SPOKANE, WA, October 27, 2005 Red Lion Hotels Corporation (NYSE:RLH) today announced results for the third quarter and the nine months ended September 30, 2005.
Key Third Quarter Results
"This was a very active and positive quarter for our company. We demonstrated our commitment to the Red Lion brand by changing our company name, introducing our new brand image and announcing our plan to expand to 100 markets. We completed the sale of six non-core hotel properties under our asset sale program and our capital reinvestment program is on track. Renovations progressed at three of our company-owned hotels and we are pleased with the gains in ADR achieved at these hotels. The results were in line with our expectations and validate our renovation strategy," said Mr. Arthur M. Coffey, President and CEO of Red Lion Hotels Corporation.
Total revenues from continuing operations during the quarter were $47.2 million, up 0.3% from the same quarter of 2004. Revenues in the hotel segment were up 1.7% to $43.0 million. This increase was due to a 4.2% increase in RevPAR, which was partially offset by a decline in banquet revenue from reduced group business. Franchise and management revenues increased 15.9% to $0.8 million. Revenues in the entertainment segment were down $0.7 million or 27.8%, due to the fact that no shows were presented during the quarter, compared to four shows in the same quarter last year. Revenues in the real estate segment grew modestly to $1.3 million.
EBITDA from continuing operations was $10.8 million, up 4.6% from the same quarter of 2004, reflecting a slightly improved profit margin. Net income from continuing operations was $2.8 million, or $0.22 per fully diluted share, up 6.1% from the same quarter last year. Net income applicable to common shareholders was $6.8 million, or $0.51 per fully diluted share, up 93.2% from the same quarter last year, and includes a $2.7 million net after-tax gain from the sale of non-core hotel properties.
Total revenues from continuing operations for the nine months ended September 30, 2005 were $126.9 million, up 1.7% from the same period last year. EBITDA from continuing operations increased 2.7%, to $20.1 million. Net income from continuing operations was $0.6 million, or $0.05 per fully diluted share, down 53.2%% from the same period last year. Net income applicable to common shareholders was $5.4 million, or $0.41 per fully diluted share, up 240% from the same period last year, and includes a $2.7 million net after-tax gain from the sale of non-core hotel properties.
In the third quarter of 2005, RevPAR (revenue per available room) for comparable system-wide hotels (hotels owned, leased, managed and franchised for at least one year) increased by 5.5% over the same quarter of the previous year, to $55.90. This increase was primarily the result of a 4.7% increase in ADR (average daily rate) to $78.92, and a 0.6 point increase in average occupancy.
RevPAR from continuing operations at owned and leased hotels increased by 4.2%, driven by a 4.7% increase in ADR and offset by a 0.3 point decline in average occupancy. Average occupancy has not been adjusted to reflect out-of-service rooms related to the renovation program. Hotel revenues from continuing operations increased 1.7%, to $43.0 million. This was due to the 4.2% increase in RevPAR, and partially offset by the previously discussed decline in banquet revenue associated with reduced group business. Hotel operating expenses increased 1.6%, to $31.4 million. Hotel gross margin was unchanged at 27.0%.
"This marks the seventh consecutive quarter of RevPAR growth at Red Lion Hotels. We continued to improve our hotel metrics despite the potential for disruptions related to our renovation program. This demonstrates that our plan to minimize disruption and displacement at locations undergoing renovation is proceeding successfully," commented John Taffin, Executive Vice President, Hotel Operations. "We also continued to focus on elevating our service standards. Our newly expanded service training program is designed to reinforce the high standards of personal connection and service that represent the 'Red Lion Way.'"
The company's new service training program will be implemented across all hotels in the Red Lion network, beginning with the newly renovated hotels. This first phase of the program is designed to capitalize on the synergies between the physical enhancements made to the hotels and the company's increased focus on connecting with guests on a personal level. The program will be instituted at all owned, managed and franchised hotels.
Capital Reinvestment Program and Renovation Update
In the quarter, the company continued renovations at the Red Lion Hotel Seattle Airport in Washington, Red Lion Hotel Boise Downtowner in Idaho and the Red Lion Hotel Kelso in Washington. Third quarter results from these three hotels showed significant growth in ADR that contributed to their aggregate RevPAR growth, despite lower occupancy rates caused by renovated rooms being out of service. Renovations at these hotels are scheduled to be completed during the fourth quarter of 2005.
In October, renovations commenced at additional hotels and by year-end, 17 hotels will either be undergoing or have completed the renovation process. The company expects rate increases at these hotels, followed by growth in average occupancy as the upgrades are completed and all of the rooms are made available. The full scope of this $40 million capital reinvestment plan involves the upgrade of 31 company-owned Red Lion Hotels by mid-2006, giving the company a strong network of upgraded hotels as it enters the high travel season in the summer of 2006.
In the quarter, the company completed the sales of six hotel properties generating aggregate gross proceeds of $25.4 million. In addition, the company has non-contingent sale agreements in place for another hotel and the Crescent Court commercial complex, which are expected to close in the fourth quarter and generate gross proceeds of $24.2 million. The company also has contingent agreements for the sale of two other hotels. The company is selling these non-core assets to finance its $40 million capital reinvestment program. There are two remaining hotel properties that the company continues to market under this program.
In July, the company completed the sale of a fifty percent interest in the Kalispell Center retail and hotel complex in Kalispell, Montana. The purchaser was GVD Commercial Properties, Inc., an experienced developer that will help drive a multi-phase expansion and renovation of the retail property and allow the company to focus on its core hotel business.
Also in July 2005, Red Lion launched its newly designed website, www.redlion.com, another key element in the company's plan to enhance its infrastructure. Among the site's many industry-leading tools and functions are reference rates that give a guest an idea of costs even if the guest does not know travel dates, the ability to compare Red Lion's rates against rates on other travel sites, online access to a live reservation agent and online redemption of the company's proprietary "Only4Me Web Deals."
After focusing for the past several years on developing a modern, scalable and efficient infrastructure, the company unveiled its new and revitalized brand image in September 2005. To demonstrate its commitment to the Red Lion brand, the company also changed its name from WestCoast Hospitality Corporation (NYSE: WEH) to Red Lion Hotels Corporation (NYSE: RLH). In addition, the company adopted a new corporate logo which communicates the strength, vitality and aggressiveness that represent today's Red Lion. The new logo is available for viewing at www.redlion.com/graphics.
Also in September 2005, the company announced its growth strategy that leverages its brand equity in the Western U.S. to expand the Red Lion brand to more than 100 markets over the next five years. The initial focus of the expansion program will be in major cities in California, Arizona, Colorado, Minnesota and Texas. At the end of September 2005, the company highlighted the revitalized Red Lion brand and launched its new franchise initiative at The Lodging Conference in Phoenix, Arizona.
"This is an exciting time for our company. During the quarter, we continued to execute on our plan to rejuvenate the Red Lion brand and implement our growth strategy. We are laying the foundation that will support our growth, and we will continue to implement our strategies to expand the Red Lion brand," Coffey concluded.
The company will host a conference call at 11:00 a.m. PDT (2:00 p.m. EDT) on Thursday, October 27, 2005 to discuss earnings for the third quarter of 2005. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 639-6205. International callers should dial (703) 925-2608. There is no pass code required for this call. This conference call will also 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 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 shortly after the call on the Red Lion 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 upper mid-scale, full service hotels under its Red Lion® brand. The RLH hotel network is comprised of over 66 hotels located in 11 states and one Canadian province, with more than 11,600 rooms and 564,000 square feet of meeting space. The company also operates an entertainment and event ticket distribution business and a real estate business that develops, manages and brokers sales and leases of commercial real estate. The company is headquartered in Spokane, WA. For more information, please visit our 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 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 2004 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