SPOKANE, WA, May 5, 2011 - Red Lion Hotels Corporation (NYSE: RLH), a western U.S.-based owner and franchisor of midscale hotels, announced its results for the first quarter ended March 31, 2011.
Total revenue during the first quarter was $34.3 million, consistent with the prior year period results. Revenue from hotels of $30.2 million declined slightly from $30.6 million in the prior year period. EBITDA from continuing operations before special items for the first quarter of 2011 was a loss of $0.2 million, compared to $1.9 million for the first quarter of 2010. Net loss from continuing operations was $4.8 million in the quarter, or $0.25 per share, compared to a loss of $4.2 million, or $0.23 per share, for the prior year period.
"This week, we were able to sign an attractive agreement to sell our Seattle Fifth Avenue hotel to a new owner affiliated with Lowe Enterprises and its management company, Destination Hotels & Resorts," said President and Chief Executive Officer Jon E. Eliassen. "Both companies are highly regarded in the hospitality industry. They will operate the hotel under a franchise agreement with Red Lion, maintaining our presence in downtown Seattle. Upon the closing of this transaction, we will have successfully monetized a valuable asset in an important step in our strategy to recapitalize our balance sheet."
Eliassen continued, "Turning to our first quarter results, as anticipated, group demand softened in many of our markets. However, we were able to largely offset the group decline with strong transient performance enabling us to maintain RevPAR year over year. As we move through the year, we are cautiously optimistic that we will be able to leverage stronger revenue performance to drive improved profitability."
Summary results for the three-month period follow:
In addition, key hotel operating metrics from continuing operations presented on a comparable basis, and reported hotel revenues and operating margin for the first quarter ended March 31, 2011 and March 31, 2010, are highlighted below for owned and leased hotels:
First Quarter 2011 Results
Comparing the first quarter of 2011 to the first quarter of 2010, occupancy for owned and leased hotels remained flat at 48.2 percent. ADR increased slightly to $80.34, resulting in a 0.2 percent increase in RevPAR.
Including franchised hotels, system wide RevPAR on a comparable basis for the quarter increased 2.1 percent due to a 110 basis point increase in occupancy, partially offset by a 0.2 percent decline in ADR.
Revenue from hotels of $30.2 million was down slightly compared to the prior year period. This was primarily due to a $0.6 million, or 7 percent, decline in food and beverage revenue, mainly as a result of reduced banquet business given lower group occupancy during the quarter. Rooms revenue was essentially flat at $21.3 million year over year as an increase in the transient segment largely offset a decline in group business. Hotel direct operating margin declined to 9.9 percent during the quarter from 13.2 percent in the same period in 2010 due primarily to the decline in food and beverage revenues and an increase in sales & marketing, utility and food costs.
Revenue from the entertainment segment increased $0.3 million to $2.8 million, driven by an increase in the number of shows in the quarter versus the prior year. However, operating margin for the segment declined by $0.3 million primarily driven by lower revenues and increased expenses of the ticketing portion of the business.
Revenue from the franchise segment increased $0.1 million in the first quarter to $0.7 million. The segment showed a $0.2 million decline in operating margin as a result of increased investment to grow and support the business and additional expenses associated with the change in operators at the Sacramento franchise.
Liquidity and Balance Sheet
As of March 31, 2011, the company had approximately $5.6 million in cash and cash equivalents, and outstanding debt of $132.1 million, $50.0 million of which is classified as current.
Capital expenditures during the first quarter totaled $0.4 million for necessary hotel improvement projects.
On March 25, 2011, KeyBank National Association acquired all of the interests of the other lenders under the company's $30 million revolving credit facility and the covenants were simultaneously amended.
During the quarter, the company announced plans to offer for sale its Red Lion Colonial Hotel, located in Helena, Montana. The company expects to use the proceeds from the sale to pay down debt while redeploying the equity in the property to enhance the Red Lion brand. The company expects to maintain the hotel's Red Lion affiliation, either as a managed or franchised property or both.
The company has presented the assets of its Seattle Fifth Avenue and its Helena, Montana properties as "Assets Held for Sale" on its balance sheet at March 31, 2011. The assets of the Denver Southeast property did not meet all criteria for this classification and thus continue to be presented as non-current assets in the company's property and equipment line on the balance sheet.
The company continues to focus on the strategy of growing the Red Lion brand through franchising. The previously announced Red Lion Inn Rancho Cordova near Sacramento is scheduled to open within the next few weeks. Last week, the owner of the Red Lion Hotel Concord - Walnut Creek franchise unexpectedly closed the hotel. While the company currently has no further information about the Concord property, it is willing to consider future involvement, if that is an option.
On May 4, 2011, the company announced it has entered into a definitive agreement to sell its Red Lion Hotel on Fifth Avenue to an affiliate of Lowe Enterprises ("Lowe") for $71 million. The buyers are entering into a franchise agreement with Red Lion Hotels Franchising Inc. and the hotel will continue to operate as a Red Lion, managed by Lowe's hospitality management subsidiary, Destination Hotels & Resorts. In addition to the franchise agreement, the company is entering into an affiliation agreement with a subsidiary of Destination Hotels & Resorts to facilitate the cross-promotion of hotels between the companies. The company currently anticipates that the closing will occur by the end of the second quarter.
Outlook for 2011The company is reaffirming its RevPAR guidance for 2011, previously provided on March 2, 2011, based on the outlook for the markets in which the company operates and information available today:
Conference Call Information
The company will hold a conference call at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, May 5, 2011 to discuss the results for investors, analysts and portfolio managers. Hosting the call will be President and Chief Executive Officer Jon E. Eliassen and Executive Vice President and Chief Financial Officer Dan Jackson. Executive Vice President and Chief Operating Officer George Schweitzer will also be available to answer questions.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 288-9626. International callers should dial (612) 332-0345.
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 and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 4:00 p.m. Pacific Time on May 5, 2011, through June 5, 2011 at (USA) (800) 475-6701 or (International) (320) 365-3844 access code - 201843. 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 midscale hotels under its Red Lion® brand. As of March 31, 2011, the RLH hotel network was comprised of 45 hotels located in eight states and one Canadian province, with 8,630 rooms and 429,797 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, 2010 and in other documents filed by the Company with the Securities and Exchange Commission.
Director of Corporate Communications