a variety of risks and
uncertainties that could cause actual results to differ materially from
those expressed. Such risks and uncertainties include, among
others, economic cycles; international conflicts; changes in future
demand and supply for hotel rooms; competitive conditions in the
lodging industry; relationships with franchisees and properties; impact
of government regulations; ability to obtain financing; changes in
energy, healthcare, insurance and other operating expenses; ability to
sell non-core assets; ability to locate lessees for rental property;
dependency upon the ability and experience of executive officers and
ability to retain or replace such officers as well as other matters
discussed in the company's annual report on Form 10-K for the year ended December 31, 2008 and in other documents
filed by the company with the Securities and Exchange Commission.
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except per share amounts and footnotes)
Three months
ended December 31,
2009 2008 $ Change % Change
---- ---- -------- --------
Revenue:
Hotels $31,994 $35,151 $(3,157) -9.0%
Franchise 281 313 (32) -10.2%
Entertainment 2,722 5,041 (2,319) -46.0%
Other 655 808 (153) -18.9%
--- --- ---- -----
Total revenues 35,652 41,313 (5,661) -13.7%
------ ------ ------ -----
Operating expenses:
Hotels 28,563 30,387 (1,824) -6.0%
Franchise 132 129 3 2.3%
Entertainment 2,092 4,347 (2,255) -51.9%
Other 465 553 (88) -15.9%
Depreciation and amortization 5,350 5,323 27 0.5%
Hotel facility and land lease 1,500 1,502 (2) -0.1%
Hotel impairments 8,686 - 8,686 nm
(Gain) loss on asset
dispositions, net (111) 48 (159) nm
Undistributed corporate expenses 675 933 (258) 27.7%
Restructuring expenses 136 2,067 (1,931) 93.4%
--- ----- ------ ----
Total expenses 47,488 45,289 2,199 4.9%
------ ------ ----- ---
Operating loss (11,836) (3,976) (7,860) -197.7%
Other income (expense):
Interest expense (2,206) (2,291) 85 3.7%
Other income, net 400 197 203 103.0%
--- --- --- -----
Loss before income taxes (13,642) (6,070) (7,572) -124.7%
Income tax benefit (4,888) (2,128) (2,760) -129.7%
------ ------ ------ ------
Net loss (8,754) (3,942) (4,812) -122.1%
------ ------ ------ ------
Net income attributable to
noncontrolling interest 7 11 (4) 36.4%
------- ------- ------- ------
Net loss attributable to Red Lion
Hotels Corporation $(8,747) $(3,931) $(4,816) -122.5%
======= ======= ======= ======
Loss per share attributable to
Red Lion Hotels Corporation -
basic and diluted $(0.48) $(0.22)
Weighted average shares - basic and
diluted (1) (in thousands) 18,177 18,201
EBITDA (2) $(6,079) $1,555 $(7,634) nm
EBITDA as a percentage of
revenues (2) -17.1% 3.8%
(1) For the three months ended December 31, 2009 and 2008, all of the
1,194,460 and 1,311,115 options to purchase common shares outstanding
as of those dates were considered anti-dilutive, due to the loss for
the periods and excluded from the calculations of loss per share.
Likewise as of those dates, all of the 239,318 and 48,866 restricted
stock units outstanding, respectively, were considered anti-dilutive
due to the losses, as were all of the 44,837 convertible operating
partnership units outstanding during both periods.
(2) The definition of "EBITDA" and how that measure relates to net loss
is discussed further in this release under Non-GAAP Financial
Measures.
Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except per share amounts and footnotes)
Year ended
December 31,
2009 2008 $ Change % Change
---- ---- -------- --------
Revenue:
Hotels $149,379 $170,552 $(21,173) -12.4%
Franchise 1,678 1,862 (184) -9.9%
Entertainment 11,690 12,016 (326) -2.7%
Other 2,641 3,140 (499) -15.9%
----- ----- ---- -----
Total revenues 165,388 187,570 (22,182) -11.8%
------- ------- ------- -----
Operating expenses:
Hotels 114,852 131,214 (16,362) -12.5%
Franchise 430 355 75 21.1%
Entertainment 9,466 11,234 (1,768) -15.7%
Other 2,075 2,100 (25) -1.2%
Depreciation and
amortization 20,954 19,316 1,638 8.5%
Hotel facility and land
lease 6,976 6,998 (22) -0.3%
Hotel impairments 8,686 - 8,686 nm
Gain on asset
dispositions, net (243) (156) (87) -55.8%
Undistributed corporate
expenses 5,200 9,643 (4,443) -46.1%
Restructuring expenses 136 2,067 (1,931) -93.4%
--- ----- ------ -----
Total expenses 168,532 182,771 (14,239) -7.8%
------- ------- ------- ----
Operating income (loss) (3,144) 4,799 (7,943) -165.5%
Other income (expense):
Interest expense (8,503) (9,247) 744 8.0%
Other income, net 936 1,530 (594) -38.8%
--- ----- ---- -----
Loss before income taxes (10,711) (2,918) (7,793) nm
Income tax benefit (4,063) (1,202) (2,861) -238.0%
------ ------ ------ ------
Net loss (6,648) (1,716) (4,932) nm
------ ------ ------ -----
Net income attributable to
noncontrolling interest 1 12 (11) nm
------ ------ ------ -----
Net loss attributable to
Red Lion Hotels Corporation (6,647) (1,704) (4,943) nm
====== ====== ====== =====
Loss per share attributable
to Red Lion Hotels
Corporation - basic and
diluted $(0.37) $(0.09)
Weighted average shares -
basic and diluted (1) (in
thousands) 18,106 18,234
EBITDA (2) $18,747 $25,657 $(6,910) -26.9%
EBITDA as a percentage of
revenues (2) 11.3% 13.7%
(1) For the years ended December 31, 2009 and 2008, all of the 1,194,460
and 1,311,115 options to purchase common shares outstanding,
respectively, were considered anti-dilutive due to the loss for the
periods and excluded from the calculations of loss per share.
Likewise as of those dates, all of the 239,318 and 48,866 units of
outstanding but unissued restricted stock were considered
anti-dilutive for the same reason. In addition, all of the 44,837
convertible operating partnership units outstanding during both
periods were considered anti-dilutive.
(2) The definition of "EBITDA" and how that measure relates to net loss
is discussed further in this release under Non-GAAP Financial
Measures.
Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share data)
December 31 December 31,
2009 2008
---- ----
Assets:
Current assets:
Cash and cash equivalents $3,885 $18,222
Restricted cash 3,801 3,890
Accounts receivable, net 8,100 11,337
Inventories 1,282 1,375
Prepaid expenses and other 3,134 2,574
----- -----
Total current assets 20,202 37,398
------ ------
Property and equipment, net 285,782 298,496
Goodwill 28,042 28,042
Intangible assets, net 10,199 10,376
Other assets, net 7,337 6,460
----- -----
Total assets $351,562 $380,772
======== ========
Liabilities:
Current liabilities:
Accounts payable $5,716 $10,990
Accrued payroll and
related benefits 2,315 4,925
Accrued interest payable 318 314
Advance deposits 496 398
Other accrued expenses 7,658 7,756
Long-term debt, due
within one year 3,171 3,008
----- -----
Total current liabilities 19,674 27,391
------ ------
Revolving credit facility 26,000 36,000
Long-term debt, due after
one year 77,151 80,323
Deferred income 8,638 8,476
Deferred income taxes 13,190 16,366
Debentures due Red Lion
Hotels Capital Trust 30,825 30,825
------ ------
Total liabilities 175,478 199,381
------- -------
Stockholders' equity:
Red Lion Hotels Corporation
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; 18,180,104 and 17,977,205
shares issued and outstanding 182 180
Additional paid-in
capital, common stock 142,479 141,137
Retained earnings 33,408 40,055
------ ------
Total Red Lion Hotels
Corporation
stockholders' equity 176,069 181,372
Noncontrolling interest 15 19
-- --
Total equity 176,084 181,391
------- -------
Total liabilities and
stockholders' equity $351,562 $380,772
======== ========
Red Lion Hotels Corporation
Consolidated Statement of Cash Flows
(unaudited)
($ in thousands)
Year ended
December 31,
2009 2008
---- ----
Operating activities:
Net loss $(6,648) $(1,716)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 20,954 19,316
Gain on disposition of property, equipment and
other assets, net (243) (156)
Restructuring expenses (non-cash) - 1,144
Impairment loss 8,686 -
Deferred income tax provision (3,176) (1,197)
Equity in investments (9) (133)
Imputed interest expense - 111
Stock based compensation expense 1,238 2,245
Provision for doubtful accounts 212 166
Change in current assets and liabilities:
Restricted cash 89 549
Accounts receivable 2,306 (947)
Inventories 93 82
Prepaid expenses and other (560) 786
Accounts payable (5,274) 6,801
Accrued payroll and related benefits (2,610) (1,243)
Accrued interest payable 4 (42)
Other accrued expenses and advance
deposits 630 (2,963)
--- ------
Net cash provided by operating activities 15,692 22,803
------ ------
Investing activities:
Purchases of property and equipment (16,425) (56,377)
Liquor license purchase (500) -
Non-current restricted cash for sublease tenant
improvements, net - 2,151
Proceeds from disposition of property and
equipment 16 41
Advances to Red Lion Hotels Capital Trust (27) (27)
Other, net (34) 458
--- ---
Net cash used in investing activities (16,970) (53,754)
------- -------
Financing activities:
Borrowings on revolving credit facility 11,000 38,000
Repayment of revolving credit facility (21,000) (2,000)
Repayment of long-term debt (3,009) (14,000)
Borrowings on long-term debt - 14,000
Common stock redeemed (13) (1,828)
Proceeds from issuance of common stock under
employee stock purchase plan 119 164
Distributions to noncontrolling interest (3) -
Additions to deferred financing costs (153) (207)
---- ----
Net cash (used in) provided by financing
activities (13,059) 34,129
------- ------
Change in cash and cash equivalents:
Net (decrease) increase in cash and cash
equivalents (14,337) 3,178
Cash and cash equivalents at beginning of period 18,222 15,044
------ ------
Cash and cash equivalents at end of period $3,885 $18,222
====== =======
Red Lion Hotels Corporation
Hotel Statistics
(unaudited)
System-wide Hotels as of December 31, 2009
------------------------------------------
Meeting Space
Hotels Rooms (sq. ft.)
------ ----- ---------
Red Lion
Owned and
Leased
Hotels 32 6,243 309,684
Red Lion
Franchised
Hotels 13 2,428 121,560
-- ----- -------
Total Red
Lion Hotels 45 8,671 431,244
== ===== =======
Comparable Hotel Statistics (1)
Three months ended Three months ended
December 31, 2009 December 31, 2008
------------------- -------------------
Average Average
Occupancy ADR RevPAR Occupancy ADR RevPAR
(2) (3) (4) (2) (3) (4)
---------- ---- ------- ---------- ---- -------
Owned and
Leased
Hotels 46.9% $76.75 $35.96 46.9% $82.57 $38.76
Franchised
Hotels 44.8% $76.02 $34.05 48.4% $75.14 $36.35
---- ------ ------ ---- ------ ------
Total System
Wide 46.3% $76.56 $35.44 47.3% $80.47 $38.09
==== ====== ====== ==== ====== ======
Change from prior comparative period:
Owned and
Leased
Hotels - -7.0% -7.2%
Franchised
Hotels (3.6) 1.2% -6.3%
---- --- ----
Total System
Wide (1.0) -4.9% -7.0%
==== ==== ====
Year ended Year ended
December 31, 2009 December 31, 2008
----------------- -----------------
Average Average
Occupancy ADR RevPAR Occupancy ADR RevPAR
(2) (3) (4) (2) (3) (4)
--------- ---- ------- ---------- ---- -------
Owned and
Leased
Hotels 56.9% $83.44 $47.49 60.7% $89.05 $54.05
Franchised
Hotels 52.8% $76.27 $40.28 57.9% $78.18 $45.25
---- ------ ------ ---- ------ ------
Total System
Wide 55.7% $81.44 $45.37 59.9% $85.97 $51.47
==== ====== ====== ==== ====== ======
Change from prior comparative period:
Owned and
Leased
Hotels (3.8) -6.3% -12.1%
Franchised
Hotels (5.1) -2.4% -11.0%
---- ---- -----
Total System
Wide (4.2) -5.3% -11.9%
==== ==== =====
(1) Includes all hotels owned, leased and franchised, presented on a
comparable basis for hotel statistics.
(2) 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.
(3) Average daily rate ("ADR") represents total room revenues divided
by the total number of paid rooms occupied by hotel guests.
(4) Revenue per available room ("RevPAR") represents total room and
related revenues divided by total available rooms.
Red Lion Hotels Corporation
Disclosure of Special Items
(unaudited)
During the fourth quarter of 2009, the Company recorded hotel impairments
of $8.7 million related to the Red Lion Denver Southeast and the Red Lion
Astoria properties. During the three and twelve months ended December 31,
2009 and 2008, the Company recorded restructuring charges primarily
related to initiatives to streamline operations and eliminate costs
totaling approximately $0.1 million and $2.1 million, respectively. In
the first quarter of 2008, the Company recorded an expense of $3.7 million
in separation costs from the retirement of the Company's former President
and Chief Executive Officer. As a result, the operations as presented in
the accompanying financial statements for the years ended December 31,
2009 compared to 2008 do not reflect a meaningful comparison between
periods. The follow table represents a reconciliation of certain earnings
measures before special items to income (loss) after special items.
Three months ended Three months ended
December 31, 2009 December 31, 2008
------------------- -------------------
($ in thousands
except per share Net Diluted Net Diluted
data) Loss EBITDA EPS Loss EBITDA EPS
---- ------ -------- ---- ------ --------
Amount before
special items $(3,057) $2,743 $(0.16) $(2,598) $3,622 $(0.15)
Special items:
Hotel
impairments
(1) (8,686) (8,686) (0.48) - - -
Restructuring
expenses (2) (136) (136) (0.01) (2,067) (2,067) (0.11)
Income tax
benefit of
special items,
net (3) 3,132 - 0.17 734 - 0.04
------- ------- ------ ------- ------ ------
Amount per
consolidated
statement of
operations $(8,747) $(6,079) $(0.48) $(3,931) $1,555 $(0.22)
======= ======= ====== ======= ====== ======
Change from the
comparative
period:
Amount before
special items -17.7% -24.3% -5.4%
Amount per
consolidated
statement of
operations -122.5% -490.9% -118.7%
Year ended December 31, Year ended December 31,
2009 2008
----------------------- -----------------------
($ in thousands Net
except per share Net Diluted Income Diluted
data) Loss EBITDA EPS (Loss) EBITDA EPS
---- ------ -------- ------- ------ --------
Amount before
special items $(957) $27,569 $(0.05) $1,986 $31,378 $0.11
Special items:
Hotel
impairments (8,686) (8,686) (0.48) - - -
Restructuring
expenses (2) (136) (136) (0.01) (2,067) (2,067) (0.11)
Separation
costs (4) - - - (3,654) (3,654) (0.20)
Income tax
benefit of
special items,
net (3) 3,132 - 0.17 2,031 - 0.11
------- ------- ------ ------- ------- ------
Amount per
consolidated
statement of
operations $(6,647) $18,747 $(0.37) $(1,704) $25,657 $(0.09)
======= ======= ====== ======= ======= ======
Change from the
comparative period:
Amount before
special items -148.2% -12.1% -148.0%
Amount per
consolidated
statement of
operations -290.1% -26.9% -307.9%
(1) The line item as presented on the accompanying consolidated
statements of operations as "hotel impairments" consists of an
impairment of net book value of the Red Lion Denver Southwest of $8.5
million, and an impairment of the net book value of the Red Lion
Astoria property of $0.2 million.
(2) The line item as presented on the accompanying consolidated
statements of operations as "restructuring expenses" consists of the
following:
For the three and twelve months ended
December 31,
2009 2008
---- ----
Severance charges $136 $923
Stock based compensation related
to separation (non-cash) - 269
Intangible and other asset
write-offs (non-cash) - 875
--- ---
Total $136 $2,067
==== ======
(3) Represents taxes on special items at the Company's expected
incremental tax rate as applicable.
(4) Amount as included in the line item "Undistributed corporate
expenses" on the accompanying consolidated statements of operations.
Red Lion Hotels Corporation
Reconciliation of EBITDA to Net Loss Attributable to Red Lion
Hotels Corporation
(unaudited)
($ in thousands)
The following is a reconciliation of EBITDA to net loss
attributable to Red Lion Hotels Corporation for the periods
presented:
Three months
ended Year ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
EBITDA $(6,079) $1,555 $18,747 $25,657
Income tax benefit 4,888 2,128 4,063 1,202
Interest expense (2,206) (2,291) (8,503) (9,247)
Depreciation and amortization (5,350) (5,323) (20,954) (19,316)
------ ------ ------- -------
Net loss $(8,747) $(3,931) $(6,647) $(1,704)
======= ======= ======= =======
NON-GAAP FINANCIAL MEASURES
---------------------------
EBITDA is defined as net loss attributable to Red Lion Hotels Corporation,
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 (loss) attributable to Red Lion Hotels
Corporation and other financial performance measures provided in
accordance with generally accepted accounting principles in the United
States ("GAAP").
We use EBITDA to measure the financial performance of our owned and leased
hotels 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 taxing 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 loss attributable to Red Lion Hotels Corporation, which is the most
comparable financial measure calculated and presented in accordance with
GAAP. EBITDA does not represent cash generated from operating activities
determined in accordance with GAAP, and should not be considered as an
alternative to operating income or net income (loss) attributable to Red
Lion Hotels Corporation 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.
