SPOKANE, WA, February 13, 2008 - Red Lion Hotels Corporation (NYSE: RLH) today announced its fourth quarter and full-year results for the year ended December 31, 2007. The Company completed a successful 2007, with continued growth in RevPAR and EBITDA. Summary results from the three month and full-year period follow:
1 Excludes certain gains and expenses on the extinguishment of debt and the gain on the disposition of our real estate management business, all in 2006, net of their impact on income taxes. A schedule of the Disclosure of 2006 Special Items is included with this release.
In addition, key hotel operating metrics, on a comparable basis, and hotel operating margins for the fourth quarter and year are highlighted below for owned and leased hotels:
As previously announced, Anupam Narayan has been named President and Chief Executive Officer following the retirement of Arthur Coffey, the company's former President and CEO. Mr. Narayan was formerly Red Lion's Chief Investment and Financial Officer.
Mr. Narayan, commenting on the fourth quarter and full year results, said, "We were able to drive solid performance in the fourth quarter through strong RevPAR increases which led to significant growth in EBITDA and hotel operating margin. We are pleased to see continuing rate and occupancy increases from our enhanced brand, systems and service training at our revitalized properties. We also realized a substantial EBITDA increase in our Entertainment division during the quarter from the presentation of Walt Disney's The Lion King in Honolulu."
Mr. Narayan continued, "2007 was an excellent year for Red Lion as we succeeded in achieving our goals in RevPAR, margins and EBITDA, while repositioning and strengthening our brand. Our acquisition of the Anaheim hotel is an example of the execution of our long-term growth strategy of acquiring properties in key hub cities in the U.S. We believe the turmoil in the capital markets has created a favorable environment for strategic buyers with strong balance sheets. Our commitments to our core business and our strong balance sheet have positioned us well to execute on our plan in a challenging market."
Fourth Quarter Results
Red Lion's total revenue during the fourth quarter was $44.1 million, up 11.6% from the prior-year period. Revenue from hotels was $36.9 million, up 3.7% from the fourth quarter of 2006, driven by an 8.6% increase in RevPAR at owned and leased hotels. Hotel direct operating profit increased 19.4% to $5.8 million from the prior-year period, a 205 basis point increase to 15.7% versus 13.6% in 2006. Fourth quarter 2007 results included no revenue from the Red Lion Hotel Sacramento, compared to three months of revenue in the prior-year period. In addition, fourth quarter 2007 contained two and a half months revenue from the recently purchased Anaheim property, which was not in the prior-year period results. On a comparable property basis, hotel revenue increased 6.0%.
The 8.6% RevPAR increase for owned and leased hotels in the fourth quarter 2007 was driven by a 4.5% increase in ADR and a 200 basis point increase in occupancy. System-wide, RevPAR increased 2.8% quarter on quarter, led by a 4.2% increase in ADR and partially offset by an 80 basis point decrease in occupancy. We believe the system-wide results were somewhat negatively impacted by renovations being conducted at franchised hotels to meet Red Lion's enhanced brand standards.
Franchise and management revenue was $0.5 million, slightly down from the prior-year period due to the receipt of a franchise termination fee in the prior period and fewer franchisees. Entertainment revenue was $5.8 million, an increase of $3.4 million from the same quarter in 2006 primarily due to the successful 12-week presentation of Walt Disney's The Lion King in Honolulu, Hawaii which will not be repeated in 2008.
EBITDA from continuing operations for the fourth quarter was $4.7 million, an increase of 24.3% excluding 2006 special items, while net loss from continuing operations was $1.1 million - an improvement of $0.3 million excluding 2006 special items. Loss per fully diluted share from continuing operations was $0.06, versus a loss of $0.07 per fully diluted share excluding 2006 special items.
Full Year 2007 Results
Red Lion's total revenue for 2007 was $186.9 million, up 9.7% from full year 2006. Reported revenue from hotels was $166.2 million, up 7.3% from 2006, driven by a 12.3% increase in RevPAR at owned and leased hotels. For the full year 2007, hotel direct operating profit increased 20.2% to $38.7 million, and hotel direct operating margin saw a 250 basis point increase year-over-year to 23.3%. Full year 2007 results included the effect of the sublease and franchising of the Red Lion Hotel Sacramento in July 2007 (which resulted in Sacramento moving out of the hotel segment and into the franchise segment). In addition, 2007 results also included revenue from the acquisition of the Anaheim Maingate Hotel in October 2007. On a comparable property basis, hotel revenue increased 9.6%.
The 12.3% RevPAR increase for owned and leased hotels for 2007 was driven by a 6.6% increase in ADR and a 310 basis point increase in occupancy, as well as increases in rooms that were out of service for renovation in the first half of 2006. System-wide, RevPAR increased 7.6% year-over-year, led by a 5.9% increase in ADR and a 100 basis point increase in occupancy.
Franchise and management revenue was $2.8 million, down 3.4% from the prior year primarily due to non-recurring termination fees and fewer franchisees in the system paying royalties. Entertainment revenue was $14.8 million, an increase of 37.5% from 2006 due mainly to the $3.4 million increase in the fourth quarter of 2007 from the 12-week presentation of Walt Disney's The Lion King.
EBITDA from continuing operations for 2007 was $33.1 million, an increase of 23.3% from 2006 excluding 2006 special items, while net income from continuing operations was $5.2 million, a $3 million increase from the previous year excluding 2006 special items. Earnings per fully diluted share increased to $0.27 from $0.14 per share excluding 2006 special items.
Outlook for 2008
The company is initiating the following guidance for 2008:
The company expects to take a charge of approximately $4 million for separation costs related to the retirement of its former President and CEO, Arthur Coffey. Red Lion's 2008 EBITDA guidance does not include the impact of this charge.
Red Lion Anaheim Update
The company has completed design work for the renovation of its recently acquired Anaheim hotel and will begin work on guest rooms in the second quarter of this year. As previously mentioned, the company does not expect the hotel to fully cover the lease payments in 2008 with the majority of this shortfall coming in the first half of the year while its rooms are under renovation.
During the three months ended December 31, 2007, the company repurchased 924,200 shares for a total cost of $9.1 million. The remaining $0.9 million under the plan was used to buy 93,000 shares in January 2008, completing the $10 million program. As of January 31, 2008, the company had 18.2 million common shares outstanding.
Liquidity and Balance Sheet
As of December 31, 2007, the company had $17.2 million in cash and cash equivalents, and interest bearing debt obligations of $114.0 million - all of which are at fixed interest rates. The company continues to maintain a $50 million line of credit, which remains unused and is available to fund future acquisitions or other investments as market conditions warrant.
For 2008, the company is projecting capital expenditures of $16.7 million driven by ongoing maintenance and hotel improvement capital expenditures of $11.7 million and Anaheim renovation costs.
Conference Call Information
The Company will hold a conference call at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) on February 14, 2008, to discuss the results for interested investors, analysts and portfolio managers. Management on the call will include President and CEO Anupam Narayan and John Taffin, Executive Vice President, Hotel Operations.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 288-8961. International callers should dial (612) 288-0337.
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 3:00 p.m. PST on February 14, 2008, through March 31, 2008 at (800) 475-6701 or (320) 365-3844 (International) access code - 908979. 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 December 31, 2007 the RLH hotel network was comprised of 53 hotels located in eight states and one Canadian province, with 9,388 rooms and 472,529 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, 2006 and in other documents filed by the company with the Securities and Exchange Commission.
Red Lion Hotels Corporation
Julie Langenheim, Investor Relations Manager