Red Lion Hotels Corporation (the “Company”) (NYSE: RLH), a growing
hospitality company doing business as RLH Corporation which
franchises upscale, midscale and economy hotels, today reported
third quarter 2019 results.
Third Quarter
Highlights
- Net loss attributable to RLH Corporation for the quarter was
$3.5 million or ($0.14) per share compared to net income
attributable to RLH Corporation of $8.9 million or $0.35 per
diluted share in the prior year period. The year-over-year change
is primarily due to a gain of $26.0 million from asset sales in the
year ago period and lost revenue from hotels sold during 2018.
- Adjusted EBITDA for the third quarter was $5.9 million, an
increase of $0.1 million as compared to the third quarter of 2018,
reflecting the impact of cost controls the Company has implemented
over the last year offset by lower company operated hotel profits
and higher bad debt expense primarily due to one large
customer.
- Franchise related revenues grew 7%
year-over-year to $16.2 million. Adjusted Core EBITDA was $1.9
million as compared to $0.8 million a year ago.
- Executed 47 franchise agreements,
an increase of 57% year-over-year. The agreements are comprised of
10 midscale hotels and 37 select service hotels; of these, 14 are
for new locations. Offsetting new franchise agreements were 60
terminations, comprised of 9 midscale hotels and 51 economy hotels.
Year-to-date, the Company executed 143 agreements, an increase of
43% from last year, and had 176 terminations compared to 68 in the
prior year.
- Announced non-binding agreements
for the sale of four hotels, Red Lion Hotel Atlanta Airport, Hotel
RL Washington D.C., Hotel RL in Salt Lake City and Red Lion Hotel
Anaheim, for an approximate total of $85 million in gross proceeds
with net proceeds to the Company of $32 million to $36 million
after hotel debt repayments and joint venture distributions. The
sale of all four hotels are expected to close by the end of Q1
2020.
- Realigned 2019 guidance for
Adjusted EBITDA from continuing operations to a range of $11.5
million to $13.5 million from $20.5 million to $22.5 million prior,
reflecting under-performance of company owned hotels, elevated
terminations in the core franchise business year-to-date and
increase in bad debt expense and related collection costs for a
large customer.
Third Quarter 2019
Financial Results
The Company reported a net loss attributable to
RLH Corporation of $3.5 million or $(0.14) per share in the third
quarter as compared to net income attributable to RLH Corporation
of $8.9 million or $0.35 per diluted share in the prior year
period. The year-over-year change was primarily related to the loss
of revenue from sale of the Company Operated hotels as well as
the associated gain of $26.0 million in the 2018 period.
Adjusted EBITDA for the third quarter was $5.9
million, an increase of $0.1 million as compared to the third
quarter of 2018, reflecting a reduction in operating costs and
compensation expense offset by lower company operated hotel profits
and higher bad debt expense primarily due to one large
customer.
Royalty fees decreased 9.5% to $5.9 million
primarily due to terminated agreements in SSB branded hotels.
Marketing, reservations and reimbursables revenue, which are fees
from franchised properties associated with the Company’s brands and
shared services, increased 9.3% to $8.3 million due to an increase
in transaction and reservation fees.
Selling, general, administrative and other
expenses, which include franchise sales, operations and corporate
costs and bad debt expense, remained relatively flat at $8.2
million, as the Company’s continued focused on leveraging
technology to drive efficiencies, controlling costs and reducing
payroll, including a decrease in incentive compensation, was offset
by an increase in bad debt and related expenses due to a large
customer.
An asset impairment charge of $5.4 million was
recorded in the current year quarter based on carrying values of
hotels under non-binding sale agreements compared to the sale
values.
For the quarter, the Company executed 47
franchise agreements comprised of 10 upscale and midscale hotels
and 37 select service hotels, an increase of 56% from executed
franchise agreements signed in the prior year period. Year-to-date,
the Company has signed 143 contracts including 23 upscale and
midscale hotels and 120 select service hotels. Of the 143 contracts
signed to date, 40 are for new locations. Our midscale franchise
contracts typically open six to eighteen months after signing and
contain future royalty rate increases, which allow our revenue to
increase without needing to increase support costs. For
instance, midscale contracts, signed throughout 2019, contributed
just $0.1 million in 2019 royalty revenues and are expected to
contribute approximately $0.5 million of royalty revenue in 2020
and increase annually by 10% to 20% for the following two
years.
Offsetting the newly executed signings in the
quarter were 60 terminations which included 9 midscale hotels as
well as 51 economy hotels. Year to date, there have been 176
terminations comprised of 17 midscale hotels and 159 economy
hotels.
Balance Sheet and Liquidity
RLH Corporation finished the third quarter with
cash and restricted cash of $21 million including $7.3 million of
cash and cash equivalents held by the joint ventures and debt of
$55 million comprised of a corporate term loan of $4.0 million, a
corporate level $10 million revolving line of credit, and $41
million of hotel mortgages. As of September 30, 2019, the Company
had a low net debt to trailing 12 months Adjusted EBITDA ratio of
2.5 times. Adjusted free cash flow for the nine months ended
September 30, 2019 was approximately $3.8 million as compared to
the prior year period of $(16) million and $(15.) million for the
twelve months ended December 31, 2018.
Hotel Sales
During the quarter, the Company entered into
non-binding agreements to sell four Company owned hotels for gross
proceeds of approximately $85 million and net proceeds to the
Company of $32 million to $36 million after hotel debt repayments
and joint venture distributions. The hotels include Red Lion
Atlanta Airport, Hotel RL Washington D.C. and Hotel RL Salt Lake
City, all of which are held in joint venture entities of which RLH
owns 55%. The Company also announced the execution of a
non-binding sales agreement for the Red Lion Hotel Anaheim, which
is a wholly owned unencumbered asset. Net proceeds to the
Company will be used to pay down corporate debt and fund future
franchise growth opportunities.
The sales are expected to be completed by the
end of Q1 2020.
2019 Expectations
The Company is providing updated guidance with
respect to the number of franchise agreements, Corporate Selling
General and Administrative expenses, and a reduction in Adjusted
EBITDA from continuing operations. Revised expectations for 2019 do
not contemplate the sale of the owned hotels under contract due to
the unknown timing of the sales. As each sale closes, the
Company will disclose the material terms of each transaction in an
8K filing including the historical Adjusted EBITDA relating to the
sold hotel.
- The Company affirms its
expectations for executed franchise agreements for 2019. The
Company expects to execute between 175 to 210 contracts.
- Adjusted EBITDA from continuing operations is now expected to
be between $11.5 million and $13.5 million in 2019, down from $20.5
million and $22.5 million prior, reflecting the under performance
of the remaining company owned hotels and the core franchise
business as well as the additional expenses due to increases in bad
debt and collection costs.
- Selling, general, administrative and other expense guidance is
being suspended while management and the board are reviewing how to
align the cost structure with our revenue base.
- The four hotels currently under
non-binding sale agreements contributed $5.1 million and $6.3
million of Adjusted EBITDA for the nine months ended September 30,
2019 and 2018, respectively. These four hotels also
contributed $7.5 million of Adjusted EBITDA for the full year of
2018. These four hotels contributed $25.3 million and $26.2
million of revenue for the nine months ended September 30, 2019 and
2018, respectively. These four hotels also contributed $33.8
million of revenue for the full year of 2018.
Conference Call
Information
RLH Corporation will host a conference call on
Friday, November 8 at 9:00 AM Eastern Time, to discuss the results
for interested investors, analyst and portfolio managers.
To participate in the conference call, please
dial the following number 10 minutes prior to the scheduled time:
(877) 407-8289. International callers should dial (201)
689-8341.
This conference call will also be webcast live
on www.rlhco.com in the Investor Relations section of the website.
To listen to the live call, please go to the RLH Corporation
website at least 15 minutes prior to the start of the call to
register and to download and install any necessary audio software.
For those unable to participate during the live broadcast, a replay
will be available at approximately 12:00 PM Eastern Time on
November 8 through midnight November 22, 2019 at (877) 660-6853 or
(International) (201) 612-7415, using access code 13695406. The
replay will also be available shortly after the call on the RLH
Corporation website.
To learn more about franchising with RLH
Corporation, visit franchise.rlhco.com. We don’t wait for the
future. We create it.
About RLH Corporation
Red Lion Hotels Corporation is an innovative
hotel company doing business as RLH Corporation which focuses on
the franchising of upscale, midscale and economy hotels. The
Company strives to maximize return on invested capital for hotel
owners across North America through relevant brands,
industry-leading technology and forward-thinking services. For more
information, please visit the company’s website at
www.rlhco.com.
Forward Looking Statements
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, 2018, and in other documents
filed by the Company with the Securities and Exchange
Commission. The forward-looking statements contained herein speak
only to the date of this press release. The Company
undertakes no obligation to update or revise any forward-looking
statements except as required by law.
Social Media:
www.Facebook.com/myhellorewards www.Twitter.com/myhellorewards www.Instagram.com/myhellorewards www.Linkedin.com/company/rlhco
Investor Relations Contact:
Nikki SaksInvestor Relations
203-682-8263investorrelations@rlhco.com
Media Contact:
Roxanne RobascoVice President, Brand Marketing & PR
914-217-7803roxanne.robasco@rlhco.com
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Comprehensive Income
(Loss) |
(unaudited) |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue: |
|
|
|
|
|
|
|
|
Royalty |
|
$ |
5,909 |
|
|
$ |
6,530 |
|
|
$ |
17,516 |
|
|
$ |
16,575 |
|
Other franchise |
|
2,016 |
|
|
1,016 |
|
|
3,772 |
|
|
2,412 |
|
Company operated hotels |
|
16,633 |
|
|
20,857 |
|
|
43,839 |
|
|
68,758 |
|
Marketing, reservations and reimbursables |
|
8,300 |
|
|
7,591 |
|
|
22,632 |
|
|
19,874 |
|
Other |
|
5 |
|
|
6 |
|
|
13 |
|
|
32 |
|
Total revenues |
|
32,863 |
|
|
36,000 |
|
|
87,772 |
|
|
107,651 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, administrative and other expenses |
|
8,196 |
|
|
8,112 |
|
|
21,921 |
|
|
23,590 |
|
Company operated hotels |
|
12,673 |
|
|
16,051 |
|
|
36,750 |
|
|
54,924 |
|
Marketing, reservations and reimbursables |
|
7,080 |
|
|
7,453 |
|
|
22,088 |
|
|
20,226 |
|
Depreciation and amortization |
|
3,636 |
|
|
3,621 |
|
|
11,192 |
|
|
12,714 |
|
Asset impairment |
|
5,382 |
|
|
7,100 |
|
|
5,382 |
|
|
7,100 |
|
Loss (gain) on asset dispositions, net |
|
1 |
|
|
(26,196 |
) |
|
45 |
|
|
(42,094 |
) |
Transaction and integration costs |
|
201 |
|
|
95 |
|
|
436 |
|
|
2,196 |
|
Total operating expenses |
|
37,169 |
|
|
16,236 |
|
|
97,814 |
|
|
78,656 |
|
Operating income (loss) |
|
(4,306 |
) |
|
19,764 |
|
|
(10,042 |
) |
|
28,995 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
(1,699 |
) |
|
(1,417 |
) |
|
(3,690 |
) |
|
(5,366 |
) |
Loss on early retirement of debt |
|
— |
|
|
(794 |
) |
|
(164 |
) |
|
(794 |
) |
Other income (expense), net |
|
44 |
|
|
34 |
|
|
121 |
|
|
214 |
|
Total other income (expense) |
|
(1,655 |
) |
|
(2,177 |
) |
|
(3,733 |
) |
|
(5,946 |
) |
Income (loss) before taxes |
|
(5,961 |
) |
|
17,587 |
|
|
(13,775 |
) |
|
23,049 |
|
Income tax expense (benefit) |
|
486 |
|
|
(26 |
) |
|
676 |
|
|
(239 |
) |
Net income (loss) |
|
(6,447 |
) |
|
17,613 |
|
|
(14,451 |
) |
|
23,288 |
|
Net (income) loss attributable to noncontrolling interest |
|
2,980 |
|
|
(8,670 |
) |
|
4,040 |
|
|
(14,079 |
) |
Net income (loss) and
comprehensive income (loss) attributable to RLH Corporation |
|
$ |
(3,467 |
) |
|
$ |
8,943 |
|
|
$ |
(10,411 |
) |
|
$ |
9,209 |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share -
basic |
|
$ |
(0.14 |
) |
|
$ |
0.36 |
|
|
$ |
(0.42 |
) |
|
$ |
0.38 |
|
Earnings (loss) per share -
diluted |
|
$ |
(0.14 |
) |
|
$ |
0.35 |
|
|
$ |
(0.42 |
) |
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares -
basic |
|
25,112 |
|
|
24,545 |
|
|
24,859 |
|
|
24,334 |
|
Weighted average shares -
diluted |
|
25,112 |
|
|
25,729 |
|
|
24,859 |
|
|
25,437 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
(1) |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
(626 |
) |
|
$ |
22,625 |
|
|
$ |
1,107 |
|
|
$ |
41,129 |
|
Adjusted
EBITDA |
$ |
5,899 |
|
|
$ |
5,751 |
|
|
$ |
10,624 |
|
|
$ |
13,458 |
|
(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those
measures relate to net income (loss) are discussed further in this
release under Reconciliation of Non-GAAP Financial Measures. |
|
RED LION HOTELS CORPORATION |
Condensed Consolidated Balance Sheets |
(unaudited) |
(In thousands, except share data) |
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents ($4,363 and $4,564 attributable to
VIEs) |
|
$ |
18,267 |
|
|
$ |
17,034 |
|
Restricted cash ($2,930 and $2,652 attributable to VIEs) |
|
2,930 |
|
|
2,755 |
|
Accounts receivable ($1,405 and $1,064 attributable to VIEs), net
of an allowance for doubtful accounts of $3,377 and $2,345,
respectively |
|
19,496 |
|
|
18,575 |
|
Notes receivable, net |
|
4,188 |
|
|
2,103 |
|
Other current assets ($716 and $680 attributable to VIEs) |
|
4,961 |
|
|
6,218 |
|
Total current assets |
|
49,842 |
|
|
46,685 |
|
Property and equipment, net
($67,514 and $74,250 attributable to VIEs) |
|
107,554 |
|
|
115,522 |
|
Operating lease right-of-use
assets ($10,855 and $0 attributable to VIEs) |
|
48,553 |
|
|
— |
|
Goodwill |
|
18,595 |
|
|
18,595 |
|
Intangible assets, net |
|
58,233 |
|
|
60,910 |
|
Other assets, net ($703 and $705
attributable to VIEs) |
|
5,085 |
|
|
8,075 |
|
Total assets |
|
$ |
287,862 |
|
|
$ |
249,787 |
|
LIABILITIES |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable ($890 and $650 attributable to VIEs) |
|
$ |
5,176 |
|
|
$ |
5,322 |
|
Accrued payroll and related benefits ($342 and $369 attributable to
VIEs) |
|
1,868 |
|
|
5,402 |
|
Other accrued liabilities ($895 and $1,092 attributable to
VIEs) |
|
5,519 |
|
|
4,960 |
|
Long-term debt, due within one year ($24,628 and $25,056
attributable to VIEs) |
|
24,628 |
|
|
25,056 |
|
Operating lease liabilities, due within one year ($966 and $0
attributable to VIEs) |
|
4,801 |
|
|
— |
|
Total current liabilities |
|
41,992 |
|
|
40,740 |
|
Long-term debt, due after one
year, net of debt issuance costs ($16,468 and $0 attributable to
VIEs) |
|
20,496 |
|
|
9,114 |
|
Line of credit, due after one
year |
|
10,000 |
|
|
10,000 |
|
Operating lease liabilities, due
after one year ($11,941 and $0 attributable to VIEs) |
|
46,871 |
|
|
— |
|
Deferred income and other
long-term liabilities ($330 and $480 attributable to VIEs) |
|
1,541 |
|
|
2,245 |
|
Deferred income taxes |
|
1,217 |
|
|
772 |
|
Total liabilities |
|
122,117 |
|
|
62,871 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
RLH 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;
25,118,512 and 24,570,158 shares issued and outstanding |
|
252 |
|
|
246 |
|
Additional paid-in capital, common stock |
|
182,723 |
|
|
182,018 |
|
Accumulated deficit |
|
(26,923 |
) |
|
(16,512 |
) |
Total RLH Corporation stockholders' equity |
|
156,052 |
|
|
165,752 |
|
Noncontrolling interest |
|
9,693 |
|
|
21,164 |
|
Total stockholders’ equity |
|
165,745 |
|
|
186,916 |
|
Total liabilities and stockholders’ equity |
|
$ |
287,862 |
|
|
$ |
249,787 |
|
|
RED LION HOTELS CORPORATION |
Condensed Consolidated Statements of Cash
Flows |
(unaudited) |
(In thousands) |
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
Operating
activities: |
|
|
|
|
Net income (loss) |
|
$ |
(14,451 |
) |
|
$ |
23,288 |
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
|
Depreciation and amortization |
|
11,192 |
|
|
12,714 |
|
Noncash PIK interest and amortization of debt
issuance costs |
|
929 |
|
|
892 |
|
Amortization of key money and contract
costs |
|
997 |
|
|
535 |
|
Amortization of contract liabilities |
|
(994 |
) |
|
(563 |
) |
Loss (gain) on asset dispositions, net |
|
45 |
|
|
(42,094 |
) |
Noncash loss on early retirement of debt |
|
67 |
|
|
794 |
|
Asset impairment |
|
5,382 |
|
|
7,100 |
|
Deferred income taxes |
|
445 |
|
|
(1,445 |
) |
Stock-based compensation expense |
|
2,503 |
|
|
2,896 |
|
Provision for doubtful accounts |
|
1,780 |
|
|
651 |
|
Fair value adjustments to contingent
consideration |
|
— |
|
|
581 |
|
Change in operating assets and liabilities, net
of business acquired: |
|
|
|
|
Accounts receivable |
|
(2,148 |
) |
|
(7,293 |
) |
Notes receivable |
|
(16 |
) |
|
(7 |
) |
Key money disbursements |
|
(665 |
) |
|
(5,420 |
) |
Other current assets |
|
1,014 |
|
|
(1,740 |
) |
Accounts payable |
|
45 |
|
|
1,405 |
|
Other accrued liabilities |
|
(1,170 |
) |
|
79 |
|
Net cash provided by (used in) operating
activities |
|
4,955 |
|
|
(7,627 |
) |
Investing
activities: |
|
|
|
|
Capital expenditures |
|
(4,104 |
) |
|
(6,190 |
) |
Acquisition of Knights Inn |
|
— |
|
|
(26,888 |
) |
Net proceeds from disposition of property and equipment |
|
— |
|
|
113,838 |
|
Collection of notes receivable |
|
262 |
|
|
— |
|
Advances on notes receivable |
|
(90 |
) |
|
(537 |
) |
Net cash provided by (used in) investing
activities |
|
(3,932 |
) |
|
80,223 |
|
Financing
activities: |
|
|
|
|
Borrowings on long-term debt, net of discounts |
|
32,935 |
|
|
30,000 |
|
Repayment of long-term debt and finance leases |
|
(22,510 |
) |
|
(107,899 |
) |
Proceeds from line of credit borrowing |
|
— |
|
|
10,000 |
|
Debt issuance costs |
|
(692 |
) |
|
(1,317 |
) |
Distributions to noncontrolling interest |
|
(7,430 |
) |
|
(20,972 |
) |
Contingent consideration paid for Vantage Hospitality
acquisition |
|
— |
|
|
(4,000 |
) |
Stock-based compensation awards canceled to settle employee tax
withholding |
|
(2,135 |
) |
|
(615 |
) |
Stock option and stock purchase plan issuances, net and other |
|
217 |
|
|
238 |
|
Net cash provided by (used in) financing
activities |
|
385 |
|
|
(94,565 |
) |
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash: |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
1,408 |
|
|
(21,969 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
19,789 |
|
|
44,858 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
21,197 |
|
|
$ |
22,889 |
|
|
RED LION HOTELS CORPORATION |
Additional Hotel Statistics |
(unaudited) |
|
A summary of activity relating to our owned or franchised
properties by type from January 1, 2019 through September 30,
2019, including the approximate number of available rooms, is
provided below: |
|
|
|
|
|
|
|
|
|
|
Upscale Service Brand ("USB") |
|
Select Service Brand ("SSB") |
|
Total |
|
Hotels |
|
Total Available Rooms |
|
Hotels |
|
Total Available Rooms |
|
Hotels |
|
Total Available Rooms |
Beginning quantity, January 1,
2019 |
112 |
|
|
15,900 |
|
|
1,215 |
|
|
69,800 |
|
|
1,327 |
|
|
85,700 |
|
Newly opened / acquired
properties |
7 |
|
|
600 |
|
|
28 |
|
|
1,400 |
|
|
35 |
|
|
2,000 |
|
Change in brand |
(1 |
) |
|
(100 |
) |
|
1 |
|
|
100 |
|
|
— |
|
|
— |
|
Terminated properties |
(17 |
) |
|
(1,900 |
) |
|
(159 |
) |
|
(10,100 |
) |
|
(176 |
) |
|
(12,000 |
) |
Ending quantity, September 30,
2019 |
101 |
|
|
14,500 |
|
|
1,085 |
|
|
61,200 |
|
|
1,186 |
|
|
75,700 |
|
A summary of activity relating to our USB hotels by
brand from January 1, 2019 through September 30, 2019 is
provided below:
USB Brand Hotels |
|
Hotel RL |
|
Red Lion Hotels |
|
Red Lion Inn and Suites |
|
Signature |
|
Other |
|
Total |
Beginning quantity, January 1,
2019 |
|
8 |
|
|
46 |
|
|
43 |
|
|
2 |
|
|
13 |
|
|
112 |
|
Newly opened / acquired
properties |
|
— |
|
|
— |
|
|
5 |
|
|
2 |
|
|
— |
|
|
7 |
|
Change in brand |
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
(2 |
) |
|
(1 |
) |
Terminated properties |
|
— |
|
|
(5 |
) |
|
(7 |
) |
|
— |
|
|
(5 |
) |
|
(17 |
) |
Ending quantity, September 30,
2019 |
|
9 |
|
|
41 |
|
|
41 |
|
|
4 |
|
|
6 |
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, September 30,
2019 |
|
1,800 |
|
|
8,400 |
|
|
3,400 |
|
|
200 |
|
|
700 |
|
|
14,500 |
|
A summary of activity relating to our SSB hotels by
brand from January 1, 2019 through September 30, 2019 is
provided below:
SSB Brand Hotels |
|
ABVI and CBVI |
|
Knights Inn |
|
Country Hearth |
|
Guest House |
|
Signature Inn |
|
Other |
|
Total |
Beginning quantity, January 1,
2019 |
|
777 |
|
|
332 |
|
|
53 |
|
|
27 |
|
|
2 |
|
|
24 |
|
|
1,215 |
|
Newly opened / acquired
properties |
|
24 |
|
|
2 |
|
|
1 |
|
|
1 |
|
|
— |
|
|
— |
|
|
28 |
|
Change in brand |
|
1 |
|
|
(1 |
) |
|
5 |
|
|
— |
|
|
— |
|
|
(4 |
) |
|
1 |
|
Terminated properties |
|
(89 |
) |
|
(49 |
) |
|
(6 |
) |
|
(6 |
) |
|
(2 |
) |
|
(7 |
) |
|
(159 |
) |
Ending quantity, September 30,
2019 |
|
713 |
|
|
284 |
|
|
53 |
|
|
22 |
|
|
— |
|
|
13 |
|
|
1,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending rooms, September 30,
2019 |
|
38,100 |
|
|
16,900 |
|
|
2,500 |
|
|
1,500 |
|
|
— |
|
|
2,200 |
|
|
61,200 |
|
A summary of our executed agreements for the
nine months ended September 30, 2019 is provided below:
|
|
|
|
|
|
|
|
|
USB |
|
SSB |
|
Total |
Executed franchise license
agreements, nine months ended September 30, 2019: |
|
|
|
|
|
|
New locations |
|
14 |
|
|
26 |
|
|
40 |
|
New contracts for existing locations |
|
9 |
|
|
94 |
|
|
103 |
|
Total executed franchise license agreements, nine months ended
September 30, 2019 |
|
23 |
|
|
120 |
|
|
143 |
|
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
Free Cash Flow is a non-GAAP measured defined as net cash provided
by or used in operating activities less capital expenditures. The
Company believes it is an important liquidity measure that provides
useful information to management and investors about the amount of
cash generated by the business. |
Adjusted Free Cash Flow is a non-GAAP measure defined as Free Cash
Flow adjusted to reflect the impact of certain investing or
financing cash flows such as acquisitions, proceeds from
dispositions of properties, borrowings and repayments of long-term
debt, and distributions to non-controlling interests. We believe
this information is necessary as reflecting significant cash flows
from strategic investing and financing decisions provides the most
accurate overall measure of cash generated or used by the
business. |
Free Cash Flow and Adjusted Free Cash Flow are commonly used
measures of performance. We utilize these measures because
management finds them a useful tool to calculate more meaningful
comparisons of past, present and future cash generation and as a
means to evaluate the results of core, ongoing operations. We
believe they are a complement to reported net cash provided by
(used in) operating activities, investing activities, and financing
activities. Free Cash Flow and Adjusted Free Cash Flow are not
intended to represent net cash provided by (used in) operating
activities, investing activities, or financing activities defined
by generally accepted accounting principles in the United States of
America ("GAAP"), and such information should not be considered as
an alternative to reported information or any other measure of
performance prescribed by GAAP. In addition, other companies may
calculate Free Cash Flow and, in particular, Adjusted Free Cash
Flow differently than we do or may not calculate them at all,
limiting the usefulness of Free Cash Flow and Adjusted Free Cash
Flow as comparative measures. |
The following is a reconciliation of GAAP net cash provided by
(used in) operating activities to non-GAAP Free Cash Flow and
Adjusted Free Cash Flow for the nine months ended September 30,
2019 and 2018 (in thousands): |
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
Net cash provided by
(used in) operating activities(1) |
|
$ |
4,955 |
|
|
$ |
(7,627 |
) |
Less: Capital expenditures |
|
(4,104 |
) |
|
(6,190 |
) |
Free Cash
Flow |
|
851 |
|
|
(13,817 |
) |
Acquisition of Knights Inn |
|
— |
|
|
(26,888 |
) |
Net proceeds from disposition of property and equipment |
|
— |
|
|
113,838 |
|
Borrowings on long-term debt, net of discounts |
|
32,935 |
|
|
30,000 |
|
Proceeds from line of credit borrowing |
|
— |
|
|
10,000 |
|
Repayment of long-term debt and finance leases |
|
(22,510 |
) |
|
(107,899 |
) |
Distributions to noncontrolling interest |
|
(7,430 |
) |
|
(20,972 |
) |
Adjusted Free Cash
Flow |
|
$ |
3,846 |
|
|
$ |
(15,738 |
) |
|
(1) Includes cash outflows for key money disbursements of $0.7
million and $5.4 million for the nine months ended September 30,
2019 and 2018, respectively. |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
The following is a reconciliation of GAAP net cash provided by
(used in) operating activities to non-GAAP Free Cash Flow and
Adjusted Free Cash Flow for the year ended December 31, 2018 (in
thousands): |
|
|
Year ended December 31, 2018 |
|
|
Net cash provided by
(used in) operating activities(1) |
|
$ |
(3,514 |
) |
Less: Capital expenditures |
|
(8,615 |
) |
Free Cash
Flow |
|
(12,129 |
) |
Acquisition of Knights Inn |
|
(27,249 |
) |
Net proceeds from disposition of property and equipment |
|
113,748 |
|
Borrowings on long-term debt, net of discounts |
|
30,000 |
|
Proceeds from line of credit borrowing |
|
10,000 |
|
Repayment of long-term debt and finance leases |
|
(107,999 |
) |
Distributions to noncontrolling interest |
|
(21,457 |
) |
Adjusted Free Cash
Flow |
|
$ |
(15,086 |
) |
|
(1) Includes cash outflows for key money disbursements of $5.7
million for the year ended December 31, 2018. |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
EBITDA is defined as net income (loss), before interest, taxes,
depreciation and amortization. The Company believes it is a useful
financial performance measure due to the significance of our
long-lived assets and level of indebtedness. |
Adjusted EBITDA is an additional measure of financial performance.
The Company believes that the inclusion or exclusion of certain
special items, such as stock-based compensation, gains and losses
on asset dispositions and impairments, is necessary to provide the
most accurate measure of core operating results and as a means to
evaluate comparative results. |
During the fourth quarter of 2018, we modified the definition of
Adjusted EBITDA as used in prior periods to exclude the effect of
non-cash stock compensation expense. We believe that the exclusion
of this item is consistent with the purposes of the measure
described below and we have applied this modification to all prior
periods presented. |
EBITDA and Adjusted EBITDA are commonly used measures of
performance in the industry. RLH Corporation utilizes these
measures because management finds them a useful tool to calculate
more meaningful comparisons of past, present and future operating
results and as a means to evaluate the results of core, ongoing
operations. Our board of directors and executive management team
consider Adjusted EBITDA to be a key performance metric and
compensation measure. The Company believes the measures are a
complement to reported operating results. EBITDA and Adjusted
EBITDA are not intended to represent net income (loss) defined by
generally accepted accounting principles in the United States of
America ("GAAP"), and such information should not be considered as
an alternative to reported information or any other measure of
performance prescribed by GAAP. In addition, other companies in the
industry may calculate EBITDA and, in particular, Adjusted EBITDA
differently than the Company does or may not calculate them at all,
limiting the usefulness of EBITDA and Adjusted EBITDA as
comparative measures. |
Non-Core Adjusted EBITDA includes the results of our Company
Operated Hotels. Core Adjusted EBITDA is comprised of franchise and
all other results, including all Selling, general, administrative
and other expenses. Management believes this presentation provides
a meaningful comparison of our financial results as Core Adjusted
EBITDA represents the results of our Company as a franchise only
business. |
|
The following is a reconciliation of Core and Non-Core GAAP net
income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted
EBITDA for the three months ended September 30, 2019 (in
thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net income
(loss) |
|
$ |
(1,684 |
) |
|
$ |
(4,763 |
) |
|
$ |
(6,447 |
) |
Depreciation and amortization |
|
1,859 |
|
|
1,777 |
|
|
3,636 |
|
Interest expense |
|
302 |
|
|
1,397 |
|
|
1,699 |
|
Income tax expense |
|
486 |
|
|
— |
|
|
486 |
|
EBITDA |
|
963 |
|
|
(1,589 |
) |
|
(626 |
) |
Stock-based compensation (1) |
|
941 |
|
|
— |
|
|
941 |
|
Asset impairment(2) |
|
— |
|
|
5,382 |
|
|
5,382 |
|
Transaction and integration costs (3) |
|
37 |
|
|
164 |
|
|
201 |
|
Loss (gain) on asset dispositions (4) |
|
(1 |
) |
|
2 |
|
|
1 |
|
Adjusted
EBITDA |
|
1,940 |
|
|
3,959 |
|
|
5,899 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(660 |
) |
|
(660 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
1,940 |
|
|
$ |
3,299 |
|
|
$ |
5,239 |
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses and Marketing, reservations and reimbursables on
the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(2) During the third quarter of 2019, we recognized an impairment
on our Hotel RL Washington DC joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The loss (gain) relates to our sale of various fixed assets
during the three months ended September 30, 2019. |
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
The following is a reconciliation of Core and Non-Core GAAP net
income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted
EBITDA for the three months ended September 30, 2018 (in
thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net income
(loss) |
|
$ |
(3,098 |
) |
|
$ |
20,711 |
|
|
$ |
17,613 |
|
Depreciation and amortization |
|
1,451 |
|
|
2,170 |
|
|
3,621 |
|
Interest expense |
|
425 |
|
|
992 |
|
|
1,417 |
|
Income tax expense (benefit) |
|
(26 |
) |
|
— |
|
|
(26 |
) |
EBITDA |
|
(1,248 |
) |
|
23,873 |
|
|
22,625 |
|
Stock-based compensation (1) |
|
1,160 |
|
|
— |
|
|
1,160 |
|
Asset impairment (2) |
|
— |
|
|
7,100 |
|
|
7,100 |
|
Transaction and integration costs (3) |
|
95 |
|
|
— |
|
|
95 |
|
Loss on early retirement of debt (4) |
|
794 |
|
|
— |
|
|
794 |
|
Gain on asset dispositions (5) |
|
— |
|
|
(26,023 |
) |
|
(26,023 |
) |
Adjusted
EBITDA |
|
801 |
|
|
4,950 |
|
|
5,751 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(53 |
) |
|
(53 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
801 |
|
|
$ |
4,897 |
|
|
$ |
5,698 |
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses, Company operated hotels and Marketing,
reservations and reimbursables on the Condensed Consolidated
Statements of Comprehensive Income (Loss). |
(2) During the third quarter of 2018, we recognized an impairment
on our Hotel RL Baltimore Inner Harbor joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The Loss on early retirement of debt arose primarily on a $20.6
million early payment of our Senior Secured Term Loan. The debt was
repaid using proceeds from a distribution from RL Venture after the
sales of our Red Lion Hotel Port Angeles and Hotel RL
Spokane. |
(5) The gain relates
to the sale of two properties during the three months ended
September 30, 2018. |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
The following is a reconciliation of Core and Non-Core GAAP net
income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted
EBITDA for the nine months ended September 30, 2019 (in
thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net income
(loss) |
$ |
(7,282 |
) |
|
$ |
(7,169 |
) |
|
$ |
(14,451 |
) |
Depreciation and amortization |
|
5,542 |
|
|
5,650 |
|
|
11,192 |
|
Interest expense |
|
831 |
|
|
2,859 |
|
|
3,690 |
|
Income tax expense |
|
676 |
|
|
— |
|
|
676 |
|
EBITDA |
(233 |
) |
|
1,340 |
|
|
1,107 |
|
Stock-based compensation (1) |
|
2,503 |
|
|
— |
|
|
2,503 |
|
Asset impairment (2) |
|
— |
|
|
5,382 |
|
|
5,382 |
|
Transaction and integration costs (3) |
|
272 |
|
|
164 |
|
|
436 |
|
Employee separation and transition costs (4) |
|
35 |
|
|
— |
|
|
35 |
|
Loss on early retirement of debt (5) |
|
— |
|
|
164 |
|
|
164 |
|
Loss (gain) on asset dispositions (6) |
|
— |
|
|
45 |
|
|
45 |
|
Legal settlement expense (7) |
|
— |
|
|
952 |
|
|
952 |
|
Adjusted
EBITDA |
|
2,577 |
|
|
8,047 |
|
|
10,624 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(1,665 |
) |
|
(1,665 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
2,577 |
|
|
$ |
6,382 |
|
|
$ |
8,959 |
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses and Marketing, reservations and reimbursables on
the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(2) During the third quarter of 2019, we recognized an impairment
on our Hotel RL Washington DC joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The costs recognized in 2019 relate to a reduction in force
that was implemented in the second quarter of 2019. These costs are
included within Selling, general, administrative and other expenses
on the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(5) The loss on early retirement of debt relates to unamortized
deferred debt issuance costs and prepayment fees incurred related
to the payoff of a mortgage loan at RLS DC Venture, which was
replaced through a new mortgage loan with a different lender. |
(6) The loss
(gain) relates to our sale of various fixed assets during the nine
months ended September 30, 2019. |
(7) Legal settlement expense relates to a settlement agreement with
current and former hotel workers regarding a wage dispute in
California. This expense is included in Company operated hotels
expense on the Condensed Consolidated Statement of Comprehensive
Income (Loss). |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures |
(unaudited) |
|
The following is a reconciliation of Core and Non-Core GAAP net
income (loss) to Core and Non-Core non-GAAP EBITDA and Adjusted
EBITDA for the nine months ended September 30, 2018 (in
thousands): |
|
|
Core |
|
Non-Core |
|
Total |
Net income
(loss) |
|
$ |
(12,453 |
) |
|
$ |
35,741 |
|
|
$ |
23,288 |
|
Depreciation and amortization |
|
4,386 |
|
|
8,328 |
|
|
12,714 |
|
Interest expense |
|
645 |
|
|
4,721 |
|
|
5,366 |
|
Income tax expense (benefit) |
|
(239 |
) |
|
— |
|
|
(239 |
) |
EBITDA |
|
(7,661 |
) |
|
48,790 |
|
|
41,129 |
|
Stock-based compensation (1) |
|
2,896 |
|
|
— |
|
|
2,896 |
|
Asset impairment (2) |
|
— |
|
|
7,100 |
|
|
7,100 |
|
Transaction and integration costs (3) |
|
2,196 |
|
|
— |
|
|
2,196 |
|
Employee separation and transition costs (4) |
|
975 |
|
|
— |
|
|
975 |
|
Loss on early retirement of debt(5) |
|
794 |
|
|
— |
|
|
794 |
|
Gain on asset dispositions (6) |
|
— |
|
|
(41,632 |
) |
|
(41,632 |
) |
Adjusted
EBITDA |
|
(800 |
) |
|
14,258 |
|
|
13,458 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
— |
|
|
(1,915 |
) |
|
(1,915 |
) |
Adjusted EBITDA
attributable to RLH Corporation |
|
$ |
(800 |
) |
|
$ |
12,343 |
|
|
$ |
11,543 |
|
|
(1) Costs represent total stock-based compensation for the period.
These costs are included within Selling, general, administrative
and other expenses, Company operated hotels and Marketing,
reservations and reimbursables on the Condensed Consolidated
Statements of Comprehensive Income (Loss). |
(2) During the third quarter of 2018, we recognized an impairment
on our Hotel RL Baltimore Inner Harbor joint venture property. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. |
(4) The costs relate to employee separation, primarily for
severance agreements with our Chief Operating Officer, and
President of Global Development in May 2018. These costs are
included within Selling, general, administrative and other expenses
on the Condensed Consolidated Statements of Comprehensive Income
(Loss). |
(5) The Loss on early retirement of debt arose primarily on a $20.6
million early payment of our Senior Secured Term Loan. The debt was
repaid using proceeds from a distribution from RL Venture after the
sales of our Red Lion Hotel Port Angeles and Hotel RL Spokane. |
(6) The gain relates
to the sale of nine properties during the nine months ended
September 30, 2018. |
|
RED LION HOTELS CORPORATION |
Reconciliation of Non-GAAP Financial Measures - Guidance
for the Year Ended December 31, 2019 |
(unaudited) |
|
Forecasted amounts are based on assets owned as of the date of this
release. The Company's projections are predicated on numerous
assumptions that are subject to change. There can be no assurance
that the Company will achieve these results. |
The following is a reconciliation of GAAP net income (loss) to
non-GAAP EBITDA and Adjusted EBITDA for our guidance for the year
ended December 31, 2019: |
|
|
2019 Forecast Range |
|
|
Low Case |
|
High Case |
Net loss |
|
$ |
(19,657 |
) |
|
$ |
(17,792 |
) |
Depreciation and amortization |
|
14,783 |
|
|
14,783 |
|
Interest expense |
|
5,195 |
|
|
5,195 |
|
Income tax expense (benefit) |
|
785 |
|
|
906 |
|
EBITDA |
|
1,099 |
|
|
3,099 |
|
Stock-based compensation (1) |
|
3,387 |
|
|
3,387 |
|
Asset impairment (2) |
|
5,382 |
|
|
5,382 |
|
Transaction and integration costs (3) |
|
436 |
|
|
436 |
|
Employee separation and transition costs (4) |
|
35 |
|
|
35 |
|
Loss on early retirement of debt (5) |
|
164 |
|
|
164 |
|
Loss on asset dispositions (6) |
|
45 |
|
|
45 |
|
Legal settlement expense (7) |
|
952 |
|
|
952 |
|
Adjusted EBITDA |
|
$ |
11,500 |
|
|
$ |
13,500 |
|
|
|
|
|
|
(1) Represents total projected stock-based compensation for
2019. |
(2) In the third quarter of 2019 we recognized an impairment on our
Hotel RL Washington DC joint venture property. No projected loss is
included in this amount. |
(3) Transaction and integration costs include incremental expenses
incurred for potential and executed acquisitions and dispositions
of assets. No projected costs are included in this amount. |
(4) The costs relate to a reduction in force that was implemented
in the second quarter of 2019. No projected costs are included in
this amount. |
(5) The loss on early retirement of debt relates to unamortized
deferred debt issuance costs and prepayment fees incurred related
to the payoff of a mortgage loan at RLS DC Venture in May 2019,
which was replaced through a new mortgage loan with a different
lender. No projected gain or loss is included in this amount. |
(6) The loss (gain) from the sale of various fixed assets during
the nine months ended September 30, 2019. No projected gain or loss
is included in this amount. |
(7) Legal settlement expense relates to a settlement agreement with
current and former hotel workers regarding a wage dispute in
California. No further expense is expected related to this
settlement. |
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