Red Lion Hotels Corporation
Nov 4, 2009
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Red Lion Reports Third Quarter 2009 Results

Focus on Revenue Mix and Cost Controls Drive Higher Margins

SPOKANE, WA, November 4, 2009 - Red Lion Hotels Corporation (NYSE: RLH) today announced its results for the third quarter and nine-month period ended September 30, 2009. Summary results for the three and nine-month periods follow:

In addition, key hotel operating metrics, on a comparable basis, and reported hotel operating margins for the three and nine-month periods ended September 30, 2009 and September 30, 2008 are highlighted below for owned and leased hotels:

Commenting on the third quarter results, President and Chief Executive Officer Anupam Narayan said, "The weak economic and industry environment continued to drive declines in RevPAR; however, I was pleased with our aggressive sales and marketing efforts and revenue management during the quarter. Those efforts and our continued focus on cost controls enabled us to once again increase our hotel operating margin from the prior-year quarter."

Narayan continued, "We have no debt maturities until September 2011 and we expect to end the year funding all of our operational and capital needs from operating cash flow. The industry continues to have limited forward visibility, and as such we will continue to focus on maximizing our profitability and cash flow by keeping a close eye on our cost structure and driving revenues through our sales and marketing efforts. General expectations are for some stabilization in the industry in the second half of 2010, and we are managing the company with that outlook in mind."

Third Quarter Results

Red Lion's total revenue during the third quarter of 2009 was $50.5 million, compared to $56.9 million for the prior-year period. Revenue from hotels was $45.6 million, down 14.7% from the third quarter of 2008. RevPAR for owned and leased hotels on a comparable basis for the third quarter of 2009 was down 13.8%, due to a 420 basis point decrease in occupancy and an 8.6% decrease in ADR. Despite the lower revenues, hotel direct operating margin for the quarter was 31.5%, an increase of 140 basis points from the prior-year period. System-wide RevPAR (which includes franchised hotels) on a comparable basis for the quarter decreased 15.0%, caused by a 510 basis point decrease in occupancy and an 8.4% decrease in ADR.

Franchise and management revenue was $0.4 million, a decrease of $0.4 million from the prior-year period due primarily to the receipt of $0.3 million in franchise termination fees in the third quarter of 2008. Entertainment revenue was $3.9 million, an increase of $2.0 million compared to the same quarter in 2008 which was due to the successful production of various shows during the quarter with no comparables during the prior-year period.

EBITDA for the third quarter of 2009 was $12.4 million, compared to $14.1 million for the third quarter of 2008, an 11.8% decline on a year-over-year basis. The company's net income was $3.2 million, compared to net income of $4.4 million for the prior-year period. Diluted earnings per share were $0.18, compared to diluted earnings per share of $0.24 for the third quarter of 2008.

Nine Months 2009 Results

Red Lion's total revenue for the nine months ended September 30, 2009 was $129.7 million, compared to $146.3 million in the same period in 2008. Reported revenue from hotels was $117.4 million, down 13.3% from the prior-year period, primarily due to the weak economic and industry environment. Hotel direct operating profit decreased 10.1% to $31.1 million, although direct operating margin increased approximately 100 basis points to 26.5%.

RevPAR for owned and leased hotels on a comparable basis for the first nine months of 2009 was down 13.4%, due to a 520 basis point decrease in occupancy and a 5.9% decrease in ADR. System-wide, RevPAR on a comparable basis decreased 13.1% from the prior-year period, with a 530 basis point decrease in occupancy and a 5.2% decrease in ADR.

Franchise and management revenue was $1.4 million, down $0.2 million from the prior-year period. Entertainment revenue was $9.0 million, up $2.0 million from the prior-year period.

EBITDA for the nine-month period ending September 30, 2009 was $24.8 million, compared to $27.8 million for the prior-year period before a one-time expense for separation costs. The company's net income was $2.1 million, compared to net income of $4.6 million for the prior-year period before the one-time expense for separation costs. Diluted earnings per share for the nine-month period ending September 30, 2009 was $0.12, compared to diluted earnings of $0.25 per share for the prior-year period before the one-time expense for separation costs.

Liquidity and Balance Sheet

As of September 30, 2009, the company had approximately $5.1 million in cash and cash equivalents, and outstanding debt of $133.9 million. The company's debt balance is comprised of $22.0 million outstanding under its variable rate credit facility, $13.3 million under a variable rate note with a bank, $30.8 million of publicly traded unsecured debt in the form of deeply subordinated trust preferred securities and a total of $67.8 million in fixed-rate non-recourse notes collateralized by individual hotels. The company's first term debt maturity is in September 2011 in the aggregate amount of $22.2 million. Only the credit facility, which also matures in September 2011, and the variable rate bank note have restrictive financial covenants, with which the company is in compliance as of September 30, 2009. During the seasonally strong third quarter, the company paid down $8 million of its variable rate credit facility.

Capital expenditures for the first nine months of 2009 totaled $15.1 million, including $5.7 million and $2.6 million spent on renovations at the company's Anaheim and Denver Southeast properties, respectively. The company expects to spend another $0.7 million on additional renovations at Denver Southeast in the fourth quarter of 2009 and another $2.3 million on normal capital expenditures at other properties. Combined, the total expected capital expenditures for 2009 will be approximately $18 million. Given current economic conditions, the company will continue to closely monitor capital spending.

Outlook for 2009

Based on currently available information, the company is revising its guidance for 2009 as follows:

Conference Call Information

The company will hold a conference call at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) on November 5, 2009, to discuss the results for interested investors, analysts and portfolio managers. Management on the call will include President and CEO Anupam Narayan and Chief Financial Officer Anthony Dombrowik.

To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (888) 428-4474. International callers should dial (612) 234-9960.

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 November 5, 2009, through December 5, 2009 at (800) 475-6701 or (320) 365-3844 (International) access code - 119376. 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 September 30, 2009, 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, 2008 and in other documents filed by the company with the Securities and Exchange Commission.

Contact:
Red Lion Hotels Corporation
Julie Langenheim, Investor Relations Manager
(509) 777-6322

Investor Relations:
ICR Inc.
William Schmitt
(203) 682-8200