SPOKANE, WA, February 16, 2010 - Red Lion Hotels Corporation (NYSE: RLH), a western U.S.-based owner of midscale and upscale hotels, today announced its results for the fourth quarter and full year ended December 31, 2009.
Fourth quarter RevPAR for owned and leased hotels decreased 7.2%, a sign of slowing RevPAR declines
Fourth quarter occupancy held steady year-over-year
2009 EBITDA was $27.6 million before special items, down $3.8 million year-over-year despite a $22.2 million revenue decline
The Company completed amendments to its credit facility that modified covenants and increased financial flexibility
The Company recognized an impairment charge of $8.7 million
Total revenue during the fourth quarter was $35.7 million, down 13.7 percent from $41.3 million in the prior-year period. Revenue from hotels was $32.0 million, down 9.0 percent from $35.2 million in the fourth quarter of 2008. EBITDA before special items for the fourth quarter of 2009 was $2.7 million, compared to $3.6 million for the fourth quarter of 2008. Net loss before special items was $3.1 million in the quarter, or $0.16 per diluted share, compared to a net loss of $2.6 million, or $0.15 per diluted share, for the prior-year period. Reported Net Loss for the fourth quarter including special items was $8.7 million, compared to $3.9 million in the prior year period.
President and Chief Executive Officer Jon Eliassen commented, "The lodging industry environment continues to be challenging, but I am encouraged by the fact that our RevPAR performance only declined at a single-digit level in the fourth quarter. Our performance was generally better than that of the industry, which on average continued to report double-digit RevPAR declines."
Eliassen continued, "Throughout early 2009, our active response to the economic downturn helped minimize the negative impact to the bottom line. Our expense management initiatives exceeded our goals for cost containment. We are well positioned to maximize profitability and cash flow when the economy begins to recover. While we reduced operating expense, we have continued to focus on customer service, as positively reflected in our customer satisfaction rankings. In parallel, our ongoing customer retention efforts helped us to grow revenue from our guest frequency program, the Red Lion R&R Club, by 3.7% and net membership by 35% year-over-year."
Summary results for the three-month and full year periods follow:
(1)Excludes $8.7 million impairment charge incurred in the fourth quarter of 2009; restructuring charges of approximately $0.1 million and $2.1 million in the fourth quarters of 2009 and 2008, respectively; and $3.7 million in separation costs incurred in the first quarter of 2008 related to the retirement of the Company's former President and CEO.
In addition, key hotel operating metrics on a comparable basis, and reported hotel operating margins for the fourth quarter and full-year periods ended December 31, 2009 and December 31, 2008 are highlighted below for owned and leased hotels:
Fourth Quarter Results
Comparing the fourth quarter 2009 to 2008, occupancy for owned and leased hotels held steady at 46.9 percent year-over-year. ADR declined 7.0 percent resulting in a 7.2 percent decline in RevPAR. System-wide RevPAR (which includes franchised hotels) on a comparable basis for the quarter decreased 7.0 percent due to a 100 basis point decline in occupancy and a 4.9 percent decline in ADR.
Compared to the prior-year period, revenue from hotels was down 9.0 percent to $32.0 million primarily as a result of a 7.6%, or $1.7 million, decrease in room revenue reflecting continuing challenges across all market segments with the largest decline coming in the group segment. Hotel direct operating margin declined to 10.7 percent during the fourth quarter 2009 compared to 13.6 percent in 2008. The margin decrease in the quarter was primarily due to investments in sales and marketing technology and personnel resources, as well as promotional initiatives designed to help position the company for room revenue growth in 2010.
Franchise and management revenue was relatively flat at $0.3 million year-over-year, and entertainment revenue decreased to $2.7 million, a result of the mix of shows presented during the comparable periods. However, direct operating margin for the entertainment segment increased by over 900 basis points to 23.1% due primarily to expense management in ticketing operations.
Full Year 2009 Results
Total revenue for the full year ended December 31, 2009, was $165.4 million, down 11.8 percent from $187.6 million in 2008. Reported revenue from hotels was $149.4 million, down 12.4 percent from $170.6 million in the prior year. Despite a $4.8 million decline in hotel direct operating profit to $34.5 million, hotel direct operating margin was maintained at 23.1% year-over-year due to the Company's successful focus on profitability.
RevPAR for owned and leased hotels on a comparable basis for 2009 was down 12.1 percent due to a 380 basis point decrease in occupancy and a 6.3 percent decrease in ADR. System-wide, RevPAR on a comparable basis decreased 11.9 percent year-over-year due to a 420 basis point decline in occupancy and a 5.3 percent decline in ADR.
Franchise and management revenue declined $0.2 million to $1.7 million, primarily due to a reduction of franchised hotels in the system. Entertainment revenue decreased slightly to $11.7 million, or by 2.7 percent, and direct operating margin for Entertainment increased to 19.0 percent from 6.5 percent reported in 2008.
EBITDA before special items for the full year ended December 31, 2009 was $27.6 million, compared to $31.4 million in the prior year. Net loss in 2009 before special items totaled $1.0 million, or $0.05 per diluted share, compared to net income before special items of $2.0 million, or $0.11 per diluted share, in the prior year.
During the fourth quarter, the Company recognized an impairment loss of $8.5 million on the Red Lion Denver Southeast hotel. The property was purchased in May 2008 for $25.3 million and the Company has spent approximately $5.0 million in renovations since the acquisition. Since September 2008, the Denver market has experienced a substantial and sustained decline in demand for hotel rooms across all market segments. In addition, the Company also recognized a $0.2 million impairment loss on a second property. These impairments are reflected as a special item for 2009 and separately identified in the Company's operating results.
Liquidity and Balance Sheet
As of December 31, 2009, the company had approximately $3.9 million in cash and cash equivalents, and outstanding debt of $137.1 million. The Company was in compliance with all covenants of its credit facilities as of December 31, 2009.
On February 8, 2010, the Company signed an amendment to each of its primary credit line and term note to increase the Company's financial flexibility. The amendments modified the Company's total leverage ratio and senior leverage ratio covenants for 2010 and 2011. In exchange, the rate in each case was increased modestly and the capacity under the line of credit was reduced to $37.5 million from $50 million. Management does not expect the reduction in capacity under the line of credit to impact its liquidity or operating plans. None of the Company's other debt agreements contain restrictive financial covenants.
Capital expenditures during the full year ended December 31, 2009 totaled $16.4 million, including $5.6 million and $3.5 million spent on renovations at the Company's Anaheim and Denver Southeast properties, respectively. 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.
Outlook for 2010
Given the current economic environment, it is very difficult to provide definitive guidance for 2010 at this time. In general, industry expectations suggest continued RevPAR declines in the first half of 2010. In the second half of 2010, we expect RevPAR declines to abate. Based on the outlook and information available today, the Company is providing the following broad guidance for 2010, which it expects to update as the year unfolds:
2010 RevPAR for Company owned and leased hotels is expected to be flat to down 3% compared to 2009 on an annual basis;
2009 direct hotel operating margin is expected to range from flat to up 100 basis points; and
EBITDA is expected to be $27 to $29 million, before any special items.
Eliassen concluded, "In 2010, we will focus on our mix of business in an effort to drive revenue. We will also implement a strategy to expand the Red Lion brand through a refocused franchising effort across the western states where we possess strong brand recognition and loyalty. Longer term, we are committed to improving profitability and providing competitive returns for our investors."
Conference Call Information
The company will conduct a conference call on February 16, 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 Chief Financial Officer Anthony Dombrowik.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 288-8975. International callers should dial (612) 332-0107.
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 February 16, 2010, through March 16 , 2010 at (800) 475-6701 or (320) 365-3844 (International) access code - 145520. 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, 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.
Red Lion Hotels Corporation
Julie Langenheim, Investor Relations Manager
Financial Relations Board