Red Lion Hotels Corporation
Oct 28, 2004
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WestCoast Hospitality Corporation Announces Third Quarter Financial Results; ADR Increases 2.0% and RevPAR Increases 7.0%

SPOKANE, Wash., Oct 28, 2004 /PRNewswire-FirstCall via COMTEX/ -- WestCoast Hospitality Corporation (NYSE: WEH) today announced financial results for its third quarter ended September 30, 2004. System-wide RevPAR (revenue per available room) for comparable hotels (hotels owned, leased, managed and franchised for at least one year) increased 7.0% in the third quarter of 2004 to $52.71 from $49.27 in the third quarter of 2003. The increase in RevPAR resulted in part from a 3.2 percentage point increase in average occupancy, to 70.5% in the third quarter of 2004 from 67.3% for the third quarter of 2003. In addition, ADR (average daily rate) increased 2.0% to $74.72 in the most recent quarter from $73.23 during the prior year comparable quarter. The Company reported total revenues of $56.0 million for its third quarter of 2004, compared to $54.5 million for the comparable period in 2003. Earnings per share were $0.27 in the third quarter of 2004, compared to earnings per share of $0.20 in the prior year third quarter. EBITDA (earnings before interest, taxes, depreciation and amortization) increased 8.1% to $12.7 million for the third quarter of 2004 from $11.7 million in the third quarter of 2003.

Arthur Coffey, President and Chief Executive Officer of WestCoast Hospitality Corporation, noted, "Our strategy has been to increase occupancy through strategic marketing and investment in our properties, and then to increase rate as demand heightens for our rooms. Our occupancy has now increased year on year for each of the past ten calendar months and the resulting demand allowed us to increase rates during the third quarter. The combined effect of this strategy is that during the first nine months of 2004 our RevPAR has increased at a faster rate than the RevPAR of hotels we identified as our direct competitors over the past year."

The Company is pleased to announce that its branded websites have become its single largest source of electronically distributed room revenue. The Company has also increased its reservation contribution to system hotels over the past year to 36% during the third quarter of 2004 from 28% during the third quarter of 2003. John Taffin, Executive Vice President, Hotel Operations, noted, "Our brand strengthening initiatives, marketing efforts and technology upgrades are achieving the desired results. Our central reservations system is able to drive more business to our system hotels and a greater percentage of that business is coming through the Company's branded websites. This growth in branded website revenue results in higher yields."

OPERATING RESULTS

The Company reported hotel and restaurant revenue of $50.5 million at owned and leased hotels for the third quarter of 2004, compared to $49.2 million in the third quarter of 2003. Owned hotel RevPAR increased 7.0% during the quarter. Owned hotel ADR increased 1.5% and occupancy increased 3.6 percentage points. Increased ADR and solid expense management drove improvement in operating margins, with hotel and restaurant operating income increasing 12% to $11.7 million in third quarter of 2004 from $10.4 million in the third quarter of 2003.

Franchise, central services and development revenue was $759 thousand in the third quarter of 2004, versus $973 thousand in the comparable period of 2003. The revenue decline was primarily due to the difference in the number of hotels franchised by the company and the associated royalty fees.

Entertainment division revenue was $2.5 million in the third quarter of 2004, compared to $2.0 million in the third quarter of 2003. The increase in revenues was primarily due to an increase in the number of events presented during the quarter, compared to the same quarter of 2003. The increase in operating expenses was largely due to the costs associated with the event presentations, and partially due to increases in ticketing operating costs during the third quarter of 2004. Revenues less direct costs for third quarter 2004 increased slightly when compared to same quarter 2003.

Real estate division revenue declined slightly during the third quarter of 2004 to $2.1 million from $2.2 million. Expenses in the division increased to $1.3 million from $1.2 million. The decrease in revenues was due primarily to lower percentage rents and rent modifications. The increase in expenses was related primarily to increased maintenance expenses at owned properties and increased payroll and commission charges in the division.

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 brokering 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
       Title:       Vice President, Chief Financial Officer
       Phone:  1-509-459-6100
       Internet:    InvestorRelations@WestCoastHotels.com
                    www.westcoasthotels.com
                    www.ticketswest.com
                    www.redlion.com
                    www.g-b.com


                    WestCoast Hospitality Corporation
                  Consolidated Statements of Operations
                               (unaudited)
                            ($ in thousands)

                                           Three months ended
                                              September 30,
                                             2004     2003   $ Change % Change

    Revenue:
       Hotels and restaurants               $50,469  $49,230  $1,239     2.5%
       Franchise, central services and
        development                             759      973    (214)  -22.0%
       Entertainment                          2,533    2,023     510    25.2%
       Real estate                            2,144    2,177     (33)   -1.5%
       Corporate services                        82       81       1     1.2%

       Total revenues                        55,987   54,484   1,503     2.8%

    Operating expenses:
       Hotels and restaurants                38,807   38,848     (41)   -0.1%
       Franchise, central services and
        development                             416      376      40    10.6%
       Entertainment                          2,349    1,845     504    27.3%
       Real estate                            1,270    1,191      79     6.6%
       Corporate services                        78       83      (5)   -6.0%
       Depreciation and amortization          3,283    4,284  (1,001)  -23.4%
       Gain on asset dispositions, net         (134)    (117)    (17)   14.5%
       Conversion expenses                       --       24     (24) -100.0%

       Total direct expenses                 46,069   46,534    (465)   -1.0%

       Undistributed corporate expenses         672      712     (40)   -5.6%

       Total expenses                        46,741   47,246    (505)   -1.1%

    Operating income                          9,246    7,238   2,008    27.7%

    Other income (expense):
       Interest expense                      (4,082)  (2,886) (1,196)   41.4%
       Interest income                          115       96      19    19.8%
       Other income, net                         17       87     (70)  -80.5%
       Equity income in investments, net         81       20      61   305.0%
       Minority interest in
        partnerships, net                       (52)      14     (66) -471.4%

    Income before income tax expense          5,325    4,569     756    16.5%

    Income tax expense                        1,827    1,337     490    36.6%

    Net income                                3,498    3,232     266     8.2%

    Preferred stock dividend                     --     (634)    634  -100.0%

    Income applicable to common
     shareholders                            $3,498   $2,598    $900    34.6%


    EBITDA(1)                               $12,690  $11,739    $951     8.1%
    EBITDA as a percentage of revenues        22.7%    21.5%


  (1) 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 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 Per Share and Hotel Statistics
                                   (unaudited)
                              (shares in thousands)

                                           Three months ended
                                              September 30,
                                              2004     2003  $ Change % Change
    Earnings per common share:
       Basic                                  $0.27    $0.20
       Diluted                                $0.26    $0.20

    Weighted average shares - basic          13,059   13,003
    Weighted average shares - diluted (1)    13,345   13,289

    Comparable Hotel Statistics:

       Combined (owned, leased, managed and
        franchised) (2)

           Average occupancy(3) (6)           70.5%    67.3%
           ADR(4)                            $74.72   $73.23    $1.49    2.0%
           RevPAR(5) (6)                     $52.71   $49.27    $3.44    7.0%


    (1) For the three months ended September 30, 2004 and 2003 options to
        purchase common stock were anti-dilutive and are therefore
        not included in the calculation of earnings per common share.
        286,161 convertible operating partnership ("OP") units are reflected
        in the calculation of diluted weighted average shares for those same
        periods.

    (2) Includes hotels owned, leased, managed and franchised for greater than
        one year by WestCoast Hospitality Corporation.

    (3) 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.

    (4) Average daily rate ("ADR") represents total room revenues divided by
        the total number of paid rooms occupied by hotel guests.

    (5) Revenue per available room ("RevPAR") represents total room and
        related revenues divided by total available rooms.

    (6) 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 Statements of Operations
                               (unaudited)
                            ($ in thousands)

                                          Nine months ended
                                             September 30,
                                            2004      2003   $ Change % Change

    Revenue:
      Hotels and restaurants              $129,476  $126,671  $2,805     2.2%
      Franchise, central services and
       development                           2,050     2,950    (900)  -30.5%
      Entertainment                          7,952     6,008   1,944    32.4%
      Real estate                            6,828     6,843     (15)   -0.2%
      Corporate services                       248       256      (8)   -3.1%

      Total revenues                       146,554   142,728   3,826     2.7%

    Operating expenses:
      Hotels and restaurants               109,548   106,603   2,945     2.8%
      Franchise, central services and
       development                           1,008     1,268    (260)  -20.5%
      Entertainment                          6,998     5,327   1,671    31.4%
      Real estate                            3,774     3,624     150     4.1%
      Corporate services                       224       242     (18)   -7.4%
      Depreciation and amortization          9,574    10,047    (473)   -4.7%
      (Gain) loss on asset dispositions,
       net                                    (530)      579  (1,109) -191.5%
      Conversion expenses                       --       392    (392) -100.0%

      Total direct expenses                130,596   128,082   2,514     2.0%

      Undistributed corporate expenses       2,305     2,040     265    13.0%

      Total expenses                       132,901   130,122   2,779     2.1%

    Operating income                        13,653    12,606   1,047     8.3%

    Other income (expense):
      Interest expense                     (11,452)   (8,241) (3,211)   39.0%
      Interest income                          343       303      40    13.2%
      Other income (expense), net               37      (205)    242  -118.0%
      Equity income in investments, net         89        99     (10)  -10.1%
      Minority interest in
       partnerships, net                        68       144     (76)  -52.8%

    Income before income tax expense         2,738     4,706  (1,968)  -41.8%

    Income tax expense                         783     1,449    (666)  -46.0%

    Net income                               1,955     3,257  (1,302)  -40.0%

    Preferred stock dividend                  (377)   (1,915)  1,538   -80.3%

    Income applicable to common
     shareholders                           $1,578    $1,342    $236    17.6%

    EBITDA(1)                              $23,764   $22,994    $770     3.3%
    EBITDA as a percentage of revenues       16.2%     16.1%


    (1) 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 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 Per Share and Hotel Statistics
                                   (unaudited)
                              (shares in thousands)

                                           Nine months ended
                                              September 30,
                                              2004     2003  $ Change % Change
    Earnings per common share:
       Basic and Diluted                      $0.12    $0.10

    Weighted average shares - basic          13,043   12,997
    Weighted average shares - diluted (1)    13,330   13,283

    Comparable Hotel Statistics:

       Combined (owned, leased, managed and
        franchised) (2)

           Average occupancy (3) (6)          61.4%    58.0%
           ADR (4)                           $71.65   $71.14    $0.51    0.7%
           RevPAR (5) (6)                    $44.01   $41.25    $2.76    6.7%


    (1) For the nine months ended September 30, 2004, 752 options to purchase
        common stock were dilutive and are included in the
        calculation of diluted earnings per common share.  For the nine months
        ended September 30, 2003 all options to purchase
        common stock were anti-dilutive and are therefore not included in the
        calculation of earnings per common share.
        286,161 convertible operating partnership ("OP") units are reflected
        in the calculation of diluted weighted average shares
        for both periods.

    (2) Includes hotels owned, leased, managed and franchised for greater than
        one year by WestCoast Hospitality Corporation.

    (3) 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.

    (4) Average daily rate ("ADR") represents total room revenues divided by
        the total number of paid rooms occupied by hotel guests.

    (5) Revenue per available room ("RevPAR") represents total room and
        related revenues divided by total available rooms.

    (6) 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)

                                                September 30,     December 31,
                                                    2004              2003
    Assets:
      Current assets:
        Cash and cash equivalents                  $16,261            $8,121
        Restricted cash                              4,632             4,952
        Accounts receivable, net                    10,753             9,306
        Inventories                                  2,037             2,140
        Prepaid expenses and other                   2,879             2,137
            Total current assets                    36,562            26,656

      Property and equipment, net                  292,339           264,039
      Goodwill                                      28,042            28,042
      Intangible assets, net                        13,838            14,412
      Other assets, net                             10,933            20,076

            Total assets                          $381,714          $353,225

    Liabilities:
      Current liabilities:
        Accounts payable                            $5,547            $6,990
        Accrued payroll and related
         benefits                                    6,034             4,849
        Accrued interest payable                       800               775
        Advance deposits                               217               253
        Other accrued expenses                      10,882             8,069
        Long-term debt, due within one
         year                                        8,581             5,667
            Total current liabilities               32,061            26,603

      Long-term debt, due after one year           147,546           145,770
      Deferred income                                8,713             9,279
      Deferred income taxes                         18,808            16,761
      Minority interest in partnerships              2,555             2,623
      Debentures due WestCoast
       Hospitality Capital Trust                    47,423                --
            Total liabilities                      257,106           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;
       13,060,919 and 13,006,361 shares
       issued and outstanding                          131               130
      Additional paid-in capital, common
       stock                                        84,448            84,196
      Retained earnings                             40,029            38,451
            Total stockholders' equity             124,608           152,189

            Total liabilities and
             stockholders' equity                 $381,714          $353,225


                        WestCoast Hospitality Corporation
                      Consolidated Statement of Cash Flows
                                   (unaudited)
                                ($ in thousands)

                                                      Nine months ended
                                                         September 30,
    Operating activities:                            2004              2003

      Net income                                    $1,955            $3,257
      Adjustments to reconcile net income
       to net cash
        provided by operating activities:
          Depreciation and amortization              9,574            10,047
          (Gain) loss on disposition of
           property and equipment and
           other assets                               (530)              579
          Non-cash reduction of preferred
           stock resulting in gain                      --              (522)
          Write-off of deferred loan fees               --               790
          Deferred income tax provision              2,047               500
          Minority interest in
           partnerships                                (68)             (144)
          Equity in investments                        (89)              (99)
          Compensation expense related to
           stock issuance                               --                 5
          Provision for doubtful accounts              188               337
          Change in current assets and
           liabilities:
             Restricted cash                           320            (2,140)
             Accounts receivable                    (1,635)             (314)
             Inventories                               103                80
             Prepaid expenses and other               (742)              114
             Accounts payable                       (1,443)              476
             Accrued payroll and related
              benefits                               1,185               118
             Accrued interest payable                   25                85
             Other accrued expenses and
              advance deposits                       3,411               997

          Net cash provided by operating
           activities                               14,301            14,166

    Investing activities:
      Purchases of property and equipment          (19,069)           (5,141)
      Proceeds from disposition of
       property and equipment                          198               398
      Proceeds from disposition of
       investment                                       94               441
      Investment in WestCoast Hospitality
       Capital Trust                                (1,423)               --
      Advances to WestCoast Hospitality
       Capital Trust                                (2,116)               --
      Proceeds from collections under
       note receivable                               1,725                --
      Distributions from equity investee               449                --
      Other, net                                        30                62

         Net cash used in investing
          activities                               (20,112)           (4,240)

    Financing activities:
      Proceeds from note payable to bank            11,000            47,700
      Repayment of note payable to bank            (11,000)          (99,800)
      Proceeds from debenture issuance              47,423                --
      Repurchase and retirement of
       preferred stock                             (29,412)               --
      Proceeds from long-term debt                      83            55,200
      Proceeds from short-term debt                     --             2,658
      Repayment of long-term debt                   (3,335)           (2,806)
      Proceeds from issuance of common
       stock under
       employee stock purchase plan                    113                99
      Preferred stock dividend payments             (1,011)           (1,927)
      Principal payments on capital lease
       obligations                                      --              (268)
      Proceeds from option exercises                   140                --
      Additions to deferred financing
       costs                                           (50)           (1,466)

         Net cash provided by (used in)
          financing activities                      13,951              (610)

    Change in cash and cash equivalents:
      Net increase in cash and cash
       equivalents                                   8,140             9,316
      Cash and cash equivalents at
       beginning of period                           8,121               752

      Cash and cash equivalents at end of
       period                                      $16,261           $10,068


                          WestCoast Hospitality Corporation
                       Reconciliation of EBITDA to Net Income
                                     (unaudited)
                                  ($ in thousands)

                                         Three months ended  Nine months ended
                                            September 30,       September 30,
                                             2004     2003     2004     2003

     EBITDA                                $12,690  $11,739  $23,764  $22,994
       Income tax expense                   (1,827)  (1,337)    (783)  (1,449)
       Interest expense                     (4,082)  (2,886) (11,452)  (8,241)
       Depreciation and amortization        (3,283)  (4,284)  (9,574) (10,047)
     Net income                             $3,498   $3,232   $1,955   $3,257


                             NON-GAAP FINANCIAL MEASURES

EBITDA is defined as net income or 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.

SOURCE WestCoast Hospitality Corporation

Peter Hausback, Vice President, Chief Financial Officer of
WestCoast Hospitality Corporation, +1-509-459-6100, or
InvestorRelations@WestCoastHotels.com
www.ticketswest.com

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