SPOKANE, WA, April 27, 2006 - Red Lion Hotels Corporation (NYSE:RLH) today announced results for the first quarter ended March 31, 2006.
Financial and Operational Highlights
Arthur M. Coffey, President and CEO of Red Lion Hotels Corporation, commenting on the quarter, said, "The first quarter of 2006 was very successful for our company. We increased revenues, improved our operations and achieved double-digit growth in EBITDA. Our room renovation program is well underway and on track for completion in mid-2006, in time for the busiest travel season of the year. We also recently announced the divestment of our commercial real estate management business, which will allow us to increase our focus on our core hotel business and on our strategy to enhance and expand the Red Lion brand."
First Quarter Results:
The company's total revenues from continuing operations during the quarter were $36.6 million, up 3.2% from the same quarter of 2005. Revenues in the hotels segment were up 2.3% to $31.0 million. Franchise and management revenues declined $0.2 million in the quarter. Higher franchise and management revenues in the previous first quarter included a $0.3 million management contract termination fee triggered by the sale of a hotel that had previously left the system. Revenues in the real estate segment increased $0.1 million in the first quarter of 2006. Revenues in the entertainment segment increased $0.6 million to $3.4 million, due mainly to differences in the type and mix of shows presented in the two quarters.
EBITDA from continuing operations was $2.3 million, up 30.9% from the first quarter of 2005, driven primarily by improved operating results in the hotel segment. Net loss from continuing operations narrowed to $2.7 million, compared to a net loss of $3.0 million in the same quarter last year. Overall net loss narrowed to $3.0 million, or $(0.22) per fully diluted share, compared to a net loss of $3.1 million, or $(0.24) per fully diluted share, in the same quarter last year. The company's quarterly net loss includes a $0.2 million non-cash charge resulting from new accounting rules requiring the expensing of equity-based compensation.
In the first quarter of 2006, RevPAR for comparable system-wide hotels (hotels owned, leased, managed and franchised for at least one year) increased 8.7% over the same quarter of the previous year, to $38.65. This increase was the result of a 9.7% increase in ADR (average daily rate) to $74.98, which was partially offset by a 0.5 percentage point decline in average occupancy during the quarter.
Revenues from continuing operations for owned and leased hotels increased 2.3%, to $31.0 million. This increase was due to a 4.2% increase in RevPAR, which was partially offset by declines in food and beverage revenues and other incidental revenues associated with lower occupancy during the quarter. The increase in RevPAR was driven by a 9.7% increase in ADR while occupancy declined by 2.7 percentage points due mainly to the displacement impact of renovations. It should be noted that in comparing RevPAR and occupancy, the company does not exclude rooms out of service for renovation at its owned and leased hotels. During the quarter, EBITDA for the hotels segment increased $0.5 million to $1.5 million. Hotels segment direct operating margin improved to 10.2% in the first quarter of 2006, from 8.9% in the first quarter of 2005.
"Red Lion produced another quarter of RevPAR growth at system-wide hotels despite the decline in occupancy associated with a significant number of rooms being out of service for renovation at owned and leased hotels. We believe the physical improvements we are making to the hotels are driving increases in average daily rates," commented John Taffin, Executive Vice President, Hotel Operations. "We scheduled our renovation program to take place during the slowest travel seasons of the year in order to minimize the impact of out of service rooms on our hotel operations. Although we expect to experience some additional displacement in the second quarter that will adversely impact our occupancy, upon completion of our room renovations, we will enter the peak travel season in the third quarter with an attractively updated room product."
Capital Reinvestment Program and Renovation Update
As of March 31, 2006, the company had substantially completed room renovations at 11 of 31 owned and leased hotels. Three of those hotels substantially completed renovations in the fourth quarter of 2005: Red Lion Hotel Seattle Airport in Washington, Red Lion Hotel Boise Downtowner in Idaho and the Red Lion Hotel Kelso in Washington. Average RevPAR at these hotels increased 28.0% in the first quarter of 2006, driven by an increase of 18.5% in ADR and a 4.7 percentage point increase in occupancy. This follows average RevPAR growth in these same hotels of 14.5% in the fourth quarter of 2005. The remainder of the company's room renovation plan is expected to be completed by mid-2006.
Other Highlights and Recent Events
In the first quarter of 2006, the company completed the sale of the Red Lion Hotel Hillsboro and the Executive Court portion of the WestCoast Ridpath Hotel. By March 31, 2006, closings under the company's property disposition plan yielded aggregate gross proceeds of approximately $58.3 million. The company has utilized the net proceeds to fund its hotel renovation program and retire approximately $18.1 million in associated debt. The company continues to actively pursue disposition of the remaining three hotels originally identified for sale.
On March 27, 2006, the company entered into a revised credit agreement with Wells Fargo Bank, N.A. providing for a revolving credit facility with a total of $10 million in borrowing capacity for working capital purposes. This facility provides for a two-year $6 million line of credit secured by two hotels, and a one-year $4 million line of credit secured by personal property. The company has no outstanding borrowings under these lines of credit.
On April 11, 2006, the company announced an agreement to divest the real estate management portion of its real estate division in a tax-free reorganization. The divestment is expected to be completed on April 30, 2006. For the full year 2005, the real estate management business contributed $2.3 million and $0.1 million to the company's revenue and operating income, respectively. The divested business will continue to manage the company's office and retail assets after the divestment.
"Our results in the first quarter demonstrate that the resources we have committed to the enhancement of the Red Lion brand continue to produce positive results. As we enter the second quarter, we will continue our efforts to improve our product and enhance and expand the presence of the Red Lion brand. We look forward to the successful execution of our initiatives driving long-term growth," Coffey concluded.
The company will host a conference call at 11:00 a.m. PT (2:00 p.m. ET) on Thursday, April 27, 2006 to discuss earnings for the first quarter ended March 31, 2006. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (800) 553-0351. International callers should dial (612) 332-0819. There is no pass code required for this call. This conference call will be broadcast live over the Internet and can be accessed by all interested parties at www.redlion.com, in the Investor Relations portion of the website. To listen to the live call, please go to the Red Lion Hotels Corporation 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 beginning at 2:30 p.m. PT on April 27, 2006 through May 12, 2006 at (800) 475-6701 or (320) 365-3844 (International) access code - 827087. The replay will also be available shortly after the call on the Red Lion Hotels Corporation website for 90 days.
About Red Lion Hotels Corporation
Red Lion Hotels Corporation (NYSE: RLH) is a hospitality and leisure company primarily engaged in the ownership, management, development and franchising of midscale and upscale full service hotels under its Red Lion® brand. As of March 31, 2006 the Red Lion hotel network was comprised of 61 hotels located in 10 states and one Canadian province, with 10,687 rooms and 521,537 square feet of meeting space. 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.
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 2005 fiscal year and in other documents filed by the company with the Securities and Exchange Commission.
Red Lion Hotels Corporation
Julie Langenheim, Investor Relations Manager
CCG Investor Relations
Crocker Coulson, President
(310) 231-8600 ext 103