WestCoast Hospitality Corporation Announces First Quarter Financial
Results; RevPAR Increases 6.2% SPOKANE, Wash., May 5
/PRNewswire-FirstCall/ -- WestCoast Hospitality Corporation today
announced financial results for the first quarter ended March 31,
2004. The Company reported total revenues of $41.6 million for the
first quarter of 2004, compared to $40.2 million for the comparable
period in 2003. RevPAR (revenue per available room) for comparable
hotels (hotels owned, leased, managed and franchised for at least
one year) increased 6.2% from $33.03 in the first quarter of 2003
to $35.08 in the comparable period of 2004. The increase in RevPAR
resulted from an increase in average occupancy, from 48.3% in the
first quarter of 2003 to 51.3% for the first quarter of 2004, and a
slight increase in average daily rate, to $68.39. EBITDA (earnings
before interest, taxes, depreciation and amortization) was $2.6
million in the first quarter of 2004 compared to $2.5 million for
the first quarter of 2003. Loss per share was $0.21 in the first
quarter of 2004, compared to a per share loss of $0.19 in the prior
year first quarter. Hotel and restaurant revenue increased during
the quarter, from $34.1 million in the first quarter of 2003 to
$34.9 million in the comparable period of 2004. The Company was
able to increase revenue by executing on its previously stated
strategy of growing market share by increasing occupancy levels,
while maintaining average daily rate. Central reservation
technology upgrades that were implemented in 2003 and distribution
strategies enabled by this new technology contributed to this
success. During the quarter the total room revenue contribution to
hotels from the central reservation system increased, raising
system wide hotel room revenue contribution from 25.4% to 29.9%.
The majority of the rooms contribution increase was derived from
third party Internet sites, also referred to as alternate
distribution systems (ADS). "We are happy with the positive impact
of the investment in technology and inventory management strategies
we implemented last year," stated John Taffin, Executive Vice
President of Hotel Operations. "The benefits of our approach to ADS
merchant models are beginning to take hold and we are competing
well on third party Internet sites. Our guaranteed lowest rate
program for our proprietary sites is also beginning to have a
positive impact by driving traffic to our sites." During the
quarter the Company implemented its "We Promise or We Pay"
initiative, which guarantees that hotel rates found at its
http://www.redlion.com/ and http://www.westcoasthotels.com/
websites are at least as competitive as any rates found elsewhere
on the Internet. The Company also will be implementing two other
important guest initiatives during the second quarter of 2004.
First, high speed Internet access was installed in many of the
Company's owned hotels during the first quarter of 2004 with the
remaining hotel installations to be completed during the second
quarter. Second, the Company will be upgrading most of its
guestrooms with new pillowtop mattresses, linens, carpets and
coverlets as part of a program designed to enhance guest comfort.
While departmental operating expenses in the hotel division were
well managed, hotel and restaurant non-departmental operating
expenses increased during the quarter. The increase was due in part
to additional sales personnel training costs and higher sales
department salaries and wages associated with the deployment of a
stronger sales force. Utility costs were also higher as compared to
the prior year. These increases negatively impacted year on year
margins in the division. During 2004, the Company closed on two
hotel acquisitions, in Yakima and Bellevue, Washington. Both
transactions utilized proceeds from the 2003 sale of the Red Lion
River Inn, which accommodated a Section 1031 tax deferred exchange.
Franchise, central services and development revenue was $576
thousand compared to $1.1 million in the prior year period. The
decrease in revenue was primarily due to a reduction in royalty
fees resulting from a net decline in the number of hotels
franchised by the Company, from 31 franchises in place during the
first quarter of 2003 to 22 during the first quarter of 2004.
Operating expenses for the first quarter of 2004 declined $212
thousand compared to the prior year. Entertainment division revenue
increased 37.8% during the quarter, from $2.6 million in the first
quarter of 2003 to $3.6 million in the comparable period of 2004,
while departmental profit margins increased from 15.8% to 21.9%.
The strong financial performance for the division was primarily the
result of WestCoast Entertainment presenting three major Broadway
shows in the first quarter of 2004 as compared to two in the same
period of 2003, and partly the result of favorable ticket sales in
the majority of our geographic regions. Oregon and Washington
regions both returned positive revenue results and the Company's
ticketing presence in the Seattle area was expanded during the
quarter. New opportunities in both states are being explored.
Colorado region market share continues to increase, and while most
revenue segments in the region had positive results for the
quarter, ski lift ticket sales declined approximately 8% to 11% for
most Colorado resorts. In April 2004, the Company announced the
expansion of ticketing services into the Green Bay, Wisconsin
market with a ticketing services agreement with Event Pro, LLC.
Real estate division revenue increased during the quarter, from
$2.3 million in the first quarter of 2003 to $2.5 million in the
first quarter of 2004. The revenue increase was primarily due to
additional leasing income and residential development fees earned
during the first quarter. Additional costs were incurred for
leasing commissions associated with the new leasing contracts while
energy costs and certain other expenses increased as well. During
the first quarter, the Company closed on a public offering through
WestCoast Hospitality Capital Trust of $46 million of trust
preferred securities, the holders of which are entitled to
cumulative cash distributions at a 9.5% annual rate. The trust used
the offering proceeds to acquire debentures from the Company having
payment terms that mirror the distribution terms of the trust
preferred securities. The net proceeds from the offering, after
offering costs of $2.3 million, were $43.7 million. The transaction
successfully completed a year long effort to positively reposition
the Company's debt and capital structure. For three main reasons,
depreciation and amortization increased $469 thousand during the
quarter. First, capital additions added to the depreciable base of
property and equipment. Second, the amortization of deferred
finance costs associated with the borrowing made during 2003
increased amortization expense. Finally, the first quarter of 2004
included depreciation of certain assets previously held for sale
for which no expense was recognized in the first quarter of 2003.
Interest expense increased during the quarter from $2.6 million in
the first quarter of 2003 to $3.3 million in the first quarter of
2004. The increase was due to a greater average amount of
outstanding interest-bearing debt, primarily due to the debentures
issued in connection with the trust preferred offering. While
interest on these new debentures is payable at a 9.5% rate, the
interest is deductible under current Federal tax law, which gives
the debentures an effective post tax rate of approximately 6.2%.
Proceeds from the sale of the debentures were used in part to
redeem all of the Company's outstanding preferred stock, resulting
in a reduced preferred stock dividend as compared to the first
quarter of 2003 because the preferred stock dividend only accrued
during the portion of the first quarter that the preferred stock
was outstanding. Dividends on the preferred stock were payable at
an average rate of 8.5%, and were not tax deductible, which gave
the stock a higher effective post tax rate than that of the new
debentures. 97.7% of the Company's outstanding debt is now
fixed-rate debt. The Company believes this is favorable as the
economic outlook points towards rising interest rates in the
upcoming year. The Company's President and CEO, Arthur Coffey,
continues to satisfactorily recuperate from a snowmobile accident
on February 14, 2004. Mr. Coffey recently participated in the
Company's senior management team retreat on April 19, 2004. He has
also been progressively increasing his review of the Company's
operations, and periodically provides management with
recommendations and insights regarding the Company's initiatives.
The Company expects Mr. Coffey to return to the office during the
second quarter of 2004. WestCoast Hospitality Corporation is a
hospitality and leisure company primarily engaged in the ownership,
management, development and franchising of mid-scale, full service
hotels under its WestCoast(R) and Red Lion(R) brands. In addition,
through its entertainment division, which includes its
TicketsWest.com, Inc. subsidiary, it engages in event ticket
distribution and promotes and presents a variety of entertainment
productions. G&B Real Estate Services, its real estate
division, engages in traditional real estate-related services,
including developing, managing and acting as a broker for sales and
leases of commercial and multi-unit residential properties. 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 and managing and leasing
properties owned by third parties; 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 2003 fiscal year and in other
documents filed by the Company with the Securities and Exchange
Commission. CONTACT: Peter Hausback VP, Chief Financial Officer
+1-509-777-6338 WestCoast Hospitality Corporation Consolidated
Statements of Operations (unaudited) ($ in thousands) Three months
ended March 31, 2004 2003 $ Change % Change Revenue: Hotels and
restaurants $34,866 $34,096 $ 770 2.3% Franchise, central services
and development 576 1,089 (513) -47.1% Entertainment 3,585 2,601
984 37.8% Real estate 2,513 2,302 211 9.2% Corporate services 90 88
2 2.3% Total revenues 41,630 40,176 1,454 3.6% Operating expenses:
Hotels and restaurants 34,070 32,631 1,439 4.4% Franchise, central
services and development 267 479 (212) -44.3% Entertainment 2,801
2,190 611 27.9% Real estate 1,448 1,217 231 19.0% Corporate
services 72 77 (5) -6.5% Depreciation and amortization 3,076 2,607
469 18.0% (Gain) loss on asset dispositions (189) 332 (521) -156.9%
Conversion expenses -- 288 (288) -100.0% Total direct expenses
41,545 39,821 1,724 4.3% Undistributed corporate expenses 785 740
45 6.1% Total expenses 42,330 40,561 1,769 4.4% Operating loss
(700) (385) (315) 81.8% Other income (expense): Interest expense
(3,287) (2,642) (645) 24.4% Interest income 95 104 (9) -8.7% Other
income, net 16 19 (3) -15.8% Equity income in investments, net 19
58 (39) -67.2% Minority interest in partnerships 119 112 7 6.3%
Loss before income tax benefit (3,738) (2,734) (1,004) 36.7% Income
tax benefit (1,390) (965) (425) 44.0% Net loss (2,348) (1,769)
(579) 32.7% Preferred stock dividend (377) (640) 263 -41.1% Loss
applicable to common shareholders $(2,725) $(2,409) $(316) 13.1%
EBITDA(A) $2,625 $2,515 $ 110 4.4% EBITDA as a percentage of
revenues 6.3% 6.3% (A) The definition of "EBITDA" and how that
measure relates to net income is discussed below under Non-GAAP
Financial Measures. EBITDA represents net income, or in this case
net loss, before interest expense, income tax benefit or expense,
depreciation, and amortization. EBITDA is not intended to represent
net income as defined by generally accepted accounting principles
in the United States and such information should not be considered
as an alternative to net income, cash flows from operations or any
other measure of performance prescribed by generally accepted
accounting principles in the United States. We utilize EBITDA
because management believes that investors find it to be a useful
tool to perform more meaningful comparisons of past, present and
future operating results and as a means to evaluate the results of
core on-going operations. WestCoast Hospitality Corporation
Earnings (Loss) Per Share and Hotel Statistics (unaudited) (shares
in thousands) Three months ended March 31, 2004 2003 $ Change %
Change Loss per common share: Basic and diluted $ (0.21) $ (0.19)
Weighted average shares - basic 13,024 12,992 Weighted average
shares - diluted(A) 13,024 12,992 Comparable Hotel Statistics:
Combined (owned, leased, managed and franchised)(B) Average
occupancy(C)(F) 51.3% 48.3% ADR (D) $ 68.39 $ 68.35 $ 0.04 0.1%
RevPAR (E)(F) $ 35.08 $ 33.03 $ 2.05 6.2% (A) For the three months
ended March 31, 2004 and 2003 both operating partnership units
outstanding and options to purchase common stock were anti-dilutive
and are therefore not included in the calculation of loss per
common share. (B) Includes hotels owned, leased, managed and
franchised for greater than one year by WestCoast Hospitality
Corporation. (C) 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. (D) Average daily rate ("ADR") represents
total room revenues divided by the total number of paid rooms
occupied by hotel guests. (E) Revenue per available room ("RevPAR")
represents total room and related revenues divided by total
available rooms. (F) Rooms under significant renovation were
excluded from total available rooms. Due to the short duration of
renovation, in the opinion of management, excluding these rooms did
not have a material impact on RevPAR or average occupancy.
WestCoast Hospitality Corporation Consolidated Balance Sheets
(unaudited) ($ in thousands, except share data) March 31, December
31, 2004 2003 Assets: Current assets: Cash and cash equivalents $
14,337 $8,121 Restricted cash 5,288 4,952 Accounts receivable, net
10,166 9,306 Inventories 1,990 2,140 Prepaid expenses and other
3,626 2,137 Total current assets 35,407 26,656 Property and
equipment, net 269,294 264,039 Goodwill 28,042 28,042 Intangible
assets, net 14,217 14,412 Other assets, net 22,378 20,076 Total
assets $369,338 $353,225 Liabilities: Current liabilities: Accounts
payable $5,977 $6,990 Accrued payroll and related benefits 6,028
4,849 Accrued interest payable 773 775 Advance deposits 454 253
Other accrued expenses 9,528 8,069 Long-term debt, due within one
year 5,763 5,667 Total current liabilities 28,523 26,603 Long-term
debt, due after one year 144,594 145,770 Deferred income 9,090
9,279 Deferred income taxes 16,961 16,761 Minority interest in
partnerships 2,504 2,623 Debentures due WestCoast Hospitality
Capital Trust 47,423 -- Total liabilities 249,095 201,036
Stockholders' equity: Preferred stock - 5,000,000 shares
authorized; $0.01 par value 588,236 issued and outstanding at
December 31, 2003 -- 6 Additional paid-in capital, preferred stock
-- 29,406 Common stock - 50,000,000 shares authorized; $0.01 par
value; 13,045,549 and 13,006,361 shares issued and outstanding 130
130 Additional paid-in capital, common stock 84,387 84,196 Retained
earnings 35,726 38,451 Total stockholders' equity 120,243 152,189
Total liabilities and stockholders' equity $369,338 $353,225
WestCoast Hospitality Corporation Consolidated Statement of Cash
Flows (unaudited) ($ in thousands) Three months ended March 31,
Operating activities: 2004 2003 Net loss $(2,348) $(1,769)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 3,076 2,607 (Gain) loss
on disposition of property and equipment and other assets (189) 332
Deferred income tax provision 200 350 Minority interest in
partnerships (119) (112) Equity in investments (19) (58)
Compensation expense related to stock issuance -- 5 Provision for
(recovery of) doubtful accounts (23) 111 Change in current assets
and liabilities: Restricted cash (336) (341) Accounts receivable
(837) 139 Inventories 150 135 Prepaid expenses and other (1,489)
(1,345) Accounts payable and income taxes payable (1,013) (484)
Accrued payroll and related benefits 1,179 (442) Accrued interest
payable (2) 10 Other accrued expenses and advance deposits 2,293
2,427 Net cash provided by operating activities 523 1,565 Investing
activities: Additions to property and equipment (7,019) (2,658)
Proceeds from disposition of property and equipment 7 5 Proceeds
from investment distribution 122 -- Investment in WestCoast
Hospitality Capital Trust (1,423) -- Advances to WestCoast
Hospitality Capital Trust (2,065) Other, net (14) 136 Net cash used
in investing activities (10,392) (2,517) Financing activities:
Proceeds from note payable to bank 11,000 22,200 Repayment of note
payable to bank (11,000) (20,000) Proceeds from debenture issuance
47,423 -- Repurchase and retirement of preferred stock (29,412) --
Proceeds from short-term debt -- 1,800 Repayment of long-term debt
(1,080) (893) Proceeds from issuance of common stock under employee
stock purchase plan 51 55 Preferred stock dividend payments (1,011)
(646) Principal payments on capital lease obligations -- (99)
Proceeds from option exercises 140 -- Additions to deferred
financing costs (26) (27) Net cash provided by financing activities
16,085 2,390 Change in cash and cash equivalents: Net increase in
cash and cash equivalents 6,216 1,438 Cash and cash equivalents at
beginning of period 8,121 752 Cash and cash equivalents at end of
period $14,337 $2,190 WestCoast Hospitality Corporation
Reconciliation of EBITDA to Net Income (unaudited) ($ in thousands)
The following is a reconciliation of EBITDA to net loss for the
period presented: Three months ended March 31, 2004 2003 EBITDA $
2,625 $ 2,515 Income tax benefit 1,390 965 Interest expense (3,287)
(2,642) Depreciation and amortization (3,076) (2,607) Net loss $
(2,348) $ (1,769) NON-GAAP FINANCIAL MEASURES EBITDA is defined as
net income, or in this case net loss, before interest, taxes,
depreciation and amortization. EBITDA is considered a non-GAAP
financial measurement. We believe it is a useful financial
performance measure for us and for our shareholders and is a
complement to net income and other financial performance measures
provided in accordance with generally accepted accounting
principles in the United States ("GAAP"). We use EBITDA to measure
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 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 it to
net income, 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 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. DATASOURCE: WestCoast Hospitality Corporation
CONTACT: Peter Hausback, VP, Chief Financial Officer of WestCoast
Hospitality Corporation, +1-509-777-6338, or Web site:
http://www.redlion.com/ Web site: http://www.ticketswest.com/ Web
site: http://www.g-b.com/ Web site: http://www.westcoasthotels.com/
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