SPOKANE, WA, May 5, 2010 - Red Lion Hotels Corporation (NYSE: RLH), a western U.S.-based owner and franchisor of midscale hotels, today announced its results for the first quarter ended March 31, 2010.
Total revenue during the first quarter was $34.3 million with revenue from hotels of $30.6 million; both consistent with the prior year period results of $34.6 million and $30.8 million, respectively. EBITDA before special items for the first quarter of 2010 was $1.7 million, compared to $1.6 million for the first quarter of 2009. Net loss before special items was $3.6 million in the quarter, or $0.19 per diluted share, compared to a net loss of $3.3 million, or $0.18 per diluted share, for the prior year period. Reported net loss attributable to Red Lion for the first quarter including special items was $4.4 million, or $0.24 per diluted share.
President and Chief Executive Officer Jon Eliassen commented, "We are very pleased to report a 4.9% increase in RevPAR at the outset of 2010, breaking the trend of RevPAR declines in the preceding six quarters, and in contrast with continued broader industry declines. During the first quarter, we executed on our strategy of capturing more business from the group and preferred corporate segments. We also drove higher rate in the transient segment. To further support our sales and franchise growth strategies, we added key executives in the first quarter with four senior management appointments."
Summary results for the three-month periods follow:
(1) Excludes $1.2 million of cash and non-cash costs recorded in the first quarter of 2010 related to the separation of the Company's former President and CEO included with undistributed corporate expenses.
In addition, key hotel operating metrics on a comparable basis, and reported hotel revenues and operating margin for the first quarter ended March 31, 2010 and March 31, 2009, are highlighted below for owned and leased hotels:
First Quarter 2010 Results
Comparing the first quarter of 2010 to the first quarter of 2009, occupancy for owned and leased hotels increased 220 basis points to 48.2%. ADR held steady at $80.10 resulting in a 4.9% increase in RevPAR. Including franchised hotels, system-wide RevPAR on a comparable basis for the quarter increased 1.7% due to a 130 basis point increase in occupancy, partially offset by a 1.0% decline in ADR.
Revenue from hotels of $30.6 million was relatively level compared to the prior year period. Rooms revenue increased $0.8 million, or 4.1%. RevPAR for comparable owned and leased hotels increased 4.9% driven by business mix and revenue management initiatives. The focus on higher rated group and preferred corporate guests reduced the Company's reliance on bookings sourced from discount online travel agent channels.
As part of the Company's emphasis on long-term profitability, we are implementing changes to our food and beverage operations, including modifying offerings in select markets and emphasizing breakfast-inclusive room rate options. Primarily as a result of the implementation of these changes, food and beverage revenue declined $1.1 million in the quarter, or 12.0%.
Hotel direct operating margin declined to 12.7 percent during the quarter from 13.4 percent in the same period in 2009 due primarily to the increase in sales and technology resources to help position the Company to capitalize on an industry recovery.
Revenue from the franchise and entertainment segments and the related profitability of those operations were much the same year-over-year.
Change in Accounting Principle
New accounting standards regarding consolidation of variable interest entities ("VIE") became effective on January 1, 2010. The Company's Central Program Fund ("CPF") now meets the definition of a VIE. The CPF is our system-wide marketing support resource that benefits both owned and franchised hotels, however historically only the Company's owned hotels' proportionate share of CPF expenses were recognized. Based on the new guidance, the Company will now include all of the expenses and other balances of the CPF in the consolidated financial statements, including revenue received from franchisees to support CPF activities. The adoption of this standard was applied retrospectively and the impact of this consolidation on reported results for the three months ended March 31, 2010 and 2009 was an additional expense before the impact of income tax of $0.4 million and $0.6 million, respectively. The activities of the CPF are cyclical throughout any one year and upon consolidation had essentially no impact on full year 2009 results. The Company expects the net impact to be immaterial to full year 2010 results as well. For additional information, a detail of the consolidation of the CPF for the current period is included as a table to this release titled "Impact of Change in Accounting Principle."
Liquidity and Balance Sheet
Capital expenditures during the quarter ended March 31, 2010 totaled $1.5 million. 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. As of March 31, 2010, the Company had approximately $4.3 million in cash and cash equivalents, and outstanding debt of $137.4 million.Key Executive Additions
During the first quarter, the following appointments to key leadership positions were announced, underscoring the Company's commitment to its operational, sales and franchise growth strategies:
Outlook for 2010
While first quarter RevPAR performance is encouraging, the Company remains cautious on its outlook for 2010 given limited visibility of the summer selling season which drives a majority of revenue and profit. The lodging industry as a whole remains in a period of considerable rate pressure given the aggressive marketing and sales environment and associated short booking windows. The Company hopes to see reversal of these trends later in 2010 and into 2011. Despite these general concerns, based on currently available information, the Company is increasing its guidance for 2010 as follows:
Chief Operating Officer George Schweitzer noted, "We are pleased with the results we have seen from our sales initiatives including our breakfast-inclusive room sales strategy. We expect to realize continued benefits from our sales and marketing investments as the year progresses. For the balance of 2010, we will continue to focus on our mix of business in an effort to drive RevPAR growth. With franchise growth another top priority, we are aggressively marketing the Red Lion brand to franchisees in the west as a strong alternative to less flexible national brands."
Conference Call Information
The Company will conduct a conference call on May 6, 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 Senior Vice President 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) 230-1951. International callers should dial (612) 234-9959.
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 May 6, 2010 through June 6, 2010 at (800) 475-6701 or (320) 365-3844 (International) access code - 155110. 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 March 31, 2010, 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, 2009 and in other documents filed by the Company with the Securities and Exchange Commission.